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  • Unreported Judgment

Deputy Commission of Taxation v Lister

 

[2002] QCA 270

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

30 July 2002

DELIVERED AT:

Brisbane

HEARING DATE:

10 July 2002

JUDGES:

Davies, Williams and Jerrard JJA

Separate reasons for judgment of each member of the Court, each concurring as to the orders made.

ORDERS:

1. Dismiss the appeal by Leonard Warburton Lister against the judgment in D156/00 with costs;

2. With respect to the appeal by Kathleen Patricia Lister against the judgment in D157/00:

(i) allow the appeal and set aside the judgment    in favour of the Deputy Commissioner of Taxation in the sum of $144,854.21 with costs;

(ii) in lieu thereof order that the application for summary judgment be dismissed;

(iii) further order that the application of 19 June 2001 be adjourned for further consideration by the District Court as to directions for trial;

(iv)  order that the respondent Deputy Commissioner of Taxation pay the appellant’s costs of the appeal to be assessed.

CATCHWORDS:

INCOME TAX AND RELATED LEGISLATION – COLLECTION AND RECOVERY OF TAX – PROCEEDINGS FOR RECOVERY  - SUMMARY JUDGMENT -  appeal against summary judgment in favour of the respondent by appellants / company directors for failure to comply with s 222AOB of Income Tax Assessment Act 1936 (Qld) – whether there was a defence to the claim pursuant to s 222AOJ of the Act such that the appellants did not take part in the management of the company

Income Tax Assessment Act 1936 (Qld),  s 220 AAM, s 222 AOB, s 222 AOC,  s 222 AOE, s 222 AOJ

Uniform Civil Procedure Rules 1999 (Qld), r 292

COUNSEL:

Mr L W Lister on his own behalf and by leave appeared for Mrs K P Lister

P G Bickford for the respondent

SOLICITORS:

Mr L W Lister on his own behalf and by leave appeared for Mrs K P Lister

Australian Taxation Office Legal Practice (Townsville) for the respondent

[1] DAVIES JA:  I agree with the reasons for judgment of Williams JA and with the orders he proposes.

[2] WILLIAMS JA:  The appellants (husband and wife) appeal against decisions of a District Court judge giving summary judgment in favour of the respondent in separate, but substantially identical, actions brought against each appellant.

[3] It is convenient to deal first with the proceeding (which was numbered D156/00 in the Townsville registry) brought by the respondent against the male appellant.

[4] The statement of claim alleged that the male appellant was a director of Keencliff Pty Ltd (“the company”) continuously during the period 1 July 1998 to 31 January 2000.  The pleading then alleged that the company made deductions for purposes of Division 2 of Part VI and Division 1AAA of the Income Tax Assessment Act of 1936 (“the ITAA”) and in consequence incurred liabilities under s 220AAM.  Those liabilities for the period 1 January 1998 to 31 January 2000 totalled $82,492.21.  Further it was alleged that the company made deductions for the purposes of Division 3A of Part VI and Division 1AAA of the ITAA and incurred liabilities consequent thereto under s 220AAM for the period 1 December 1999 to 31 January 2000 totalling $62,362.00.

[5] It was then alleged that with respect to those liabilities the male appellant, as director, failed to comply with s 222AOB of the ITAA and that by force of s 222AOC he became liable to pay a penalty to the respondent in the amount of the unpaid deductions.  In consequence the respondent claimed a total of $144,854.21 against the male appellant.

[6] The defence admitted that the male appellant was a director of the company and that obligations arose with respect to the amounts particularised.  The pleading went on to raise a number of issues with respect to the effect of s 222AOC and then set up a defence purportedly relying on s 222AOJ of the ITAA.  Essentially it was alleged that from approximately early 1998 to September 1999 the appellant did not take part in the management of the company at any material time “as the effective director making decisions in respect of the company’s affairs, appointed one David Sparkman, as the business manager of the company and delegated to the said David Sparkman all responsibility for all aspects of the management of the company during that period”.   It is then asserted that during that period the appellant resided in Brisbane.  It was not disputed that the principal place of business of the company was Gladstone.  The pleading alleges that throughout the relevant period the appellant relied entirely upon Sparkman to ensure “compliance by the company with its statutory obligations including its obligations pursuant to” the ITAA.   There is also an allegation that an employee perpetrated frauds upon the company during that period which had a significant impact on its financial viability.

