MILLER v DEPUTY COMMISSIONER OF TAXATION SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, PRIESTLEY and BEAZLEY JJA 19 September 1997, 18 December 1997 [1997] NSWCA 205 PtVI Division 9 Income Tax Assessment Act — s222APB — s222API — director's liability -"'no reasonable steps" — "recover" — "begin to be wound up" This appeal challenges the entry of summary judgment in favour of the Deputy Commissioner of Taxation ("the DCT") against the appellant. The appellant was a director of Belcora Pty Ltd. The company was sent an estimate of unpaid group tax liabilities under s222AGB of the Income Tax Assessment Act. S222APC allowed the DCT to recover unpaid liabilities from a director where s222APB had not been complied with before the end of 14 days. The appellant admitted that he failed to comply with s222APB(1) by causing the company to do one of four things within 14 days: (a) pay the amount of the estimate; (b) make an agreement with the Commissioner under s222ALA; (c) appoint an administrator to the company; (d) begin to be wound up within the meaning of the Corporations Law. On appeal, the appellant claimed: (1) A defence was made out under s222API(3) because he took all reasonable steps to comply with s222APB(1) or alternatively there were no such steps that could have been taken. (2) As one of two gridlocked directors, the 14 days allowed in s222APB(1) was insufficient time to cause the company to begin to be wound up within the meaning of the Corporations Law. (3) The DCT commenced proceedings in the District Court in contravention of s222APE. That section prevents the DCT from recovering a penalty until the end of 14 days after a penalty notice has been provided. Held; Appeal allowed: (1) A defence under s222API(3) is only made out where the appellant shows the reasonableness of his conduct in relation to all four options offered to the directors by s222APB(1). (2) The evidence showed that there was a triable issue that there were no reasonable steps which the appellant could have taken to wind up the company within 14 days of receipt of the estimate. However the appellant's failure to attempt to meet the other requirements of s222APB(1) means a triable defence of 'no reasonable steps' had not been raised. (3) Given that the purpose of the penalty notice was to provide a final warning, the DCT was not entitled to commence proceedings to recover the penalty until the lapse of the 14 day period after receipt of the penalty notice. Mason P This appeal, by leave, challenged the entry of summary judgment in favour of the Deputy Commissioner of Taxation ("the DCT") against the defendant/appellant. The judgment was in the sum of $55,264 plus costs and is for a debt based on a penalty imposed on the appellant as a director of Belcora Pty Ltd ("the company") under PtVI Division 9 of the Income Tax Assessment Act ("the Act"). Division 9 deals with penalties for directors of non-remitting companies. 2 UNREPORTED JUDGMENTS The appellant admitted on the pleadings that the company was a registered group employer under s221F of the Act, and that the DCT had sent an estimate of the company's liability to pay amounts equal to the deductions made by the company from payments made to its employees. The Notice of Estimate of Liability was sent to the company on 10 October 1994 in accordance with s222AGB and it estimated the company's liability at $55,264.20. Pursuant to s222AHA the company became liable to pay the estimate to the DCT. This section is found in Division 8 of PtVI. At issue in the proceedings in the District Court was the DCT's claim that the appellant was liable to a penalty in a sum equal to the unpaid amount of the estimate. The right to recover such a penalty from a director of a company that fails to pay the estimated sum at the end of 14 days after the estimate notice is sent is created by Division 9 of PtVI. Division 9 commences at s222ANA which relevantly states: "222ANA(1) [Purpose of Division] The purpose of this Division is to ensure that a company either meets its obligations under Division 1AA, 2, 3A, 3B, 4 or 8, or goes promptly into voluntary administration under Pt5.3A of the Corporations Law or into liquidation. 222ANA(2) [Imposition of Duty] 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 notice is given." Division 9, Subdivision C (which commences at s222APA) deals with companies failing to pay estimates under Division 8. S222APA states that the subdivision applies if a company incorporated under the Corporations Law becomes liable under s222AHA to pay an estimate. S$222APB provides: "APB(1) [Duty of directors] 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 s222ALA in relation to the company's liability to pay the estimate; (c) appoint an administrator of the company under s436A of the Corporations Law; (d) begin to be wound up within the meaning of that Law. APB(2) [Compliance] This section is complied with when: (a) the company's liability to pay the estimate is discharged; or (b) the company makes an agreement as mentioned in para(1)(b); or (c) an administrator of the company is appointed under s436A, s436B or s436C of the Corporations Law;! (d) the company begins to be wound up within the meaning of that Law; whichever first happens, even if the directors did not cause the event to happen. 