District Court New South Wales Medium Neutral Citation: Deputy Commissioner of Taxation v Scarf [2013] NSWDC 114 Hearing dates: 10 April 2013; 16 April 2013 (submissions) Decision date: 04 June 2013 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) Judgment for the plaintiff for $211,225.00. (2) Defendant pay plaintiff's costs. (3) Liberty to apply in relation to costs and interest. (4) Exhibits retained for 28 days. Catchwords: TAXATION - Company failed to remit tax - two default notices (DPN) for successive periods of time sent to director - subsequent email from ATO to director referring to "DPN" and not "DPNs" - whether estoppel by representation - whether estoppel by convention - whether misleading Legislation Cited: Civil Procedure Act 2005 (NSW), s 100 Customs Tariff (Anti-Dumping) Act 1975 (Cth), s 8 Income Tax Assessment Act 1936 (Cth), Part 9, Subdivision B, ss 222AOB, 222AOC, s 222AOJ(1) Land Tax Management Act 1956 (NSW), s 47(1) Stamp Duties Act 1920 (NSW), s 37(1) Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) Taxation Administration Act 1953 (Cth), Schedule 1, ss 250-25, 255-5, 255-15, 255-45, 269-15, 269-25, 269-20 and 269-40 Cases Cited: AGC (Investments) Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1379 Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 154 Collector of Customs v Palmer Steel Trading (Aust) Pty Ltd [2003] QSC 434 Dabbs v Seaman (1925) 36 CLR 538 Davis v CGU Insurance Ltd [2009] SASC 220 Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466 Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697 Jones v Dunkel (1959) 101 CLR 298 Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135 Legione v Hateley (1983) 152 CLR 406 Maritime Electric Company Ltd v General Dairies Ltd [1937] AC 610 Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 Moratic Pty Ltd v Gordon [2007] NSWSC 5 Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051 Onward Building Society v Smithson [1893] 1 Ch 1 Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 Sanpine v Koompathoo Aboriginal Land Council [2005] NSWSC 365 Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149 Texts Cited: Handley, The Hon Justice K R, "Unconscionability in estoppel: Triable issue or foundational principle?" [2007] QUTLawJJl 27 Category: Principal judgment Parties: Plaintiff: Deputy Commissioner of Taxation Defendant: Damien Richard Scarf Representation: Plaintiff: Mr R Scruby Defendant: Mr G McNally SC Plaintiff: ATO Legal Services Branch Defendant: Breene & Breene Solicitors File Number(s): 2011/383964 Publication restriction: None Judgment 1The plaintiff by Amended Statement of Claim filed on 20 June 2012 seeks payment of $211,225 together with interest pursuit to s 100 Civil Procedure Act 2005 (NSW) in relation to two director penalty notices ("DPNs"). The two DPNs relate to PAYG instalments of amounts payable to the Commissioner of Taxation under s 269-20 of Schedule 1 to the Taxation Administration Act 1953 (Cth) ("TAA"). 2Section 269-20 of Schedule 1 to the TAA applies only to liabilities of directors after 1 July 2010. Prior to that time, the substance of Division 269 was contained in Subdivision B of Part 9 of the Income Tax Assessment Act 1936 (Cth) ("ITAA 1936"). The Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) ("Amendment Act") transferred these provisions across to the TAA in the new Division 269. By item 65(4) of the Amendment Act, all of Division 269 apart from s 269-20 applies to liabilities that arose prior to 1 July 2010. For these liabilities, ss 222AOB and 222AOC of the ITAA 1936 apply instead of s 269-20. 3The defendant, by an Amended Defence filed on 18 October 2012, admits receipt of the DPNs, but raises a substantive defence of common law estoppel by representation. An additional defence of estoppel by convention was relied upon in submissions. 4The Amended Defence also pleads, in paragraph 22, that the defendant took all reasonable steps to comply with s 222AOB(1) ITAA 1936 within the meaning of s 222AOJ(1) ITAA 1936, including entering into an arrangement under s 255-15 in Schedule 1 to the TAA. This was not pursued at the hearing. The issues for determination in these proceedings 5The issues for determination are: (1)Whether the conduct of the parties gives rise to a common law estoppel by representation (or alternatively estoppel by convention), preventing the plaintiff from asserting that the defendant was served with two different DPNs dated 3 March 2011 and/or is liable for penalty amounts otherwise due under s 222AOC ITAA 1936 and s 269-20(1) of Schedule 1 to the TAA, precluding the plaintiff from relying on the consequences of the failure to take steps to avoid the effect of the penalty notices by placing the company into liquidation within the 21 day period; (2)Whether in the circumstances, if the defendant establishes the foundation for an estoppel, the estoppel is of no effect in the face of the Commonwealth statutes; (3)Whether the same facts relied upon by the defendant in the estoppel case, makes the second DPN misleading so that it is invalid and cannot be relied upon by the plaintiff: Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271; and, (4)Whether the plaintiff was precluded by s 269-15(3) of Schedule 1 to the TAA from commencing these proceedings because of the existence of the arrangement entered into by the parties on 17 September 2011. The circumstances leading to the issue of two DPNs 6The defendant had been, since 2003, the sole director and secretary of a clothes manufacturing company established by his family more than fifty years ago ("the company"). The company enjoyed many decades of success but encountered financial difficulties over a period of some years (Exhibit A, Annexure A). For each of the quarters 1 January 2009 to 31 March 2009 and 1 April 2009 to 30 June 2009, the company withheld amounts from salary and remuneration it paid, but did not remit these amounts to the Commissioner. As at 3 March 2011, the total to be remitted was $30,435.75. This meant that as at 3 March 2011, the company was under an obligation, pursuant to s 222AOC(1) ITAA, to pay these quarterly amounts. 7From 1 September 2009 onwards, the company was required to remit amounts monthly. For each of the monthly periods 1 September 2009 to 31 January 2011, the company withheld, but did not remit, salary and remuneration which by 3 March 2011 totalled $223,740 (the monthly amounts). 8The company entered into a series of payment arrangements for payment of outstanding obligations by instalments. Prior to 3 March 2011, the most recent of these had been a payment arrangement on 4 February 2011 (affidavit of Mr Gregory Phillips of 26 March 2013, paragraph 20; see also annexure M at p 69). 9The company defaulted on the payment arrangement. On 3 March 2011, the plaintiff sent two DPNs to the defendant. These were: (a)A notice in relation to the quarterly amounts up to June 2009 (the first DPN); and, (b)A notice in relation to the monthly amounts for the period 1 September 2009 to 31 January 2011 (the second DPN). 10On 7 March 2011 at 3:35pm, the defendant emailed a contact at the ATO, Ms Marianne Esser, saying: "I know your [sic] not handling our file any longer but I just wanted to check as to why the amount of 15K was not withdrawn from our account for the last 2 weeks. Any help would be great.Kind regardsDamien" (Exhibit E, p 3) 11This was replied to by Ms Jan Stamp at 5:02pm on that same day, 7 March 2011, as follows: "With reference to your e-mail to previous case officer asking why the direct debit payments have not been withdrawn from your account The arrangement to pay input 03/2/2011 has defaulted due to the following: 1st payment 11/02/11 $30,000 - payment dishonoured 3rd paymnt [sic] 25/02/2011 $15,000 - payment dishonoured The activity statement for Jan 2011 ITW due on 21/02/11 was lodged and not paid, the Dec 10 BAS due 28/02/2011 has not been lodged. A condition of all arrangement is that current obligations must be lodged and paid by the due dates. Owing to the above the arrangement has defaulted and the direct debit has been cancelled. Director Penalty Notices were issued to you 03/03/11" (Exhibit E, p 4) 12The reference to "Director Penalty Notices" in the final line is of significance. Firstly, the defendant was being told that "Director Penalty Notices", in the plural, "were" issued to him on 3 March 2011. Secondly, the defendant would be personally liable as a director for these payments if the DPNs were not complied with. The defendant replied 16 minutes later as follows: "thank [sic] you for the information. Please advise how we can get this situation on track and I have received no notice. Please advise which address they have been sent to." (Exhibit E, p 4) 13Ms Stamp sent a message by SMS to Mr Phillips the following morning, 8 March 2011 at 9:27am as follows: "Damien Scarfe left a message on my phone 7/3/11 4.39pm requesting I return call re the DPNs. Provided 0419 888 800" (Exhibit E, p 6) 14Each of the DPNs had an identical front page with an identical date, and an identical second page with the same information. Behind the first DPN there was one sheet containing information about the two outstanding quarterly statements up to June 2009, making a total of three pages. The other DPN contained two sheets of paper, making a total of four pages in all, as there was a longer list of PAYG withholding amounts for the period 1 September 2009 to 31 January 2011. 