Re David Malcolm Reynolds v Deputy Commissioner of Taxation; Act G42-49 of 1984 and Act G16-24 of 1984 Income Tax [1984] FCA 249; 3 FCR 329 (26 August 1984)

FEDERAL COURT OF AUSTRALIA

Re: DAVID MALCOLM REYNOLDS
And: DEPUTY COMMISSIONER OF TAXATION
Nos. ACT G15 of 1984; ACT G42-49 of 1984 and ACT G16-24 of 1984
Income Tax
[1984] FCA 249; 3 FCR 329

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Blackburn(1), Lockhart(2) and Neaves(3) JJ.

CATCHWORDS

Income Tax - Offences - Company registered as a group employer - Wages paid to employees after making tax instalment deductions therefrom - Company failed to remit amounts deducted to Commissioner of Taxation - Whether para.252(1)(j) of Income Tax Assessment Act 1936 authorises the taking of criminal proceedings against a director or officer of the company in respect of the company's default.

Income Tax - Offences - Company registered as group employer - Tax instalment deductions not forwarded to Commissioner - Whether director liable for company's default - Income Tax Assessment Act 1936 (Cth), s. 252(1)(j). Held, per Lockhart and Neaves JJ., Blackburn J. dissenting, that s. 252(1)(j) of the Income Tax Assessment Act 1936 (Cth) does not authorise the taking of criminal proceedings against a director of a company in default of its group employer obligations.

HEARING

Canberra, 1984, July 11, 12; September 26. 26:8:1984
APPEAL.

Appeal from the Supreme Court of the Australian Capital Territory (Gallop J.).

P.J. Lanigan, for the appellant.

J.S. Burchett Q.C. and T. Bathurst, for the respondent.
Cur. adv. vult.

Solicitors for the appellant: Manfred Stinson & Dougall.

Solicitor for the respondent: Australian Government Solicitor.
G.F.V.

ORDER

Nos. ACT G15 of 1984 and ACT G42-49 of 1984:

1. The appeals by David Malcolm Reynolds be allowed.

2. So much of the orders of the Supreme Court of the Australian Capital Territory as dismissed the appeals to that Court and confirmed the convictions recorded against the appellant and the penalties imposed in respect thereof be set aside and in lieu thereof orders that the appeals to the Supreme Court of the Australian Capital Territory be allowed, the convictions recorded against the appellant be quashed and the penalties imposed in respect thereof be set aside.

3. The parties have liberty to apply.

Nos. ACT G16-24 of 1984:

1. The appeals by the Deputy Commissioner of Taxation be dismissed.

2. The parties have liberty to apply.

Appeal allowed.

DECISION

Part VI of the Income Tax Assessment Act 1936 ("the Act") is entitled "Collection and Recovery of Tax". Division 2 of that Part is entitled "Collection by Instalments of Tax on Persons other than Companies". The scheme of this Division is that employers are required to deduct, from payments of salary or wages to their employees, amounts representing the income tax for which those employees may be liable, and to pay to the Commissioner the amounts so deducted. A "group employer" (one who has ordinarily had in his employment ten or more employees from whose salary or wages he has been required to make deductions) is required by subs. 221F(5) to pay to the Commissioner the amount of the deductions he has so made not later than the seventh day of the month next succeeding the month in which he has made them. Failure to comply with any of the provisions of s.221F is an offence (subs.11).

Sub-section 252(1) of the Act makes provisions relating to the public officer of a company which carries on business in Australia or derives in Australia income from property. Every such company must appoint a public officer. The liability of the public officer is prescribed in paragraph 252(1)(f), as follows

"The public officer shall be answerable for the doing of all such things as are required to be done by the company under this Act or the Regulations, and in case of default shall be liable to the same penalties."

Paragraph (j) of the same subsection, however, goes far beyond the scope of the rest of the subsection. This paragraph, which had its origin in an amendment to s.88 of the Act of 1922, is as follows:

"Notwithstanding anything contained in this section, and without in any way limiting, altering or transferring the liability of the public officer of a company, every notice, process or proceeding which under this Act or the regulations thereunder may be given to, served upon or taken against the company or its public officer may, if the Commissioner thinks fit, be given to, served upon or taken against any director, secretary or other officer of the company or any attorney or agent of the company and that director, secretary, officer, attorney or agent shall have the same liability in respect of that notice, process or proceeding as the company or public officer would have had if it had been given to, served upon or taken against the company or public officer."

The proper construction of this paragraph is the principal matter for determination in these appeals.

The Court has before it nine appeals by Mr Reynolds, which by agreement were heard together. The appellant was convicted in the Court of Petty Sessions of the Australian Capital Territory of nine offences of failing to comply with paragraph 221F(5)(a) of the Act, that paragraph being, as mentioned above, the provision which requires a group employer to pay to the Commissioner the amount of deductions made from employees' wages. In each case, the information, as amended, was in this form: the one quoted being the first, and the others differing only in respect of dates and amounts.