1. The "or" is missing in the original, but is clearly intended here. URJ MILLER v DEPUTY COMMISSIONER OF TAXATION (Mason P) 3 APB(3) [Effect of non-compliance] 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 subs(1) until this section is complied with." The appellant admitted on the pleadings that he did not cause the company to do any of the four things stated in s222APB(1) within the stipulated period.? S222APC states: "Tf s222APB is not complied with before the end of the 14 days, each person who was a director of the company at any time during the 14 days is liable to pay to the Commissioner, by way of penalty an amount equal to the unpaid amount of the estimate." Any amount payable by a director under this legislative scheme is recoverable as a debt in a court of competent jurisdiction.3 The DCT's right to recover the penalty is controlled by s222APE, which states that the Commissioner is not entitled to "recover from a person" a penalty under the Subdivision "until the end of 14 days after the Commissioner gives to the person a notice ('the penalty notice')" containing stipulated information. In the present case the penalty notice was sent by prepaid post to the appellant on 14 October 1994. The proceedings for the penalty were commenced in the District Court on 31 October 1994, when a statement of liquidated claim was issued. On 9 December 1994 default judgment was entered. The appellant moved successfully to set this aside. He swore that his wife did not bring to his attention the statement of claim which was handed to her at their home. The default judgment was set aside after a hearing before the Chief Judge of the District Court which took place in September or October 1995. Thereafter the appellant filed his Notice of Grounds of Defence on 30 October 1995. In February 1997 the DCT moved the Court for summary judgment, which was granted on 18 April 1997. There is no basis for accepting the appellant's submission that the earlier order by the Chief Judge setting aside the default judgment prohibited the making of the later order for summary judgment by McGuire DCJ.4 The right to recover the penalty is also limited by s222API which gives the director certain defences. S222API(3) and s222API(4) provide: "(3) [Reasonable steps] It is also a defence if it is proved that: (a) the person took an reasonable steps to ensure that the directors complied with subs222APB(1); or (b) there were no such steps that the person could have taken. (4) ['Reasonable'] In subs3: 'reasonable' means reasonable having regard to: (a) when, and for how long, the person was a director and took part in the management of the company; and (b) all other relevant circumstances." In paraS of his Notice of Grounds of Defence the appellant pleaded that there were no reasonable steps he could have taken to ensure that the company complied with s222APB. He provided the following particulars: 2. Statement of Liquidated Claim para8-para9, which were not traversed. 3. S221R(IAA(d),(1). 4. See Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246; Wilson v Union Insurance Co (1992) 112 FLR 166 at 181. 4 UNREPORTED JUDGMENTS "a. In or about October 1994 neither Belcora Pty Ltd Law (sic) the defendant had the cash resources and/or other facilities to pay the amount sought by the plaintiff in the notice under s222APE of the Act; b. the directors and shareholders of Belcora Pty Ltd, the defendant and Stuart Miller, were gridlocked in that Stuart Miller refused to consent to the appointment of a liquidator or administrator." The appellant's evidence was that there were two directors of the company, himself and his father Stuart. The appellant's role was to supervise men on site in the company's demolition business. The appellant was aged 24 at about the time when the various notices were served in October 1994. He swore that in October 1994 neither he nor the company had cash reserves or facilities to pay the money due to the DCT. He discussed with his father the company's taxation liability some time between the receipt by the company of the Notice of Estimate of Liability and the execution by the appellant of a statutory declaration in accordance with s222AGF on 24 October 1994. His father said: "The taxation debt will be paid from the debtors of the company (Belcora Pty Ltd) or Marlasi [another family company] will lend the money to Belcora to satisfy the debt. I do not want to appoint an administrator or liquidator." The appellant said that he had relied upon his father for advice or his opinion in many matters of financial administration of the several companies where he and his father were co-directors. On this basis the appellant swore that he believed there were no reasonable steps available to him to comply with the