Guss v Deputy Commissioner of Taxation [2005] FCA 1499 (26 October 2005)

Last Updated: 26 October 2005

FEDERAL COURT OF AUSTRALIA

Guss v Deputy Commissioner of Taxation [2005] FCA 1499

INCOME TAX – Withholding tax – Company obliged to withhold tax and pay to Commissioner – Obligation of director to pay tax when company does not – Commissioner empowered to recover tax from director – Notice to director to pay within specified period a pre-condition for institution of recovery proceedings – Whether decision to issue and serve notice a decision of an administrative character under an enactment – Whether decision to commence recovery proceedings such a decision.




Income Tax Assessment Act 1936 (Cth) ss 222AFA, 222AGA, 222AGB, 222AHA, 222ANA, 222APA, 222APB, 222APC, 222APE
Taxation Administration Act 1953 (Cth) Schedule 1, s 255-5
Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 5, 11.




Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 applied
Golden City Car & Truck Centre Pty Ltd v Deputy Commissioner of Taxation (1999) 99 ATC 4131 applied
Southern Farmers Group Ltd v Deputy Commissioner of Taxation (SA) (1989) 21 FCR 66 discussed








ANTONY DAVID GUSS V DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

VID 607 OF 2005

SUNDBERG J
26 OCTOBER 2005
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 607 OF 2005

BETWEEN:	ANTONY DAVID GUSS APPLICANT
AND:	DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT

JUDGE:	SUNDBERG J
DATE OF ORDER:	26 OCTOBER 2005
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed as incompetent.
2. The applicant pay the respondent’s costs of the motion notice of which was filed on 29 July 2005.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 607 OF 2005

BETWEEN:	ANTONY DAVID GUSS APPLICANT
AND:	DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT

JUDGE:	SUNDBERG
DATE:	26 OCTOBER 2005
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

BACKGROUND

1 On 20 June 2005 the applicant applied to the Court under the Administrative Decisions (Judicial Review) Act 1977 (the Act) for an order of review of

"the decision made by the Respondent:

(a) On or about 28 June 2004 to issue and serve on me a Notice of Director’s Liability to pay a Penalty pursuant to section 222APE of the Income Tax Assessment Act 1936 ... (the Notice) in respect of amounts said to be owing to the Respondent by Bongania Pty Ltd ....
(b) On 20 July 2004 to institute against me proceedings in the Melbourne Magistrates Court being proceedings No S01771028, alleging a debt against me by reason of a failure to comply with the Notice."

2 The application contains no grounds of review. Cf ss 5 and 11 of the Act and Order 54 rule 2 and Form 56 in Schedule 1 of the Rules of Court. The application is supported by an affidavit of the applicant asserting that an officer of the respondent involved in making "the decision" was actuated by bad faith.

3 The respondent has applied by motion for an order dismissing the application on several grounds. The only ground that was pursued at the hearing of the motion was that the decisions sought to be reviewed are not "decisions" for the purposes of the Act.

LEGISLATIVE PROVISIONS

4 Division 8 of Part VI of the Income Tax Assessment Act 1936 (ITAA) (ss 222AFA to 222AMB) is headed "Prompt recovery, through estimates and payment agreements, of certain amounts not remitted". Subdivision A – "Object and interpretation" – consists of ss 222AFA to 222AFC. Section 222AFA gives an overview of Division 8:

"(1) The purpose of this Division is to enable the Commissioner to take prompt and effective action to recover amounts not remitted as required by Divisions 1AAA, 3B and 4 of this Act, or Part 2-5 in Schedule 1 to the Taxation Administration Act 1953.
(2) It does so by empowering the Commissioner to make an estimate of the amounts, and to recover the amount of the estimate.
(3) Although an estimate creates a liability distinct from the underlying liability to remit amounts, the person liable can ensure that the Commissioner does not keep more than those amounts.
(4) This Division also empowers the Commissioner to agree to a person paying off over a period liabilities under:

(a) Division 1AAA, 3B or 4; or
(b) this Division; or
(c) Part 2-5 in Schedule 1 to the Taxation Administration Act 1953."

5 Subdivision B – "Making, reducing and revoking estimates" – consists of ss 222AGA to 222AGG. Section 222AGA(1) provides:

"If the Commissioner has reason to suspect that:

(a) a person (the person liable) has become liable under a remittance provision to pay an amount to the Commissioner; and
(b) the liability to pay that amount remains undischarged after the due date;

the Commissioner may make what he or she thinks is a reasonable estimate of the unpaid amount of that liability."