15According to Mr Scarf's affidavit, he went to the letterbox and collected a number of items of post which were addressed to him. He then states at paragraphs 6-8 of his affidavit: "6. I then continued to open the rest of the post, and while doing so, opened a second letter from the ATO in relation to RFSR headed "Director Penalty Notice" ("the Second Letter"). I noticed that the Second Letter was also dated 3 March 2011, and upon a quick comparison, appeared identical to the First Letter in every respect. Annexed to this affidavit and marked "B" is a copy of the Second Letter that was provided to my solicitors by the ATO. 7. On the basis that the First Letter and Second Letter were both dated 3 March 2011 and appeared to be identical in every respect, I assumed that the Second Letter was a duplicate of the First Letter that had been sent to me. 8. I did not notice at the time that the DPN enclosed with the Second Letter was not identical to the First DPN, or that it identified amounts totalling $223,740 ("the Second DPN")." (Exhibit 1) 16The defendant telephoned the number provided at the bottom of the first DPN and spoke to Ms Vicky Windsor of the ATO on or about 8 March 2011 (Mr Scarf's affidavit, paragraph 9). He described that telephone conversation in paragraph 9 of his affidavit as follows: "I said: "I received a letter from the ATO yesterday. It had a director penalty notice attached to it. The company is called RFSR Pty Ltd and the ACN is 000 165 140." Ms Windsor said: "Yes, the DPN was sent to you because the company has failed to remit amounts withheld by it to the tax office before the due date for each of the payments. It has been sent to you because you are the director of the company." I said: "OK, well what do I need to do?" Ms Windsor said: "There are a number of options that are set out on the letter itself about what you can do. I can see from our records that RFSR Pty Ltd owes a significant amount to the ATO for amounts withheld by it." I said: "Yes, I know. Is it possible to enter into another arrangement to start paying off the amounts in instalments?" Ms Windsor said: "The ATO will consider a request to enter into a payment arrangement but you will need to provide the ATO with sufficient financial material to evidence the company's financial position. The ATO needs to be sure that the company will be able to meet the repayments and will be able to meet its ongoing obligations to remit withheld amounts. I can send you an email with a list of the types of material that you should send to us. After we receive that material, the ATO will consider whether or not it is appropriate to enter into an arrangement in respect of the amounts owed by RFSR Pty Ltd." I said: "OK, well once I get your email, I can start gathering all the financial information."" 17Ms Windsor has no recollection of this conversation. The telephone diary note which she made at the time reads: "Incoming call received from Director Damien Scarf on 08/03/11 at 8:00am QEST. POI satisfied. Director informed: * Met with accountant last night to discuss why arrangement had defaulted. * Accountant was to release funds on time for the instalments and also have BAS lodged and paid on time. Accountant had not kept up to date with arrangement conditions and the releasing of the funds causing the direct debit to dishonour and BAS not being paid.* Would like to re-enter another arrangement under the same conditions as the previous arrangement.* Has the funds available to make up the missed instalments and the latest BAS is ready to be lodged and paid. Funds are also available to pay BAS.* Would like to change from quarterly lodger to monthly lodger for all roles.* Best contact number is 0419888800 and prefers replies also in email if possible.* Would like to know if should go ahead and make payments for missed instalments and BAS.* Would like to know what has to do about the DPN notice issued.I informed Director:* I will look into another arrangement and get back to Director with result.* Due to debt amount will need approval for arrangement.* If payments are made today and BAS lodged and paid today it will be looked on more favourably.* I explained the DPN and the Directors liability and potential consequences.* I will look into changing the roles to monthly.Looking further into the history of the case the client has had 6 previous arrangements where 4 have defaulted and 2 have been cancelled. I have been unable to locate financial information that will support the viability of the business as well as the ability to maintain a payment arrangement and meet all future taxation obligations.This entity also has a history of insolvency.Next action: phone Director back to request financials and complete BVAT before any consideration is given to any further payment arrangements; verify if finance has been sought; verify if any assets are able to be liquefied or PIF can be achieved." (Exhibit A, annexure A) 18The plaintiff agreed in cross-examination (T 22-23) that the email referred to in [10] above told him not only why the amounts in question had not been taken out of the company's account, namely that the arrangement had been defaulted upon by the company, but that "director penalty notices" (in the plural) had been issued on 3 March 2011 (T 23). At T 23, Mr Scruby asked: "Q. You understood when you read that, didn't you, that more than one director penalty notice had been sent to you? A. I certainly understand that now but I did not pick up on that then due to the seriousness of the matter. I was not aware of the plural." 19Mr Scruby then asked the defendant: "Q. Is it the case that in March 2011 you weren't paying any particular attention to how many director penalty notices were in existence because you were very concerned about the company's position as distinct from your own position? A. Not necessarily. Q. Well, I think you said in answer to my earlier question that you didn't really focus on the last sentence of this email, is that right? A. Yes. Q. And is it the position that you didn't really focus on it because your main concern was with the company's liability and not with any personal liability that you might have? A. No, no that's not correct. Q. Well when you read "director penalty notices" it would have been obvious to you, wouldn't it, that more than one notice had been sent to you, at least according to the ATO at this time? A. It is very obvious now. Q. It would have been obvious then? A. Well, that is a fair comment you are making counsel, but no not the case. It certainly is now though. DPN was what I saw. Q. You saw director penalty notice didn't you, in capital letters, and you would have appreciated when you read this that there was at least two director penalty notices that had been issued? A. I wouldn't have thought so no, due to only having one company I wouldn't have thought there would have been two notices. Q. If you look at your response to that email, see that at the top of the page, you see "From Damien Scarf"? A. "Kind regards Damien". Q. Yes? A. Yes. Q. You see it says: "Please advise how we can get this situation on track. I have received no notice. Please advise which address they have been sent to." See that and you wrote the words "they" didn't you because you appreciated at this time that at least two notices had been sent to you, correct? A. No, not necessarily but it is a fair comment to make, a fair observation." (T 23-24) 20The defendant was asked about the message he left for Ms Stamp that she should return his call, which she had recorded in her telephone message as a request from the defendant that he "return call re the DPNs". 