Supreme Court New South Wales Medium Neutral Citation: Deputy Commissioner of Taxation v Power [2012] NSWSC 995 Hearing dates: 17 August 2012 Decision date: 09 November 2012 Jurisdiction: Common Law Before: Johnson J Decision: The Plaintiff is to bring in short minutes to give effect to this judgment, including the calculation of the quantum of judgment and interest. The parties will be heard in the event that there is no agreement as to costs. Catchwords: TAXES AND DUTIES - collection and recovery - corporate employer withheld pay-as-you-go deductions - amounts required to be remitted to the Australian Taxation Office by due date - failure to remit required payments - Director Penalty Notices ("DPNs") issued and not complied with - claim that the DPNs were invalid - requirements for valid DPNs - DPNs satisfied legislative requirements - Plaintiff entitled to judgment Legislation Cited: Taxation Administration Act 1953 (Cth) Income Tax Assessment Act 1936 (Cth) Corporations Act 2001 (Cth) Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) Acts Interpretation Act 1901 (Cth) Explanatory Memorandum, Tax Laws Amendment (Transfer of Provisions) Bill 2010 Cases Cited: Deputy Commissioner of Taxation v Falzon [2008] QCA 327 Robertson v Deputy Commissioner of Taxation [2010] NSWCA 58; 239 FLR 29 Australian Securities and Investment Commission v Marlborough Gold Mines Limited [1993] HCA 15; 177 CLR 485 Deputy Commissioner of Taxation v Di Florio [No 2] [2012] WADC 70 Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; 199 CLR 370 Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; 165 CLR 71 Texts Cited: --- Category: Principal judgment Parties: Deputy Commissioner of Taxation (Plaintiff) Representation: Counsel: Mr DM Jay (Plaintiff) Mr PJ Beazley, Solicitor (Defendant) Solicitors: ATO Legal Services Branch (Plaintiff) Beazley Singleton Lawyers (Defendant) File Number(s): 2011/213127 Publication restriction: --- Judgment 1JOHNSON J: By Statement of Claim filed 30 June 2011, the Plaintiff, the Deputy Commissioner of Taxation, seeks judgment against the Defendant, Kevin Patrick Power, in the sum of $896,663.77 (together with interest and costs) arising from the issue of, and non-compliance with, director penalty notices ("DPNs") issued upon the Taxation Administration Act 1953 (Cth) ("TAA 1953"). 2The claim relates to the failure of a company, Oakdale Newcastle Formwork Pty Limited ("Oakdale"), of which the Defendant was a director, to remit pay-as-you-go ("PAYG") deductions, withheld on behalf of employees, to the Australian Taxation Office ("ATO"). 3The Defendant did not challenge the contention that Oakdale had failed to make the required payments. The sole issue in the proceedings was whether the DPNs issued by the Plaintiff to the Defendant were valid. 4The Defendant contended that the DPNs were invalid as they failed to accord with the requirement in s.269-25(2)(b) TAA 1953 that the DPNs inform the Defendant that he was liable because of an obligation which he had, or formerly had, under Division 269 of the TAA 1953. Factual Background 5The relevant facts are not in dispute. What follows may be taken as findings of fact by the Court. 6Oakdale was incorporated in New South Wales on 4 August 2008 and went into administration on or about 29 July 2011. The Defendant was a director of Oakdale between 31 March 2009 and 23 May 2011. 7Oakdale employed staff and withheld amounts of tax on their behalf. It reported these amounts to the ATO in Business Activity Statements ("BAS") and Instalment Activity Statements ("IAS"). Oakdale was then required under the relevant legislation to remit these amounts to the ATO by a specified date (the "due date"). 8Details of the amounts withheld for the relevant periods, and the respective dates at which time each amount was due to be remitted, are set out below (as extracted from the parties' Agreed Statement of Facts and Issues at [4]): Amounts held pursuant to the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936") Amount withheld Withholding Period Due Date for Payment Amount Withheld First 1 Jan 2010 - 31 Mar 2010 26 May 2010 $258,691.00 Amounts withheld pursuant to the TAA 1953 Amount withheld Withholding Period Due Date for Payment Amount Withheld First 1 July 2010 - 31 July 2010 23 Aug 2010 $125,402.00 Second 1 August 2010 - 31 August 2010 21 Sep 2010 $145,609.00 Third 1 December 2010 - 31 December 2010 28 Feb 2011 $172,285.00 Fourth 1 January 2011 - 31 January 2011 21 Feb 2006 [sic] $77,514.00 Fifth 1 February 2011 - 28 February 2011 21 Mar 2011 $111,246.00 Sixth 1 April 2011 - 30 April 2011 23 May 2011 $142,909.00 Total $774,965.00 9As a result of amendments to the legislation which came into effect on 1 July 2010, the first of these periods was subject to the former provisions of the ITAA 1936. The remaining six periods were subject to the amended TAA 1953. 10It is agreed by the parties that the Defendant did not make all of the required remittance payments in respect of the periods set out above. The Agreed Statement of Facts and Issues indicates that the Defendant did make remittance payments in the sum of $136,922.23 (see [5] of the Agreed Statement of Facts and Issues), and this takes the form of a credit against the Defendant's liability. 