"David M. Reynolds of 36 Knox Street Weston as director of Fairlin Pty. Limited and a person who was a director of that company within the meaning of s.252(1)(j) of the Income Tax Assessment Act 1936 failed to comply with the provision of s.221F(5)(a) of the Income Tax Assessment Act as made applicable to him by virtue of s.252(1)(j) in that Fairlin Pty. Limited being a group employer in accordance with Division 2 of Part VI of the said Act during the month of October 1981 failed to pay to the Commissioner of Taxation on or before 7 November 1981 deductions of income tax from the wages of its employees during the month of October 1981 such deduction being in the sum of $1383.60."

The appellant appealed unsuccessfully to the Supreme Court of the Australian Capital Territory, which affirmed the conviction in each case. For the hearing of the appeals there was an agreed statement of facts which, as amended, read as follows:

"1. Fairlin Pty. Limited is a company duly incorporated in the A.C.T.

2. David Malcolm Reynolds (the Appellant) was at all material times a

director of the said Fairlin Pty. Limited.

3. Fairlin Pty. Limited was at all material times a properly registered group employer within the meaning of s.221A(1) of the Income Tax Assessment Act and an employer of various persons during the relevant period.

4. Fairlin Pty. Limited paid salary and wages to its employees in each of the months of October 1981 to June 1982 inclusive and made deductions therefrom on account of income tax pursuant to s.221C(1) and (1A).

5. In each of the said months Fairlin Pty. Limited failed to 'pay to the Commissioner the amount of tax deductions' made from wages of its employees on or before the 7th day of the month following the month which deductions were made.

6. The company wages were paid weekly from the company bank account and no further cheque was drawn each week from the company account and no separate fund created to hold tax deducted amounts, pending remission to the Commissioner.

7. Wages were calculated and a cheque for nett wages (gross wages less tax deducted) was drawn, cashed and only these moneys paid to employees.

8. Fairlin Pty. Limited has ceased trading and has not paid the deductions to the Commissioner.

9. The amount of tax deductions which Fairlin Pty. Limited failed to pay to the Commissioner for each month (being the monthly total deductions made from employees' wages) is set out in the information in each instance.

10. The Appellant in his personal capacity was not, in relation to any matter which is material to these proceedings, an employer who paid salary or wages to person who were his own employees.

11. A Deputy Commissioner of Taxation in the exercise of powers or functions validly delegated to him by the Commissioner of Taxation under s.8(1) of the Administration Act 1953 saw fit to institute proceedings against the Appellant as director of Fairlin Pty. Limited pursuant to s.252(1)(j)."

The appellant appeals to this Court against each order of the Supreme Court affirming his conviction. The question in the appeals is whether paragraph 252(1)(j) renders the appellant liable for the commission of the offence committed by the company, in failing to pay to the Commissioner the amounts deducted from its employees' wages.

Paragraph 252(1)(j) is certainly a remarkable provision; so far as I have been able to discover, it appears only in Australian taxation statutes. Counsel referred the Court to the passage in Hansard which records the debate in the House of Representatives when the legislative predecessor of this paragraph was introduced. It was inserted into s.88 of the Income Tax Assessment Act 1922 by Act No. 50 of 1930. The authority for thus referring the Court to Hansard was s.15AB of the Acts Interpretation Act 1901. The essential words of this section are in subs.(1)-

". . . . . . if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material . . . to determine the meaning of the provision when . . . the provision is ambiguous or obscure . . . "

Subs.(2) provides a list of material which may be considered in accordance with subs.(1), and the list includes

"(h) Any relevant material in . . . any official record of debates in the Parliament or either House of the Parliament."

In the case before us, I found the reference to Hansard totally unhelpful. In my opinion, the passage in question is not "capable of assisting in the ascertainment of the meaning of the provision". The only thing that clearly appears from it is that the Minister responsible for the Bill did not himself understand the provision in question. Apparently the second reading speech does not assist in the construction of this particular paragraph, which was introduced in Committee.

It seems to me that an attempt to construe paragraph (j) must begin with an examination of paragraph (f). This paragraph appears to me to impose on the public officer of a company the same criminal liability as falls upon the company itself, in case of any default in the doing of anything which is required to be done by the company under the Act. I do not see how it could possibly be argued that paragraph (f) does not impose criminal liability on the public officer; the words

"and in case of default shall be liable to the same penalties"

are impossible to construe otherwise than as imposing criminal liability. If, then, a company would be liable under subs.221F(11) for failing to comply with paragraph 221F(5)(a), the public officer of the company would be subject to the same criminal liability.

In Lean v. Brady [1937] HCA 75; (1937) 58 C.L.R. 328, the appellant was the public officer of a company, having been duly appointed in accordance with a provision of the Income Tax (Management) Act 1928 (NSW). By the Special Income and Wages Tax (Management) Act 1933-1934, every employer was obliged to collect from his employees by deduction the amount of a tax called the wages tax, and to pay the tax so collected in the manner prescribed. Subsection 16(8) of the latter Act was as follows

"Any employer who fails to carry out or observe any provision of this section shall be liable to account for and pay to the Commissioner any tax which by or because of his failure remains unpaid . . . such employer shall upon summary conviction be liable to a penalty . . .".