21The defendant said that he was complaining that he had not received any notice: "A. I am saying that I received no notice, as in no documentation. Hence the "Please advise where they have been sent", I am not trying to be difficult. SCRUBY Q. I suggested to you that you rang up Jan Stamp and asked her to return your call regarding DPNs? A. Yes. Q. And isn't it the position that after doing that you searched your letterbox at home and tried to find the DPNs that the ATO have told you about? A. Yes. Q. You did find them didn't you, on the evening of 7 March? A. Yes. Q. When you were looking for them you were looking for, at least, two weren't you? A. No, at that time I was certainly in the one DPN mode. I am not privy to the way the ATO necessarily does things at this level and was not expecting to considering we have one ACN. Q. Weren't you expecting to because Jan Stamp had told you in an email that at least two had been sent to you? A. Not really. Q. You, in fact, found two envelopes from the ATO at your home, didn't you? A. Yes. Q. On the evening of the 7th. That wasn't a shock to you was it, that there were two envelopes and not just one? A. No, I thought they were duplicates. Q. Didn't you open both envelopes and read them? A. I opened the first envelope and read it and then I opened the second envelope and thought it was a duplicate of the first. Q. When you opened well perhaps we should go to what was in the first envelope. You have got your affidavit in there, it is page 9. Is this the position, that you say you opened the first envelope and you read pages 9 to 11 of what now appears in your affidavit? A. Yes." (T 25-26) 22The defendant agreed he was aware that the company's liabilities to the ATO at the time were in excess of $500,000. He was asked then how, if he opened only the first notice and saw a claim for only $30,000, he would have assumed that the second letter was simply a duplicate of the first: "Q. You saw there [in the first letter] that the total quantum, subject to that notice, was just over $30,000? A. Yes. Q. And you thought it quite likely, didn't you, when you opened the second envelope that there would be a notice in there for a sum significantly greater than $30,000 didn't you? A. No. Q. Because you knew the company's obligations were to the tune of more than $500,000? A. Sure, but the company being a large company or medium sized company always had a rolling balance of a similar amount. Q. It would have struck you as very odd, I suggest, that the ATO had only sent you a notice for $30,000 or thereabouts? A. I was not privy to those sorts of notices counsel so I wouldn't have no I wouldn't have thought that would have been at the time a discounted rate of any kind or a bargain of any kind, no." (T 27) 23The defendant was asked why he would have assumed that the second letter was a duplicate of the first when the letter contained three pages whereas the second letter contained four pages: "Q. If I go back to the second envelope. You would have appreciated, surely, that tit contained four pages? A. I don't recall now. Q. It is possible that you appreciated that, isn't it? A. I don't recall. This was a couple of years ago now. Q. It is the position that you actually can't recall what you read in the second envelope? A. No that is not my position. Q. Well how much did you read? A. I recall reading enough to make me feel that it is identical to the first letter." (T 27) 24The defendant said he read only the first page and "and perhaps a little bit of the second page but I would be guessing I read the second page" (T 28). 25It was put to him that with documents of this importance there is no way he would have stopped at the first or second pages: "Q. You knew, didn't you, when you were reading what was in the first envelope that the important part of that document was not the covering letter but what came after it. You would have appreciated that wouldn't you? A. Yes. Q. And appreciating that when you open the second envelope there is no way you would have just stopped at the first or second pages there. You would have kept going wouldn't you? A. Not as it turns out. Q. You did keep going, didn't you? A. I can't give you that answer. I know as ridiculous as it sounds, I did not." (T 28) 26The defendant denied that he read both documents and appreciated he had been served with two penalty notices claiming different amounts (T 28-29). He denied that he was in a state of concern about the company at the time (T 28) and about his own position (T 29). 27The defendant's account would have been in a position to give evidence on this issue, according to the submissions of the plaintiff. According to the diary note of Ms Windsor, the defendant told her that he "met with accountant last night to discuss" and on 9 March 2011, the defendant told Ms Windsor: "Our accountant is actioning your request for information this morning." 28However, the defendant's evidence was that he did not consult his accountant at all on 7 March 2011. His evidence about consulting his accountant on 9 March 2011 is conflicting. 29The evidence concerning consulting the accountant on 7 March 2011 was as follows: "Q. You were concerned about your own position personally, weren't you? A. Naturally. Q. You went and saw your accountant on the evening of 7 March, didn't you? A. No, I don't recall seeing my accountant on 7 March. I put that in an affidavit. Q. You don't recall, is that your evidence? A. No I don't recall. Q. Didn't you go and see your accountant to discuss both your situation and the company situation? A. On 7 March? Q. On the evening of 7 March? A. No, I did not. Q. Do you deny doing that or you just don't recall? A. I deny doing that." (T 29) 30The evidence concerning subsequent consultation of the accountant was as follows: "Q. And certainly by the morning of 9 March you had spoken to your accountant about this? A. Yes. ... Q. When you spoke to your accountant you gave him the two envelopes and their contents, didn't you? A. No, I didn't Q. Is this the position, you didn't know for sure whether the two envelopes were identical, did you? A. No, I did not know for sure. Q. Did you ever receive a director penalty notice before? A. No, never. Q. Wasn't this exactly the sort of thing that you would look to your accountant for advice on, these notices? A. Naturally, it is certainly is there area of expertise. Q. There was no reason for you to not to show your accountant the two envelopes and the contents, was there? A. No reason, I think we are also getting a little confused as to who we are referring to as the accountant. HER HONOUR Q. Who is the accountant you are referring to here in "Our accountant is actioning", who was that? A. In this case your Honour this could be our inhouse accounts clerk. I guess I have misused the term accountant as she is more of basically the manager that manages all of our accounts that reports to the accountant. So that is done internally not externally. Q. So that is another person again who you would have talked to about this? A. Well got information from to furnish the request from the ATO, yes. Q. It is a request from the ATO. Is this somebody else you may have shown these documents to? A. No, I didn't show any documents. SCRUBY Q. Didn't you ask this person about the two envelopes? A. Which person? Q. The person you are referring to who is an internal employee of the company who you described as your accountant? A. In this case I did describe her as an accountant but no, I would not have spoken to her about something as personal or as in depth as the DPN. Q. You say the word accountant is an accurate description of this person? A. She is not a chartered accountant but she assists our accountant with all the information that they need to prepare us for our BAS and for GST and all of those things. Q. Does she have a title? A. Accounts clerk. Q. She is an accounts clerk. Why didn't you call her accounts clerk if that is who you were referring to? A. My mistake. Q. Isn't it the position that you actually saw your accountant about this because it was so serious you needed to speak to your accountant directly? A. My accountant was certainly very involved in this process." (T 31-33) 31Mr Scruby went on to ask (T 33): "Q. And you spoke to your accountant about the two envelopes and their contents, didn't you? A. Not the two envelopes. Q. It would have been an obvious thing to do, wouldn't it? A. I spoke to my accountant and said I had been issued with a DPN and we now needed to furnish the ATO with a lot of their requests." 