11By reason of the failure of Oakdale to remit all the withheld PAYG deductions by the due date, the Defendant became personally liable to a penalty under relevant provisions of the legislation (to be considered in further detail later in this judgment). 12Prior to commencing proceedings to recover the penalty, the ATO was required to give notice to the Defendant of his liability and to inform him of what was required in order to have the penalty remitted. 13Four DPNs were issued by the ATO in respect of the seven periods in which the Company failed to remit withheld amounts. 14DPNs were issued to the Defendant on the following dates: (a)two notices were sent 8 February 2011; (b)one notice was sent 11 April 2011; (c)one notice was sent 25 May 2011. 15The DPNs were each identical in form and required the Defendant to take one of the following courses of action within 21 days of receipt: (a)discharge Oakdale's liability; or (b)place Oakdale in administration within the meaning of the Corporations Act 2001 (Cth); or (c)commence the winding up of Oakdale; or (d)make an arrangement with the ATO under s.255-15 in Schedule 1 to the TAA 1953 to pay Oakdale's liability by instalments. 16The Defendant did not take any of these courses of action within 21 days of receipt of the DPNs. 17Pursuant to that failure, the Plaintiff commenced proceedings to recover the amounts owing to it. The Plaintiff's Case 18Each of the four DPNs was drafted and posted to the Defendant by staff members of the ATO. These persons were Donna Nugent, Juanita Smit, and Myrl Baker. At the hearing, the Plaintiff read affidavits of each of those staff members, annexed to which are copies of the respective DPNs and associated covering letters. 19The basis and quantum of the Defendant's liability are outlined by the Plaintiff in the affidavit of another ATO staff member, Chaya Shettar, affirmed 25 January 2012. The material annexed to that affidavit includes the following: (a)BAS and IAS, prepared and lodged by Oakdale, which disclose the salary and wages paid to employees as well as the amounts of withheld PAYG deductions (Annexures "A1"-"A7"); (b)an ATO Statement of Account for Oakdale, indicating liabilities and credits in respect of the BAS and IAS (Annexure "F"); and (c)an ATO Statement of Account setting out the calculation of Director Penalties (Annexure "G"). 20Oakdale's Statement of Account and the respective BAS and IAS show how Oakdale's liabilities have accrued and where credits have been applied. Included in these is the credit for the $136,922.23 paid by Oakdale (see [10] above). 21The total unpaid liability of Oakdale is $896,663.77. This figure is comprised of the total amount of withheld deductions, as disclosed in the BAS and IAS lodged by Oakdale, which were not remitted in accordance with requirements. 22The quantum of the Defendant's liability is equal to that of Oakdale's unpaid liability, and is evidenced by an ATO Statement of Account setting out the calculation of the penalty the Defendant is now being asked to pay. 23The Plaintiff also relied on an evidentiary certificate under s.255-45 of the TAA 1953. That certificate is Annexure "I" to the affidavit of Ms Shettar. A certificate under that provision is prima facie evidence of the matters asserted therein: TAA 1953, s.255-45(1). The Defendant's Case 24In an Amended Defence filed 21 November 2011, the Defendant raised two defences. One of these was a challenge to the quantum of his liability; however, this issue was not pressed in the Defendant's written submissions or at the hearing. Secondly, he argued that the DPNs served upon him in respect of Oakdale's failure to remit withheld deductions were invalid, for failing to state that he was liable because of an obligation he was under when serving as a director. 25The Defendant did not file and serve evidence within the various timetables fixed by the Court for this purpose prior to the hearing. Late on the evening before the hearing, Mr Beazley, solicitor for the Defendant, informed the Plaintiff that he wished to tender certain documents at the hearing. The Plaintiff objected to this course, and I declined the Defendant's application for reasons then given (T3-6, 8, 17 August 2012). 26The sole issue in contest at the hearing concerned the validity of the DPNs. The Defendant contended that the DPNs did not comply with the content requirements under s.269-25. Whilst principally based on the requirements of subsection (2)(b) of that provision, there were essentially three submissions advanced to challenge the validity of the DPNs: (a)Submission 1: That the DPNs failed to distinguish between current and past director obligations. (b)Submission 2: That the DPNs failed to state, as was required by s.269-25(2)(b), that the Defendant was liable to pay a penalty because of an obligation which he had under Division 269 of the TAA 1953. (c)Submission 3: That the DPNs related to two or more penalties and failed to comply with s.269-25(2)(b) in respect of each. The Relevant Law 27The system of withholding PAYG deductions from the salary or wages of an employee, for the purpose of remitting those deductions to the ATO on behalf of the employee, is provided for in Division 12 of Schedule 1 to the TAA 1953. Section 12-35 provides: "An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)." 