penalty notice issued by the DCT pursuant to s222APE. In the light of the issues tendered in the pleadings and the affidavit evidence filed in relation to the application for summary judgment, the question for determination was whether the DCT established the absence of a triable issue on the defence of "reasonable steps" conferred by s222API.5 After referring to the four steps referred to in s222APB, McGuire DCJ said: "The defendant has done none of these things claiming that because of impecuniosity he was unable to make payment nor to enter into any agreement. Further that he was unable to appoint an administrator or to commence winding up proceedings because of a dispute with his fellow director. It appears to me that the mere fact that the plaintiff (sic) is without funds is not a circumstance which enables him to rely upon s222 API(3) that is a defence that no such steps could have been taken nor is he entitled to rely upon that defence by merely stating that he could not get agreement from his fellow director to institute proceedings for the appointment of an administrator or to place the company into liquidation. Even without the agreement of his co-director the defendant could have taken steps to begin winding up proceedings or to appoint an administrator. However no such steps were taken. It would be grotesque if a defendant could raise as a valid defence the fact that he was unable to take reasonable steps merely because of impecuniosity or merely because he could not gain unanimity from his co-director. I believe that he could have taken steps and did not do so and that his failure so to do was not reasonable. He has no defence available to him under s222API(3) on the material before me." 5. See Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 89; Singh v Varinder Kaur (1985) 61 ALR 702; Hawker Noyes Equipment Pty Ltd v Dueeasy Pty Ltd, Court of Appeal 18 July 1996, unreported. URJ MILLER v DEPUTY COMMISSIONER OF TAXATION (Mason P) 5 A major argument raised by the appellant was that the 14 days allowed in s222APB(1) was insufficient time for the appellant as one of two "gridlocked" directors to "cause the company to... begin to be wound up within the meaning of the [Corporations] Law'. The DCT accepts that it is established that (so far as concerns a winding up by order of the court) the winding up "begins" in that context when the order is made, and not when the winding up proceedings are filed.7 The DCT contended 'that 14 days was a sufficient time to make it unreasonable for the appellant to have failed to bring this about. I disagree, at least in the sense that the DCT has not established that the contrary is not triable. According to the stern mandate of s222APB(1), time runs from "the day when the Commissioner sent to the company" the estimate notice (emphasis added). The notice was posted by ordinary post on 10 October 1994. It was sent to the company's registered office c/- a firm of accountants at Burwood, New South Wales. At that time the appellant lived elsewhere, at Artarmon. His work was to supervise men on site who were involved in demolition work. He and his wife had a 10 month old child. He was aged 26 and relied on his father for business advice. The evidence showed that the father was unwilling to cooperate in the appointment of an administrator or liquidator, and that he was hoping fondly (to put the matter in its kindest light) to trade the company out of its parlous state and keep the DCT at bay by finding money to pay to meet its liability from moneys in the family group of companies. (I emphasise that these were all untested assertions by the appellant, but they were the evidence at the time when summary judgment was entered.) All of these matters are, in my view, "relevant" in the sense indicated in s222API(4). The DCT pointed to cases which illustrate that a winding up order can be obtained in under 14 days. I do not doubt this. But I cannot see how the DCT established that there was no triable issue that there were no reasonable steps which the appellant could have taken® to procure the winding up of the company within the 14 days allotted. He would not have learnt of the notice "sent" to the company on 10 October until some days later. Learning of his father's "intransigence" would like a little time. Winding up could have been sought from the court on either of the insolvency or the just and equitable grounds. But having regard to need for the appellant to get legal advice, prepare a summons, file, serve, advertise and almost certainly obtain a shortening of time, there was at the very least an arguable defence that an order would not be forthcoming within the time limited. In those circumstances there was an arguable basis for contending that there was no point in commencing the (expensive) exercise. There is no material that would suggest that the option of a creditor's voluntary winding up of the insolvent company was open to the appellant. It follows that the appellant prevented the DCT from showing the absence of a triable case in relation to a defence of proving (in the words of s222API(3)(b)) that there were no (reasonable) steps that he could have taken to bring about the winding up of the company in the 14 days. 6. S22APB(1)(d). 