FEDERAL COURT OF AUSTRALIA Commissioner of Taxation v De Martin and Gasparini Pty Ltd [2011] FCA 286 Citation: Commissioner of Taxation v De Martin and Gasparini Pty Ltd [2011] FCA 286 Parties: THE COMMISSIONER OF TAXATION v DE MARTIN AND GASPARINI PTY LIMITED (ACN 000 205 372) File number: NSD 151 of 2010 Judge: BENNETT J Date of judgment: 31 March 2011 Catchwords: TAXATION – notice issued by Commissioner pursuant to Taxation Administration Act 1953 (Cth) s 260-5 – whether notice valid – whether "the date of this notice" means date notice bears or date of receipt of notice – whether ambiguous where inconsistent times for payment stated – whether notice requires payment "at or within a specified time" pursuant to s 260-5(5)(b) Words & Phrases: "at or within a specified time", "the date of this notice" Legislation: Taxation Administration Act 1953 (Cth) s 260-5 Federal Court Rules O 29 r 2 Cases cited: Associated Dominions Assurance Society Pty Ltd v Balmford (1950) 81 CLR 161 distinguished Deputy Commissioner of Taxation v Government Insurance Office of New South Wales (1992) 36 FCR 314 cited Goodin v Commissioner of Taxation (2002) 169 FLR 282 cited Perpetual Trustee Co Ltd v Holdsworth [1966] 2 NSWR 755 cited Date of hearing: 16 March 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: Mr D Fagan SC with Ms S Foda Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr F Corsaro SC with Mr M Condon Solicitor for the Respondent: Crisp Legal IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 151 of 2010 BETWEEN: THE COMMISSIONER OF TAXATION Applicant AND: DE MARTIN AND GASPARINI PTY LIMITED (ACN 000 205 372) Respondent JUDGE: BENNETT J DATE OF ORDER: 31 MARCH 2011 WHERE MADE: SYDNEY THE COURT: 1. ORDERS that, pursuant to O 29 r 2, the following questions be decided separately from, and before, any trial in these proceedings: (a) Is the notice from the Commissioner of Taxation to de Martin & Gasparini dated 12 December 2008 (the Notice) a valid notice pursuant to s 260-5 of schedule 1 of the Taxation Administration Act 1953 (Cth)? (b) If the answer to question "a" above is no, should the applicant's claim be dismissed? 2. ANSWERS question (1)(a): no. 3. DECLARES that the Notice is invalid. 4. ANSWERS question (1)(b): yes. 5. ORDERS that the application be dismissed. 6. ORDERS that order 5 be stayed until 4 p.m. on 4 April 2011. 7. ORDERS that the costs of the proceedings, including the costs of the notice of motion, be reserved. If the costs cannot be agreed, the parties are to file and serve written submissions as to costs within 7 days or by agreement to appear at 9:30 a.m. on 5 April. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 151 of 2010 BETWEEN: THE COMMISSIONER OF TAXATION Applicant AND: DE MARTIN AND GASPARINI PTY LIMITED (ACN 000 205 372) Respondent JUDGE: BENNETT J DATE: 31 MARCH 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant (the Commissioner) commenced proceedings against the respondent (DMG) to enforce a notice it served on DMG requiring DMG to pay money owing to Arndell Formwork (NSW) Pty Limited (Arndell) directly to the Commissioner (the Notice). There are separate proceedings in the Court between DMG and Arndell disputing whether these moneys are owed. 2 By notice of motion dated 10 December 2010, DMG seeks, in these proceedings, an order pursuant to O 29 r 2 of the Federal Court Rules that there be a separate determination of whether the Notice is valid pursuant to s 260-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (the Act). DMG claims that the Notice is invalid for ambiguity and for failure to comply with s 260-5. If the Court determines that the Notice is invalid, DMG seeks to have the Commissioner's application dismissed. THE RELEVANT REQUIREMENTS OF THE NOTICE 3 Section 260-5 of the Act relevantly provides: (4) A notice under this section must: (a) require the third party to pay to the Commissioner the lesser of, or a specified amount not exceeding the lesser of: (i) the debt; or (ii) the available money; or (b) if there will be amounts of the available money from time to time – require the third party to pay to the Commissioner a specified amount, or a specified percentage, of each amount of the available money, until the debt is satisfied. (5) The notice must require the third party to pay an amount under paragraph (4)(a), or each amount under paragraph (4)(b): (a) immediately after; or (b) at or within a specified time after; the amount of the available money concerned becomes an amount owing to the debtor. [emphasis added] 4 The Commissioner contends that the Notice is in compliance with ss 260-5(4)(b) and 260-5(5)(b). 