28The requirement to remit those monies to the ATO is contained in Subdivision 16-B. Section 16-70(1) TAA 1953 provides: "An entity that withholds an amount under Division 12 must pay the amount to the Commissioner in accordance with this Subdivision." 29A director of a company that withholds amounts under Division 12 is under a personal obligation to ensure that the company remits those amounts to the Commissioner by the specified due date. Failure to do this can result in liability on the part of the director to pay a penalty to the Commissioner. 30Prior to 1 July 2010, this regime was set out in the ITAA 1936. In Deputy Commissioner of Taxation v Falzon [2008] QCA 327, Fraser JA summarised the regime (at [14]-[15]): "[14] Section 222AOB of ITAA obliges a director to cause the company to pay each such amount to the Commissioner, to enter a payment agreement with the Commissioner under s 222ALA, or to appoint an administrator or to begin the winding up of a company. Section 222AOC imposes a penalty, equal to the tax withheld, upon a person who is a director during the period from the date the money is withheld and the due date for its payment. ... [15] Section 222AOE provides that the Commissioner is not entitled to recover the penalty from the director unless the Commissioner has given the director a notice setting out the amount of the unpaid liability under s 222AOC and stating that the director must pay the penalty unless, within 14 days, the liability has been discharged, the company has entered into a s 222ALA agreement, an administrator has been appointed or the company is being wound up. ..." 31The ITAA 1936 was amended on 1 July 2010 by the Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) ("the 2010 Amending Act"). The 2010 Amending Act repealed the parts of the ITAA 1936 that set out director obligations and added Division 269 to Schedule 1 of the TAA 1953. 32Division 269 creates a new regime with respect to directors' obligations and the penalties that attach to any failure to comply with those obligations. Nevertheless, the provisions are largely a rewrite of the previous legislation and few changes have been introduced: Explanatory Memorandum, Tax Laws Amendment (Transfer of Provisions) Bill 2010, [1.8]-[1.9]. 33Section 269-10 TAA 1953 sets out the scope of the Division as follows: Obligations that directors must cause company to comply with Item This Division applies if, on a particular day (the initial day), a company registered under the Corporations Act 2001 ... and the company is obliged to pay to the Commissioner on or before a particular day (the due day ) ... 1 withholds an amount under Division 12 that amount in accordance with Subdivision 16-B. ... 34The obligations of directors of companies that withhold amounts under Division 12 are set out in s.269-15 TAA 1953: "Directors' obligations (1)The directors (within the meaning of the Corporations Act 2001) of the company (from time to time) on or after the initial day must cause the company to comply with its obligation. (2)The directors of the company (from time to time) continue to be under their obligation until: (a)the company complies with its obligation; or (b)an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001; or (c)the company begins to be wound up (within the meaning of that Act)." 35Where a director fails to comply with the foregoing obligations, he or she becomes liable to pay a penalty to the Commissioner under s.269-20 TAA 1953: "Penalty for director on or before due day (1)You are liable to pay to the Commissioner a penalty if: (a)at the end of the due day, the directors of the company are still under an obligation under section 269-15; and (b)you were under that obligation at or before that time (because you were a director). Note:Paragraph (1)(b) applies even if you stopped being a director before the end of the due day: see subsection 269-15(2). (2)The penalty is due and payable at the end of the due day. ... Amount of penalty (5)The amount of a penalty under this section is equal to the unpaid amount of the company's liability under its obligation." 36Prior to commencing proceedings against any director, the Commissioner must give the director notice under s.269-25 TAA 1953: "Commissioner must give notice of penalty (1)The Commissioner must not commence proceedings to recover from you a penalty payable under this Subdivision until the end of 21 days after the Commissioner gives you a written notice under this section. Content of notice (2)The notice must: (a)set out what the Commissioner thinks is the unpaid amount of the company's liability under its obligation; and (b)state that you are liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount because of an obligation you have or had under this Division; and (c)explain the main circumstances in which the penalty will be remitted." 