7. See Re Scobie (1995) FCR 177 at 185; Joye v Beach Petroleum" NL (1996) 67 FCR 275 at 287. 8. Cf s222API(3)(b). 6 UNREPORTED JUDGMENTS The appellant submits that it follows that the summary judgment should have been refused. The DCT countered with a submission that raises an important question of construction of the statutory scheme.? According to the DCT, the appellant could not make out "a defence" under s222API(3) unless the appellant showed what I shall loosely call the reasonableness of his conduct in relation to all four of the options offered to the directors by s222APB(1). The DCT argues that there is simply no evidence that the appellant took any steps with a view to causing the company to make an agreement with the Commissioner under s222ALA,!° or that there were no such (reasonable) steps that could have been taken. There is a factual and procedural dispute concerning s222ALA, consideration of which may be deferred until the construction point is addressed. The appellant submits that a director need only address one of the four options offered to the company by s222APB(1), and that it suffices if he or she proves that, in relation to that option, all reasonable steps were taken by that person to ensure that the directors caused the company to do one of the four options, or that there were no such steps that the person could have taken. In support of this contention, reference was made to s222APB(1) where it speaks of the directors causing the company "to do at least one" of the four matters. I would reject this submission. What the directors have to do to comply with s222APB(1) is cause the company to do at least one of the four matters. If none of the four matters occurs there has been non-compliance by the directors: see s222APB(2). The taking by a director of "all reasonable steps to ensure" compliance by the directors obviously requires that each option be addressed, either in the sense of taking reasonable steps to bring it about or declining to do anything on the basis that there were no such steps that the director could have taken. The alternative construction would mean that if it were reasonable not to cause the company to pay the estimate to the Commissioner (option (a)) because the company were hopelessly insolvent, the-director could sit on his or her hands yet still make out the "defence". That would be absurd, and would defeat the purpose spelled out explicitly in s222ANA(1) and s222ANA(2). Turning then to the factual and procedural issues concerning s222ALA and s222APB(1)(b), the DCT points to the failure of the appellant to raise this matter in the particulars provided in paraS of his Notice of Grounds of Defence. I consider this to be a good answer to the appellant's belated attempt to fall back on a defence relating to s222APB(1)(b). No "defence" having been raised concerning reasonable steps directed at making an agreement with the Commissioner, it was not incumbent on the DCT to show the absence of a triable case in this regard!!. The attempt to remedy the matter for the first time on appeal runs into the additional difficulty of satisfying the principles for appellate review stated in Suttor v Gundowda Pty Ltd!2 and Coulton v Holcombe.!3 In any event the evidence supports the DCT. Application was made by the appellant for leave to read a further affidavit directed at this and other matters. Adequate notice of the additional evidence had not been given. Accordingly, 9. Strictly speaking, a notice of contention should have been filed. However, the point has been raised by the DCT when the leave application was heard and no objection was taken in the hearing of the appeal to this matter being canvassed, as it was, in the written and oral submissions. 10. Cf s222APB(1)(b). 11. General Credit Finance Pty Ltd v Grimm [1978] Qd R 449 at 470. 12. (1950) 81 CLR 418 at 438. 13. (1986) 162 CLR 1 at 7-8. URJ MILLER v DEPUTY COMMISSIONER OF TAXATION (Mason P) 7 leave to adduce further evidence was refused. This brings us back to the evidence before the Court below, albeit tendered in relation to other issues. S222ALA relevantly provides: 222ALA(1) [Undertaking to pay] The Commissioner may make with a person a written agreement under which the person is to pay specified amounts, on specified days, for the purpose of discharging one or more specified liabilities of the person, each of which is: (a) a liability under a remittance provision; or (b) a liability to pay an estimate. 222ALA(2) [Other provisions] An agreement may contain other provisions. 222ALA(3) [""special conditions'] An agreement may also provide that, if the person contravenes specified provisions of it, so much of the total of the specified amounts as remains unpaid becomes due and payable on the day of the contravention. If an agreement so provides, the specified provisions are called special conditions. 