A "remittance provision" includes a provision in Schedule 1 to the Taxation Administration Act 1953 (TAA), s 16-70, which deals with payment to the Commissioner of amounts withheld under Division 12 of the Act. Where the Commissioner has made an estimate, notice thereof must be given to the person liable: s 222AGB.

6 Section 222AHA(1), which is in Subdivision C - "Recovering unpaid amount of estimate" - provides:

"If the Commissioner makes an estimate and sends notice of it to the person liable or to the person’s trustee, the person must pay to the Commissioner the amount of the estimate. This liability is called a liability to pay an estimate."

7 Division 9 (ss 222ANA to 222AQD) is headed "Penalties for directors of non-remitting companies". Subdivision A - "Object and interpretation" - consists of ss 222ANA to 222ANB. Section 222ANA gives an overview of Division 9:

"(1) The purpose of this Division is to ensure that a company either meets its obligations under Division 1AAA, 3B, 4 or 8 of this Act, or under Subdivision 16-B in Schedule 1 to the Taxation Administration Act 1953 , or goes promptly into voluntary administration under Part 5.3A of the Corporations Act 2001 or into liquidation.
(2) The Division imposes a duty on the directors to cause the company to do so. The duty is enforced by penalties. However, a penalty can be recovered only if the Commissioner gives written notice to the person concerned. The penalty is automatically remitted if the company meets its obligations, or goes into voluntary administration or liquidation, within 14 days after the notice is given.
(3) A penalty recovered under this Division is applied towards meeting the company’s obligations under the relevant Division. Conversely, amounts paid by the company reduce the amount of a penalty.
(4) Sections 220AAZA, 221YHZJ and 221YR of this Act, and Part 4-15 in Schedule 1 to the Taxation Administration Act 1953, provide for the recovery of amounts payable under this Division.

8 Subdivision C - "Company failing to pay estimate under Division 8" - consists of ss 222APA to 222API. The Subdivision applies if a company becomes liable under s 222AHA to pay an estimate: s 222APA. Section 222APB provides in part as follows:

"(1) The persons who are directors of the company from time to time on and after the day when the Commissioner sent to the company notice of the estimate must cause the company to do at least one of the following within 14 days after that day:

(a) pay to the Commissioner the amount of the estimate;
(b) make an agreement with the Commissioner under section 222ALA in relation to the company’s liability to pay the estimate;
(c) appoint an administrator of the company under section 436A of the Corporations Act 2001;
(d) begin to be wound up within the meaning of that Act.

...

(3) If this section is not complied with before the end of the 14 days, the persons who are directors of the company from time to time after the 14 days continue to be under the obligation imposed by subsection (1) until this section is complied with."

9 Section 222APC provides that if s 222APB is not complied with before the end of the 14 days, each person who was a director of the company at any time during that period is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the estimate. Section 222APE(1) provides in part:

"The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice (the penalty notice) that:

(a) sets out details of the unpaid amount of the estimate; and
(b) if the penalty notice is given within 14 days after the Commissioner sent to the company notice of the estimate -- states that at the end of those 14 days the person will become liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount unless:

(i) the company’s liability to pay the estimate has been discharged; or
(ii) an agreement relating to that liability is in force under section 222ALA; or
(iii) the company is under administration within the meaning of the Corporations Act 2001; or
(iv) the company is being wound up; and

...

(d) states that the penalty will be remitted if, at the end of 14 days after the penalty notice is given:

(i) the company’s liability to pay the estimate has been discharged; or
(ii) an agreement relating to that liability is in force under section 222ALA; or
(iii) the company is under administration within the meaning of the Corporations Act 2001; or
(iv) the company is being wound up."

10 In summary of the foregoing, once a company becomes obliged to pay the amount of the estimate under s 222AHA, the provisions of Subdivision C of Div 9 (ss 222APA to s 222API) apply. The directors of the company must cause it to do at least one of the things set out in s 222APB within fourteen days after notice is given under s 222AGB. If they fail to do so, they become liable to pay a penalty: s 222APC. But the Commissioner cannot recover the penalty unless he gives notice under s 222APE which is not complied within fourteen days of the giving of the notice.

11 Part 4-15 of Schedule 1 to the TAA (ss 250-1 to 265-65) (referred to in s 222ANA(4) of the ITAA) deals with "Collection and recovery of tax-related liabilities and other amounts". Section 255-5 of the TAA provides:

"(1) An amount of a tax-related liability that is due and payable:

(a) is a debt due to the Commonwealth and
(b) is payable to the Commissioner.

(2) The Commissioner ... may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable."

Section 250-10 lists various "tax-related liabilities". One of them is "penalty under Subdivision C of Part 9 .... 222APE".