37Section 269-30 TAA 1953 sets out circumstances in which the penalty may be remitted: "A penalty of yours under this Division is remitted if the directors of the company stop being under the relevant obligation under section 269-15: (a)before the Commissioner gives you notice of the penalty under section 269-25; or (b)within 21 days after the Commissioner gives you notice of the penalty under that section." 38It is pertinent to note the effect of the recent amendments to the TAA 1953 on the current proceedings. As stated above (at [9]), the first of the seven periods in respect of which relief is sought by the Plaintiff occurred prior to the amendments of 1 July 2010 and is, therefore, subject (to some extent) to the former provisions of the ITAA 1936. 39However, s.65(4) of the 2010 Amending Act provides: "Division 269 in Schedule 1 to the Taxation Administration Act 1953 (other than section 269-20) has effect, from the commencement time, as if the penalty were payable under Subdivision 269-B in that Schedule." 40The effect of s.65(4) is that the provisions of Division 269 (including, inter alia, the obligations of directors of companies required to withhold under Division 12, and the content requirements for DPNs) have retrospective application. It should be noted, however, that the quantum of any penalty, and the circumstances in which it is payable, are provided for in s.269-20. Consequently, for penalties issued prior to 1 July 2010, these matters will still be determined under the previous legislation. 41Therefore, notwithstanding that the first DPN ("DPN 1") was issued in respect of a period occurring prior to the amendments (that period being 1 January 2010 to 31 March 2010), the content requirements of DPN 1 will be assessed by reference to the TAA 1953 as amended by the 2010 Amending Act. Determination of the Validity of the DPNs 42As foreshadowed earlier in this judgment, the Defendant advanced three submissions upon which the DPNs were said to be invalid under s.269-25. Each will be considered in turn. Submission 1: Failure To Distinguish Between Current And Past Obligations 43The parties agreed that the Defendant ceased his role as a director of Oakdale on 23 May 2011. An ASIC search conducted on 24 January 2012 (Annexure "H" to the affidavit of Chaya Shettar) confirms this fact. 44The final DPN ("DPN 4") was served on 25 May 2011 - two days after the Defendant ceased his role. Consequently, it was argued by the Defendant that DPN 4 was required to stipulate that he was liable to pay a penalty because of a past obligation he had when a director of Oakdale. At paragraph 12 of the Defendant's written submissions, Mr Beazley contended that, "[i]n respect of a former director, the obligation should be stated in the past". 45Mr Jay, counsel for the Plaintiff, made oral submissions in response to this argument, referring to both the evidence and the governing legislation. 46Firstly, the Plaintiff directed the Court to the affidavit of Myrl Baker. At Annexure "A" to that affidavit was an ASIC search conducted by Ms Baker on 24 May 2011, one day after the Defendant ceased his role as director. The search indicated that the Defendant was still a director at that time (it appears that the ASIC database had not yet been updated). The Court was informed that it is usual practice for changes to not appear on the ASIC database for a period of time (T14.31). On this basis, the Plaintiff submitted that, to the knowledge of Ms Baker, the Defendant was a director of Oakdale as at the date on which she conducted the search, and that it was appropriate for DPN 4 to be expressed in the present tense. 47The Plaintiff directed the Court to the decision of the Court of Appeal in Robertson v Deputy Commissioner of Taxation [2010] NSWCA 58; 239 FLR 29. This was a case concerning the service of a notice under the former provisions of the ITAA 1936 to an address which the ASIC database indicated to be the current address of a director, in circumstances where that address was no longer correct. The Court rejected a submission that the ATO officer should not have relied solely upon the ASIC database. Gzell J (Allsop P and Handley AJA agreeing) (at 36-37 [49]-[60]) observed that ASIC was required to receive, store, and make available to the public, information given to it under the Corporations Act 2001 (Cth), and that a parliamentary intention is evinced that the ASIC database is a reliable source of information. 48The Plaintiff submitted that, therefore, a person who conducts an ASIC search is entitled to rely and act upon the accuracy of the information obtained. I accept that submission. The wording of DPN 4 reflected the status of the Defendant as then disclosed in the ASIC database. Ms Baker was entitled to act upon those records for the purpose of issuing DPN 4. The submission of the Defendant does not demonstrate any defect in DPN 4, let alone a defect which affects its validity. 