222ALA(8) [Commissioner's option] Nothing in Division 9 obliges the Commissioner to enter into an agreement with a company. SAQA(2) is also relevant: 222AQA(2) [Liability of directors] If the company contravenes the agreement by failing to pay a specified amount on or before the specified day, or by contravening a special condition, each person who was a director of the company at any time during the period beginning on the day when the agreement was made and ending on the day of the contravention is liable to pay to the Commissioner, by way of penalty, an amount equal to the balance payable under the agreement." The appellant accepts, as he must, that he made no attempt to persuade the DCT to make an agreement under s222ALA. However, the real defence sought to be raised was that there were no reasonable steps which he could have taken referable to a payment agreement within the 14 days of the sending of the notice of estimate. The appellant points to the insolvency of the company and of other family companies (which the DCT proved were wound up at venous dates in late 1994 and early (1995); the unsupportive attitude of his fellow director, and the statement in a letter from the DCT dated 14 October 1994 (enclosing the penalty notice) which stated that "you might also note that we would be reluctant to enter into any payment agreement to pay an estimate". Reference is also made to s222AQA(2) as providing reasons why the directors might reasonably refrain from seeking to persuade the Commissioner to enter into a payment agreement. In my view, this material did not raise a triable defence referable to s222APB(1)(b) (assuming it were open on the pleadings). No steps were taken in relation to a payment agreement. It was not discussed between the directors. The appellant might have said to his fellow director: "Dad, let's go in and try to talk the Commissioner into making an agreement." But he did nothing. It is true that the appellant's father seemed intent on doing little or nothing, intending or hoping to use the money coming in from debtors of the company, or a loan from Marlasi Holdings Pty Ltd. But that very prospect might well have induced the Commissioner to enter into a payment agreement had it been offered. According to the appellant, his father was seeking at the time to obtain "financial facilities" 8 UNREPORTED JUDGMENTS by mortgaging real estate owned by Marlasi Holdings Pty Ltd. Instead there was silence, apart from a belated attempt on behalf of the company to vary the amount of the estimate itself.!4 It is true that the letter of 14 October 1994 was discouraging, but it clearly offered the opportunity of discussing a payment agreement, emphasising in effect that the alarm clock was ticking loudly. I do not think that it provided the appellant with a defence that there were no reasonable steps that he could have taken with regard to a payment agreement, even when added to the other difficulties facing the various family companies. Nor did s222AQA(2) which, at its highest, made a payment agreement risky for the directors. Those risks could have been addressed in the proffered conditions of the payment agreement proposed to the Commissioner. But none was, because the directors were apparently content to ignore the option in the single-minded pursuit of their own interests. The stringent legislative scheme required more from them if the defence was to be made out, even in the limited sense of raising a triable issue for the DCT to negate. Leave was also sought to invoke a further defence not raised before McGuire DCJ or in the Notice of Grounds of Defence. Notice of intention to raise it in the appeal was first given to the DCT on 15 September 1997, when the appellant served his outline of submissions for the appeal listed for hearing on 19 September 1997. The defence was that the proceedings were commenced in the District Court (on 31 October 1994) before the DCT was entitled to recover the penalty from the appellant. S222APE states that the Commissioner is not entitled to recover a penalty under the Subdivision "until the end of 14 days after the Commissioner gives to the person" a penalty notice. The content of the penalty notice stipulated in s222APE(1) It is required that it: "(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 s222ALA; or (iii) the company is under administration within the meaning of the Corporations Law; or (c) if the penalty notice is given more than 14 days after the Commissioner sent to the company notice of the estimate - states that the person is liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount; 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 s222ALD; or (iii) the company is under administration within the meaning of the Corporation Law; or (iv) the company is being wound up." 14. Cf s222AGC-s222AGF. URJ MILLER v DEPUTY COMMISSIONER OF TAXATION (Mason P) 9 The appellant says that the penalty notice was not "given" when posted, but only when it was received. I agree. 