[7] It was in those circumstances that the respondent applied for summary judgment pursuant to r 292 of the Uniform Civil Procedure Rules.  That application was filed on 19 June 2001, heard on 10 August 2001, and for reasons published on 12 December 2001 summary judgment was given in favour of the respondent in the sum of $144,854.21.

[8] On appeal the male appellant appeared on his own behalf, and also for his wife.  Essentially the argument advanced on appeal was that on the material the male appellant raised a defence pursuant to s 222AOJ of the ITAA such that the matter should have been allowed to go to trial.  Relevantly for present purposes that section provides:

 

“(2)  It is a defence if it is proved that, because of illness or for   some other good reason, the person did not take part in the management of the company at any time when:

(a)the person was a director;  and

(b)the directors were under the obligation to comply with sub-section 222AOB(1) or 222AOBAA(1). 

(3) It is also a defence if it is proved that:

(a)    the person took all reasonable steps to ensure that the directors complied with sub-section 222AOB(1), 222 AOBAA(1) or 222AOBA(1) (whichever is relevant);

(b)    there were no such steps that the person could have taken.

    (4) In sub-section (3):

    ‘reasonable’ means having regard to:

(a) when, and for how long, the person was a director and took part in the management of the company;  and

(b)  all other relevant circumstances.”

[9] For present purposes it was the director’s obligation to comply with s 222AOB(1) which is relevant.  That section provides:

 

“The persons who are directors of the company from time to time on or after the first deduction day must cause the company to do at least one of the following on or before the due date:

(a) comply with its obligations in relation to deductions (if any) and amounts withheld (if any) whose due date is the same as the due date;

(b) make an agreement with the Commissioner under s 222ALA in relation to the company’s liability under a remittance provision in respect of such deductions (if any) and amounts withheld (if any);

(c) appoint an administrator of the company under s 436A of the Corporations Law;  or

(d) begin to be wound up within the meaning of that Act.”

[10] Section 222AOC provides that if s 222AOB is not complied with, each person who was a director of the company at any time during the relevant period “is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the company’s liability in question”.  Before the Commissioner is entitled to recover that penalty notice must be given to the director pursuant to s 222AOE;  by such notice the director is given fourteen additional days in which to comply with the obligations pursuant to s 222AOB.

[11] Affidavits from both sides containing extensive material were placed before the judge at first instance.  From the respondent’s point of view that material prima facie established all the necessary prerequisites to its succeeding.  The real question was whether or not the material filed in support of the male appellant’s position indicated a defence pursuant to s 222AOJ.  That material did address the issues raised in the defence and, for present purposes, it is sufficient to say that the affidavit material repeated, and prima facie established, the facts alleged in the defence. 

[12] The learned trial judge concluded that such material did not raise issues such as warranted the matter going to trial.

[13] On his own admission the male appellant returned to Gladstone to exert some control over the affairs of the company on 27 September 1999.  Significantly, approximately $100,000 of the amount of $144,854.21 in issue became due after that date.  Therefore, on the male appellant’s own material, so far as the greater part of the claim was concerned, he could not contend that he “did not take part in the management of the company” during the material time.