49Secondly, the Plaintiff pointed to the nature of the obligations on directors under s.269-15, and submitted that the obligation is a continuing one that exists not by reference to whether or not a person is a director, but by reference to the company's obligation to withhold and remit. 50A number of observations ought be made in this regard: (a)Section 269-15 uses the phrase "from time to time" when referring to directors of a company, thereby implying (understandably) that the directorship of a company may change; (b)The effect of s.269-15(1) is that, if a person becomes a director at any time on or after the initial day as defined, that person inherits the obligation to cause the company to comply; (c)Section 269-15(2) provides that, once a person acquires the obligation, he or she continues to be subject to it until one of a given list of events occurs (which list includes the company complying with its obligation). (d)According to s.269-20(1), a director will become liable to a penalty if, at the end of the due day, the company has not complied with its obligations, and that person was under an obligation to cause the company to comply by reason of having the status of director "at any time prior to the due day". This interpretation is supported by the note to s.269-20(1) which adds that a person is liable to pay, notwithstanding that the person may have stopped being a director before the end of the due day. I note, in accordance with [40] above, that s.269-20(1) does not apply to the first of the periods in respect of which DPNs were issued by the Plaintiff. In my view, however, the predecessor to that section, s.222AOC ITAA 1936 (which is applicable to the first period), is not materially different. 51Accordingly, a proper construction of the legislation indicates that the obligation is indeed a continuing one, and that it survives any renunciation of directorial duty. 52I accept the Plaintiff's submission on this aspect. As the Defendant's obligation is a continuing one, there was no need to express the obligation in the past tense, notwithstanding that he was no longer a director of Oakdale at the time of receipt. 53It follows that there was no reason why the ATO ought to have made changes to DPN 4 upon learning that the Defendant was no longer a director. 54I reject this challenge to the validity of DPN 4. Submission 2: Failure to State in the DPNs that the Defendant Was Liable to Pay a Penalty Because of an Obligation He Was Under 55The second submission constituted the core of the Defendant's resistance to the relief sought against him. It was submitted that the DPNs failed to comply with the content requirements in s.269-25(2)(b). 56Paragraph 8(b) of the Amended Defence stated that the DPNs issued to the Defendant in respect of Oakdale's failure to remit withheld deductions: "... failed to state - as required by s.269-25(2)(b) - that the defendant was so liable because of an obligation the defendant then had, or had had, under Division 2 [sic] of Chapter 2 in schedule 1 to the [TAA 1953]." 57The Defendant did not put in issue the validity of the service of the DPNs. So much is clear from his Amended Defence at paragraph 8(a). Furthermore, it was not contended by the Defendant that the Plaintiff failed to set out what the ATO perceived to be the quantum of his liability in accordance with s.269-25(2)(a). Nor was issue taken with regard to the requirement in s.269-25(2)(c) that the Plaintiff explain the circumstances in which the penalty may be remitted. Such circumstances, and the Commissioner's perceived quantum of the Defendant's liability, are plainly set out both in the DPNs themselves and in the respective covering letters. 58Therefore, attention ought be directed solely to the requirements of s.269-25(2)(b) of the TAA 1953, and whether the DPNs satisfied these requirements. 59Section 269-25(2)(b) TAA 1953 has not been considered by the Supreme Court of a State or Territory, or an appellate court. Accordingly, there is no decision which binds this Court or which the Court should follow, as a matter of comity, unless convinced that the interpretation is plainly wrong: Australian Securities and Investment Commission v Marlborough Gold Mines Limited [1993] HCA 15; 177 CLR 485 at 492. 60However, the provision was considered by the District Court of Western Australia in Deputy Commissioner of Taxation v Di Florio [No 2] [2012] WADC 70. This case involved an analogous defence whereby a director argued that DPNs served upon him were deficient on the grounds that they failed to state that he was liable because of an obligation he had as a director. 61In that case, Scott DCJ noted at [33]: "Counsel were unable to refer me to any cases relating to the provisions of s 269-25 of the TAA and nor was I able to locate any cases relating to that section. Nonetheless, save for the period of notice the provisions of that section are identical to s 222AOE of the ITAA. ..." 