14 October 1994 was a Friday, so the earliest conceivable time when the posted penalty notice could have been received would have been Monday 17 October 1994. (I do not regard the loss of tho right to lead evidence to the contrary as causing any injustice because I would take judicial notice that same day delivery by post is regrettably a thing of the past. No evidence could establish the contrary, at least in the context of rebutting an arguable defence in an application for summary judgment). The proceedings were commenced on 31 October 1994, less than 14 days later. However, the DCT's main response to this foreshadowed defence is to dispute the interpretation of s222APE implicit in the appellant's argument. The DCT submits that the Commissioner does not "recover [a penalty] from a person" on the day proceedings are commenced. Rather, recovery occurs at its earliest when judgment is entered. This did not occur until well outside the 14 day period. This interpretation of the word "recover" is supported by the judgment of Smart J in Maksimovic v Coshott,!5 when he pointed out that the ordinary meaning of "recover" when used in a legal context is to get back or gain by judgment in a court of law; to obtain possession of, or a right to, by legal process: Oxford English Dictionary, fifth meaning. The fourth meaning of 'recover' in the Macquarie Dictionary is to substantially the same effect. The DCT also submits that this interpretation draws support from the contrast between s222APE which uses "recover" and s221R(1) which, speaks of a debt being "sued for and recovered". See also s222API(1). I was at first attracted to the DCT's argument. However, I would on balance reject it. When one looks at the purpose of the penalty notice implicit in its prescribed contents one infers that its function is to alert the party potentially liable of his or her fate if certain things do not happen. One of the statements (in s222APE(1)(d)) is that the penalty will be remitted if "at the end of 14 days after the penalty notice is given" one of the four events there stated has not occurred. This clearly implies that the penalty notice is intended as a final warning, albeit in the back-handed way of inferring that a penalty which (ex hypothesi has or will have been incurred) will not be remitted in the circumstances stipulated. The Act clearly contemplates that the penalty will be recovered by legal proceedings. The right to recover, ie the cause of action, logically precedes the act of commencement of the proceedings. In other words, the curial process seeks to determine the existence of a right (to a penalty) imposed by the Act. Viewed in this way, the commencement of proceedings is the commencement of the process that leads to the recovery of the penalty in the sense indicated in the judgment of Smart J to which I have referred. When s222APE implies that such process is to be delayed until the lapse of a 14 day period from the giving of a penalty notice the commencement of that process requires to be delayed the obvious purpose of the section is to be carried into effect. The argument based upon comparison between s222APE and s221R is a classical invocation of the expressio unius maxim. Caution is always required before yielding to such an argument.!6 Such caution is doubly justified where the 15. (1987) 11 NSWLR 18 at 187. See also Walker v Secretary, Department of Social Security (1995) 56 FCR 354 at 360. 16. See Fay v Rood, and Traffic authority of New South Wales (1990) 20 NSWLR 665 at 669; Wentworth v NSW Bar Association (1992) 176 CLR 239 at 250. 10 UNREPORTED JUDGMENTS exaction of a penalty is involved and where one is dealing with such an untidy patchwork as the Income Tax Assessment Act. Accordingly, I would uphold the appeal on this belatedly-raised ground. Since the proceedings were commenced prematurely, and in breach of s222APE as I have construed it, they must be dismissed. Obviously the DCT is at liberty to commence fresh proceedings and, if so advised, to move afresh for summary judgment. Having regard to the circumstances in which the point was raised I would not disturb the costs order made in the court below and would propose that there be no order for the costs of the appeal. I record that counsel for the appellant foreshadowed a challenge to the validity of Divisions 8 and 9 of PtVI of the Act. It was first raised in a written submission filed on the eve of the hearing date. No ground of appeal had foreshadowed it. The Court drew attention to the costs implications. After an adjournment for a couple of hours to enable the proposed amendment to be formulated, counsel for the appellant announced that the constitutional point was withdrawn. I propose the following orders: 1. Appeal allowed. 2. Set aside the order for summary judgment. 3. Enter a verdict for the defendant. 4. Subject to the order made by Judge McGuire on 18 April 1997 that - the defendant pay the plaintiffs costs of the motion for summary judgment (which costs order is confirmed), the plaintiff is to pay the defendant's costs of the proceedings in the District Court. 