District Court New South Wales

• Medium Neutral Citation: Deputy Commissioner of Taxation v Zammitt [2012] NSWDC 135
• Hearing dates: 3/5/2012, 31/5/2012 and 1/6/2012
• Decision date: 31 August 2012
• Before: P Taylor SC DCJ

Decision

(a) Proceedings dismissed.

(b) Plaintiff to pay the defendant's costs.

• Catchwords: TAXATION AND REVENUE - Income tax - director penalty notice - service of notice - content of notice - retrospective legislation - repealed legislation - interpretation - costs - interest
• Legislation Cited: Acts Interpretation Act 1901 (Cth); Acts Interpretation Amendment Act 2011 (Cth); Civil Procedure Act 2005; Evidence Act 1995 (Cth); Income Tax Assessment Act 1936 (Cth); Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth); Tax Laws Amendment (2011 Measures No. 7) Act 2011 (Cth); Taxation Administration Act 1953 (Cth); Uniform Civil Procedure Rules 2005
• Cases Cited: Amended KW and KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2003] QSC 336; Australian Building Construction Employees' & Builders Labourers' Federation v Commonwealth (1986) 66 ALR 363; [1986] HCA 47; Australian Education Union v General Manager of Fair Work [2012] HCA 19; Bawn Pty Ltd v Metropolitan Meat Industry; Board (1971) 92 WN (NSW) 823; Bayeh v Deputy Commissioner of Taxation [1999] FCA 1194; Bodnar v Townsend [2003] TasSC 148; Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd [2000] FCA 1223; Deputy Commissioner of Taxation (NSW) v Gruber (1998) 43 NSWLR 271; Deputy Commissioner of Taxation v Manta's On The Beach Pty Ltd [2012] FCA 417; Deputy Commissioner of Taxation v Meredith (2007) 245 ALR 150; [2007] NSWCA 354; Deputy Commissioner of Taxation v Soong [2009] NSWSC 495; Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370; Esber v Commonwealth (1992) 174 CLR 430; Esso Australia Resources Pty Ltd v Commissioner of Taxation (No 1) [2011] FCAFC 134; Mabo v Queensland (1988) 166 CLR 186; Miller v Deputy Commissioner of Taxation (1997) 26 ACSR 533; Minister of Natural Resources v New South Wales Aboriginal Land Council and Another (1987) 9 NSWLR 154; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; Repatriation Commission v Goulding [2008] FCA 1858; Robertson v Deputy Commissioner of Taxation (2010) 239 FLR 29; Soong v Deputy Commissioner of Taxation (2011) 278 ALR 538; SZGMB v Minister for Immigration and Multicultural Affairs [2006] FCA 437; SZHDC v Minister for Immigration and Multicultural Affairs [2006] FCA 600; TJM Products Pty Ltd v Industry Research and Development Board (1998) 83 FCR 379
• Texts Cited: Uniform Evidence Law, Stephen Odgers, 10th edition
• Category: Principal judgment
• Parties: Deputy Commissioner of Taxation (plaintiff); Kevin Emanuel Zammitt (defendant)
• Representation: Mr D Jay (plaintiff) on 3/5/2012; Dr M Perry QC with Mr D Jay (plaintiff) on 31/5/2012 and 1/6/2012; Mr P Rodionoff (defendant); ATO Legal Services Branch (plaintiff); Bongiorno Lawyers (defendant)
• File Number(s): 2010/100600
• Publication restriction: No

Judgment

I. Introduction

1 The Deputy Commissioner of Taxation seeks to recover from Kevin Zammitt taxes unremitted by a company formerly known as Work Care Medical Pty Ltd ("Work Care Medical") under Division 9 of the Income Tax Assessment Act 1936 (Cth) ("the Assessment Act"). Mr Zammitt was a director of Work Care Medical. The director penalty notice required for recovery of the taxes was served on Mr Zammitt but it specified the wrong date for the remission of penalties. Further, Division 9 was repealed and replaced by Division 269 of the Taxation Administration Act 1953 (Cth) ("the Administration Act"). The Deputy Commissioner says that Division 269 allowed recovery against Mr Zammitt, and that recent retrospective legislation cured the problem with the date. I agree with the second argument, but not the first.

II. Background

A. Summary of the provisions of the Assessment Act

2 Division 9 of the Assessment Act contained provisions to ensure that a company either met certain taxation obligations or promptly went into voluntary administration or into liquidation (s 222ANA).

3 To achieve this purpose, the Assessment Act obliged directors to cause the company by the relevant due date to comply with its obligations, make an agreement with the Commissioner, appoint an administrator, or begin to be wound up (s 222AOB, see also ss 222AOBAA and 222AOBA).

4 Directors who failed to do this became liable to pay a penalty to the Commissioner equal to the amount of the company's liability (s 222AOC).

5 However, the Commissioner was not entitled to recover from the director the "penalty payable" until 14 days after the Commissioner had given the director a notice stating the details of the unpaid amount, stating the liability of the director to pay that amount, and stating that the penalty would be remitted if, at the end of the 14 days, the company had met the liability, entered an agreement with the Commissioner, was under administration or was being wound up (s 222AOE).

6 The director penalty notice could be given by sending it by post to an address that appeared from ASIC documents to be the person's place of residence or business (s 222AOF).

7 As indicated by section 222AOE, if the company met its obligations, entered an agreement with the Commissioner, or went into voluntary administration or into liquidation within the 14 days after the director was given the notice, the penalty would be remitted (s 222AOG).

B. The factual background

8 On 27 November 2009 Barbara Morris, an officer of the Australian Taxation Office, prepared a director penalty notice ("the Notice") and covering letter, addressed the envelope from an address of Mr Zammitt that she obtained from ASIC records, placed the Notice and the letter in the envelope, sealed the envelope, affixed a postage stamp and posted the envelope in an Australia Post box on Smith Street, Moonee Ponds, Victoria at 4.40pm.

9 The letter referred to the enclosed Notice and stated:

We will commence action for the recovery of the penalty without further warning unless, at the end of 14 days from the date the enclosed notice is given to you:

(a) the company's liability has been discharged; or

(b) an agreement relating to such liability is in force under s 222ALA of the Income Tax Assessment Act 1936; or

(c) the company is under administration within the meaning of the Corporations Act 2001; or

(d) the company is being wound up.

The penalty will be remitted if any one of these options is adopted within 14 days from the date the enclosed notice is given to you; that is, 14 days from the issue date of this letter.

You should keep in mind that you will continue to be liable to a penalty if any one of the options has not been adopted at the end of 14 days after the date of this letter (that is, any agreement would need to be executed by both the company and the Commissioner before the expiration of the 14 days). [bold in original]

10 The accompanying Notice contained details of the amount owing and stated:

The penalty in respect of each unpaid amount of the company's liability as detailed in the above table will be remitted if, at the end of 14 days after the date on this notice: -

(a) the company's liability in respect of that unpaid amount has been discharged; or

(b) an agreement relating to the liability is in force under s 222ALA of the ITAA 1936; or

(c) the company is under administration within the meaning of the Corporations Act 2001; or

(d) the company is being wound up. [bold in original]

11 Both the letter and the Notice were dated 27 November 2009.

12 It is common ground that none of the four options necessary to obtain remission of the penalty occurred within the 14-day period from the date of the Notice or, if it were relevant, in the days shortly thereafter.