32The defendant consulted the bookkeeper in his office as well as his accountant about the DPNs. Neither of these persons was called and the plaintiff asked me to draw a Jones v Dunkel inference (Jones v Dunkel (1959) 101 CLR 298) in relation to the failure to call the plaintiff's accountant. I note the following in cross-examination: "Q. I will come to that. Now, is this the position. During March you were getting advice on the company situation from your account's [sic] clerk, correct? A. Yes. Q. And from your accountant? A. Yes. Q. You were getting advice from them too, weren't you, about your position in relation to director penalty notices, weren't you? A. No. Q. Well you say that so far as you were concerned there was only one DPN for about $30,000, is that right? A. Yes. Q. You spoke to your accountant about at least that, didn't you? A. I made him aware that I had received a notice, yes. Q. You would have asked him about it, wouldn't you? A. Yes." (T 35) 33The defendant claimed that he was relying on Ms Windsor in relation to the DPNs (T 35-36). It was put to him that he was relying on Ms Windsor of the ATO to renegotiate a payment arrangement for the company (T 37) but denied that this was the extent of his reliance upon her (T 36 line 8). Mr Scruby asked the defendant: "Q. You never told her that two envelopes had been sent to your house, did you? A. No. Q. You never told her that you received one envelope containing a DPN and then another one that appeared to you to be a duplicate. You never told her that did you? A. No. Q. And that is because you weren't relying on anything that she was telling you about DPNs, that is right isn't it? A. No." (T 36) 34The defendant agreed that he had made no notes, but denied that he had problems with his recollection (T 37). 35On 11 March 2011, the defendant said that "the regular weekly s [sic] will be guaranteed" (Exhibit 1, p 21) and he made similar statements in an email dated 14 March 2011 (Exhibit 1, p 45). He told Ms Windsor that his business had "turned the corner" and that he was "very genuine with my information and sentiments" (Exhibit 1, p 46). He made similar statements in an email of 17 March 2011 (Exhibit 1, p 88). 36On Tuesday 22 March 2011 at 3:22am, the defendant sent the following email to Ms Windsor: "Dear Vicky, Thank you for once again for taking my call yesterday. My concern is that I feel I am running out of time regarding the DPN sent on the 03.03.2011 I hence need your suggested plans for reinstatement of the payment plans at your earliest. To update you on my plans. [sic] I have requested finance to pay out the whole amount which under this arrangement should I be able to continue the payment plan then the finance will be in within 90 days. This is through the ANZ bank and I have a letter of offer on hand. Knowing what banks are like if the payment plan were to be extended unit [sic] the end of June then I feel we would have a great result. My fear is that should the payment plan not be able to extend then my options will change dramatically regarding finance and the whole amount will be harder to pay whilst running company on a daily basis. I look forward to putting this situation behind the company and getting on with business. Your latitude on this matter is greatly appreciated and will certainly be the last time we ask for assistance." (Exhibit 1, annexure O, p 90) 37The defendant was asked about this "running out of time" conversation as follows: "Q. I particularly want to ask you about the first paragraph. You see there it says, "My concern is I feel I am running out of time regarding the DPN sent on 3 March", see that? A. Yes. Q. Isn't it the case that the DPN you are referring to there is a DPN for just over $220,000? A. No. Q. Well you weren't running out of time regarding a DPN for just over $30,000, were you? A. Why not? Q. Well what is the answer to my question? A. You are suggesting that I still had more time than I thought? Q. Well your evidence, as I understand it, is that the DPN you are referring to in this email is one for just over $30,000, is that right? A. Yes. Q. And you understood, didn't you, that if the company paid the $30,000 then you would have no liability under the DPN for it. You understood that didn't you? A. Yes." (T 33-34) 38The company had in fact paid in excess of the amount owed on the first DPN, namely $45,000 (T 34). It was put to the defendant that this meant that therefore there was no question of running out of time in relation to the first DPN that he claimed was the only document he had read: "Q. And you weren't running out of time regarding paying $30,000 to the Commissioner, were you? A. Yes, but at that point I thought that everything had been wrapped up into one in respect to the half million dollars that we were then negotiating on. That is what I was then referring to because I felt that we had moved on. Q. Sorry, moved on from what? A. We had never talked about the amount of the DPN, it was always entering into a payment arrangement for our outstanding amount to the ATO. Q. Go to page 21 please. Read as much of that as you like but I want to direct your attention not the second paragraph where you say, "I have arranged for $40,000 to be directly deposited into our ATO portal." A. Yes. Q. The position in March was, wasn't it, that the company could pay the Commissioner at least $45,000 immediately, correct? A. Yes. Q. So far as your liability A. Me personally, not the company. Q. I beg your pardon? A. It was me personally, not the company. Q. Right, well you personally could pay at least $45,000, correct? A. Yes. Q. Go back to page 90 please. That was true at 22 March too wasn't it, you personally could pay $45,000? A. Yes. Q. You weren't running out of time regarding a DPN to the tune of just over $30,000 were you? A. No, not based on this, no. Q. You were running out of time regarding a DPN to the tune of just over $220,000, weren't you? A. No, that was not my thought process at the time. Q. That was your thought process and that is why you wrote this email, isn't it? A. No. Q. You understood when you wrote this email that the Commissioner had sent to you a DPN to the tune of just over $220,000, didn't you? A. No. Q. You had no doubt about that at any time in March 2011, did you, from 7 March, did you? A. Yes, I did have a doubt about that. Q. Was it the position you had doubt but you weren't sure? A. No, we had a DPN for over $200,000 but I can assure you counsel we would not have been sitting here now. I would then have been forced to make a very hard decision." (T 34-35) 39On 24 March 2011, Ms Windsor notified the defendant that a payment arrangement would be accepted. In April and May the company made payments, but by 5 May 2011, the company was in default. On 17 September 2011, the company and the plaintiff entered into a further payment arrangement which was again the subject of default by the defendant in October 2011. 40The defendant was cross-examined about these arrangements as follows: "Q. Could I ask you something a little bit different. I want to ask you about the period in which you were negotiating with Ms Windsor, is this a fair statement? You had no doubt during those negotiations that the company would honour its obligations under whatever payment arrangement was concluded? A. Please repeat the question? Q. In March 2011 you were negotiating with Ms Windsor for a payment arrangement? A. Yes. Q. I think by the time that arrangement was concluded the company's liabilities were up around $600,000? A. Yes. Q. You believed, didn't you, that if you could agree on an arrangement then the company would be able to meet the payments that were required under it? A. I thought that at the time, yes. Q. You were very confident, weren't you? A. Yes, I had to be. Q. In fact you had no doubt about it, did you? A. I don't know if that is entirely true. It was the task that I had been charged to do and I was confident, yes. Q. Could you look at page 21 of your affidavit please. You see in this email, the first sentence, you tell Ms Windsor that your company is a 50 plus year old family company? A. Yes. Q. And at this time it was very important to you wasn't it to keep the company going? A. Naturally. Q. You certainly didn't want to put it into liquidation, did you, because it had significance to you and your family? A. No, not entirely. The company has been around a long time, it has served many generations but clear business decisions must always be made." (T 38) 41The defendant agreed his position was that the company was in a sufficiently strong position for payments under the payment arrangements to be guaranteed (T 39 line 40). He agreed that he had told the ATO that the company would not miss a payment and that "this is a guarantee" (T 39 line 48). It was put to him that his confidence in the company's ability to pay extended to the DPN for the amount just over $220,000. The defendant denied this. 42On 10 November 2011, the defendant received a further DPN (which is not the subject of these proceedings). On 11 November 2011, the plaintiff served a statutory demand on the company for $882,000. On 29 November 2011, the defendant resolved to place the company into voluntary liquidation. 