5. No order as to the costs of the appeal. Priestley JA I agree with Mason P's reasons and the orders he proposes, but wish to state briefly in my own words, my opinion on one aspect of the case. This concerns one of the two principal matters argued in the appeal namely, whether McGuire DCJ was wrong in holding that the defendant had no arguable defence under paraS of his notice of grounds of defence. The defence alleged in para5 was that there were no reasonable steps the defendant could have taken to ensure that the company complied with s222APB of the Income Tax Assessment Act. $222APB(1) says that when the Commissioner has sent an estimate notice to the company the directors must do at least one of four things within fourteen days. If none of those things is done before the end of the fourteen days, s222APC makes each director-liable to pay to the Commissioner by way of penalty an amount equal to the unpaid amount of the estimate. S222API gives defences to a person sued in proceedings to recover penalties under the Subdivision in which s222APB and s222APC appear. Subs(3) of s222API says it is a defence if it is proved that: "(a) the person took all reasonable steps to ensure that the directors complied with subs222APB(1); or (b) there were no such steps that the person could have taken." In my opinion the way in which subs(3) works is that by virtue of para(a) it would be a defence for a director to prove that he had taken all reasonable steps to ensure that the directors caused the company to do at least one of the four things listed in s222APB(1), but a person seeking to rely on the defence under para(b) would have to show that there were no steps that person could have taken to cause the company to do any of the four things listed in s222APB(1). URJ MILLER v DEPUTY COMMISSIONER OF TAXATION (Beazley JA) 11 As to para(a), take an example of a person attempting to ensure that the directors caused the company to do the first of the four things listed in s222APB(1), that is payment to the Commissioner of the amount of the estimate; say the person is one of two directors and they agree that each of them will separately personally pay to the Commissioner half of the amount of the estimate and each shows to the other the cheque he or she is about to send to the Commissioner. In such a case, if one director carried out the agreement and the other pretended to his or her co-director to do so, but did not, I would think that the director who had taken steps to see that the Commissioner was paid the amount of the estimate, had carried out his or her part in doing so, and had believed that the other director was doing the same, would at least arguably have proved that he or she had taken all reasonable steps to ensure that the directors complied with subs222APB(1). The difference in the situation in regard to para(b) follows from the fact that if the reasonable steps referred to in para(e) had succeeded then the company would have done "at least one" of the four things listed, and the section would have been complied with, whereas under (b), to show that s222APB could not have been complied with, it would be necessary to show that there were no reasonable steps which could have been taken to ensure that the company did any of the four listed things. The defendants para5 defence particularised the facts which he said showed there were no reasonable steps he could have to en to ensure the company complied with s222APB. The facts particularised, if established, arguably showed that there were no reasonable steps the defendant could have taken to cause the company to do two, or possibly three, of the four things listed in s222APB(1). However the particulars did not provide any basis for an argument that there were no steps that the defendant could have taken to cause the company to do the fourth of the things listed (the making of an agreement with the Commissioner (para(b)). Thus, in my opinion, the defendant could not make out the defence under s222API(3)(b) which he had pleaded. An effort was made to cure this position in argument in this court, but for the reasons given by Mason P, I agree that the argument sought to be raised should not in the circumstances be entertained in the appeal. As earlier indicated, I agree with Mason P's reasons and proposed orders. Beazley JA I agree with Mason P. Appeal allowed. Set aside the order for summary judgment. Enter a verdict for the defendant. Subject to the order made by Judge McGuire on 18 April 1997 that the defendant pay the plaintiffs costs of the motion for summary judgment (which costs order is confirmed), the plaintiff is to pay the defendant's costs of the proceedings in the District Court. 5. No order as to the costs of the appeal. RYN Counsel for the appellant: R Rasmussen Solicitor for the appellant: Gells, Solicitors Counsel for the respondent: D Godwin 12 UNREPORTED JUDGMENTS Solicitor for the respondent: Australian Government Solicitor