13 Although Mr Zammitt raised certain factual issues in his defence, relevant to the amount of the unpaid debt of Work Care Medical, he did not serve any evidence in respect of those matters. The Deputy Commissioner relied on affidavits and a certificate under section 255-45 of Schedule 1 of the Administration Act purporting to prove the amount of unpaid debt of Work Care Medical under section 222AOC of the Assessment Act and the liability of Mr Zammitt for the penalty. At the hearing, Mr Zammitt did not contest that his liability was established.

14 But Mr Zammitt did contend that the Deputy Commissioner was not entitled to recover the penalty, arguing that the Notice served upon him did not satisfy the statutory requirements.

C. The legal background

15 One necessary component of a director penalty notice was that it accurately inform the director of the alternative courses available to him: Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370, 384-5 at [33], [36] and [39]. If a notice was misleading about compliance requirements then the notice was invalid: Deputy Commissioner of Taxation (NSW) v Gruber (1998) 43 NSWLR 271, 276A and 276G.

16 In Miller v Deputy Commissioner of Taxation (1997) 26 ACSR 533, the New South Wales Court of Appeal held in respect of section 222APE, a provision similar to section 222AOE, that the Commissioner could not commence proceedings for recovery of the penalty until 14 days after the penalty notice was received, which must have been at least one business day after posting, because a notice is not given until it is received.

17 In Deputy Commissioner of Taxation v Meredith (2007) 245 ALR 150; [2007] NSWCA 354, the Court of Appeal decided by majority on 10 December 2007 that a director penalty notice which was proved to have been posted but found not to have been received or delivered was nevertheless "given" for the purposes of the Act (see [50], [75], [76], [86] and [87]). The decision made no reference to Miller.

18 Basten JA, with whom Ipp JA agreed, held (see [50] and [86]) that the statutory precondition to recovery is satisfied by sending the notice by post to the relevant address. And at [87], "...the question of non-delivery is irrelevant if the statutory precondition to recovery is satisfied by the act of sending the notice in accordance with the statutory prescriptions." (See also [75]-[76]).

19 Accordingly, section 222AOF "...provided a self-contained means of satisfying the precondition to recovery specified in s 222AOE, and was not itself subject to the operation of s 29..." (see [82]). Section 29 of the Acts Interpretation Act 1901 (Cth) ("Acts Interpretation Act") provided for service to be deemed to be effected at the time it would ordinarily be delivered, in the absence of contrary proof, but it was held to have no application because of section 222AOF. Sections 222AOF and 222AOE thus defined not only the means of service, but also the time of service.

20 The effect of the decision was to hold that the director penalty notice was given, and thus the 14-day period commenced when the notice was posted rather than when it was received.

21 Giles JA, in dissent, determined that the terms of section 222AOF(1) attracted section 29(1) of the Acts Interpretation Act rather than controverted it. His Honour stated (at [23]-[24]):

"[23] ...Where it [s 222AOF] speaks of giving a penalty notice by sending by post, the sending by post being the means of giving the penalty notice, that is authorising a document to be served by post; the duality of giving by sending is within the use of "any other expression" [in s 29] to signify serving by post.

[24] Two consequences follow. First, unless the contrary intention appears the service is deemed to be effected by properly addressing prepaying and posting the penalty notice as a letter. Second, unless the contrary is proved service is deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post."

22 The Notice in the present case was posted in the period after the Meredith decision. The Notice specified that the 14-day period operated from the date of the Notice, which was in this case the same date as the date the Notice was placed in the Australia Post box.

23 In this judgment, when I refer to posting or postage I am referring to the acts which conclude with the provision of the article to the postal service.

24 On 1 July 2010 Division 9 of the Assessment Act was repealed, and replaced by Division 269 of the Administration Act. Section 269-25 of the Administration Act replaced section 222AOE of the Assessment Act. Section 269-25 provided for a 21-day period of notice.

25 At the same time, the Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) ("the Transitional Provisions") was enacted. Division 5 of Schedule 1 to that Act provided:

Division 5-Directors' obligations

64 Application-Division 269 in Schedule 1 to the Taxation Administration Act 1953

Subject to item 65, Division 269 in Schedule 1 to the Taxation Administration Act 1953, as added by this Schedule, applies in relation to an amount payable by a company to the Commissioner before, on or after the commencement time.

65 Transitional-penalties

No doubling-up of penalties

(1) Subsection 269-20(1) in Schedule 1 to the Taxation Administration Act 1953, as added by this Schedule, does not apply if the due day referred to in that subsection occurs before the commencement time.

(2) Subsection 269-20(3) in Schedule 1 to that Act, as added by this Schedule, does not apply if the 14th day referred to in that subsection occurs before the commencement time.

New provisions apply to existing penalties

(3) Subitem (4) applies in relation to a penalty that, just before the commencement time, was payable under Division 9 of Part VI of the Income Tax Assessment Act 1936.

(4) 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.

26 The operation of these provisions form the basis of the second of Mr Zammitt's arguments, that section 269-25 of the Administration Act and not section 222AOE of the Assessment Act determines whether the liability of Work Care Medical is recoverable from Mr Zammitt.

27 In any event, in Soong v Deputy Commissioner of Taxation (2011) 278 ALR 538, a bench of five justices sat on the Court of Appeal to determine whether Meredith was correct. Although the decision was given in 2011, it concerned a notice under section 222AOE of the Assessment Act. The Court of Appeal in Soong (at [1], [2], [3], [8] and [57]) unanimously decided that Meredith was not correct and (at [49] and [50]) endorsed the decision of Giles JA in Meredith. The Court in Soong held that section 29 of the Acts Interpretation Act governed the time when notice was given under section 222AOE.

28 In Soong, the relevant companies were placed in liquidation within 14 days of the date of receipt of the notice, although not within 14 days of the date of postage. This was sufficient for Ms Soong to obtain a remission of the penalties under section 222AOG, and preclude recovery by the Deputy Commissioner pursuant to section 222AOE. An application for special leave to appeal to the High Court was dismissed on 12 August 2011 (see [2011] HCATrans 212).

29 Thereafter, on 29 November 2011, the Commonwealth enacted the Tax Laws Amendment (2011 Measures No. 7) Act 2011. Schedule 7 of that Act (hereafter "Schedule 7") provided:

"Schedule 7 - Penalty notice validation

1 Validation of notices

(1) This item applies if the Commissioner gave (or purported to give) a notice under former s 222AOE on or after 10 December 2007 by sending it by pre-paid post in accordance with s 28A of the Acts Interpretation Act 1901.

(2) For the purpose of former s 222AOE, treat the notice as having been given at the time the Commissioner sent it by pre-paid post in accordance with s 28A of the Acts Interpretation Act 1901.

(3) This item applies despite s 29 of the Acts Interpretation Act 1901.

(4) This item does not affect rights or liabilities arising between parties to proceedings heard and finally determined by a court on or before the commencement of this item, to the extent that those rights or liabilities arose from, or were affected by, a notice referred to in sub-item (1).