[14] But it is equally clear that during the earlier time that the other amounts became due he also took part in the management of the company.  During the course of argument in this court the male appellant’s attention was drawn to material exhibited to affidavits filed on behalf of the respondent which showed that on at least 21 October 1998, 2 December 1998, 3 December 1998, 23 June 1999, 27 July 1999 and 27 August 1999 he was in contact with officers of the Australian Tax Office with respect to the company’s obligations pursuant to the ITAA.  Ultimately the male appellant conceded that during the period he was in Brisbane he was the director of the company responsible for dealings with the Australian Tax Office.  In those circumstances it is not arguable that he “did not take part in the management of the company” during that material time and it is also not arguable that he “took all reasonable steps to ensure that the directors complied with” their obligations, particularly the obligation pursuant to s 222AOB.

[15] There is also no doubt that there was no response from the male appellant to the various notices he received pursuant to s 222AOE.  No explanation at all was forthcoming as to why the male appellant did not comply with s 222AOB as he was required to do.

[16] It is unnecessary for present purposes to decide whether the phrase “take part in the management of the company” should, in this context, be given a wide or, as it has been given in other contexts, a narrow construction.  See, for example:  Holpitt Pty Limited v Swaab (1992) 33 FCR 474 and Commissioner for Corporate Affairs v Bracht [1989] VR 821.

[17] Though both at first instance and on appeal some question was raised as to the quantum of the respondent’s claim, there is no substance in the point.

[18] It follows that the male defendant has no defence to the claim and there is no need for a trial of the proceeding with respect to the claim against him.  The learned judge at first instance was therefore right in granting summary judgment in favour of the respondent.

[19] The appeal of the male appellant should be dismissed with costs.

[20] I now turn to the appeal by the female appellant;  her position is quite different.  The respondent’s proceeding against her was D 157/00 in the Townsville registry, and the claim was identical with that made against her husband.

[21] In her defence matters specific to her position were raised in addition to matters identical with those relied upon by her husband.  She alleged that when the company was incorporated it was a statutory requirement that it have two directors.  She said that she agreed, at the request of her husband, to become a director on the basis that “she would not be required to nor would she be expected to take any part in the management of the company”.  She then alleged that she “has not at any time during her directorship of the company . . . taken any active role in the management of the company”.  She also alleged that “by reason of her state of health” she was not able to take any active role in the management of the company.  She alleged that all that she did as a director was predicated upon her trust that her husband would make appropriate arrangements for the management of the company.

[22] Then in her principal affidavit in response to the application for summary judgment the following passages appear:

 

“I maintain that for reasons of health, I did not take part in the management of Keencliff, during the period to which these proceedings relate (that is, the period between January 1998 and January 2000).  I only ever became a director of Keencliff because at the time of its incorporation (1989) the law then required that a company have not less than two directors.  . . .  I now know that a company need only have one director.  Had I known of that fact at the time when such change was made to the law, I would have resigned as a director of Keencliff, leaving my husband as the sole director of that company.

. . . 

As a consequence of the aforesaid health problems, I have not ever involved myself in the management of Keencliff.  . . .

. . .

During the time that I was a director of Keencliff, I signed a number of documents relating to my position as a director of Keencliff.  Those documents were generally prepared by Keencliff’s accountants.  Those documents include specific company documents, and also company and personal taxation documents.   I did not generally raise any query or question as to the documents I was signing.  I simply assume that such documents were necessary for the proper and effective running of Keencliff.”

[23] That was supported by an affidavit from Dr N Fraser.  Since 1994 he has treated the female appellant with respect to angina pectoris, high blood pressure, stress, and a thyroid condition.  He also records that she suffered a heart attack approximately fifteen years ago and in consequence spent some ten days in intensive care.  Relevantly his affidavit goes on to say:

 

“I am aware that Mrs Lister is, and has been, a company director. . . .  I do not know the specific role which Mrs Lister plays in terms of her position in the company, nor the extent to which she actually works in the company.  I have been informed by Mrs Lister, and verily believe, that Mrs Lister’s role in the company is minimal, and it was always Mr Lister who took primary responsibility for running the company. 

 

In general terms, it is my view that a person of Mrs Lister’s age, suffering the health problems which Mrs Lister presently suffers from, would have very grave difficulty in being actively involved in the operation of the company on a daily basis.”