Subsection 15(1) of the latter Act provided that certain sections of the Income Tax (Management) Act 1928

"shall be applicable to the tax (i.e. the wages tax) as if such taxes were the income tax under the principal Act" (i.e. the Income Tax (Management) Act 1928).

Those sections of the principal Act included one which provided that the public officer should be liable for the doing of all such things as were required to be done by or on behalf the company under the Act and in case of default in doing any such things should be liable for all penalties imposed for any breach of the provisions of the Act.

The appellant in Lean v. Brady was convicted of having failed to pay to the Commissioner the wages tax which the company had collected from its employees, but had failed to pay to the Commissioner. The High Court quashed the conviction. The essence of the Court's decision was in the effect given to the words of subs.15(1) quoted above, which made the liability of the public officer in respect of wages tax depend upon the notional assimilation of wages tax to income tax. Under the Income Tax (Management) Act there was provision for certain criminal liability of a company (and consequently of its public officer) but there was no provision for criminal liability for non-payment of income tax. The liability of the public officer was not expressly provided for in the Special Income and Wages Tax (Management) Act, but only by reference to the principal Act, as if the wages tax were income tax. Once one assumed, therefore, that wages tax collected under the Special Income and Wages Tax (Management) Act was "income tax under the principal Act", it followed that the public officer could not be criminally liable for not paying it; and this was notwithstanding the fact that the company itself could be criminally liable for not paying it, under the Special Income and Wages Tax (Management) Act.

But in the case before this Court there is nothing comparable to this notional treatment of one kind of tax as another kind of tax, as a determinant of the liability of the public officer. Section 221F requires the employer to collect money from his employees, and makes it an offence not to pay to the Commissioner money so collected. Paragraph 252(1)(f) makes the public officer of a company liable, in case of default by the company, to the same penalties as those to which the company is liable. In my opinion it is clear that Lean v. Brady is no answer to the proposition that the public officer of a company which commits the offence of not paying money to the Commissioner in accordance with paragraph 221F(5)(a) is liable to the same penalties as the company.

One now has to turn to paragraph 252(1)(j). Its words may, for the purposes of this case, be reduced to the following

". . . every . . . proceeding which under this Act . . . may be . . . . taken against the company or its public officer may, if the Commissioner thinks fit, be . . . taken against any director . . . of the company . . . and that director . . . shall have the same liability in respect of that . . . proceeding as the company or public officer would have had if it had been . . . taken against the company or public officer."

This provision seems to me quite explicit. I see no escape from the conclusion that the effect of this section, for the purposes of these appeals, is exactly the same as if paragraph (f) had read

"The public officer, and, if the Commissioner thinks fit, any director, shall be answerable for the doing of all such things . . . etc."

Paragraph (j) imposes criminal liability on a director, in the circumstances set out, no less certainly than paragraph (f) imposes criminal liability on the public officer. In the case of a director, the elements of the crime are the following

(a) default by the company in the doing of something which is required to be done by the company under the Act;

(b) the fact that the defendant was a director of the company; and

(c) a decision by the Commissioner that proceedings in respect of such

default be taken against the defendant.

(Incidentally, this last element should, I consider, have been alleged in the information in the Court of Petty Sessions; it was however proved, and included in the statement of agreed facts). There is no necessary element of fault, either by way of act or of omission, on the part of the defendant, any more than there is in the case of criminal liability of a public officer under paragraph (f). Indeed, the liability under paragraph (j) is one step further removed from the normal constitution of a criminal offence, in that a decision to prosecute the director is expressed as an element of the offence; it is not merely (as it is normally) an unexpressed but necessary step in the subjection of the accused to the criminal process. It is not for the Court to speculate why the legislature chose this drastic method of applying a criminal sanction for the protection of the revenue. One would have been much less surprised to see a provision which enabled the Commissioner, in the event of default on the part of the company, to serve an appropriately worded notice on a public officer or director, and created the offence of failing to comply with the notice. Such a provision would be much less potentially harsh. But the fact that the Parliament has not seen fit to adopt such a procedure, but has preferred one which appears to be paralleled only in other Australian tax legislation, does not enable this Court to reject the Parliament's plainly expressed intention.

I can see no way of construing either paragraph (f) or paragraph (j) as excluding criminal liability altogether. There might well be room for such an argument if paragraph (f) were not there; it would then be possible to argue that paragraph (j) does not expressly refer to criminal liability at all. That, in my opinion, is the answer to an alternative argument put to the Court on behalf of the respondent in this case, that the respondent's case could be established without reliance on paragraph (f). As I have already said, paragraph (f), using as it does the words "default" and "penalties", must impose criminal liability. The words of paragraph (j), in turn, do not permit the conclusion that the liability imposed is limited to civil liability, since paragraph (f) is clearly not so limited.