THE FACTS

12 At all relevant times the applicant was the sole director of Bongania Pty Ltd. On about 24 June 2004 the respondent estimated, pursuant to s 222AGA of the ITAA, the amount of the liability of Bongania under s 16-70 of Schedule 1 to the TAA. The respondent sent written notice of the estimate to Bongania in accordance with s 222AGB of the ITAA. Accordingly Bongania became obliged, pursuant to s 222AHA, to pay the amount of the estimate. The applicant became obliged, pursuant to s 222APB, to cause Bongania to do at least one of the things listed in s 222APB within fourteen days. He did not do so, and accordingly he became liable, pursuant to s 222APC, to pay by way of penalty an amount equal to the unpaid amount of the estimate. On or about 28 June 2004 the respondent sent written notice to the applicant in accordance with s 222APE. A covering letter informed the applicant that action to recover the penalty would be taken without further notice if, after the end of fourteen days from the date the penalty notice is given to him, the penalty had not been remitted. On 20 July 2004 the respondent instituted proceedings in the Magistrates Court of Victoria for recovery of the unpaid amount.

"DECISION"

13 Section 5 of the Act enables a person to apply for an order of review in respect of "a decision to which this Act applies" by which he or she is aggrieved. A decision to which the Act applies is "a decision of an administrative character made ... under an enactment": s 3(1). In Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 337 Mason CJ said:

"a reviewable ‘decision’ is one for which provision is made by or under a statute. That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration. A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment.

Another essential quality of a reviewable decision is that it be a substantive determination ...."

His Honour had earlier said (at 336):

"the examples of decision listed in the extended definition contained in s 3(2) are also indicative of a decision having the character or quality of finality, an outcome reflecting something in the nature of a determination of an application, inquiry or dispute or, in the words of Deane J, ‘a determination effectively resolving an actual substantive issue’."

COMMISSIONER’S SUBMISSIONS

14 The Commissioner contended that the first decision sought to be reviewed, the respondent’s decision to issue and serve the s 222APE notice, is not a substantive determination. There is no application, inquiry or dispute that is thereby determined.

15 In relation to the second decision, namely to institute proceedings, the Commissioner relied on Golden City Car & Truck Centre Pty Ltd v Deputy Commissioner of Taxation (1999) 99 ATC 4131. There the applicant sought to review under the Act the Commissioner’s decision to commence recovery proceedings in the Supreme Court of Queensland. Cooper J held that that decision was not one to which the Act applied. His Honour said at [25]-[26]:

"The tax payable by the applicants under the amended income tax assessments, by the operation of s 208 of the Act, constituted debts due to the Commonwealth. By s 8 and s 209 of the Act the respondent was, as part of the administration of the Act, obliged to seek to recover the debts and, if necessary, authorised to sue in a court of competent jurisdiction for the debts in its official name. Once the debt became due and owing, absent payment, the applicants were always exposed to the probability of judgment being entered against them as a step in the recovery process.

The decision to sue is itself but one step in the recovery process. There is nothing in the decision which is final or determinative or which removes a benefit or exposes the applicants to a detriment which they are not already subject to: Strictly Stainless Pty Limited v Deputy Commissioner of Taxation (Davies J, unreported, 5 November 1993 at p 4); Hutchins v Deputy Commissioner of Taxation (1996) 65 FCR 269 at 274, 276-277; Ruddy v Deputy Commissioner of Taxation (1998) 98 ATC 4369 at 4373-4374."

THE APPLICANT’S SUBMISSIONS

16 The applicant made the following submissions:

(a) The making of the estimate upon which the notice is based is, in the terms of s 6(1) of the Act, "conduct for the purposes of making a decision to which this Act applies"
(b) The decision in Bond (at 337-339) supports the view that there is a decision reviewable under the Act in this case
(c) Southern Farmers Group Ltd v Deputy Federal Commissioner of Taxation (1989) 21 FCR 66 supports the contention that there is a decision reviewable under the Act in this case
(d) Golden City and the cases cited in the quotation at [15] are distinguishable for three reasons. First, because of the statutory defences in s 222API of the ITAA to the obligations imposed by s 222APB. Secondly, because "[o]nly after issue of a valid notice in accordance with s 222APE was the Respondent entitled to issue the Magistrates Court Proceeding". Thirdly, because those cases "do not relate to a director’s penalty notice".

"REASONING"

17 In my view the first decision is not reviewable. It is not a substantive determination. There is no application, inquiry or dispute that is determined by or as a result of it. It is a mere procedural formality, in the nature of a warning to the applicant that recovery proceedings will be taken unless the company’s liability has been discharged or one of the other things mentioned in s 222APE(1)(b) has occurred.