[24] Material filed by the respondent disclosed that the female appellant had signed some documents relating to her taxation position as a director of the company, and had also claimed to be engaged “full time” as a director. 

[25] The learned judge at first instance concluded he did “not think an arguable defence is available to Mrs Lister by reference to s 222AOJ of the ITAA”.  Inferentially he appears to have concluded that the female appellant’s failure to make any satisfactory response to her obligations under s 222AOB or the notice served under s 222AOE was because it was never her intention to play any active role as a director in the company, rather than because of her health problems. 

[26] It is true that in her affidavit she deposed to the fact that she had signed certain company documents as a director, but the significance and extent of that cannot be gauged in the absence of further evidence as to the precise documents she signed and the regularity of her so doing.    Again it is unnecessary for the purposes of this appeal to determine the precise meaning of the phrase “take part in the management of the company” in the context of s 222AOJ. 

[27] That section makes it a defence for the female appellant to prove she “did not take part in the management of a company” during the material time; that is the very matter sworn to in her affidavit.  Whilst it is true that on one occasion she says that she did not take part in the management of the company because it was never her intention to do so, in another part she says that it was “as a consequence of” her health problems that she did not do so.  There may be no inconsistency between those statements.

[28] Given that there is no doubt that the female appellant does have serious health problems the material at first instance was not such as to enable the court to be satisfied that she had no defence.  There was, at least, the necessity for a trial to determine whether or not she did take part in the management of the company despite those health problems.  That would, amongst other things, involve an evaluation of her role in signing certain company documents.  It may well be that evidence at a trial would establish that what she in fact did amounted to taking part in the management of the company notwithstanding her health problems.  It might also be that the conclusion after trial was that her failure to comply with s 222AOB was due to an intention not to play an active role in the management of the company  irrespective of her illness; it  may well follow that in those circumstances a defence under s 222AOJ was not made out.  As all such issues could only be resolved after trial it was inappropriate to grant summary judgment.

[29] It follows that the application for summary judgment should have been dismissed so far as the female appellant was concerned.

[30] On 28 May 2001, before the summary judgment proceedings were commenced, the solicitor for the respondent wrote requesting “that you provide a report from an appropriately qualified medical specialist” dealing with the issue whether the female appellant’s health problems made her unable to take part in the management of the company. That was asked for so the respondent could make a final decision on whether to seek summary judgment against her.  No medical report was forthcoming so the summary judgment proceedings were commenced.  It was only on the morning of the hearing that the affidavit of Dr Fraser was produced.  In those circumstances the female appellant ought not have her costs of the application at first instance.  The application, which sought directions as to trial in the alternative to summary judgment, should be adjourned back to the District Court for further consideration.

[31] The orders of the court should therefore be:

 

1. Dismiss the appeal by Leonard Warburton Lister against the judgment in D156/00 with costs;

2. With respect to the appeal by Kathleen Patricia Lister against the judgment in D157/00:

 

(i) allow the appeal and set aside the judgment in favour of the Deputy Commissioner of Taxation in the sum of $144,854.21 with costs;

(ii) in lieu thereof order that the application for summary judgment be dismissed;

(iii) further order that the application of 19 June 2001 be adjourned for further consideration by the District Court as to directions for trial;

(iv) order that the respondent Deputy Commissioner of Taxation pay the appellant’s costs of the appeal to be assessed.

[32] JERRARD JA:  I agree with the reasons for judgment of Williams JA and with the orders proposed.

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Editorial Notes

  • Published Case Name:

    Deputy Commissioner of Taxation v Lister & Anor

  • Shortened Case Name:

    Deputy Commission of Taxation v Lister

  • MNC:

    [2002] QCA 270

  • Court:

    QCA

  • Judge(s):

    Davies JA, Williams JA, Jerrard JA

  • Date:

    30 Jul 2002

Litigation History

No Litigation History

Appeal Status

No Status