Counsel for the appellant tried to convince us that if paragraph (j) does import criminal liability, there can be a distinction between liability for some kinds of default, and liability for other kinds. His argument was that paragraph (j) imposes criminal liability only for non-compliance with machinery provisions, such as the timely submission of returns, or the truthfulness of the facts stated in returns, and not for the non-payment of tax. Counsel drew some comfort in this respect from some of the words of Dixon J. in Lean v. Brady at p.336, e.g.

"The discharge of the various responsibilities placed upon the taxpayers in relation to the administration of the income tax law of which, perhaps, the best example, because the most common place, is making annual returns of income . . . The 'things required to be done' do not refer to payment of tax but to the active responsibility falling on taxpayers in connection with returns, assessments and ancillary matters."

These are two answers to this valiant attempt to cut down the scope of paragraph (j). One is that Dixon J. was referring to a New South Wales Act in which non-payment of tax was not an offence, whereas in the Act, non-payment of deductions from wages is an offence. The other is that the default alleged against the company is, precisely, default in a matter of machinery - an "ancillary matter" - the payment over to the Commissioner of money collected as tax from those who may be liable to pay the tax. It is to be remembered that s.221F forms part of Part VI of the Act, entitled "Collection and Recovery of Tax". To my mind, the impossibility of making a rational distinction between an ancillary matter such as the submission of a truthful return, and an ancillary matter such as the payment over of deductions from wages, is ample manifestation of the unsoundness of attempting to distinguish between kinds of "default" in construing paragraph 252(1)(j).

Stress was placed by counsel for the appellant on the fact that paragraph (j) does not stop at imposing criminal liability on directors, but extends to secretaries, other officers of the company, or any attorney or agent of the company. As an argument against the desirability of the legislation, this seems to me very weighty, but I find it impossible to accept it as an argument against the construction of the paragraph as imposing criminal liability on this appellant. The Court's task is to apply the legislation in accordance with its clear purpose, however much it may regret the result.

I would dismiss Mr Reynold's appeals.

The Court also has before it nine appeals by the Deputy Commissioner. In the proceedings in the Court of Petty Sessions, the learned magistrate ordered, on each information, that the defendant pay the amount which had not been paid to the Commissioner by the company. In the Supreme Court the appellant also appealed against these orders, and in this respect the appeals were upheld by the learned judge. It was contended that the order of the learned magistrate was valid as an exercise of power under s.21B of the Crimes Act 1914, which reads as follows:

"21B. Where -

(a) a person is convicted of an offence against a law of the

Commonwealth; or

(b) an order is made under section 19B in relation to an offence against a law of the Commonwealth committed by a person,

the Court may, in addition to the penalty, if any, imposed upon the person, order the offender -

(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence; or

(d) to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered by the person as a direct result of the offence."

The learned judge rejected this argument, holding that the non-payment of the moneys deducted from the employees' wages was not a "loss suffered", or an "expense incurred" by the Commonwealth. He therefore set aside this part of the magistrate's order in each case. The nine appeals by the Deputy Commissioner are against these orders of the learned judge.

In my opinion the learned judge was correct in setting aside these orders of the Court of Petty Sessions, but I would prefer to express the reason for doing so somewhat differently. I have already said that in my opinion the criminal liability resting on the appellant (as I continue, for the sake of clarity, to call him) had no element in it of fault on his part, and that the elements of the offence were first, the non-payment by the company to the Commissioner of the amounts deducted from the wages of the employees; secondly, the directorship of the defendant in the company; and thirdly, the decision of the Commissioner to prosecute the defendant. Obviously, the third of these elements did not exist when the Commonwealth "suffered the loss" by the non-payment of the moneys, nor was the "loss" affected by the coming into existence of that third element. It cannot, therefore, be said that the loss was suffered "by reason of the offence".

I would dismiss the Deputy Commissioner's appeals.

These appeals from the Supreme Court of the Australian Capital Territory (Gallop J.) raise two important questions.

The first question is whether para. 252(1)(j) of the Income Tax Assessment Act 1936 ("the Act") authorises the taking of criminal proceedings against a director or officer of a company in respect of acts of defaults of the company or its public officer which would have rendered them or either of them liable to criminal prosecution.

The second question is whether, upon conviction for an offence against sub-s. 221F(11), the director or officer may be personally liable to pay the amount of tax instalment deductions which the company had deducted from the wages of its employees but failed to remit to the Commissioner of Taxation.

The facts are agreed and may be briefly stated. Fairlin Pty. Limited ("Fairlin") was registered as a group employer within the meaning of sub-s. 221A(1) of the Act. It paid wages to its employees from October 1981 to June 1982 and made tax instalment deductions therefrom pursuant to sub-ss. 221C(1) and (1A). Fairlin failed to remit to the Commissioner the amount of those deductions. It ceased trading. The appellant, David Melcolm Reynolds ("the appellant"), was a director of Fairlin. Proceedings were instituted against the appellant pursuant to para. 252(1)(i) (to which I shall for convenience reter as "paragraph (i)") of the Act.