(5) In this item:

former s 222AOE means former s 222AOE of the Income Tax Assessment Act 1936 (as that section was in force before the commencement of Schedule 1 to the Tax Laws Amendment (Transfer of Provisions) Act 2010)." [bold in original]

III. The Issues in the Proceedings

30 Some of the issues that arose in the proceedings were eliminated as a result of concessions by one or other of the parties. The Deputy Commissioner conceded that, absent Schedule 7 and the Transitional Provisions, the Notice was invalid and Mr Zammitt was entitled to succeed. This concession seems to be well founded. The notice was "capable of being misleading", or "able to mislead" in the words of Gruber if the 14-day period started not from the date of the Notice (as was stated on the Notice) but from some later date. As senior counsel for the Deputy Commissioner submitted, the problem would not have arisen if the Notice had adopted the words of section 222AOE by referring to the date the notice is given (as was the case in Soong, see Deputy Commissioner of Taxation v Soong [2009] NSWSC 495 at [10]) rather than referring to the date on the notice.

31 As earlier indicated, there was effectively no issue about the amount of the penalty being $365,066.49. This amount, although not admitted by Mr Zammitt to be correct, was proved by the statutory certificate, was not the subject of any contrary evidence and I find that Mr Zammitt had a liability in the amount of the certificate. Whether that amount could be recovered (see s 222AOE), or should be remitted (see s 222AOG), depended upon the Transitional Provisions and Schedule 7.

32 Further, Mr Zammitt accepted that the extrinsic materials including the second reading speech, the date of 10 December 2007 in Schedule 7 (which is the date of the decision of Meredith), the headings to Schedule 9 ("Penalty notice validation") and Item 1 therein ("Validation of notices") indicated that the purpose of Schedule 7 was to validate the Notice and other equivalent notices. Mr Zammitt made reference to Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629, 644 at [28] and submitted that if a construction of Schedule 7 that validated the Notice was reasonably open, it should be accepted. Section 15AA of the Acts Interpretation Act is to like effect. But Mr Zammitt submitted that such a construction was not reasonably open.

33 In the result, there were four issues for determination:

(1) Did the provisions of Schedule 7 operate to validate the otherwise invalid Notice?

(2) Was the evidence of correct postage sufficient to establish that the Deputy Commissioner complied with section 28A of the Acts Interpretation Act?

(3) Did the Transitional Provisions operate upon the penalty so as to require a further penalty notice?

(4) Did the retrospectivity of the legislation affect interest or costs?

IV. Analysis

A. Did Schedule 7 validate the Notices?

34 A number of sub-issues arise in connection with the operation of Schedule 7.

(a) Retrospectivity and pending litigation

35 Schedule 7 purports retrospectively to amend repealed legislation. It applies to all notices on or after 10 December 2007. Matters already heard and determined are excluded from its operation but not matters pending in court.

36 There is no doubt that the Commonwealth has the power to enact retrospective legislation, even when that legislation impacts on the result of proceedings currently pending in the courts: see Australian Building Construction Employees' & Builders Labourers' Federation v Commonwealth (1986) 66 ALR 363 at 369; [1986] HCA 47 at [17]:

It is well established that Parliament may legislate so as to affect and alter rights in issue in pending litigation without interfering with the exercise of judicial power in a way that is inconsistent with the Constitution. "Chapter III contains no prohibition, express or implied, that rights in issue in legal proceedings shall not be the subject of legislative declaration or action" (R v Humby; Ex parte Rooney (1973) 129 CLR 231 at 250 ; 2 ALR 297). So, in Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495 esp at 503-4 and 579-80, the validity of the Wheat Industry Stabilization Act (No 2) 1946 (Cth) was upheld, notwithstanding that the Act validated an order for the acquisition of wheat, the validity of which was in issue in the proceedings.

37 As per Mason J in Bawn Pty Ltd v Metropolitan Meat Industry Board (1971) 92 WN (NSW) 823 at 842:

"Once it is accepted that the general principle of construction recognizes that a statute may operate retrospectively so as to disturb and alter substantive rights which accrued before the commencement of the statute, provided that the statutory intention in that behalf is manifested with sufficient clarity, it is not easy to see why any different rule should be applied to the possible operation of the statute on rights which have already accrued, but are the subject of pending proceedings, at the time when the statute commences to operate. True it is that in the latter case an added element of injustice may arise in the form of a liability to costs in circumstances in which the award of costs lies not in the discretion of the court, but follows automatically the result of the litigation. Nevertheless, it does not seem that the injustice which will or may result from an interference with substantive rights in pending suits is in general so much greater that a stronger presumptive rule should be applied in such a case, in particular a rule which, according to its formulation, insists on a specific or explicit reference to rights in pending actions as an essential preliminary to the application of the new statute to those rights."

38 See also Australian Education Union v General Manager of Fair Work [2012] HCA 19 at [35].

39 Schedule 7 purports to amend the effect of a provision already repealed by the Transitional Provisions. I have not been able to identify any decision involving the retrospective amendment of a repealed provision. However, there does not appear to me to be any reason in principle why the earlier repeal of the legislation would preclude a subsequent valid retrospective amendment (see Mabo v Queensland (1988) 166 CLR 186 at 211-212). The later retrospective legislation would operate to affect rights that have accrued under the repealed legislation (see sections 2 and 7 of the Acts Interpretation Act). The defendant did not contend to the contrary.

(b) Validating the contents or service of the Notice

40 Item 1 of Schedule 7 applies if the Commissioner "gave (or purported to give) a notice under former s 222AOE" (see sub-item 1(1)).

41 In this case, the plaintiff gave the Notice but the Notice was invalid because of its contents and not because of the mode or timing of its service. The words in parentheses "(or purported to give)" operate to remedy an invalid "giving", that is, the invalid service. But in the present case the issue was not whether the document was served correctly but whether the content of the document served constituted a valid notice.

42 To put the matter another way, the legislation spoke of "gave (or purported to give) a notice", whereas in the present circumstances the plaintiff "gave a purported notice". Is there a material difference between "purporting to give a notice" and "giving a purported notice"? Strictly speaking, the former appears to cure any defect in the "giving" but not in the notice; the latter cures a defect in the notice but not in the giving.

43 This problem is repeated in sub-item 1(2) of Schedule 7. The provision seeks to cure a defect in the giving of the notice, by treating it as having been given at the time it was sent. The sub-item does not directly address any defect in the contents of the notice itself.

44 It seems to me that there is a material difference between a defective notice, and the defective service of a notice. Accordingly, the defect in the notice is not directly remedied by the parenthetical words "or purported to give".

45 However, this is not fatal to the Deputy Commissioner's case. If the proper interpretation of sub-item 1(2) is to treat the notice as having been given on the date it was posted (i.e. provided to the postal service) then the notice must be treated as no longer misleading and the defect in the notice is cured. In this event, Schedule 7 although directed at the service (or giving) of the notice would indirectly cure the defect in the content of the notice, for it would then be correct to state that Mr Zammitt had 14 days from the date on the notice to comply with section 222AOB in order to obtain a remission of the penalty.

(c) The time the Commissioner sent the Notice

46 A third problem concerns the meaning of "the time the Commissioner sent it by pre-paid post" as it appears in Item 1(2). The words in Item 1(1) including "gave a notice" are relevant to the proper construction of this phrase.

47 The phrase "send by post", in the absence of any aids in interpretation, might mean "provide to the postal service for delivery", or it may mean "deliver by means of the postal service".

48 Whilst the first interpretation might be the more common, I do not regard the natural meaning of "send" as necessarily excluding a requirement of delivery. Is it correct to say one has "sent" a letter, or an email, if it has been returned undelivered? Those circumstances would more commonly be referred to as an "attempt to send", thus indicating that at least in some contexts, sending to an address connotes delivery to that address.