62It should be observed at the outset that s.222AOE was not strictly identical to the current s.269-25 in the respects identified by Scott DCJ. Section 222AOE did not include the phrase "because of an obligation you have or had under this Division", a phrase which is pertinent to the submissions advanced in this case. 63The High Court of Australia considered the validity of notices under s.222AOE of the ITAA 1936 in Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; 199 CLR 370. The notices served in Deputy Commissioner of Taxation v Woodhams were virtually identical in form to those served in the present case (see 380-381 [24] of the Court's judgment for the relevant extract). It should be noted, however, that the question of the validity of the notices in that case related to the absence of dates at which time the amount withheld by the respondent fell to be remitted to the Commissioner. 64Relevantly for present purposes, the High Court, in a unanimous judgment, made general statements about the construction of notices in the context of the predecessor legislation. The Court stated that it is the legislative purpose behind the requirement to give a notice that determines the nature and extent of the information necessary to satisfy the statutory requirements (at 384 [33]). 65As to the legislative purpose of the provision in question, the Court stated (at 384 [35]-[37]) (emphasis added): "[35] The notice in question is addressed to a director of the company. Such a person will ordinarily have access to information concerning the company's liabilities. The notice does not create a liability to pay a penalty, and if there is to be action to recover the penalty under s 221R it will be taken in the appropriate civil jurisdiction. In that event, the rules of court will require the elements of the cause of action to be pleaded and particularised in the ordinary way. A notice before action is not intended to serve the purpose of a statement of claim. [36] The first purpose of the notice is to inform the recipient of the unpaid amount of the company's liability under the remittance provisions, and of the recipient's liability to a penalty in the same amount. The second purpose, consistently with s 222ANA, is to inform the recipient of the alternative courses available, as set out in s 222AOE(b), which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one or other of those courses is followed. [37] In a number of respects, the due date for remittance of a deducted amount is relevant to a director's liability to pay a penalty, but that is not the liability to which s 222AOE is referring. The section does not require that the notice state details of the facts relevant to the director's liability. That is a function to be served by the pleadings and particulars, if and when action is taken to recover the penalty. Nor does the section require details of all facts relevant to the company's liability. ..." 66In Deputy Commissioner of Taxation v Di Florio [No 2], Scott DCJ observed that the notice served in that case was couched in the same terms as that considered in Deputy Commissioner of Taxation v Woodhams (which, as stated above, was the same in all relevant respects to the DPNs under present consideration). His Honour held that the notice was not invalid, stating: "38 The respondent says that as the notice does not impose a liability or create a right of action but is merely a requirement for a notice before action, it was not intended that the notice explain the legal basis of the asserted liability but rather was designed to serve the specific purposes, namely those referred to in Woodhams. 39 I agree. The notice sets out the detail of the sums for which the respondent contended that the appellant as a director of the company was liable by way of a penalty. The notice in the present case is couched in the same terms as that considered by the High Court in Woodhams." . 67The decision in Deputy Commissioner of Taxation v Di Florio [No 2] is a helpful example of the construction of the current provisions by application of the principles in Deputy Commissioner of Taxation v Woodhams. Although not attracting the rule of comity, it remains useful to this Court in determining the issues raised in the present case. 68It can be accepted that the legislative purpose of the notice required under s.269-25(1) of the current legislation is the same as the legislative purpose in respect of the former notice under s.222AOE of the ITAA 1936. Such an assumption is made on the basis that the amended legislation was designed as a rewrite of the previous Act, and not a major change to legislative policy: Explanatory Memorandum, Tax Laws Amendment (Transfer of Provisions) Bill 2010, [1.8]-[1.9]. 69That legislative purpose was made clear by the High Court in Deputy Commissioner of Taxation v Woodhams and can be said to comprise two elements: (a)to inform the recipient director of the quantum of the company's unpaid liability under the remittance provisions, and of the recipient's personal liability for a penalty in the same amount; and (b)to inform the recipient of the courses of action available which will result in the remission of the penalty. 