On 23 March 1983 the appellant was convicted in the Court of Petty Sessions, Canberra of nine offences against sub-s. 221F(11) of the Act. He was fined a total of $675 ($75 for each of the nine offences); ordered to pay the Commissioner the full amount of outstanding tax instalment deductions namely, $14,113.25; and ordered to pay costs totalling $225 ($25 for each offence).

On appeal to the Supreme Court of the Australian Capital Territory the appeals were dismissed and the convictions and penalties confirmed. His Honour held, however, that there was no provision in the Act conferring power on a court of competent jurisdiction to order a person convicted of an offence under sub-s. 221F(11) to pay to the Commissioner the amount of unpaid tax instalment deductions which gave rise to the offence. His Honour also held that s. 21B of the Crimes Act 1914 is not a source of that power.

The appellant appealed from the Supreme Court's judgment except that part which upheld his appeal against the order requiring him to pay the outstanding tax deductions. The Commissioner appealed from that last mentioned part of the judgment. Although it is the Deputy Commissioner of Taxation who is technically an appellant. I shall for convenience refer to him as "the Commissioner".

It is necessary to refer to the relevant provisions of the Act to understand the questions which arise in the appeals. An "employer" means "a person who pays or is liable to pay any salary or wages" (sub-s. 221A(1)). A "group employer" means "a person who is registered as a group employer under s. 221F" (sub-s. 221A(1)). Where an employer pays salary or wages to an employee, the employer is required, at the time of paying, to make a deduction from the salary or wages at such a rate, if any, as is prescribed (sub-s. 221C(1). A group employer, not later than the 7th day of the month next succeeding a month in which he made deductions, shall pay to the Commissioner the amount of the deductions so made (para. 221F(5)(a)).

It is an offence for an employer to fail to comply with any provision of s. 221F (sub-s. 221F(11)). Penalties are provided by sub-s. 221F(12) for failure to comply with para. 221F(5)(a).

If the employer has made the deduction and failed to deal with it in the manner required by the Act, the employer is made liable to pay that amount to the Commissioner (sub-s. 221P(1)).

Sub-s. 252(1) of the Act should be set out in full but the most relevant paragraphs are paragraph (f) and paragraph (j). The sub-section provides:

"252(1) Every company carrying on business in Australia, or deriving in Australia income from property, shall at all times, unless exempted by the Commissioner, be represented for the purposes of this Act by a public officer being a person residing in Australia and duly appointed by the company or by its duly authorized agent or attorney. With respect to every such company and public officer the following provisions shall apply:

(a) The company, if it has not appointed a public officer before the commencement of this Act, shall appoint a public officer within three months after the commencement of this Act or after the company commences to carry on business or derive income in Australia.

(b) The company shall keep the office of the public officer constantly filled.

(c) No appointment of a public officer shall be deemed to be duly made until after notice therof in writing, specifying the name of the officer and an address for service upon him has been given to the Commissioner.

(d) If the company fails to duly appoint a public officer when and as often as such appointment becomes necessary, it shall be guilty of an offence.

Penalty: $4 for every day during which the failure continues.

(e) Service of any document at the address for service, or on the

public officer of the company, shall be sufficient service upon the company for all the purposes of this Act or the regulations, and if at any time there is no public officer then service upon any person acting or appearing to act in the business of the company shall be sufficient.

(f) The public officer shall be answerable for the doing of all such things as are required to be done by the company under this Act or the regulations, and in case of default shall be liable to the same penalties.

(g) Everything done by the public officer which he is required to do in his representative capacity shall be deemed to have been done by the company. The absence or non-appointment of a public officer shall not excuse the company from the necessity of complying with any of the provisions of this Act or the regulation, or from any penalty for failure to comply therewith, but the company shall be liable to the provisions of this Act as if there were no requirement to appoint a public officer.

(h) Any notice given to or requisition made upon the public officer shall be deemed to be given to or made upon the company.

(i) Any proceedings under this Act taken against the public officer shall be deemed to have been taken against the company, and the company shall be liable jointly with the public officer for any penalty imposed upon him.

(1) Notwithstanding anything contained in this section, and without in any way limiting, altering or transferring the liability of the public officer of a company, every notice, process or proceeding which under this Act or the regulations thereunder may be given to, served upon or taken against the company or its public officer may, if the Commissioner thinks fit, be given to, served upon or taken against any director, secretary or other officer of the company or any attorney or agent of the company and that director, secretary, officer, attorney or agent shall have the same liability in respect of that notice, proccess or proceeding as the company or public officer would have had if it had been given to, served upon, or taken against the company or public officer."

Section 21B of the Crimes Act 1914 ("the Crimes Act") provides:

"21B Where -

(a) a person is convicted of an offence against a law of the

Commonwealth

(b) an order is made under section 19B in relation to an offence against a law of the Commonwealth committed by a person.

the Court may, in addition to the penalty, if any, imposed upon the person, order the offender

(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence; or

(d) to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered by the person as a direct result of the offence."

It is common ground that Fairlin failed to comply with the provisions of para. 221F(5)(a) of the Act and therefore committed an offence and was liable to the penalties imposed by sub-s. 221F(12).