43The defendant's evidence in relation to the circumstances in which the company was placed into voluntary liquidation was as follows: "Q. I was going to say this, by this time the company's balance sheet had deteriorated to the extent that it had a negative equity of about 1.3 million? A. Yes. Q. I think, for example you will see that it has about $16,000 worth of assets and significant liabilities, obviously? A. Yes. Q. Isn't it the position that you put the company into liquidation in November 2011 because you realised that the company was insolvent? A. Yes. Q. It had nothing to do with your receipt of a director penalty notice in November, did it? A. No, I think they were two very separate issues. It did have pretty much everything to do with it. Q. Certainly you appreciated that you couldn't trade if the company was insolvent? This is in November 2011? A. No you couldn't." (T 42) 44The defendant agreed he was served with a statutory demand making a total of $880,000 in or about 11 November 2011 (T 43). He said he did not recall receiving such a statutory demand and that "this is the first time I've seen this document" (T 44 line 2). He agreed that the company was in default of the payment arrangement by October 2011 (T 44) and that the ATO could commence proceedings to recover the entire amount immediately (T 44 line 35). Mr Scruby asked: "Q. And isn't it the position that, appreciating that, you made a decision to put the company into liquidation in November 2011? A. No. Q. You accept in November 2011 the company had liabilities to the ATO of in excess of $800,000? A. Yes. Q. You accept the company couldn't meet those liabilities? A. I don't accept that completely, keeping in mind we were also just about to go through the most profitable months of the year." (T 44) 45The defendant made payments following receipt of the DPNs which effectively mean he no longer has liability for the quarterly amounts. These amounts exceed the total of the first DPN by $10,015. Accordingly, these proceedings concern the defendant's liability for the second DPN (the DPN issued in relation to the monthly amounts), but this amount has been reduced by $10,015, hence the total of $211,225 plus interest (see annexure F to the affidavit of Mr Gaby Amoud, Exhibit C, for the certificate under s 255-45 of Schedule 1 to TAA). It is not in dispute that, pursuant to s 255-45(1), this certificate is prima facie evidence of the defendant's liability. 46The relevant factual controversies are the content of conversations between the defendant and Ms Windsor between 8 and 24 March 2011, and whether the defendant's decision not to put the company into liquidation (or administration) in March 2011 was based on his belief that only the first DPN was in existence. 47I shall first deal with the question of whether there is estoppel on the facts, having regard to the necessary elements to make out estoppel by representation or estoppel by convention, both now being the subject of submissions. Conclusions concerning the evidence 48Essentially the defendant asks me to accept his evidence that he thought he received the same letter accidentally sent twice by the plaintiff, despite the contents of Ms Stamp's email of 7 March 2011 (see paragraph 10 above), and despite his having indicated in his reply (see paragraph 11 above) that he was expecting more than one DPN, in circumstances where he was well aware of the true extent of his company's liability and where he was receiving advice from the company accountant and company bookkeeper in the course of his dealings with the plaintiff. 49I do not accept the defendant held such a belief. I do not find the defendant to be a witness of credit. I find that he was expecting more than one DPN, and had consulted his accountant about these events. His contradictory evidence about this is also in direct contradiction with the note of Ms Windsor (paragraph 16, 28 and 29 above). His denial that he consulted his accountant about being sent two envelopes containing DPNs (paragraph 31 above) is implausible. His belief that he had paid the only DPN he had received is inconsistent with his "running out of time" conversation on 22 March 2011 with Ms Windsor (paragraphs 35-37). His statements to the plaintiff in correspondence concerning the financial health of the company (paragraphs 40-42) were inaccurate; in fact the company had deteriorated by November 2011 to having a negative equity of $1.3 million. 50I am satisfied, from the evidence of the defendant and the exchange of emails on 7 March 2011, that the defendant knew there was more than one DPN sent by the ATO. He was expecting to find, and did find, more than one envelope. In addition, whether or not the defendant had a precise knowledge of the nature and extent of the amount of money owed by the company to the ATO, he had an accountant and a bookkeeper, who on his own contemporaneous documentation, he was consulting about compliance with the proposed payment arrangements. Neither the defendant's account nor his bookkeeper was called to give evidence as to what information was imparted to them about whether there was one or more DPN, and I draw a Jones v Dunkel inference. 51The sole factual matter supporting the defendant's case is the reference by Ms Windsor to "DPN" in the singular. Ms Windsor was not discussing with the defendant the defendant's personal liability, but rather the negotiation of a payment arrangement in respect of the company's liabilities. Ms Windsor did not actually know how many DPNs were issued, but she knew the amount that was the subject of negotiation (over $600,000), which was well in excess of the amount set out in the DPN which the defendant agrees he opened, which was just over $30,000. 52The defendant's argument is that when Ms Windsor referred to "the Director Penalty Notice" in her email to the defendant (Affidavit of Vicky Windsor, Exhibit A, annexure B), this reinforced his view that there was only one DPN. This was reinforced by the conversation that he had with her on 21 March 2011 as follows: "I said: "I'm conscious that the DPN is still on foot until we reach a resolution. Have you been able to review all the information that I submitted last week?" Ms Windsor said: "I've received all of the information, and we are considering whether to reinstate your plan or start a new arrangement. I'll email you in the next day or two about it."" (Mr Scarf's affidavit, paragraph 23) 53This explains why he sent the email to Ms Windsor on 22 March 2011 referring to "the DPN" (Mr Scarf's affidavit, paragraph 24). 54The defendant was aware, as at 24 March 2011, that unless the amount specified in any DPN served upon him was paid, or a repayment arrangement entered into by that date, or the company not placed in liquidation, he would be personally liable for any amount in the DPN. This was, he said, while he attended to payment of the sum in question. 55I also reject the defendant's claim that, had he known there was a second DPN exposing him to personal liability, he would, according to his evidence, immediately have placed the company into administration or liquidation, rather than risk personal liability for a total sum over $250,000 (Mr Scarf's affidavit, paragraph 44). His evidence is that he would not have paid the $80,000 he ultimately did pay (Mr Scarf's affidavit, paragraphs 35, 42 and 44). 56I find that the defendant put the company into liquidation on 11 November 2011 not as a result of receiving a further DPN (a DPN which is not the subject of these proceedings) but by reason of the company's insolvency, which had substantially increased over the preceding six months independently of the liabilities the company had to the plaintiff. 57Having noted these findings of fact, I now turn to a consideration of the defences. The Defences 58The first issue for determination is whether the facts, if found in the defendant's favour, are such as to give raise to an estoppel by representation or to conventional estoppel. The next issue is whether, as a matter of law, the Commissioner can be estopped from recovering amounts due under ss 269-20 and 222AOC. 59As can be seen by the above outline of facts, the issues in dispute are inferences to be drawn from the communications between the defendant and Ms Windsor between 8 and 24 March 2011 and, in addition, whether the defendant's decision not to put the company into administration or liquidation in March 2011 was based on what he claims was his belief that there was only one DPN in existence. Estoppel by representation 60The elements necessary to establish estoppel by representation are set out in Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [41]; Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149 at [39]-[43]. These steps may be summarised as follows: (a)That the plaintiff made a representation that there was only one DPN, which would effectively amount to a representation that the second DPN did not exist. Any such representation must be clear and unequivocal: Legione v Hateley (1983) 152 CLR 406 at 435-437. (b)That it was reasonable for the defendant to rely upon the representation. (c)That the plaintiff ought reasonably to have known that the defendant would rely upon the representation. (d)That the defendant in fact did rely upon this representation, to his detriment. 