70Moreover, the object of Division 269 informs any interpretation of the legislative purpose of that Division. The relevant object is stated in s.269-5 TAA 1953: "The object of this Division is to ensure that a company either: (a)meets its obligations under Subdivision 16-B (obligation to pay withheld amounts to the Commissioner) and Division 268; or (b)goes promptly into voluntary administration under the Corporations Act 2001 or into liquidation." 71This object is consistent with the second arm of the legislative purpose of notices of this sort as referred to above, being to promote the discharge of a company's obligation to remit withheld deductions. 72This interpretation is supported by the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, introducing the 2010 Amending Act: "[2.13]The penalty regime reflects the public duty on directors to ensure that amounts withheld from payments to third parties are promptly forwarded to the Commissioner. The public duty arises because withheld amounts are similar in nature to amounts held on trust. That is, the directors are in a position of trust and have a duty to protect those monies until they have been forwarded to the Commissioner." 73Extrinsic material of this type is an available aid to construction: s.15AB Acts Interpretation Act 1901 (Cth). Further, the construction that I favour best achieves the purpose and object of the Act: s.15AA Acts Interpretation Act 1901 (Cth). 74It follows that directors ought be held to high standards as regards their duty to ensure compliance on the part of the companies that they control. 75Attention is now directed to the DPNs in this case. As noted above, each of the four DPNs were identical in form. An example of the body of one of the DPNs is as follows: "In exercise of the powers and functions conferred on me as a Deputy Commissioner of Taxation by a delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953 (TAA 1953), I give you notice under section 269-25 in Schedule 1 to the TAA 1953 that you, as a director of the company, are liable to pay the Commissioner by way of penalty an amount equal to the unpaid amount of each liability of OAKDALE NEWCASTLE FORMWORK PTY LIMITED, ACN 132 546 546, ("the company") pursuant to subsection 16-70(1) in Schedule 1 to the TAA 1953 in respect of amounts withheld by the company for the purposes of Division 12 in Schedule 1 to the TAA 1953, ..." 76The DPNs then set out the periods in respect of which notice was being given and the sum of the unpaid liability for each period. 77At this point, the following observations ought be made: (a)The DPNs clearly pointed the recipient to the provision pursuant to which notice was given: "I give you notice under s.269-25 in Schedule 1...". (b)The DPNs stated that "you, as a director of the company, are liable to pay ...", thereby addressing the particular source of the recipient's liability by reference to his status as a director of Oakdale. (c)The DPNs then stated that this liability was "pursuant to subsection 16-70(1) in Schedule 1 to the TAA 1953". Section 16-70(1) requires entities that withhold PAYG deductions to remit those amounts to the Commissioner. That section is located within Subdivision 16-B of Schedule 1 to the TAA 1953, which is caught within the scope of Division 269, as provided for by s.269-10 (see [33] above). That is, the director obligations contained in Division 269 apply to directors whose companies have obligations to remit withheld PAYG amounts under s.16-70(1). Therefore, the DPNs addressed the particular provision that was said to give rise to Oakdale's (and, consequently, the Defendant's) liability to make payments to the Commissioner. 78The Defendant, in his written submissions, contended that the DPNs referred only to obligations of Oakdale and not to any obligation of the Defendant. When asked during the hearing to identify the specific form of words which (in the Defendant's submission) were necessary in order to satisfy the requirements of s.269-25(2)(b), Mr Beazley submitted that the following words, or words to the following effect, were required (T22.1): "Pursuant to 269-10, the company of which you are a director, between 1 January 2010 and 31 March 2010 withheld amounts under division 12, and the company is obliged to pay the Commissioner on or before the due date, and pursuant to 269-15 you as a director of the company, on the date the amounts were withheld, had an obligation to cause the company to pay that amount." 79Mr Beazley did not submit that this was the only formulation which could satisfy what he submitted was required by the statute. However, he contended that wording of this type was necessary to meet the strictures of the legislation. 80It is true that Mr Beazley's formulation would have satisfied the legal criteria. However, the question is whether these words, or words to a similar effect, represent the minimum lawful standard required under s.269-25(2)(b), or whether something less will suffice (and, in particular, whether the contents of the DPNs will suffice). 