49 Sections 160 and 163 of the Evidence Act 1995 (Cth) ("Evidence Act") may assist in determining which of the meanings of "send by post" is appropriate. Section 160(1) provides:

160 Postal articles

(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.

Section 160 applies to these proceedings by virtue of sections 182(4A) and 5 of the Evidence Act.

50 Section 160 creates a presumption that receipt occurs four days after the date of postage. In this provision the date an article is posted must be read as the date the article was provided to the postal service, rather than the date of delivery. Sections 28A and 29 of the Acts Interpretation Act have no application to section 160 (to cause "posted" to be read as another "expression" indicating "service") because the Evidence Act is not an Act that "requires or permits a document to be served" (see ss 28A and 29).

51 Section 163 of the Evidence Act has a more direct relevance to the present matter. It applies by virtue of section 5 of the Evidence Act. Section 163(1) provides-

163 Proof of letters having been sent by Commonwealth agencies

(1) A letter from a Commonwealth agency addressed to a person at a specified address is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) to have been sent by prepaid post to that address on the fifth business day after the date (if any) that, because of its placement on the letter or otherwise, purports to be the date on which the letter was prepared.

52 This provision creates a presumption that a letter is "sent by prepaid post to that address" five days after the date of the letter. But what is the event of being "sent by...post to that address"? Again, is it providing the letter to the postal service, or delivering the letter by means of the postal service? The authorities on this question are divided.

53 In Repatriation Commission v Goulding [2008] FCA 1858 at [28] Reeves J decided that:

"[28] ...s 163 of the Evidence Act provides for a presumption as to when Commonwealth correspondence has been sent, and it does not provide for a presumption as to when that correspondence is received. I consider this comes from both the plain meaning of the words used in the section and the purpose of the section."

54 This decision indicates that the ordinary meaning of "send" at least when contrasted with "received" (and when not in an Act "which requires or permits a document to be served" so as to enliven sections 28A or 29 of the Acts Interpretation Act) is the event of commencing the sending process, rather than the final event of delivery or receipt.

55 As Reeves J noted in Goulding, this view is supported by the obiter remark of Giles JA in Meredith at [21] where his Honour said:

[21] Section 163 of the Evidence Act does not intrude into this. It is not concerned with what must be done for sending by post or when the service by sending by post is effected. It is concerned, in the case of a letter from a Commonwealth agency, with when the sending by post occurred. In the present case there is no doubt about when the sending by post occurred, which was a matter of evidence.

56 This paragraph of the reasons of Giles JA is not expressly adopted by the court in Soong (although cf Soong at [37]-[39]). The interpretation is, however, supported in the following decisions: Meredith (per Basten JA) at [86]; Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd [2000] FCA 1223 at [21], [22] (per Logan J); SZHDC v Minister for Immigration and Multicultural Affairs [2006] FCA 600 at [20] (per Stone J); Deputy Commissioner of Taxation v Soong [2009] NSWSC 495 at [24]; and is adopted in Odgers, Uniform Evidence Law, 10th edition at 913 (and see note 113).

57 On the other hand, also as noted by Reeves J at [28] in Goulding, the decision of Rares J in SZGMB v Minister for Immigration and Multicultural Affairs [2006] FCA 437, is to the contrary. Rares J at [26] stated:

"[26] ...The effect of s 163 is that the letter is presumed to have been received on the fifth business day after the date it bears..."

58 The decision of Rares J in SZGMB is not alone in the construction it gives to section 163. Similar statements can be found in Bayeh v Deputy Commissioner of Taxation [1999] FCA 1194 at [25]-[26] (per Beaumont J); Amended KW and KM Quinn Investments Pty Ltd v Deputy Commissioner of Taxation [2003] QSC 336 at [2] (per McMurdo J); Deputy Commissioner of Taxation v Manta's On The Beach Pty Ltd [2012] FCA 417 at [11] per Logan J and Bodnar v Townsend [2003] TasSC 148 at [13] (per Blow J).

59 Although I am bound by the ratio in Soong it is not clear that the passage at [39] purports to state authoritatively the meaning of section 163, as distinct from the meaning ascribed to it by Basten JA in Meredith. In these circumstances, I am compelled to return to the words of the statute.

60 With some hesitation, I have come to the view that section 163 creates a presumption as to the date a letter is provided to the postal service, rather than delivered to the addressee. My reasons for this conclusion are:

(a) Section 160 presumes that an article "sent by prepaid post addressed to a person at a specified address" was "received" on a particular day, thereby distinguishing between sending and receipt. It seems unlikely that section 163 would also create a presumption as to the date of receipt when it speaks of a presumption as to the date a letter was "sent". The use of the different words in the two related provisions suggest a different meaning; in this case "send" means provide to the postal service rather than deliver to the addressee.

(b) If sections 160 and 163 were both concerned with delivery, then there is the prospect that contrary presumptions would arise. For example, assume that the only relevant evidence is first, the date on the letter and second, the date of posting (that is, delivery to the postal service). Section 160 would presume receipt on the fourth business day after the second date, whereas section 163 would presume receipt on the fifth business day after the first date. Neither provision indicates which is to prevail. I do not regard this difficulty as capable of resolution either by the possible difference between receipt and delivery, nor by the argument that evidence of the date of posting (giving rise to the section 160 presumption) is evidence sufficient to raise a doubt about the presumption under section 163.

(c) If anything, the passage in Soong at [39] supports this construction.

61 Sections 28A and 29 of the Acts Interpretation Act may also provide assistance as to the correct interpretation of Item 1(2) of Schedule 7. These provisions concern service of documents, including service by post. They have some application if it is correct to regard giving a notice under section 222AOE, or sending a notice under section 222AOF where the timely giving (or sending) of the notice is a precondition to the recovery of a penalty, as the "service" of documents.

62 Paragraph 21 of the judgment of Giles JA in Meredith, quoted above, seems to distinguish "service by sending by post" from "sending by post" under section 163 of the Evidence Act. This distinction does not appear in sections 28A and 29 of the Acts Interpretation Act.

63 In any event, there are three reasons why the giving of a notice under section 222AOE, and the sending of a notice under section 222AOF, constitute the service of the notice.

64 First, the action of giving (and perhaps sending) a notice seems to be indistinguishable from service of a notice: both involve provision of a notice to a person by some means. Secondly, the sections 28A and 29 imply that nothing turns on the word "give" or "send" rather than "serve", by expressly providing that "give" and "send" may be an alternative expression to "serve" in an Act. Thirdly, and most authoritatively, the decision in Soong at [49]-[55] seems to require this conclusion.

65 Item 1(3), which provides that Schedule 7 applies "despite" section 29 of the Acts Interpretation Act, may indicate the contrary. The word "despite" indicates that if Item 1 is contrary to section 29, Item 1 is unaffected by section 29. However, one must first determine the meaning of Item 1: the word "despite" does not compel Item 1 to be given a meaning contrary to section 29. Of course section 28A remains directly applicable to Schedule 7.

66 If "give" or "send" relevantly means "serve", then this has a significant effect on Schedule 7.

67 Item 1 could then be read as follows: item 1(1) provides that Schedule 7 applies if the Commissioner served a notice by serving it by prepaid post; item 1(2) provides that the notice is to be treated as having been served at the time the Commissioner served it by pre-paid post.