61I shall deal with each of these in turn. 62The defendant submits that there were three categories of representations: (a)The first representation is asserted to be that the sending of two identical letters dated 3 March 2011 with "two distinct DPNs" attached (defendant's written submissions, p 4, paragraph 28). It is submitted that by sending two DPNs, one of three pages and one of four pages, there was a representation that there was only one DPN, which representation was reinforced by the letter on the first two pages being identical. (b)The second representation was that, in a conversation Ms Windsor had with the defendant on 8 March 2011, she referred to "the DPN", and repeated this reference to "the DPN" that same day to the defendant in an email. (c)A "silent representation" was made by Ms Windsor in that when the defendant referred to "the DPN" in the conversations over this period, and in the email in which she referred to "the Director Penalty Notice", she failed to point out that there was a second DPN. 63The defendant submits that the estoppel claim prevents the plaintiff from asserting that he received the second DPN dated 3 March and/or did not place the company into liquidation by the due date and/or is not liable under the second DPN for the amount claimed. Was the representation made? 64The defendant was expecting more than one DPN because he had been told that more than one DPN had been sent. These DPNs, if the defendant had read them, would have been clear on their face. 65Evidence of a representation must be a clear and definite statement of the fact represented: Davis v CGU Insurance Ltd [2009] SASC 220; Legione v Hateley, supra, at 435-437; Dabbs v Seaman (1925) 36 CLR 538. The highest the defendant can put in the evidence is that one employee of the plaintiff referred, in conversations with him, and in one email, to "Director Penalty Notice" in the singular rather than the plural, while another (Ms Stamp) did not. This cannot amount to a representation amounting to an estoppel. As Bowen LJ said Onward Building Society v Smithson [1893] 1 Ch 1 at 14: "an estoppel can only be effected by what is express and clear - by a statement by which the parties mean to bind themselves in making their contract. I need not read again the observations in Right v. Bucknell, to the effect that estoppel can only be by what is clear and precise. This rule is not a mere technical rule, but is of great importance. It would be very dangerous to extract a proposition by inference from the statements of a deed, and hold the party estopped from denying it; estoppel can only arise from a clear, definite statement." 66Simply referring to the "Director Penalty Notice" in the singular is incapable of amounting to a clear and unequivocal representation that the second DPN did not exist. 67While the focus of estoppel by conduct is on the person who was induced to act (Handley, The Hon Justice K R, "Unconscionability in estoppel: Triable issue or foundational principle?" [2007] QUTLawJJl 27), the defendant had been unable to explain how it is that sending two DPNs, in circumstances where the defendant was told that more than one DPNs had been sent, amounts to any representation at all, let alone one that was clear and/or ambiguous. 68The "second representation", namely by use of a singular rather than the plural, needs to be seen in context. Essentially what the defendant argues is that the combination of sending two identical letters (identical in the sense that the first two pages being the same), the reference by Ms Windsor to DPN in the singular on two occasions and her failure to point out that there were two DPNs, amounted, in total, to a representation capable of finding an estoppel. 69I do not accept these submissions. I am satisfied that the reference by Ms Windsor to "Director Penalty Notice" in the singular was not a clear and unambiguous representation that there was only one DPN, namely the DPN for $30,435.75. 70In addition, it would be necessary to identify that the one DPN was the first DPN and not the second, as counsel for the plaintiff points out in his written submissions (paragraph 13). 71The conversations between Ms Windsor and the defendant did not relate to the defendant's personal liability under the DPNs, but to negotiation of a payment arrangement with respect to the whole of the company's liabilities. The "silence" in failing to correct his reference to "DPN" is explicable on that basis. She was negotiating with the company in relation to the whole amount, not the amount in only one DPN. Was it reasonable for the plaintiff to believe the defendant would rely on any representation? 72Ms Windsor was not the taxation offcial who had sent the DPNs to the defendant, nor was she in anyway concerned whether they were paid or not. Her conversations with the defendant were concerned not with the defendant's personal liability under the DPNs but concerning the negotiation of a payment arrangement in respect of the company's liabilities. She could not have had any reason to think that the defendant was relying upon her to confirm that there was only one DPN in existence, and that was the DPN for the amount of $30,435.75. Mr Scarf's evidence stop short of saying he sought any assurances from her or queried the amounts, or queried the circumstances in which he was sent two documents which he believed were identical. Was it reasonable for the defendant to rely upon any representation? 73The written submissions of the defendant state simply that it was reasonable for the defendant, after receiving what are called the "identical letters" and then communicating with Ms Windsor to believe there was only one DPN issued on 3 March that he need concern himself with. It is further submitted that it was not unreasonable for Mr Scarf to assume that the second letter was a duplicate of the first. Even if it was unreasonable to make that assumption, it was reasonable for him to rely on Ms Windsor's use of the singular for "Director Penalty Notice" on 8 March 2011. This was because he already believed (although wrongly) that there was only one DPN, and this was confirmed by Ms Windsor's statement. 74However, other representations had been made to the defendant by employees of the plaintiff, and these were employees whose responsibilities it was to send the DPNs. He was told that two DPNs had been sent, and when he opened these documents he must have appreciated that one was three pages and the other four pages. In circumstances where there were, putting the defendant's case at its highest, conflicting representations from the plaintiff as to how many DPNs there were, not to even bother reading the second DPN beyond glancing at the first two pages and considering that these looked the same as the other document is not conduct relying on a representation but a wilful turning of a blind eye (Dabbs v Seaman, supra). Detrimental reliance 75Assuming that the above requirements are established, it is still necessary for the defendant to establish that he in fact relied to his detriment on a representation that the second DPN either did not exist, or he could ignore it. The defendant's evidence is that if he had known that the second document sent to him by the ATO was in relation to amounts for which he was personally liable, he would have placed the company into liquidation immediately so as to avoid personal liability for the whole of the sum claimed, as opposed to the amount contained in the first DPN. 76The defendant's claim that he would put his company into administration or liquidation is contradicted by the letters he sent to Ms Windsor during negotiations, assuring her that the company would have no trouble meeting its obligations. Some of the statements that he made to her are as follows: (a)"The business is now profiting and building nicely year on year" (defendant's affidavit, p 21); (b)"To come this far and fail is not an option for me" (defendant's affidavit, p 21); (c)"We will not miss a payment. This is a guarantee" (defendant's affidavit, p 45); (d)"The business has demonstrated that we have turned the corner and created a profitable business in the last 2 years and they were hard retailing years as well" (defendant's affidavit, p 46); (e)"We have a lot of exciting things happening with in the business this year ... this will no doubt see growth in excess of 25% as a minimum and pay our past debts to the ATO but become a better contributing client in the future" (defendant's affidavit, p 46); (f)"[this] will certainly be the last time we ask for assistance" (defendant's affidavit, p 90); (g)"I am very confident and believe there is no doubt we have a vehicle to make our payments as and when they are due to creditors and comply with the payment plan I have set suggested for the ATO" (defendant's affidavit, p 92). 