It was submitted by the Commissioner that proceedings pursuant to sub-s. 221F(11) are proceedings "under the Act" within the meaning of paragraph (j) and, by virtue of that paragraph, may be taken against any director of Fairlin selected by the Commissioner. The Commissioner disavowed any suggestion that paragraph (j) operated to impose a personal liability upon a director or officer of a company to pay tax payable by the company or to pay the amount of tax deductions from the salaries or wages of employees which the company (being an employer) failed to deduct or, if deducted, failed to remit to the Commissioner. The concession was made in view of the judgment of the High Court in Lean v. Brady [1937] HCA 75; (1937) 58 C.L.R. 328 to which I shall refer later. The Commissioner argued, however, that the learned Magistrate correctly ordered the appellant to pay the amount which Fairlin deducted by way of tax instalment deductions but failed to remit and that the source of such order was s. 21B of the Crimes Act.

The appellant submitted that, if the Commissioner's submissions were correct, paragraph (j) would be a vehicle for enabling the Commissioner to prosecute any director or officer he chose to prosecute for any offence committed by the company or its public officer under the Act. The consequences of this construction of paragraph (j) were said to be so extreme and oppressive that it must be presumed that the Legislature intended paragraph (j) to have a much narrower operation. Considerable reliance was placed by counsel for the appellant upon Lean v. Brady (supra) and upon the history of paragraph (j). Counsel said that paragraph (j) and its predecessor (paragraph (h) of s. 88 of the Income Tax Assessment Act 1922 which was inserted by Act No. 50 of 1930) had been a part of the income tax legislation of this country for over 50 years and that, until this case, had never been invoked for the purpose for which the Commissioner now sought to invoke it.

Counsel for the appellant referred us to the debate in the House of Representatives in 1930, as recorded in Hansard, when the predecessor of paragraph (j) was introduced. The source of this Court's power to refer to Hansard was said to be s. 15AB of the Acts Interpretation Act 1901. Whatever benefit or enlightenment may be gained by the reader of the Hansard report of this debate, it certainly does not include any guide to the meaning of the relevant statutory provision. Indeed, as one peruses the report, perplexity turns to astonishment and finally to utter confusion and despair. I sympathise with the views, expressed towards the end of the debate, by Mr. West, the member for East Sydney, which Hansard records as follows:-

"I feel somewhat embarrassed. Two former Attorney-Generals (sic) of the Commonwealth, a former Attorney-General for New South Wales, and the honourable member for Corangamite (Mr. Crouch), who also is a lawyer, disagree as to the meaning of the provision now before the Committee. When lawyers differ, how is a layman to decide? Apparently, I have no alternative but to vote with the Government, and let it bear the responsibility."

If the construction for which the Commissioner contends is correct, paragraph (j) is indeed far-reaching. It would mean that the Commissioner is empowered to decide whether any and, if so, which, directors or officers (also attorneys or agents) of the company should be prosecuted for an act or default of the company or its public officer. The director or officer selected may in fact have little, if anything, to do with the conduct of the company impugned by the Commissioner. Many offences under the Act which may be committed by a company or its public officer are either absolute or have available only very limited defences. For example, the failure of an employer to make deductions in the prescribed manner (sub-s. 221C(1)(a)); failure to remit to the Commissioner instalment deductions deducted by the employer from the salaries or wages of employees (para. 221F(5)(a)) - the relevant offence for present purposes; the unauthorized sale or disposition of tax stamps (sub-ss. 221T(2) and (3)); and forging stamps or dyes for making tax stamps (sub-s. 221Y(1)). Yet a director or officer, if selected by the Commissioner as the person to be prosecuted, will be liable for the conduct of the company or its public officer over which he may have been able to exercise little, if any, control.

It is true, as the Commissioner conceded in argument, that the person selected for prosecution would have available the same defences as may be raised by the company or its public officer, as the case may be. But where the offence is absolute this would be of little comfort to him. He would be in a worse position than a director or officer who aided and abetted the commission of an offence or was knowingly concerned in its commission. For a person to be convicted as an aider and abettor or as being knowingly concerned in the commission of the offence by another under s. 5 of the Crimes Act the requisite elements must be established by the prosecution against him, including knowledge of the material facts supporting the offence. But a director or officer charged with an offence under the Act pursuant to the powers vested in the Commissioner under paragraph (j) would be bereft of even this protection.

The Commissioner sought to ameliorate the obvious harshness of the construction of paragraph (j) for which he contended by asserting that the Commissioner's power under the paragraph to select directors or officers of the company must be exercised reasonably and in accordance with the well established rules concerning the exercise of administrative powers. This is true so far as it goes. But paragraph (j) contains no criteria governing the circumstances in which the power may be exercised. The Commissioner would obviously have considerable latitude in deciding whether to call the paragraph in aid against the particular directors or officers concerned.