68 This construction leaves open the question, what is the time the Commissioner has served the notice by pre-paid post.

69 Section 28A and 29 of the Acts Interpretation Act both indicate that service by post may involve delivery. Section 29 compels the conclusion that delivery determines the time that service is effected, whether by means of the second deeming provision or contrary proof. Section 28 is not so clear, although its reference to "sending" in a provision which equates "send" with "serve" does not provide support for a contrary view.

70 There are limitations on the utility of section 163 of the Evidence Act and section 29 of the Acts Interpretation Act in construing Schedule 7. Schedule 7 is to be construed "despite" section 29; and section 163, unlike Schedule 7, is unaffected by section 28 of the Acts Interpretation Act.

71 I have concluded that "the time the Commissioner sent [the notice] by pre-paid post" should be interpreted as the time the notice was provided to the postal service. If the alternative interpretation were adopted, Schedule 7 would have no utility, for if the notice were to be treated as having been given at the time it was delivered, Schedule 7 would merely be repeating what Soong had already decided. Section 15AA of the Acts Interpretation Act and decisions such as Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69]-[71] support this approach.

(d) For the purpose of section 222AOE

72 There is one final argument in respect of Schedule 7. It turns on the limitation inherent in the initial words of sub-item 1(2): "For the purpose of former s 222AOE".

73 These words indicate that section 222AOG is unaffected by sub-item 1(2). While section 222AOF is also not referred to in the sub-item, section 222AOF (as a result of the decision in Soong) is not concerned with the time of service so that no significance attaches to the absence of section 222AOF in sub-item 1(2).

74 However, section 222AOG is a different category. It defines whether the penalty is remitted, providing that if the director complied with section 222AOB "within 14 days after the Commissioner gives the person a notice under s 222AOE", the penalty is remitted.

75 In accordance with Soong, the date of the giving of the notice is determined by section 29 of the Acts Interpretation Act to be the date of delivery, either by the presumption in section 29 or by proof of the date of delivery.

76 If Schedule 7 has no application to section 222AOG, then the date of delivery is the relevant date for determining whether the penalty is remitted. This does not directly assist Mr Zammitt: it was not suggested that he had complied with section 222AOB within 14 days of the date of delivery of the Notice.

77 But it impacts upon the correct interpretation of section 222AOE. Is it reasonable to construe Schedule 7 as contemplating that a section 222AOE notice is valid if it says that the penalty will be remitted if the necessary steps are taken within 14 days of the date of posting of the notice, in circumstances where section 222AOG says the penalty will be remitted if the necessary steps are taken within 14 days of the date of delivery of the notice? The notice would specify a shorter period than the period allowed by section 222AOG.

78 In other words, this interpretation of Schedule 7 would allow the notice to be misleading.

79 There seem to be three possible answers to this dilemma. First, the legislature was not concerned with the disconnect between the notice specifying the terms of the remission (under s 222AOE) and the substantive provision governing the terms of the remission (s 222AOG), because no one would be misled in the future. Division 9 has been repealed, it might be said, and so section 222AOG no longer has any application.

80 Yet section 222AOG may have application to the present recovery of penalties which arose prior to the Transitional Provisions. It does not seem either reasonable or likely that Parliament would seek to validate a defective notice by a provision that causes the validated notice to be misleading. It might be thought reasonable to leave section 222AOG unamended so as to leave unaffected the remission of the penalty in the case of those persons like Ms Soong who took the necessary steps within 14 days of receiving the notice, while denying the remission of the penalty to those directors who did not act so promptly or at all. But this would conflict with the central purpose of the notice provision: that the directors be correctly informed of the alternative courses available which will result in the remission of the penalty (see Woodhams at 384D) and a notice which is misleading as to what is required to be done to secure a remission is invalid (see Gruber at 276D).

81 Although the retrospective validation of a misleading notice does not remove the misleading nature of the notice at the time it was received, I do not regard this as a reason to suppose Parliament would validate a notice by positively making it misleading.

82 A second possible answer is that Schedule 7 applies to section 222AOG even though no reference to the section is found in Item 1, but this seems offensive to the normal rules of statutory construction. If section 222AOG was intended to be affected by Item 1(2) of Schedule 7 it would have been a simple matter to include a reference to it or to the whole former Division 9.

83 Project Blue Sky Inc at [71] requires me to strive to give meaning to the opening words of Item 1(2). In my view, those words having been included, they should be given their normal meaning and effect, which is that Item 1(2) has application to section 222AOE but not to any other provision.

84 Moreover, unless the preamble "For the purpose of former section 22AOE" is given a substantive meaning, an absurdity would arise in relation to the application of Item 1(2) to Item 1(1). If a notice was posted on 9 December 2007 but delivered on 10 December 2007, then under Soong Item 1 would apply by virtue of the notice being given on or after 10 December 2007. Such a notice is then treated as having been given on 9 December 2007, by reason of Item 1(2). But without force in the preamble Item 1(2) would apply to Item 1(1) causing the notice given on 9 December to fall outside the application of Item 1, thereby creating a contradictory circularity.

85 A third possible answer is that reference to section 222AOG was unnecessary, that once Item 1(2) applied to section 222AOE, it would inevitably have effect upon section 222AOG. Section 222AOG does of course refer to section 222AOE but so does Item 1(1), and as the previous paragraph indicates, that could not mean that Item 1(2) applies for the purposes of Item 1(1).

86 I do not see how it is possible to read Item 1(2) as affecting section 222AOG without ignoring the initial words of Item 1(2). It is one thing to treat a section 222AOE notice as having been given at a particular time, but it is quite another to apply that particular time for the purpose of section 222AOG, when the item expressly provides that it is (only) for the purpose of section 222AOE.

87 Mr Zammitt has submitted that this problem illustrates the error of this construction, and that the problem would be overcome by confining the operation of Schedule 7 to the first purpose only of section 222AOE, namely the period the Commissioner must wait before being entitled to recover the penalty.

88 This approach would not leave Schedule 7 without utility. One of the purposes of section 222AOE is to preclude recovery until 14 days have elapsed after the giving of the notice. Schedule 7 reduces this period from 14 days after delivery to 14 days after posting, thereby statutorily reversing the decision in Miller. The terms of Schedule 7, which are directed to the time of the giving of the notice rather than its content, support this approach.

89 However, this approach does not reflect the purpose manifested in the heading to Schedule 7, and the heading to Item 1, which are part of the enactment by virtue of section 13(2)(d) of the Acts Interpretation Act. Nor does it reflect the intention manifest in the explanatory memorandum and the second reading speech, relevant pursuant to section 15AB of the Acts Interpretation Act. On this interpretation no penalty notices would be "validated"; the only effect would be to permit earlier recovery.

90 Further, such a construction would create its own peculiarity: not only would the Commissioner have been entitled to recover the penalty at a time when the penalty could still be remitted under section 222AOG, but this interpretation would result in two different meanings of "giving a notice" within the one section 222AOE.

91 Ultimately, none of the possible constructions are entirely satisfactory. However, as stated earlier I am directed by section 15AA of the Acts Interpretation Act to prefer the interpretation that would best achieve the purpose or object of the Act. The construction I have adopted treats the reference to the time the Commissioner sent the notice in accordance with section 28A of the Acts Interpretation Act as a reference to the date the notice was delivered to the postal service. I have applied Item 1(2) to all of the purposes of section 222AOE, in accordance with its terms and with section 23 of the Acts Interpretation Act.