77Notwithstanding the defendant's optimism in March, the company was not able to honour its obligations under the payment arrangements. It had to deal with a winding up application from the workers compensation insurer, as well as a garnishee notice from the plaintiff. By the time the 11 November 2011 statutory demand arrived from the plaintiff, the sum of $800,000 was outstanding. In March 2011, the company did have a chance of surviving, as according to the accounts provided to the ATO by the defendant, it had a net asset position of over $2 million. By contrast, by the end of November 2011, the company, according to a statement provided to the liquidator, had a negative equity of over $1 million. This had occurred over the period of time following the expiry of the DPNs the subject of this litigation. 78I am satisfied by reason of the events listed above, the financial documents tendered in these proceedings, the admissions of Mr Scarf at paragraph 23 of his affidavit, that the company was put into liquidation by him in November 2011 because it was insolvent. There was no detrimental reliance upon any representation asserted to have been made in relation to the second DPN. 79This brings me to the alternate basis of defence, namely estoppel by convention. Estoppel by convention 80Although a claim of estoppel by convention formed a part of the submissions, the case pleaded the Defence was one of estoppel by conduct (see paragraph 19 of the Defence). The addition of a defence of estoppel by convention, at the submissions stage, added complexity and created unfairness. 81In order to establish a defence of estoppel by convention, the defendant must allege and prove that the Commissioner in fact adopted this assumption that the defendant says the plaintiff is now estopped by denying: Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32]-[33]. Not only is there no pleading to this effect (Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135), but there is no evidence to support such a contention in terms of cross-examination of Ms Windsor. In addition, if such a claim had been raised in the pleadings, evidence could have been led in relation to the plaintiff's view that two DPNs had been served (see for example, pages 40-46, Exhibit B, the affidavit of Mr Phillips). I note that Ms Windsor said in cross-examination she did not know whether there was one DPN or more at the time she spoke to the defendant, which by itself is evidence, insofar as it relates to the mind of the Commissioner, which does not assist the defendant. 82The defendant relies upon Davis v CGU Insurance Ltd, supra, and submits that there is not the same requirement of clarity and unequivocality in estoppel by convention as there is in estoppel by representation. I do not accept this submission. The Court in Davis v CGU Insurance Ltd, supra, at [34] referred to the following passage in Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46 where McPherson J said the following: "The word "conventional" in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties." 83McPherson J went on to add: "Acts done privately by one party without coming to the knowledge of the other can scarcely be capable of affecting their mutual relations or of raising assumptions capable of forming a conventional or accepted basis governing their relations. To produce that consequence the acts or conduct relied upon must point plainly, if not unequivocally, to the assumption put forward as the conventional basis of relations. A course of dealing that is explicable by reference to some other equally plausible assumption inevitably falls short of establishing that the parties accept as the basis of their relations the particular assumption contended for." 84I do not accept that there was a "common assumption" (defendant's written submissions, paragraph 48) by Ms Windsor and the defendant that only one DPN had been issued. There were other "equally plausible" assumptions (Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd, supra), namely that Ms Windsor was using the singular because the defendant had done so, or as an informal short hand way of describing the DPN process. 85I am satisfied that the claim of estoppel by convention cannot be made out. However, there is a more fundamental basis upon which both claims for estoppel must fail, and that is that there is no estoppel as a matter of law. No estoppel as a matter of law 86In AGC (Investments) Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1379 at 1396 Hill J stated: "The Income Tax Assessment Act imposes obligations upon the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel would thwart". 87Counsel for the plaintiff has helpfully collected examples of the operation of this principle, in relation to the Commissioner as follows: (a)It is well established that the Commissioner cannot be estopped from issuing assessments of income tax in accordance with law: Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd (1994) 181 CLR 466 at 479; Bellinz Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 154 at 229; AGC (Investments) Ltd v Federal Commissioner of Taxation, supra, at 1396. (b)In ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697, Barrett J at [11] and [70] - [76] held that no conduct of the Chief Commissioner of State revenue could estop it from collecting duty pursuant to its discretion under s 37(1) of the Stamp Duties Act 1920 (NSW). (c)In Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051, Hamilton J held that no conduct of the Commissioner could give rise to an estoppel preventing the operation of a charge created by s 47(1) of the Land Tax Management Act 1956 (NSW). (d)In Collector of Customs v Palmer Steel Trading (Aust) Pty Ltd [2003] QSC 434, McMurdo J, applying the principle that there could be no estoppel in the face of a revenue statute, found that the Collector of Customs could not be estopped from collecting duties imposed on goods by s 8 of the Customs Tariff (Anti-Dumping) Act 1975 (Cth). 88In Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 Gummow J explained the principle under which statutory authorities cannot be estopped from performing their functions as follows: "In a case of a discretion, there is a duty under the statute to exercise a free and unhindered discretion and an estoppel cannot be raised (anymore than a contract might be relied upon) to prevent or hinder the exercise of the discretion; the point is that the legislature intends the discretion to be exercised on the basis of a proper understanding of what is required by the statute, and that the repository of the discretion is not to be held to a decision which mistakes or forecloses that understanding". 89Counsel for the defendant challenges the applicability of these principles, asserting that the estoppel is not raised against a statement by a public servant to the effect that the tax was not owing, but as to receipt and knowledge of the second DPN. Thus, this is not "the performance of any formality" (Maritime Electric Company Ltd v General Dairies Ltd [1937] AC 610; Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax, supra). The obligation to pay the tax was avoidable by the performance of a formality, namely putting the company into liquidation, hence the rule is asserted not to apply. 90Counsel for the defendant draws my attention to Sanpine v Koompathoo Aboriginal Land Council [2005] NSWSC 365 where Campbell J stated at [339]: "[339] Consistently with this, it is not every statutory requirement which is incapable of being overcome by an estoppel. Rather, one should ask: ... whether the law that confronts the estoppel can be seen to represent a social policy to which the Court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by that conduct or otherwise ... ": Kok Hung v Leong Cheong Kweng Mines Limited [1964] AC 993 at 1016-1017. See also the authorities referred to by Hamilton J in Owners - Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770 at paras [19] - [22]; Overmyer Industrial Brokers Pty Ltd v Campbells Cash and Carry Pty Ltd [2003] NSWCA 305 at paras [51] - [54]; Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 97481 at 13,534 - 13,535." 