Supreme Court New South Wales

• Medium Neutral Citation: Soong v Director of Public Prosecutions (Cth) [2014] NSWSC 1030
• Hearing dates: 22 October 2013
• Decision date: 31 July 2014
• Jurisdiction: Common Law
• Before: Adams J

Decision

The summons is dismissed with costs

• Catchwords: CRIMINAL LAW - appeal against conviction - voluntary and deliberate failure to provide security for tax liabilities as required by the Commissioner under s 255-110 - time limits stipulated for compliance reasonable - no error of law
• Legislation Cited: Crimes (Appeal and Review) Act 2001 (NSW), s 55; Taxation Administration Act 1953 (Cth), s 8ZL, Sch 1, ss 255-110, 269-20
• Category: Principal judgment
• Parties: Desley Dipyuin Soong (Plaintiff); Director of Public Prosecutions (Cth) (Defendant)
• Representation: Counsel: I Pike SC/Z Heger (Plaintiff); D Jordan SC/B Neild (Defendant); Solicitors: Diamond Conway Lawyers (Plaintiff); Director of Public Prosecutions (Cth) (Defendant)
• File Number(s): 2013/119297

Judgment

1 On 20 March 2013, the plaintiff was convicted of five offences under s 255-110 in Schedule 1 to the Taxation Administration Act 1953 (Cth) in the Local Court for failing to provide security for tax liabilities as required by the Commissioner for taxation and was fined $1,000. The plaintiff appeals to this Court under s 55 of the Crimes (Appeal and Review) Act 2001 (NSW), seeking that the conviction and orders made by the Local Court be set aside. Where an appeal involves a question of fact or mixed law and fact, leave of the Court is required: s 53(1). The defendant does not oppose leave being granted in this case.

2 Section 255-110 provides -

You commit an offence if:

(a) the Commissioner requires you to give security under section 255-100; and

(b) you fail to give that security as required.

Penalty: 100 penalty units.

3 It is worth observing that whether it is, in any case, reasonable or unreasonable for the Commissioner to require security is immaterial. Furthermore, as the offence is a "prescribed taxation offence" for the purposes of s 8ZL of the Act, "a statement or averment [of a matter of fact] in the information ... is prima facie evidence of the matter so stated or averred", although this does not apply to any "fault element of an offence".

4 The plaintiff contends that the learned Magistrate erred in concluding that the plaintiff "failed", within the meaning of s 255-110, to provide the required security or, in the alternative, that such failure was not voluntary.

The first four notices

5 The plaintiff was a director of Panlirn Pty Ltd. On 12 January 2011 four notices to give security for the due payment of future tax-related liabilities were issued to the plaintiff. The first required security for $2,000, to be given by 11 February 2011, by way of cheque or by way of registered mortgage over property with a net value of at least $20,000 or an unconditional bank guarantee for $2,000; the second notice required security by 25 February 2011 for $10,000 by way of cheque, mortgage over property with a net value of at least $20,000 or bank guarantee for $10,000; the third notice required security for $30,000 by 11 March 2011 by cheque, mortgage over property with a net value of $40,000 or bank guarantee for $30,000; and the fourth notice required security for a further $30,000 by 11 March 2011 by the same modes as specified in the third notice. On 18 February 2011 the first notice was complied with by the plaintiff furnishing a cheque for $2,000. Absent payment by cheque or provision of bank guarantees, the plaintiff was required to provide a mortgage over property worth at least $100,000 to cover the remaining three notices.

6 On 23 February 2011 Mr Nath (the plaintiff's solicitor) wrote to the Commissioner offering to give mortgage security in respect of the outstanding three notices over a property in St Ives said to be worth $650,000 which was subject to a mortgage for $550,000, thus yielding an unencumbered value of $100,000. Mr Nath sought an extension of the time limit of 25 February (specified in the second notice) to allow for preparation and execution of the relevant security documents. On the same day, the ATO responded, extending the time for compliance with the three outstanding notices to 23 March 2011, seeking the title details and a letter for the mortgagee as to the outstanding debt, consenting to the proposed second mortgage and production of the certificate of title to enable its registration and whether fluctuating priority would be required.