92 And I have not applied Item 1(2) to section 222AOG, also in accordance with its terms. This has the effect of preserving the entitlement to a remission of penalty for those directors who, like the appellant in Soong, complied with section 222AOB within the period specified in section 222AOG. I recognize that this interpretation means that the section 222AOE notice would be misleading in describing the entitlement to a remission under section 222AOG. Ordinarily this might indicate an unreasonable construction, but I do not regard it as any less reasonable than the alternative available interpretations.

93 It follows that I am persuaded that the Notice (and other notices based on the decision in Meredith which were invalidated by the decision in Soong) was intended to be validated by Schedule 7, and is validated on the proper interpretation of the provision.

94 Accordingly, I reject the argument of Mr Zammitt that the Notice is invalid.

B. Did the Commissioner satisfy section 28A of the Acts Interpretation Act 1901?

95 The second issue is whether the notice was sent by pre-paid post to the last known address in accordance with section 28A of the Acts Interpretation Act. This is a requirement for the operation of Schedule 7 by reason of the terms of sub-items 1(1) and 1(2).

96 Mr Zammitt contended in submissions in reply:

"When the Assessment Act refers to prepaid post it must be interpreted as the correct amount of the postage having been prepaid. The rate of postage depends upon envelope size.

Accordingly the plaintiff needed to lead evidence that the envelope in which the notice was sent was prepaid to the appropriate amount. This will include evidence that the envelope was not larger than the size permitted for the postage amount placed in the envelope. The affidavit of Barbara Morris dated 20 October 2010 only deposes to affixing a postage stamp and says nothing about the size of the envelope or any other information from which the correct postage rate can be determined."

97 The evidence of the plaintiff included an affidavit which stated:

"Annexed hereto and marked "B" is a true copy of the notice issued to the defendant."

98 No objection was taken to this evidence. Annexure B comprised a copy of the letter, the notice and what appears to be the envelope in which the letter and notice were sent. The envelope was addressed to the defendant at the address recorded in the ASIC records and displayed a 55 cent postage stamp, affixed in the appropriate place. It was not apparent from the annexure whether the envelope was a regular or large sized envelope.

99 To cure this possible deficiency the plaintiff sought leave to tender two envelopes, a regular sized envelope, and a larger A4 sized envelope. The plaintiff also sought to tender a document bearing the appearance of an Australia Post document recording postage charges at the relevant date, showing that 55 cents was the appropriate postage charge for a regular sized envelope.

100 I allowed the late tender of evidence.

101 The evidence was compelling that the appropriate postage stamp was affixed to the envelope, provided that the envelope was a regular size, as an A4 size envelope required $1.10 in postage.

102 Having viewed the blank envelopes tendered, having noted that the code number on the regular sized envelope was the same code as that appearing on the copy stamped envelope sent to the defendant, and having compared the envelopes with the copy envelope, I am persuaded on the balance of probabilities that the postage was the correct postage for the particular envelope utilized by the plaintiff.

103 Accordingly, I find that the correct amount of postage was pre-paid, and that Mr Zammitt's argument to the contrary must fail.

104 In a related argument Mr Zammitt sought assistance from an argument made by the plaintiff in Soong (at [29]) that "S 28A provided for service when ASIC records were not utilized". As I understand the argument, Mr Zammitt utilized this statement in an attempt to establish the converse proposition: that where ASIC records are utilized, section 28A of the Acts Interpretation Act is not enlivened. I do not accept this argument. In Robertson v Deputy Commissioner of Taxation (2010) 239 FLR 29 at [21]-[29], [40]-[44], [59] and [66]-[68], the Court found that the address derived from an ASIC search was the last known address for the purposes of section 28A.

105 It might be thought that there was no evidence that the ASIC record of Mr Zammitt's address was the address last known to the plaintiff. The evidence of Barbara Morris was only that she obtained the address from the ASIC records. However, the decision in Robertson is to the effect that there was nothing to put the Commissioner on notice that the ASIC record was inaccurate at [66], and that "the ASIC record...when searched became [the defendant's] address last known to the plaintiff" (at [67]).

106 The Deputy Commissioner advanced a further reason why I should be satisfied that Mr Zammitt's address in the ASIC records is the address last known to the plaintiff: the presumption of regularity.

107 In Minister of Natural Resources v New South Wales Aboriginal Land Council and Another (1987) 9 NSWLR 154, 164C, the Court of Appeal held:

Where a public official or authority purports to exercise a power or to do an act in the course of his or its duties, a presumption arises that all conditions necessary to the exercise of that power or the doing of that act have been fulfilled.

108 However, I am not satisfied that the presumption applies in the present case. Whilst it is true that valid service is a precondition to the exercise of the power to recover the penalty under section 222AOE, the requirements for valid service are expressly stated in section 222AOE of the Assessment Act, and in section 28A of the Acts Interpretation Act. In order to benefit from the deeming provision in these enactments, it seems to me that there must be evidence establishing that the deeming provision applies. Were it otherwise, there would be no need for the deeming provision - the presumption of regularity would suffice to establish service.

109 Accordingly, I prefer to base my decision upon the authority of Robertson. The plaintiff has established that the address in the ASIC records, utilised in this case, was the address last known to the Commissioner within the meaning of s 28A(1)(a)(ii) of the Acts Interpretation Act.

110 It follows that the notice was sent "in accordance with s 28A" under Item 1 of Schedule 7. I do not think it of any significance whether any particular person intended for that service to be effected under section 28A or under section 222AOF. It suffices to establish that service was "in accordance with s 28A" if the means of service satisfied the statutory elements.

C. Did the Transitional Provisions operate upon the penalty?

111 I have found the Notice to be valid by virtue of Schedule 7. Whether the validity of the Notice is sufficient to allow the Deputy Commissioner to recover the penalty depends upon the effect of the Transitional Provisions. Items 64 and 65 of the Transitional Provisions are set out earlier in these reasons.

112 In summary, Item 64 applies to an amount payable (at any time), by a company to the Commissioner, subject to Item 65. Item 64 uses the terms "applies in relation to an amount payable by a company". These underlined words are of wide import. The amount of penalty recoverable from a director is "in relation to" the amount payable by the company because it is the same amount payable at the same time.

113 This construction is confirmed by sub-item 65(3), which expressly states that sub-item 65(4) applies to penalties payable under Division 9 of the Assessment Act. Sub-item 65(4) provides that Division 269 (other than 269-20) has effect as if the penalty were payable under subdivision 269-B.

114 Item 65 provides that in certain circumstances subsections 269-20(1) and (2) in Division 269 of Schedule 1 to the Administration Act do not apply, to avoid a doubling-up of penalties. Those circumstances exist here, as the "due day" (subsection (1)) and the "14th day" (subsection (2)) occurred before the commencement time.

115 Thus, no penalty is imposed upon Mr Zammitt by section 269-20: the existing penalty and liability of Mr Zammitt are preserved by sub-sections 8(c) and (d) of the Acts Interpretation Act, as it then was. The repeal of section 8 by the Acts Interpretation Amendment Act 2011, Schedule 1, Part 4, Item 13 only applies to appeals and amendments occurring on or after the commencement date of that Act, and so does not apply to the earlier repeal of Division 9 of the Assessment Act.

116 However, sub-item 65(3) of the Transitional Provisions provides that sub-item 65(4) applies to a penalty payable before the commencement time, so sub-item 65(4) applies in the present case. Sub-item 65(4) makes the remainder of Division 269 in Schedule 1 of the Administration Act (other than section 269-20) applicable to the existing penalty, as if the penalty was payable under Division 269.