Another consideration telling against the Commissioner's argument is that, where Parliament has sought to render directors or officers of companies liable for offences committed by the company or its public officer under the Act, it has said so in plain terms. For example s.230 provides that any person who, or any company on whose behalf the public officer, or a director, servant or agent of the company in any return knowingly and wilfully understates the amount of any income or makes any misstatement affecting the liability of any person to tax or the amount of tax shall be guilty of an offence. Also s. 231 provides that any person who, or any company on whose behalf the public officer, or a director, servant or agent of the company, by any wilful act, default or neglect, or by any fraud, act or contrivance whatsoever, avoids or attempts to avoid assessment or taxation shall be guilty of an offence.

If the Commissioner is correct, paragraph (j) is a formidable instrument of authority vested in the Revenue. The Commissioner may in effect proceed in the courts against a wide class of persons who may have had little or no involvement in the relevant conduct of the company or its public officer. Furthermore, paragraph (j) provides no time limit within which the Commissioner may decide to commence those proceedings. I would not be prepared to endorse this construction of paragraph (j) unless compelled to do so by clear and unequivocal language. The words of Lord Loreburn L.C. in Attorney-General V. Till (1910) A.C. 50 (at pp. 51 and 52) are apposite:

"I attach great importance to the rule that unless penalties are imposed in clear terms they are not enforceable. Also, where various interpretations of a section are admissible, it is a strong reason against adopting a particular interpretation if it shall appear that the result would be unreasonable or oppressive."

It would be oppressive and unjust if the Commissioner's argument were to succeed, especially in relation to a statutory provision that has lain dormant in the income tax legislation of this country for over half a century and has, curiously enough, raised its head only now. Yet it is an argument that rests for its acceptance essentially on a close and literal construction at a time when Parliament is urging the courts to adopt, what is called by some, a purposive construction.

If there was no work for paragraph (j) to do except the work which the Commissioner would have it do, there would be force in the Commissioner's argument, although it may raise a serious question about the validity of the paragraph. But in my opinion paragraph (j) is open to a construction which is mercifully free of the harshness of the laws of Draco and gives it some sensible and legitimate work to do.

Paragraph (j) appears in Part VIII of the Act titled "Miscellaneous" and in a section (s. 252) which relates to public officers of companies. It is followed by various provisions, including sections concerning public officers of trust estates (s. 252A); agents and trustees (s. 254); and persons receiving or controlling money for non-residents (s. 255).

By s. 252 every company carrying on business in Australia or deriving in Australia income from property is required to be represented by a public officer unless an exemption is granted by the Commissioner (sub-s. 252(1)). The public officer must be a person residing in Australia (sub-s. 252(1)). Having made an appointment, the office must be constantly filled (para. 252(1)(b)). If a company fails to make the appointment within the time allowed, or fails to keep the office constantly filled, it is liable to a penalty for every day during which the failure continues (para. 252(1)(d)).

The public officer is answerable for the doing of all such things as are required to be done by the company under the Act or the regulations and, in case of default, is liable to the same penalties (para. 252(1)(f)). The public officer is thus placed in a special position under the Act. Paragraph (f) is a recognition of Parliament's perception of the importance of protecting the Revenue by imposing upon natural persons the performance of duties owed by companies. In this way the observance by companies of their responsibilities under the Act is more likely to be achieved.

An act done by the public officer of a company in his representative capacity is regarded as having been done by the company itself (para. 252(1)(g)). A company is not relieved from carrying out the requirements of the Act should the public officer be absent, or should there, for any reason, be no public officer. It is still liable for penalties for non-compliance with the Act (para. 252(1)(g)). A notice given to or requisition made upon the public officer shall be deemed to be given to or made upon the company (para. 252(1)(h)). A company is jointly liable with its public officer in respect of penalties imposed upon him (para. 252(1)(i)).

A public officer is not, however, personally liable for tax payable by the company. Lean v. Brady (supra) concerned the public officer of a company and his duties under the Income Tax (Management) Act 1928 (N.S.W.) and the Special Income and Wages Tax (Management) Act 1933 (N.S.W.) The relevant sections of those Acts (s. 78 of the former Act and sub-s. 15(1) of the latter Act) assist in construing para. 252(1)(f) of the Act; but are of little, if any, assistance in relation to paragraph (j). Notwithstanding that it does not directly concern para. 252(1)(f) of the Act, Lean v. Brady provides strong support for the view that that paragraph cannot be relied upon to establish any liability of the public officer for payment of tax for which the company is itself liable. It was not suggested by the Commissioner in the present case that any such liability could be attracted under paragraph (j). In Lean v. Brady, Dixon J. said at pp. 336-337:

". . . The imposition upon a servant or agent of a company of a personal liability for the tax owing by the company is a thing to be accomplished only by a very clear expression of legislative intention. The general words 'doing all such things as are required to be done' ought not to receive such a construction and, in my opinion, were never intended to bear it. Default in doing such things is visited by the same penalties as are imposed on the company and non payment of income tax is not an offence. This confirms the view that the things required to be done do not refer to payment of tax but to the active responsibility falling on taxpayers in connection with returns, assessments and ancillary matters."