7 On 23 March 2011 Mr Burns from the ATO spoke to Mr Nath. They discussed a caveat on the title in favour of Mr Nath's firm, which was to be withdrawn. Mr Burns also informed Mr Nath that the plaintiff would be required to pay $5,000 towards the Commissioner's costs of preparing the mortgage documents, with any excess to be refunded, and confirming an extension of time to 31 March. In a follow-up conversation, Mr Tully of the ATO informed Mr Nath that the upfront payment of $5,000 was not negotiable and the ATO would only permit solicitors on its panel (which did not include the plaintiff's solicitors) to prepare the mortgage documents. Mr Nath wrote to the ATO on 29 March, inter alia protesting about the amount of the fee and requesting verification that it was reasonable by production of the costs agreements or quotes. It was clearly implied that, until this was done, the plaintiff would not pay the $5,000 sought. Mr Nath said his client consented to the ATO lodging a caveat "to protect its interest ... based upon our client's agreement to give security" and asserted that this amounted to compliance with the notices. A further extension of the notices of four weeks was sought to "finalise and register the second mortgage".

8 On 31 March Mr Burns responded by briefly summarising the communications to date and denying that the notices had been complied with. He agreed to obtain quotes from the ATO's panel of solicitors but pointed out that this could not be done before expiration of the time limited for compliance. He agreed that, if $5,000 were paid that day, time would be extended to 7 April to allow completion of the documents and registration. The other modes of compliance with the notices were also brought to Mr Nath's attention. Later that day Mr Nath responded. He contended that there was no proper basis for the ATO's insistence on an upfront payment or, even (on one reading) any payment at all for preparation of the security documents and sought an extension of time for compliance "to allow for the issues to be resolved ... and execution and registration of the mortgage". Mr Burns replied several hours later, repeating the offer to supply quotes and reimburse any excess. He asked if Mr Nath's client had decided to decline to comply with the notices by utilising any of the three options offered. On 5 April Mr Nath replied that the plaintiff was always ready to execute the mortgage and simply required the Commissioner to identify a proper basis for payment of the $5,000 which was described as an "arbitrary" precondition. The letter concluded -

"Accordingly, we are instructed that should the Commissioner bring any action against our client as a result of our client's failure to comply with the Notices to Give Security, our client will rely upon the above as its defence."

No security was provided.

Further notices requiring security

9 On 12 April 2011 three further notices requiring security were issued, one requiring compliance by 18 May 2011 and the two others each by 6 June 2011. The first required security for $5,000 by cheque or bank guarantee; the second required security for $25,000 by cheque, mortgage over property worth at least $30,000 or a bank guarantee for $25,000; and the third required security for $28,000 by cheque, mortgage over property worth at least $30,000 or a bank guarantee for $25,000 (sic).

10 On 2 May 2011 Mr Nath wrote to Mr Burns requesting particulars of the matters relied on by the Commissioner in making the allegations in the notices which formed the basis for the requirements in each notice. On 18 May the first of these notices was complied with when the plaintiff paid $5,000 to the ATO. On 20 May the plaintiff offered to comply with the notices by way of granting a mortgage over another St Ives property which was already mortgaged but had a remaining equity of $109,000. On 24 May a solicitor in the ATO, Mr Le, informed Mr Nath that an external firm would prepare the security documents and the costs were typically between $1,500 and $5,000 and he would let him know a few days what the costs were. Mr Nath said he would get instructions. On 27 May, Mr Le wrote to Mr Nath to indicate that the ATO accepted the plaintiff's offer on condition that the mortgage was registered by 6 June 2011, that the owner (a third party) give a written assurance that he had received independent legal advice and the plaintiff agreed to pay the Commissioner's reasonable costs of preparing and registering the security and provided by 6 June 2011 a bank cheque for $1,500, which would not be refunded if the mortgage did not proceed but, if it did, would be deducted from the final amount of costs. Mr Le indicated that an external firm would prepare the documents and that he expected the final bill to be about $2,000.