18 Nor is the second decision reviewable. Save that the relevant provision in the present case is s 255-5(1) and (2) of the TAA rather than ss 208 and 209 of the ITAA considered in Golden City, the observations of Cooper J are applicable here. Sections 255-5(1) and (2) of the TAA are equivalent in effect to s 208 and 209 of the ITAA.

19 Even if the making of the estimate is a decision reviewable under the Act (something which I very much doubt) or "an integral part of the decision to issue the notice", the applicant has not sought to impugn it in the instant proceeding: see [1].

20 The applicant merely asserts that Bond supports his case. I do not accept that assertion.

21 I cannot see how the passage from Southern Farmers that the applicant relies upon (at 77-78) is of any assistance to the applicant. I agree with O’Loughlin J that "the nature and effect of" of the legislative provisions in question in a particular case are of assistance in deciding whether a decision made thereunder is reviewable under the Act. As appears above, I have in that connection considered the nature and effect of the provisions at issue in the instant proceeding.

22 I am not persuaded that Golden City and the cases cited in the quotation at [15] are distinguishable for the reasons set out at [16](d).

23 The availability of statutory defences in s 222API of the ITAA to the obligations imposed by s 222APB does not assist the applicant. They are defences available in any proceeding for recovery and must be made out in that proceeding. If anything, they show why the issue and service of the notice and the commencement of proceedings do not, in the words of Mason CJ in Bond, "entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration" or that is "substantive".

24 The "validity" of the notice is irrelevant. The applicant does not impugn the validity – in a technical sense – of the notice. Rather, he alleges the decision to issue and serve it was made in bad faith. Bad faith cannot be the invalidity that the applicant implies precludes the issue and service of the notice. That would be to confuse the question now before me with that which would be ultimately determined by the proceeding.

25 The applicant submits that Golden City and the cases cited in the quotation at [15]:

"... do not relate to a director’s penalty notice. What needs to be understood in the present case is that there is no primary liability that attaches to the applicant. The liability only arises consequent upon a decision being made by the respondent to invoke and utilise [s 222APE of the ITAA]. There is no liability independent of the making of such a decision and the service of a notice ... it follows that there can be no recovery process until the expiry of the period in s 222APE(1). In other words no liability arises, nor can there be any recovery process, until a period subsequent to the making of the impugned decision. Therefore the impugned decision cannot be said to be part of the recovery process."

That passage encompasses two related propositions – both of which are misconceived. The first is that s 222APE is the source of the liability to pay the estimate. That is incorrect. Section 222APC imposes that liability: see [9] and [10]. The second is that the recovery process cannot include its first step: ie the issue of the notice. For the reasons I have given at [17], I cannot accept that proposition. In any case, that proposition, at least in the manner in which it was put by the applicant in the quotation immediately above, assumes that the issue of the notice is a reviewable decision.

26 At the hearing, the applicant sought an adjournment. For reasons I need not go into here, I refused to grant an adjournment. However, I gave the applicant until 3 October 2005 to file written submissions. He did not do so. Only after my Associate informed the parties by fax on 6 October 2005 that the matter would be listed for judgment the next day did the applicant file written submissions. These reached the Court on 7 October 2005. They did not contain a request that they be received even though out of time. Nor was there any explanation for their lateness. Notwithstanding that the applicant was out of time, the listing for judgment was vacated. My Associate informed the parties of this by fax later that day and also reminded the respondent that I had given him an opportunity to file written submissions in reply and indicated that I wished to receive them by 13 October 2005. The respondent’s written submissions in reply were filed on that date. The next day, my Associate informed the parties by fax that the matter would be listed for judgment today. On 18 October 2005, counsel for the applicant sent a fax to my Associate containing further written submissions in reply to those of the respondent. I did not order that such a document be filed. Nor did the applicant seek permission to file such a document. Not surprisingly, the respondent raised both of these points with my Associate. Notwithstanding my views on the way in which the applicant’s representatives have conducted this matter I have, in what appears above, taken into consideration the applicant’s further written submissions in reply.

27 Neither of the decisions sought to be reviewed is "a decision of an administrative character made ... under an enactment", and accordingly the application must be dismissed as incompetent.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.

Associate:

Dated: 26 October 2005

Counsel for the Applicant:	LMF Watts
Solicitors for the Applicant:	Poulton, Elliott & Grey
Counsel for the Respondent:	D Harding
Solicitor for the Respondent:	ATO Legal Services Branch
Date of Hearing:	22 September 2005
Date of Last Written Submissions:	18 October 2005
Date of Judgment:	26 October 2005