91Campbell J went on to state at [344]-[345]: "[344] There is another way of reaching the same conclusion. Underlying the legal principles concerning whether there can be an estoppel in the face of a statute are two separate considerations. One is equity's refusal to countenance unconscionable behaviour, which is a significant motivator of the law of equitable estoppel. In the context of the promissory estoppel which is relevant to this case, the version of unconscionability that is involved is, in broad terms, that, if a person in legal relations with another has led that other to believe that strict legal rights will not be insisted on, and the other has acted in reliance on that belief, it is unfair for the person who has brought about that situation to insist that strict legal rights shall govern their relations, without giving the other person a reasonable opportunity to recover his position - and if recovery of the position is not possible at all, then the estoppel is one which applies permanently. [345] The second consideration is that the law of estoppel exists as part of an integrated legal system, and if there is a sufficiently important statutory requirement, which would be infringed if the estoppel were to be given effect to, the requirement of public policy, that the statute be observed, is regarded as more important for the law to enforce than the fair dealing between individuals which motivates the law of estoppel." 92Counsel for the defendant submits that the policy behind the legislation is to fully inform the director as to the amount owing, and to advise what steps he must take within the 21 day period so that either the debt is made, or an arrangement in the alternate kind set out by the statute is put in place, such as putting the company into liquidation. As the director who receives the DPN has power to elect whether to pay the tax or take the alternative step, the social policy of the legislation is to inform him of his potential liability. If the director is not fully informed of the amount for which he is personally liable, then he cannot make an informed decision as to what action to take. The ATO has contributed to the director not being fully informed as to his liability so there is no breach of public policy, and public policy would not be defeated by allowing the plaintiff to be estopped from asserting that the defendant owes the amount sought in these proceedings. 93I first note the following relevant provisions in the ITAA 1936 and the TAA: (a)The defendant's liability for the amounts claimed arises under s 222AOC of ITAA 1936 (in respect of Company liabilities prior to July 2010) and s 269-20(1) of the TAA in respect of liabilities after that date. Section 222AOC provides that the defendant "is liable" for the amounts in question and s 269-20(1) states "you are liable" for those amounts. (b)Section 255-5(1) of Schedule 1 to the TAA provides that an amount of a "tax-related liability" that is due and payable "is a debt due" to the Commonwealth and "is payable to" the Commissioner. (c)Amounts payable as penalties under s 269-20 are included in the summary of tax-related liabilities in s 250-10 (see item 139). (d)Section 255-5(2) provides that the Commissioner "may" sue for such a debt. (e)Section 250-25 of Schedule 1 provides that the object of Part 4-15 (in which Division 269 also appears) is to ensure that unpaid amounts of tax-related liabilities and other related amounts are collected or recovered in a timely manner. 94The estoppel set up by the defendant must be directed to either or both of: (a)preventing the Commissioner from asserting the existence of liabilities established by a statute (that is, the liabilities established by s 222AOC and s 269-20(1); and/or, (b)preventing the Commissioner from exercising a discretion conferred upon him by a statute (that is, the discretion conferred by s 255-5 to sue for debts due). 95As to (a), it is beyond the Commissioner's power to alter the liabilities imposed by the above legislative provisions. As to (b), it is beyond the power of the Commissioner to fetter his discretion to collect debts due: ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue, supra. 96The defendant does not plead that the plaintiff is estopped from denying that the Second DPN was ever sent to him, and that the plaintiff therefore is prevented by s 269-25(1) from bringing these proceedings. In the event that this was intended to be pleaded, I note that such a plea would fail for similar reasons. Section 269-25(4) specifies that a notice is taken to be given at the time the Commissioner leaves or posts it. The Commissioner cannot be estopped from asserting a legal consequence of the posting of the DPNs specified by the legislation. 97Accordingly, if I had been satisfied that the elements of estoppel either by convention or by representation had been made out, estoppel would not lie against the plaintiff, on the basis that an authority cannot be prevented from carrying out the public duties cast upon it by legislation: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105; Federal Commissioner of Taxation v Australia & New Zealand Savings Bank Ltd, supra; Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax, supra; Bellinz Pty Ltd v Federal Commissioner of Taxation, supra. The arrangement of 17 September 2011 precludes the commencing of these proceedings 98The defendant further submitted that entering into an arrangement to pay liabilities by instalment prevented the bringing of proceedings by the plaintiff against the company's director for enforcement of a personal liability. 99However, s 269-15(2) only prohibits the bringing of such proceedings while a payment arrangement is "in force". That arrange was no longer in force at the time proceedings were commenced in December 2011. In addition, the company was in default under the 17 September 2011 arrangement. Even more relevantly, by the time these proceedings were commenced, the company was in liquidation and, on any view, no arrangement could have been in force. 100An additional argument based on a requirement for a fresh DPN following the $45,000 part payment was not proceeded with, but I note that the statutory scheme specifies in s 269-40 of Schedule 1 to the TAA provides that the liability of a director is discharged to the extent that a company's liability is discharged, thereby avoiding the requirement for the issuing of a fresh DPN each time a payment is made. 101Finally, I note submissions (defendant's written submissions, paragraphs 65-66) based on Deputy Commissioner of Taxation (NSW) v Gruber, supra, to assert that a DPN which is misleading is invalid, and an argument that the receipt of two identical covering letters rendered the second DPN misleading and therefore invalid. 102However, the reason for the second notice being invalid in Deputy Commissioner of Taxation (NSW) v Gruber, supra, was that "a recipient may believe that he had to comply with both notices in a cumulative fashion" (at 276), namely to pay both amounts. The misleading nature of the second DPN in those proceedings was that it was "difficult to read the two notices together". Each claimed different amounts as payable by the recipient in respect of the same month. 103That is not the case here. The two DPNs were designed to be paid in a cumulative fashion. Both of them listed the sums due and owing, and their respective dates. The second notice followed on from the first. Each of the notices was complete on its face and accurate in its substance. Each set out accurately the amount of penalty that was to be paid. The Court of Appeal did not require the individual amounts to all be in one single DPN. To the contrary, the Court noted that a notice may be a composite document, or a series of notices may be given (at 274). 104Each of these submissions must also fail. Accordingly there should be judgment for the plaintiff for the sums sought of $211,225.00 plus costs. I have given the parties liberty to apply in relation to costs and interest. Orders (1)Judgment for the plaintiff for $211,225.00. (2)Defendant pay plaintiff's costs. (3)Liberty to apply in relation to costs and interest. (4)Exhibits retained for 28 days. ********** 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: 24 July 2013