11 On 30 May Mr Le was informed that two caveats were noted on the title and, on 31 May, telephoned Mr Nath to ask if they would be withdrawn before settlement. Mr Nath said that he would respond when Mr Le told him whether withdrawal was a condition of acceptance of the offer. Later that day Mr Le wrote to tell Mr Nath that withdrawal was a requirement, together with provision of the mortgagee's consent and the certificate of title at settlement; evidence of the outstanding debt secured by the first mortgage and of valuation was also required. On 31 May Mr Nath telephoned Mr Le to tell him that he had not yet obtained instructions. There was no explanation as to why this was so. On 1 June Mr Le told Mr Nath that the documentation of receipt of independent legal advice was not then required, but should be provided prior to completion. On 3 June at 4.40pm (a Friday and the last business day before expiry of the period for compliance at 4pm on the ensuing Monday) Mr Nath telephoned Mr Le and said that the plaintiff required the costs to be fixed at $2,000 and wanted an extension of the compliance date because his client was negotiating with the caveators and at that stage it was unlikely settlement could take place in time. Mr Le said he would seek instructions and respond. On 6 June at 1.21 pm Mr Le confirmed in writing to Mr Nath, in substance, that the estimated cost of preparation of the security documents was $2,000 and should be paid as agreed, with any excess being refunded by the ATO and also that failing to provide the security required by any of the three means stipulated by 4 pm on that day would be regarded as a default by the plaintiff. At 3.50pm Mr Nath called Mr Le confirming his instructions to fix costs at $2,000 and renewing the request for an extension of time. Mr Le, in effect, refused this extension.

12 Neither on 6 June or thereafter did the plaintiff comply with the remaining two April notices.

13 On 7 June 2011, Mr Burns sent Mr Nath his reasons for the decision to issue the April notices as requested on 2 May 2011.

Proceedings in the Local Court

14 A separate Court Attendance Notice was issued in respect of each of the notices which the Commissioner alleged had not been complied with. The learned Magistrate commenced with the conclusion, which was not disputed, that security was not provided. The plaintiff's contention was that this did not result from a deliberate act or was involuntary because the plaintiff was impecunious and unable to comply with the alternatives to giving security by way of mortgage because of various of the conditions imposed by the Commissioner. The question his Honour considered and concluded adversely to the plaintiff was whether the failure was voluntary. The plaintiff's submission was -

"The defendant [ie, the plaintiff here] was ready, willing and able to provide security by way of a mortgage, as required by the notices, but she was unable to register the mortgage on the property due to the additional requirements imposed by the commissioner which were not identified in the notices. To the extent that the matters were within the defendant's control, the defendant did all that she could to comply with the notices."

Although it was submitted by the plaintiff before me that the Magistrate erred in not considering the question of whether the plaintiff had "failed" to comply with the notices, the only arguments in this respect were those summarised in the above quotation, which he set out in his judgment.

15 In substance, the Magistrate rejected the contention that the material relied on raised a doubt about the plaintiff's ability to comply with at least the other alternative modes of satisfying the notices. So far as the mortgage proposal was concerned, his Honour referred to Mr Nath's evidence that he did not have any instructions that the plaintiff could not, at least, pay the $5,000 upfront amount for costs and, in substance, (rightly) rejected the submission that compliance with the requirement as to this payment was impossible by virtue of impecuniosity. However, it appears that his Honour did not think it necessary to pursue the mortgage issue to conclusion, given his conclusion about the availability of the alternatives as to which he concluded there was no suggestion put to the Commissioner that the plaintiff could not comply with the notice by way of the other remaining methods of payment. There was no evidence that raised the issue of involuntariness; at all events his Honour was satisfied beyond reasonable doubt that the failure to provide security was voluntary and deliberate.

Consideration

16 The plaintiff submits that, in each case, the reason for the security not being provided was that it was impossible for her to do so, an impossibility for which she was not responsible. It is argued that the prosecution bore the onus of proving that the plaintiff "failed" to comply with the notices and that the Magistrate should not have been so satisfied. It is submitted that she could not do so because of an impossibility for which she was not responsible, which arose in two respects: firstly, the Commissioner stipulated an unreasonable time for compliance with each Notice; and, secondly, the Commissioner unreasonably withheld his cooperation in respect of each Notice by making compliance conditional on the plaintiff making a down payment of an arbitrary sum towards the Commissioner's costs of preparing the mortgage documentation.