5 There is no dispute on the standard for a notice under s 260-5. Failure to comply with the section is punishable by a fine (s 260-20 of the Act; s 2A of the Act applies Chapter 2 of the Criminal Code to all offences under the Act). The notice must be explicit and strictly within the terms of the Act. The person receiving the notice must be in no doubt as to what the duty is. The notice must leave no ambiguity as to the nature of the recipient's obligation (Perpetual Trustee Co Ltd v Holdsworth [1966] 2 NSWR 755 at 757; Deputy Commissioner of Taxation v Government Insurance Office of New South Wales (1992) 36 FCR 314 at 320; Goodin v Commissioner of Taxation (2002) 169 FLR 282 at [12]). This depends on the form and content of the notice, rather than what the recipient may fortuitously have guessed (Goodin at [14]). THE NOTICE 6 The document served on DMG containing the Notice comprises five pages (the Document). The last three pages consist of annexures in the form of a copy of legislation, including s 260-5 (2 pages) and a Garnishee Payment Notification Slip (1 page). 7 The Notice is dated 12 December 2008. It seems to have been first received by DMG on 15 December 2008. 8 The first page of the Document is headed: "Notice to Pay Money to the Commissioner of Taxation under Section 260-5 of Schedule 1 of the Taxation Administration Act 1953". It then states: This document is a notice under section 260-5 of Schedule 1 of the Taxation Administration Act 1953 (TAA 1953) requiring you to pay money owing to Arndell Formwork (NSW) Pty Limited (referred to hereafter as 'the debtor'), directly to the Commissioner of Taxation. A copy of the relevant Legislation is enclosed. Below are the procedures you must follow to ensure that you comply with this notice. [emphasis added] 9 What follows are the headings "Deductions and Payments", "Indemnity", "Expiration of this notice" and "Inquiries", each followed by a short explanation. Under the heading of Deductions and Payments, it is stated: You are required under this notice to deduct an amount of fifty cents in every dollar from any money which comes to you on behalf of the debtor, for payment of the debt due to the Commonwealth. The total of the amounts deducted under this notice is to be forwarded to the Deputy Commissioner of Taxation by separate cheque every FOUR WEEKS. Payment should be accompanied by the completed Garnishee Payment Notification Slip attached to this notice. [emphasis added] 10 Page 2 of the Document is headed "Notice" and relevantly states: DE MARTIN & GASPARINI PTY LIMITED, YOU are a third party who owes, or may later owe, money ("the available money") to ARNDELL FORMWORK (NSW) PTY LIMITED ("the debtor"), of (or previously of) 24 Holbeche Road, Arndell Park NSW 2148, who, in terms of section 260-5 of Schedule 1 of the Taxation Administration Act 1953 has a debt payable to the Commonwealth of $1,119,518.17. In exercise of powers conferred on me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under section 8 of the Taxation Administration Act, YOU, DE MARTIN & GASPARINI PTY LIMITED, ARE REQUIRED TO PAY TO THE COMMISSIONER OF TAXATION EVERY TWO WEEKS from the date of this notice, out of each of the amounts of available money you become liable from time to time to make to the debtor, an amount of FIFTY CENTS IN EVERY DOLLAR of such payments UNTIL the amount of $1,119,518.17 due by the debtor is satisfied. [original emphasis] 11 Further explanation is given of the nature of the money owing to the debtor. This is followed by a warning which, inter alia, states that the recipient is legally required to comply with this notice or face severe penalties. The asserted ambiguities 12 DMG raises three arguments to support its claim that there are ambiguities in the Notice: It is unclear whether the payments made under the Notice are to be based on the date the Notice bears or the date on which it is received. It is unclear whether payments made under the Notice are to be made every two or four weeks. The Notice fails to meet the legislative requirement that payment be required 'at or within a specified time after' the amount of the available money becomes an amount owing to the debtor. Which date is used to determine the timing of the payments under the Notice? 13 DMG contends that it is unclear whether the timing of the payments under the Notice is determined by reference to the date the Notice bears or the date on which the Notice was received. 