117 Accordingly, although section 269-20 of the Administration Act (which imposes the penalties on directors) is expressly made inapplicable, that is not the case with section 269-25. Section 269-25 of the Administration Act replaces the former sections 222AOE and 222AOF of the Assessment Act, and section 269-30 replaces section 222AOG. Items 64 and 65 of the Transitional Provisions make sections 269-25 and 269-30 applicable in the present case.

118 Sections 269-15, 269-25 and 269-30 of the Administration Act provide as follows:

269-15 Directors' obligations

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).

Instalment arrangements

(3) The Commissioner must not commence, or take a procedural step as a party to, proceedings to enforce an obligation, or to recover a penalty, of a director under this Division if an *arrangement that covers the company's obligation is in force under section 255-15 (Commissioner's power to permit payments by instalments).

Note 1: The arrangement may also cover other obligations of the company.

Note 2: Subsection (3) does not prevent the Commissioner from giving a director a notice about a penalty under section 269-25.

269-25 Notice

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.

(3) To avoid doubt, a single notice may relate to 2 or more penalties, but must comply with subs (2) in relation to each of them.

When notice is given

(4) Despite section 29 of the Acts Interpretation Act 1901, a notice under subsection (1) is taken to be given at the time the Commissioner leaves or posts it.

Note 1: S 28A of the Acts Interpretation Act 1901 may be relevant to giving a notice under subs (1).

Note 2: S 269-50 of this Act is also relevant to giving a notice under subs (1).

269-30 Remission of penalty before end of notice period

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.

119 These provisions require the Commissioner to give a written notice of the penalty under section 269-25, to explain that the penalty will be remitted if the director satisfies the obligations under section 269-15 within 21 days of the date of postage of the notice, and to wait 21 days before commencing proceedings to recover the penalty.

120 The Notice served on Mr Zammitt does not comply with section 269-25 in at least two respects: it is not a notice given under section 269-25 of the Administration Act; and it does not explain that the penalty will be remitted if within 21 days of the date the notice is posted the obligations under section 269-15 are satisfied (see ss 269-25(2)(c) and 269-30). I did not understand the plaintiff to contend otherwise.

121 Accordingly, section 269-25(1) appears to preclude recovery by the Deputy Commissioner.

122 The Deputy Commissioner submitted that "where penalties were payable but not yet recovered, items 65(3) and 65(4) operate to apply the provisions of the new subdivision (269-B) for recovery", and again "items 65(3) and (4) apply to penalties that were payable but not yet recovered". These submissions appear to me to support Mr Zammitt's argument: his penalty was payable but not yet recovered.

123 The Deputy Commissioner also submitted that Item 65(4) operates in respect of discharging liabilities (under 269-40) and obtaining indemnity contribution from other directors (under 269-45). So much must be accepted. This does not operate to deny the application of section 269-25. On the contrary, the submission provides further examples of the operation of Division 269 upon directors' penalties arising under the former Division 9.

124 It seems likely that Division 269 would have been intended to apply to a director if no director penalty notice had been issued in respect of the director's liability incurred before the commencement date. The application of Division 269 would in that circumstance enable the Commissioner to issue a notice in respect of the unpaid liability. And there is nothing in the Transitional Provisions to distinguish that circumstance from one where the director has received a (valid or invalid) penalty notice.

125 The Deputy Commissioner sought to draw a distinction between directors who have a "liability to pay" under section 222AOC of the Assessment Act - that is, those who have a "penalty payable" as stated in section 222AOE - and directors in respect of whom that penalty which is payable is also recoverable under section 222AOE, or not capable of being remitted under section 222AOG. No provision was identified which indicated this distinction.

126 Schedule 1 of the Transitional Provisions does not focus on recoverability or remission but on whether the debt is "payable". Sub-item 65(4), according to sub-item 65(3), applies in relation to a penalty that was "payable". And sub-item 65(4) makes the penalty "payable" under the new Division 269 provisions. This repeated reference to "payable", and the express reference in Item 65 (repeated four times) excluding the operation of section 269-20, but not sections 269-15, 269-25 or 269-30, persuade me that the proper interpretation of the Transitional Provisions is that sections 269-15, 269-25 and 269-30 of the Administration Act apply to Mr Zammitt's penalty.

127 The explanatory memorandum to the Transitional Provisions, relied upon by the Deputy Commissioner states:

"Penalties that remain unpaid as at 1 July 2010 under the old law are taken to have been payable under the new law for the purposes of the machinery provisions".

128 I do not think this assists the Deputy Commissioner. If anything, because of the focus on penalties unpaid but payable, it supports Mr Zammitt's argument that section 269-25 of the Administration Act applies to penalties incurred, irrespective of whether or not they were recoverable at the time of commencement.

129 The Deputy Commissioner advanced one further argument, that section 8 of the Acts Interpretation Act preserves unaffected any right or liability acquired, accrued or incurred under any Act in the absence of a contrary intention appearing. As indicated earlier in these reasons, section 8 has been repealed but it is still applicable to the repeal of Division 9 of the Assessment Act, Schedule 1 of the Transitional Provisions, and Division 269 of the Administration Act.

130 The Deputy Commissioner submitted that not only the penalty but also the "right in the Commissioner to recover the penalty" was preserved by section 8.

131 The Deputy Commissioner referred to Esber v Commonwealth (1992) 174 CLR 430. At 441A the majority indicated that a "right in existence at the time the...Act was repealed" meant that "in the absence of contrary intention, the right was protected by s 8 of the Acts Interpretation Act". In the present case, the right to recover the penalty was not in existence at the time of the repeal of Division 9, as was found by Soong. But Esber was not concerned with retrospective legislation impacting on the right.

132 I have decided earlier in these reasons that Schedule 7 operated to affect rights under the repealed legislation. Therefore, although the contrary position may be arguable, those rights affected or created by Schedule 7 are rights preserved by section 8 in the absence of a contrary intention, because of the retrospectivity of Schedule 7, notwithstanding that the rights are created after the repeal of Division 9.

133 But this is not a case where there is no appearance of a contrary intention. Unlike a circumstance where Division 9 was simply repealed, here the Transitional Provisions expressly seek to affect the recovery of penalties payable under Division 9 before the commencement time (see Schedule 1 heading and sub-item 65(3)). The express effect, which manifests the contrary intention for the purposes of section 8, is that the collection and recovery of these penalties are governed by sections 269-15, 269-25 and 269-30, as if those penalties were payable under those sections.

134 The "contrary intention" could hardly be more clearly expressed. The heading to Schedule 1, the express words of Item 64 and sub-items 65(3) and 65(4), the express exclusion of section 269-20 in sub-items 65(1), (2), (4) and (6), the terms of subdivisions 269-B and 269-C of the Administration Act, and the absence in all of these provisions of any indication of a distinction between penalties which were or were not recoverable at the commencement time, plainly displace the presumption in section 8.

135 Even if some distinction were created by the reference to penalties "payable" under the Transitional Provisions, this would not assist the Deputy Commissioner. The fact that a penalty is recoverable does not make it any less payable, quite the reverse. If a choice were required as to which of the recoverable and unrecoverable (or not yet recoverable) penalties, as at the commencement time, were a "penalty...payable" and within the operation of the Transitional Provisions and Division 269, surely the former would be preferred. I note that Item 64 refers to amount "payable by a company", which is presumably an amount recoverable immediately from the company.