17 It is submitted on the plaintiff's behalf that the Commissioner was required to prove that the times specified in the notices and subsequently extended were reasonable. The Magistrate, in substance, held that there was nothing to suggest that the time limits in respect of the two stipulated modes other than the mortgage were in any way unreasonable and, as they remained available to the plaintiff at all times, there was no reason to doubt that they could have been complied with. So far as the mortgage option was concerned, the plaintiff draws attention to the fact that, although the notices referred to the possibility of complying with the requirement by giving a mortgage, they did not explain that the documentation would have to be prepared by solicitors on the ATO's panel, that it was a prerequisite that an amount on account of costs would need to be paid and, in respect of the mortgagor being a third party, it would be necessary to provide evidence that he or she had obtained independent legal advice. However, it should be noted that, although the date for compliance was initially set at 25 February 2011 in respect of what I have called the second notice, the first communication by the plaintiff with the ATO in respect of it was on 23 February, when Mr Nath wrote to offer security by way of mortgage. There was no explanation for this delay which, on the face of it, appears to be entirely within the plaintiff's control and as a result of her decision. There was no evidence that, had the plaintiff acted promptly on receipt of the notices on 12 January, it would have been difficult to provide the required security by way of mortgage (had that been the plaintiff's choice) well before the compliance date for that notice, a fortiori for the notices requiring compliance by 11 March. The incidents of executing and registering a mortgage are notoriously the commonplace of a solicitor's work. Mr Nath never suggested the slightest difficulty in this respect. Furthermore, it is self evident that, although this was not expressly stated, the provision of security would necessarily have been at the expense of the taxpayer, otherwise the security would not have covered the amount specified.

18 The plaintiff notes that, on 23 March, Mr Burns for the first time imposed the condition that the caveats be withdrawn and the legal costs of $5,000 be paid as a precondition. As to these matters, the plaintiff obtained a significant extension of time. There is no evidence that the requirement as to the caveats could not be complied with within the new timeframe or, for that matter, that the amount in respect of costs could not be paid by then. It is true that the Commissioner did not seek to justify the costs except in a general way. However, Mr Nath did not propose any lesser sum as appropriate and there was no evidence that, in light of the ATO's experience in this regard, the amount was unreasonable especially given the undertaking to repay any excess. (During argument I expressed the view that the sum seemed excessive but this was not the case actually sought to be made before the Magistrate.) The case sought to be made before me was that the requirement should not have been imposed without giving a proper basis by way of quote or costs agreement in respect of the amount. Even if this were so, I am unable to see how the refusal to pay it - accepting this was the reason for not entering into security, as to which there is really no evidence - was rendered impossible in any relevant sense. The need for a reasonable time to be allowed is obvious: it must be actually possible, by reasonable diligence, to comply with the requirement. However, the plaintiff also submits that it is necessary that the conditions for compliance, such as the requirement of prepayment of legal costs, be reasonable. I do not agree that this is necessary in the same sense. It is obviously possible to comply with a requirement (otherwise within the person's capacity), even if that requirement is unreasonable. The argument about this matter is rather unreal in light of the failure by the plaintiff to lead any evidence at all on the amount of costs usually applicable to the preparation of a mortgage. I do not consider that the Commissioner bore any onus of proving that the requirement of an upfront payment for legal costs in the sum of $5,000 with an undertaking to refund any excess was reasonable. At all events, the requirement strikes me as completely reasonable.

19 The plaintiff complains that the extension of time granted on 23 March to 28 March gave her only five clear working days to "raise $5,000 and forward it to the Commissioner; ... wait for the Commissioner to arrange for the preparation of the security documentation; ... obtain legal advice in respect of the documentation; ... execute the mortgage documents; ... and wait for the Commissioner to register the mortgage documents". It is significant, to my mind, that Mr Nath did not complain about this extension. It was only on 30 March that Mr Nath raised a problem about the prepayment. He did not suggest that it was difficult, let alone impossible, to pay this sum and there was no evidence before the Magistrate that suggested this was the case. It is enough to say that I do not accept this contention. There is no reason to think that the time frame was not adequate, even if it might have been difficult to comply with.

20 So far as the April notices were concerned, it is submitted that the time for compliance with the requirements notified on 31 May 2011 was unreasonable. The first point to be made is that Mr Nath, when he received the letter, did not suggest this was so and the only problems he raised were on 1 June about the letter of independent advice and on 3 June related to negotiations with the caveators. There was no disclosure, let alone evidence, as to the nature of these negotiations and it is impossible to evaluate their significance. The other conditions were patently able to be quickly satisfied. Furthermore, they were obvious requirements which any reasonably competent solicitor would have foreseen. It is fair to observe that Mr Nath did not suggest he did not have the information, let alone that he was surprised by the request for it.