14 DMG relies on Associated Dominions Assurance Society Pty Ltd v Balmford (1950) 81 CLR 161 where the High Court, in construing a statutory provision referring to a requirement to serve a notice in writing requiring action 'not less than fourteen days from the date of the notice', concluded, by majority, that the date of the notice is the date of service of the notice on the company and not the date that the notice bears on its face. This was based on the argument that a notice cannot be something uncommunicated. Justice Fullagar accepted that the prima facie and natural construction was to treat the word "notice" in the expression "date of the notice" as referring to a document but said that there were considerations which outweighed that construction. Justice Fullagar said that a reason for adopting a construction that the words mean the date on which the document becomes effective is to resolve all ambiguity that arises if "the date of the notice" means the date that the notice bears. As part of the reasons, Fullagar J considered the relevant statutory provisions and the theoretical ability of the notice to have different dates, that is, the date the notice bears and the date on which it comes into existence. 15 This is somewhat different from a consideration of the Notice. Here the question is not one of statutory intention but what the recipient of the Notice would understand as the date from which the payment every two weeks were to be made. 16 The question is whether the Notice complies with s 260-5. The time specified in the Notice is a time "from the date of this notice". The repeated references to "this notice" indicate that the dates of "this notice", in context, is the date that it bears. This is supported by the fact that the accompanying Garnishee Payment Notification Slip, which is part of the Document, states "Date correspondence issued: 12/12/08", that is, the date the Notice bears. That is the date from which payments are to be made. I do not accept DMG's contention that the date from which the timing of the fortnightly payments is determined in the Notice is ambiguous. Are the payments to be made every two or four weeks? 17 Page 1 of the Document directs payments to be made to the Commissioner by cheque every four weeks. This time period does not refer to the date of the Notice or any date from which payments are to be made. Page 2 of the Document directs payments to be made to the Commissioner every two weeks from the date of the Notice. Section 260-5(5) stipulates that a notice must require payment at or within 'a specified time'. 18 Both parties, in written submissions filed before the hearing, read the Notice as requiring payment every two weeks. Indeed, the Commissioner said that the Notice 'very clearly states that, every two weeks, [DMG] is required to pay to the Commissioner [the moneys]. This is straightforward'. When the discrepancy was pointed out to the Commissioner at the hearing, he submitted that it was clear that page 1 of the Document should not be construed as part of the Notice but should be construed as a covering letter that waives the requirement for payment every two weeks and extends it to four weeks. He says that the recipient would be under no misapprehension that it was entitled to defer payment to a four week period and that the recipient could safely do so. 19 That submission has a number of problems. 20 First, page 1 of the Document is entitled "Notice to pay money…" and refers on a number of occasions to "this notice". It is by no means clear that it forms no part of the Notice. To the contrary, it seems to form part of the Notice. Indeed, the Commissioner relied on page 1 to support his submission that "the date of this notice" is the date that it bears. 21 Secondly, there is nothing in the Document that suggests that the obligations on page 1 take precedence over, or are subordinate to, the obligations on page 2. 22 Thirdly, there is no information on page 1 as to the date from which the obligation to pay every four weeks arises and whether or not it runs from the date of the Notice. 23 Fourthly, and most importantly, there is a clear contradiction between the requirement to pay every four weeks (in capital letters on page 1) and the requirement to pay every two weeks (in capital letters and bolded on page 2). It is far from clear why the recipient could safely assume that it could pay every four weeks without penalty. 