The last paragraph of sub-s. 252(1) is paragraph (j). It is designed to ensure the observance by companies and their public officers of duties which the Act imposes upon them. The company may fail to appoint a public officer or a public officer may in some cases have little to do with the day-to-day affairs of the company (for example, he may be a member of an independent firm of accountants). The Commissioner is given the power to select in a particular case, a director or an officer of the company as the person who is more likely than the public officer to fulfil an obligation which the Act imposes upon the public officer or who, because of his position in or association with the company, will probably ensure observance by the company of its duties under the Act. The Commissioner may therefore select that director or officer as the person to whom he should direct a notice to fulfil some obligation imposed upon the company or its public officer under the Act: for example, a notice of the kind mentioned in para. 252(1)(h). In that case the director or officer upon whom the notice has been served becomes liable in respect of the notice to the same extent as the company or its public officer would have been if the notice had been served upon it or him as the case may be. The fact that the director or officer has been served with the notice does not in any way relieve the company or its public officer from the relevant liability.

Paragraph (j) is not confined to the giving of notices to directors or officers of companies. It provides also for service of process and taking proceedings against such persons. This enables the Act to have real force and effect. A statutory provision that a notice may be served on a director or officer of a company and that he has the same liability in respect of the notice as the company or public officer would have had if the notice had been served upon it or him, may not, by itself, be sufficient warrant for the service of process upon the director or officer, or the taking of proceedings, especially criminal proceedings, against him if he fails to comply with its requirements. The service of the notice upon the director or officer gives rise to an obligation on his part to comply with it. By authorising the service of process and the taking of proceedings against the director or officer, the Act establishes an effective sanction to ensure compliance by that person with the notice by rendering him liable to punishment upon non-compliance. Where the director or officer is visited with a personal liability to comply with a notice authorised by paragraph (j), the question of proceedings against him for breach of that liability can arise. But paragraph (j) could not have been intended to render such a person criminally liable for an act which it was never within his power to do, or, if within his power, he was not obliged to do.

There is no inconsistency between paragraphs (f) and (j). I said earlier that the public officer of a company is in a special position under the Act. It is plain from the language of paragraph (f) and other paragraphs of sub-s. 252(1) that Parliament intended the public officer to be as liable for the company's acts or defaults as the company itself. The same intent cannot be discerned from paragraph (j) except where the Act imposes a liability upon a director or officer to do something which otherwise would be the responsility of the company or the public officer. Generally, if not always, that liability will be created by the service upon the director or officer of a notice requiring performance of a particular duty. Paragraph (j) may then operate to ensure compliance by the director or officer with the obligation thus cast upon him by rendering him liable to the service of process and the institution of preceedings, including criminal proceedings.

Paragraph (j) thus construed fulfils a useful role in the Act, adding a sensible and legitimate weapon to the Commissioner's armoury to ensure that companies and public officers observe their statutory obligations. Those who control or superintend the company's affairs know that an obligation imposed upon the company by the Act may be imposed upon them personally. This may act as a spur for them to ensure that the company itself carries out its duties under the Act. This is, as I discern it, the purpose of paragraph (j).

Paragraph (j) did not authorize the taking of proceedings against the appellant in this case. It was Fairlin's failure to remit to the Commissioner the amount of tax instalment deductions that gave rise to an offence by Fairlin (sub-s. 221F(11)). If the appellant had aided or abetted the commission of the offence by Fairlin he would have been liable to prosecution as an aider and abettor pursuant to s. 5 of the Crimes Act. But the Act did not impose any obligation upon the appellant to remit the tax instalment deductions to the Commissioner. Paragraph (j) is not a source of any liability of the appellant for Fairlin's default.

It follows that the appellant's appeals must succeed and the Commissioner's appeals must fail. The Commissioner relied solely on s. 21B of the Crimes Act as the source of the liability of the appellant for payment of the outstanding tax instalment deductions. Liability under s. 21B is based on the antecedent conviction of the person concerned of an offence against a law of the Commonwealth (para. 21B(a)). As the appellant was not lawfully convicted of any such offence he cannot be liable to make reparation under s. 21B.

The appeals by the appellant should be allowed, the convictions recorded against him quashed and the penalties imposed in respect thereof set aside. The appeals by the Commissioner should be dismissed.

In my opinion paragraph 252(1)(j) of the Income Tax Assessment Act 1936, on its proper construction, did not operate to make David Malcolm Reynolds, a director of Fairlin Pty. Limited, criminally liable for the defaults of the company in failing to remit to the Commissioner of Taxation amounts deducted by way of tax instalment deductions from the salary and wages paid to its employees. I am in agreement with the reasons for reaching that conclusion that have been given by my brother Lockhart.

The appeals by David Malcolm Reynolds should, therefore, be allowed and the convictions recorded against him and the penalties imposed in respect thereof should be set aside.

The setting aside of the convictions makes it inevitable that the appeals by the Deputy Commissioner of Taxation against the refusal of the Supreme Court of the Australian Capital Territory to make orders under section 21B of the Crimes Act 1914 be dismissed.