21 The plaintiff described the Commissioner's insistence on prepayment of the legal costs as an unreasonable withdrawal of cooperation. It is firstly argued (but not before the Magistrate) that there was no power to require such a down payment. Section 255-100 empowers the Commissioner to require a person "to give security for due payment of an existing or future tax-related liability" but not, it is argued, to require payment of the costs. Thus, it is said, the plaintiff was entitled to dispute it. In my view, the clear import of the power is that the costs of compliance lay with the taxpayer and it is necessarily incidental to permitting a taxpayer to provide security otherwise than by deposit or bank guarantee (necessarily to be obtained at the taxpayer's expense) that the costs of so doing be paid by the taxpayer. That the Commissioner required the work to be performed by one of the solicitors on its panel whose bill would be paid by the taxpayer is, to my mind, plainly within the power of the Commissioner as ancillary to the compliance regime. Not only was it lawful, it is for the reasons I have mentioned reasonable. At all events, the fact that a taxpayer disputes the reasonableness of a requirement does not make it impossible to comply with: the simple fact is that the plaintiff (for reasons which may have seemed justifiable to her) decided she would not comply.

22 The prosecution accepted that it bore the onus of establishing the failure of the plaintiff in the relevant sense to provide the required security. It was necessary that it prove beyond reasonable doubt that the plaintiff's failure was intentional. A refinement of this element was the argument raised by the plaintiff that the omission to provide the security was not a failure in the relevant sense if it was impossible for the plaintiff to comply with the requirement.

23 The only evidence that the plaintiff was, as was contended in the Local Court and here, "ready willing and able to provide security by way of mortgage" was contained in the communications of Mr Nath. This was not an adequate basis for concluding this was in fact the position. Nor did they provide a sound evidentiary basis for the assertion that, in fact, the plaintiff did all that she could to comply with the notices. There was no evidence at all as to what she could or did do, except as asserted by Mr Nath. Quite apart from the delays to which I have already referred, there was no evidence, let alone explanation as to why the plaintiff could not - as distinct from would not - comply with the notices by adopting the alternative courses. The contention advanced on the plaintiff's behalf was her impecuniosity prevented it. The evidence said to support this contention was the imposition of a direct penalty of about $5 million, the service in March 2011 of a bankruptcy notice by the Commissioner, and the total sum of security sought, including in a previous notice relating to other companies of which she was a director. Quite apart from the fact that Mr Nath never suggested the plaintiff was impecunious or otherwise unable to adopt the alternatives, it is self evident that the mere existence of substantial debts or even of a creditor having taken the step of issuing a Bankruptcy Notice does not imply the impecuniosity of the debtor: many very wealthy persons have very substantial liabilities. Nor can it raise a doubt about the ability to pay.

24 Although I accept that the Commissioner bore the onus of establishing that the security was not provided as required and that this was due to the intentional act or omission of the taxpayer, the issue of impossibility because of impecuniosity was not raised by the evidence such as to require the Commissioner to prove that the taxpayer had the means to comply with any of the stipulated alternatives.

25 It is also contended on behalf of the plaintiff that the conduct was involuntary or, more precisely, that the Commissioner failed to prove it was voluntary. This argument also depends upon the alleged impecuniosity of the plaintiff, the unreasonableness of the timeframes imposed for compliance and the submission that the Commissioner withheld cooperation by making compliance by way of mortgage conditional upon down payment of the legal costs. For the reasons already given, this submission is without merit. The new argument is raised under this head that, by the time it became clear that "the parties could not reach agreement in the preparation of the mortgage documents it was impractical to obtain the necessary cheques or bank guarantees" (emphasis added). This submission cannot be accepted. That the parties did not reach agreement is plain, but this is by no means the same as agreement not being possible. Patently, it was possible for the plaintiff to have agreed with the Commissioner's requirements. Nor is there any evidence which suggests the impracticability, let alone the impossibility of the plaintiff complying by using the alternative methods.

26 The involuntariness argument was also put by way of contending that the Magistrate erred in concluding that the Plaintiff's failure to provide security was intentional. It is not improved by being recast in this way. In my respectful view the conclusion of his Honour about this matter was not only correct: it was inevitable.

Conclusion

27 The summons is dismissed with costs.

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Decision last updated: 31 July 2014