81The DPNs did not specifically refer to the obligations of directors under s.269-15. However, in my view this does not mean that the DPNs failed to inform the Defendant that he was liable because of an obligation which he had. The DPNs made clear that it was by reason of the Defendant's status as a director that he incurred the penalties. As a director, the Defendant would have had access to information concerning Oakdale's liabilities and the amounts being withheld on behalf of employees for the purpose of remittance to the ATO. Further, as a director, the Defendant ought reasonably to have known of his obligations to ensure Oakdale remitted the withheld monies. 82The DPNs also clearly fulfilled the legislative purpose of notices of this type. They informed the Defendant of the quantum of Oakdale's unpaid liability and of his liability to a penalty in an equal amount, and they made clear what he was required to do to avoid the penalty (allowing 21 days for him to comply). 83The DPNs did not create the liability to pay a penalty: Deputy Commissioner of Taxation v Woodhams at 384 [35]. Such liability accrued automatically upon the failure of Oakdale to remit withheld monies by the due date, of which it ought to have been aware were required to be remitted. 84Furthermore, the DPNs were not designed to serve as a statement of claim, setting out pleadings and particulars: Deputy Commissioner of Taxation v Woodhams at 384 [35], [37]. Instead, they had the simple object, as outlined in s.269-5, of ensuring that Oakdale discharged its obligations to remit withheld monies, by putting the recipient on notice that he would be liable to pay a penalty if such obligations were not performed within 21 days. 85In Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; 165 CLR 71, Mason CJ and Wilson, Brennan and Gaudron JJ affirmed, in the context of bankruptcy notices, that such a notice is invalid if it fails to meet a requirement made essential by the legislation, or if it could reasonably mislead a debtor as to what that person must do in order to comply with the notice. 86Section 269-25(2)(b) does not expressly require the notice to state that the recipient is liable to pay "because of an obligation you have or had under s.269-15". Instead, it refers to an obligation "under this Division". 87By stating that notice was being given pursuant to s.269-25 (a provision located within the Division in question) and by stating that the Defendant was liable to pay because Oakdale had failed in its obligations (in respect of which the Defendant was consequently liable), I am satisfied that the DPNs met the essential requirements of s.269-25(2)(b). 88Furthermore, it cannot be said that the Defendant could reasonably have been misled as to what course of action he was required to take in response to the DPNs. The courses of action were plainly set out. 89I am satisfied that the DPNs complied with the requirements of s.269-25(2)(b). I make this finding in light of the object of the Division (as provided in s.269-5) and the legislative purpose of notices of this sort as outlined by the High Court in Deputy Commissioner of Taxation v Woodhams. Submission 3: Failure to Provide Separate DPNs for Each Period 90This submission was ancillary to the Defendant's second submission, and was based on the requirements of s.269-25(3). 91The Defendant contended (at [14] of his written submissions) that "[w]here there are two amounts claimed, there is an obligation to inform the Director of the obligation in respect of each amount". 92Section 269-25(3) TAA 1953 provides: "To avoid doubt, a single notice may relate to 2 or more penalties, but must comply with subsection (2) in relation to each of them." 93In submissions, Mr Beazley asserted that the form of words required to satisfy s.269-25(2)(b) ought be repeated after each period to which the respective notice applied (T22.1-T22.13). 94On a proper construction of these DPNs, one observes that the "notice" is contained in the body of each respective document, being the paragraph commencing "In exercise of the powers and functions conferred on me ...". The periods and penalties to which each DPN applies are then listed thereafter. I am satisfied that this structure complies with s.269-25(3). 95Any recipient would read the operative part of the DPN as applying to each listed period. 96The Defendant's construction would require unnecessary duplication, which would not aid a fair reading of the document or promote an understanding of it. The legislation does not require such an approach. 97I reject the Defendant's third submission. Conclusion 98I record my conclusion that I am satisfied, on the balance of probabilities, that the Plaintiff has demonstrated an entitlement to judgment against the Defendant. 99The affidavit of Jayanthy Sivayoganathan, affirmed 17 August 2012, demonstrates that the sum owing by the Defendant to the Plaintiff as at that day by way of director penalties, was $896,663.77, together with interest to 17 August 2012 in the sum of $85,963.03, giving a total of $982,626.80. 100I will allow the Plaintiff an opportunity to bring in short minutes to give effect to this judgment, including the calculation of the quantum of judgment and interest. 101Costs will ordinarily follow the event. I will hear the parties in the event that there is no agreement as to costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 November 2012