136 The Deputy Commissioner appears to have recognized this, submitting in writing that:

"...the purpose of item 65(4)...permits the DCT to have recourse to subdivision 269-B where a liability is "payable" (in the sense that liability has crystallized and is recoverable)" [the final three words were added during oral submissions]

and

"In short, items 65(3) and (4) apply to penalties that were payable but not yet recovered. It facilitates the circumstance where the DCT had a right to recover but had not done so".

Even assuming the distinction, it is of no assistance to the Deputy Commissioner, unless there is some provision to indicate that items 65(3) and 65(4) do not render sections 269-15, 269-25 and 269-30 applicable. There is no such provision, items 65(3) and 65(4) indicate the contrary in the plainest terms.

137 But I do not think any distinction was created.

138 Further, sub-items 65(5) and 65(6) of the Transitional Provisions make Division 269 apply in circumstances where no further notice would have been required under the former Division 9. The former section 222AQA(2) created a penalty which was not subject to the notice provision of the former section 222APE, but now seems also to be subject to the notice provision in section 269-25 of the Administration Act.

139 In these circumstances, I do not think it is open to me to read the words of the Transitional Provisions and Division 269 of the Administration Act as affecting the penalty of a director incurred under section 222AOC, but leaving unaffected the recoverability of the penalty where section 222AOB has not been complied with in accordance with a notice given under section 222AOE.

140 The effect of this interpretation is that a new section 269-25 notice must be served in respect of existing unrecovered penalties with the result that more of those penalties may be remitted. Division 269 has provided a more generous notice period (a 21-day notice, rather than a 14-day notice) for a director to fulfil the requirements to obtain a remission of the penalty. The Transitional Provisions, with Division 269, require this new notice period whether or not the director had earlier received or was required to receive a section 222AOE notice. At the commencement time under the Transitional Provisions there was no valid director penalty notice that had been served in these (and presumably other) proceedings, as decided in Soong, but that seems unlikely to be the explanation for this amendment.

141 In any event, I am unable to construe the words of Items 64 and 65 so that they apply sections 269-15, 269-25 and 269-30 to those penalties not the subject of a section 222AOE notice and not apply those sections to penalties that are the subject of a (valid or invalid) section 222AOE notice.

142 For these reasons, I propose to dismiss the plaintiff's claim with costs.

D. Do the retrospective provisions impact upon interest and costs?

143 In case I am mistaken in this matter, there was another issue that was argued before me with which I should deal. It concerns the question of whether the Deputy Commissioner should receive interest and costs in the event that he succeeds.

144 Mr Zammitt's submission in favour of a special order for costs, not one following the event, can be briefly described. If Mr Zammitt were to fail in these proceedings it would be because of the retrospective legislation in Schedule 7. It is not in contest that since the decision in Soong Mr Zammitt would have succeeded had the matter come to judgment prior to the enactment of Schedule 7.

145 That factor alone may be merely a matter of misfortune. But these proceedings were ready to proceed to hearing immediately after the decision in Soong. The matter came before the Court on 25 March 2011, one month after the decision in Soong. The Deputy Commissioner had filed a motion that previous directions be vacated and that the matter be put in the inactive list. That motion was dismissed with costs and the matter was listed for a status conference on 18 April 2011 for the purpose of obtaining a hearing date.

146 On 18 April 2011, the Deputy Commissioner sought a further adjournment. Mr Zammitt resisted, claiming prejudice. The Deputy Commissioner asserted that there was no prejudice. When Mr Zammitt referred to interest, the Deputy Commissioner agreed to waive any interest for the period of the adjournment.

147 The matter came before the court again on 29 August. By that stage the special leave application in Soong was dismissed and the matter was listed for directions on 27 September 2011. On that date the earlier agreement of the Deputy Commissioner to waive interest during the period of the adjournment was again noted, and the matter was stood over to 6 January 2012. The retrospective legislation in Schedule 7 was assented to on 29 November 2011.

148 The factor that is asserted to be relevant to costs and interest is that the Deputy Commissioner, as a Commonwealth officer presumably subject to its model litigant policy, indicated that there was no prejudice to Mr Zammitt in postponing the hearing date at a time when the Deputy Commissioner appears to have been aware of the prospect of utilizing retrospective legislation to turn Mr Zammitt's certain success in the proceedings into likely failure (see T139/20).

149 When I asked what would have occurred if the adjournment had not been granted, Senior Counsel for the Deputy Commissioner indicated that the proceedings would have been discontinued and new proceedings commenced once the retrospective validating legislation had come into force (T134/12).

150 Discontinuance at that stage of the proceedings would not be permitted without leave (see rule 12.1 of the Uniform Civil Procedure Rules 2005). Whether leave would have been granted, and if so, whether it would have been granted without prejudice to the commencement of further proceedings in respect of the same penalty, must necessarily remain a matter of uncertainty. However, it can safely be concluded that the defendant would have received an order for costs and would have had a much stronger argument to resist interest in any subsequent litigation. Any award of interest, and if awarded the rate, period of time and principle amount, are in the discretion of the Court pursuant to section 100 of the Civil Procedure Act 2005.

151 The purpose of interest is to compensate a party for delayed payment. But in the present case, no amount was recoverable until 29 November 2011 when Schedule 7 was enacted. I do not think the retrospective effect alone of Schedule 7 should be construed as enlivening an entitlement to a discretionary award of interest.

152 Submissions of the Deputy Commissioner referred to TJM Products Pty Ltd v Industry Research and Development Board (1998) 83 FCR 379 and indicated that in some circumstances it maybe appropriate to order costs, up to the time of the amendment, in favour of the party whose substantive rights have been extinguished. The TJM decision involved a settlement offer that may have strengthened the position of the Commonwealth body in that case. No such offer is present in this case.

153 Mr Zammitt referred to Esso Australia Resources Pty Ltd v Commissioner of Taxation (No 1) [2011] FCAFC 134 to submit that adjournments are not generally granted to allow the Commissioner to obtain legislative change that may affect litigation. That did not occur here, apparently because there was no disclosure of the pending legislative change. Had it been disclosed, the Esso decision might indicate that an adjournment would not have been granted.

154 I have referred earlier to the Commonwealth power to enact retrospective legislation even in respect of pending proceedings. However, the existence of this power does not mean that there can be no impact on costs. Indeed, the passage in Bawn quoted earlier in these reasons contemplates that a discretionary costs order may be used to ameliorate some of the injustice.

155 In my view, the passage of retrospective legislation which has the effect of denying a party victory in pending proceedings is a proper basis for a special order against the Deputy Commissioner in respect of interest and costs, especially in circumstances where in the course of those proceedings the defendant was apparently misled about the prejudice he might suffer by not obtaining an earlier hearing date.

156 For these reasons, were the plaintiff to succeed, I would be minded to find judgment for the Deputy Commissioner in the sum of the debt, being $365,066.49, with no interest to run until 29 November 2011 and order that the Deputy Commissioner pay Mr Zammitt's costs up to 29 November 2011. An order in favour of the Deputy Commissioner for costs after 29 November 2011 may be appropriate, although that would involve consideration of the impact of the adjournment sought on 3 May 2012 and late evidence tendered by the Deputy Commissioner.

157 The orders of the Court are:

(a) Proceedings dismissed.

(b) Plaintiff to pay the defendant's costs.

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Decision last updated: 03 September 2012