24 Fifthly, the fact that the parties construed the Notice as a requirement to pay every two weeks demonstrates its ambiguity, considering that this construction does not accord with the Commissioner's present contention that page 1 of the Document constitutes a waiver of that requirement and substitutes four weeks in its place. 25 The recipient of the Notice is left in doubt as to its obligations as to the specified time for payment. The Notice is relevantly ambiguous. It therefore fails to comply with the statutory requirement that it nominate a specified time for payment. Does the Notice fail to require payment "at or within a specified time after" the amount of the available money became an amount owing to the debtor? 26 DMG submits that the reference to 'a specified time' after the moneys became owing to the debtor in s 260-5(5)(b) requires that time to be 'fixed, definite and certain' (United Repairing Co Limited v Glover [1945] NZLR 160 at 164. The word "specified" is defined in the Macquarie Dictionary (rev 3rd ed, Macquarie, 2003) to mean 'mention[ed] or name[d] specifically or definitely'. 27 DMG submits that: the Notice must require the recipient to pay each amount at a specified time or within a specified time; the specified time must be fixed by reference to the amount of money owing; it must relate to the date or specified time period; it must be by reference to a date at which or within which it must be paid; and it must be referable to a time from which the amount concerned becomes payable to the debtor. 28 DMG says that the obligation of a recipient of a notice is to pay to the Commissioner a sum determined entirely by the accrual of a liability to pay the debtor, objectively ascertained. DMG submits that the requirement to pay in rolling two week periods fixed by date creates ambiguity and also prejudices its right to consider its obligations to Arndell, in regard to whether liability has arisen and in what amount. It further contends that the Notice does not comply with the requirement in s 260-5(5)(b) that it require payment after the amount became owing to Arndell. 29 The Commissioner submits that the wording of the Notice nominates, in clear and unambiguous terms, a series of "specified times" for the making of payments. The Notice, the Commissioner says, clearly conveys that as each amount of available money becomes an amount owing to Arndell, the specified time for remitting 50% of that amount to the Commissioner will be the next fortnightly payment date. Thus, the Commissioner says, the statutory requirement that each payment is to be made 'at…a specified time after...the amount...becomes…owing to the debtor' is met. The Commissioner also says that any practical difficulties that arise for DMG are not relevant to compliance with s 260-5(5)(b). 30 As I have already determined that the Notice is ambiguous and that it therefore fails to comply with s 260-5, there is no need to consider this further ground of invalidity. I do, however, have some difficulty in accepting that the requirement for DMG to pay money that it 'become[s] liable from time to time to make to the debtor', whether every two or four weeks from the date of the Notice, is both unambiguous and complies with the requirement in the Act to pay money 'after [the money] becomes an amount owing to the debtor'. Conclusion 31 As the validity of the Notice is a prerequisite to the application by the Commissioner, it is appropriate to consider its validity as a separate question pursuant to O 29 r 2 of the Federal Court Rules. A finding on the invalidity of the Notice would determine these proceedings and thus save time and expense for the parties and the time of the Court. The answer to question (a) of DMG's notice of motion, 'is the [N]otice from the Commissioner… to [DMG] dated 12 December 2008 a valid notice pursuant to s 260-5 of the… Act?' is no. The Notice is invalid for failure to comply with the requirements of s 260-5 of the Act. 32 The Commissioner does not suggest that, if such a finding is made, his application should not be dismissed. It follows that the answer to question (b) of DMG's notice of motion, 'if the answer to question "a" above is no, should the [Commissioner's] claim be dismissed?' is yes. 33 It follows that the application should be dismissed. The Commissioner should pay the costs of this notice of motion. I will hear from the parties as to the remaining costs of the proceedings. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. Associate: Dated: 31 March 2011