Director Penalty Regime Dispute: Can a ‘Special Purpose Director’ Avoid Personal Liability for Unpaid PAYG Withholding Tax under the Taxation Administration Act 1953 (Cth)?

Introduction: Based on the authentic Australian judicial case Deputy Commissioner of Taxation v Sampath Migara Jayasinghe CI-24-01719, this article disassembles the Court’s judgment process regarding evidence and law. It transforms complex judicial reasoning into clear, understandable key point analyses, helping readers identify the core of the dispute, understand the judgment logic, make more rational litigation choices, and providing case resources for practical research to readers of all backgrounds.

Chapter 1: Case Overview and Core Disputes

Basic Information:

Court of Hearing: County Court of Victoria
Presiding Judge: Her Honour Judge Kirton
Cause of Action: Recovery of director penalties for unpaid Pay As You Go (PAYG) withholding tax.
Judgment Date: 13 June 2025
Core Keywords:
Keyword 1: Authentic Judgment Case
Keyword 2: Director Penalty Regime
Keyword 3: Taxation Administration Act 1953 (Cth)
Keyword 4: Summary Judgment
Keyword 5: Special Purpose Director
Keyword 6: Personal Liability for Company Debt

Background:

The Deputy Commissioner of Taxation (the plaintiff) initiated proceedings against Sampath Migara Jayasinghe (the defendant) to recover the sum of $5,073,707.72. The claim was founded on outstanding director penalties imposed on the defendant due to the unpaid taxation liabilities of Marine & Civil Pty Ltd (ACN 147 854 635) (the company). The plaintiff alleged that the company had withheld PAYG tax but failed to remit these amounts to the Commissioner. Consequently, as a director of the company at the relevant times, the defendant was under a statutory obligation to ensure the company’s compliance, leading to the imposition of personal penalties.

Core Disputes and Claims:

The plaintiff sought summary judgment against the defendant for the outstanding amount of director penalties, contending that the defendant’s defence had no real prospect of success. The defendant, appearing in person, admitted his appointment as a director but disputed personal liability. His primary contention revolved around his unique role as a “Special Purpose Director,” which he argued absolved him of general director responsibilities, particularly regarding financial matters and tax liabilities. He asserted that he was not involved in the day-to-day running or financial decisions of the company and had relied on assurances from another director. He also claimed a Deed of Settlement released him from all claims.

Chapter 2: Origin of the Case

The genesis of this litigation lies in a business venture aimed at securing building contracts for Marine & Civil Pty Ltd in Sri Lanka. Around December 2015, the defendant, Mr. Sampath Migara Jayasinghe, was introduced to John Martin Neylon, then chairman and director of the company, by a business associate, Dr Chris Brown. Throughout 2016, Mr. Jayasinghe actively engaged as a broker and facilitator, representing the company in negotiations with Sri Lankan government officials for a significant health ministry project valued at approximately $40,000,000.00.

A pivotal moment arose when Sri Lankan authorities informed the company that for negotiations to progress, the company required representation by a director. In response to this requirement, Mr. Jayasinghe executed a letter of consent on 3 January 2017, and on the same day, received a letter from Mr. Neylon confirming his appointment as a “Special Purpose Director” of the company. Mr. Jayasinghe understood this role to be strictly limited to executing documents and contracts related to the Sri Lankan project, without involvement in the company’s daily operations or financial decisions.

The conflict gradually emerged when, on 8 May 2018, Mr. Jayasinghe received a Director Penalty Notice (DPN) alleging significant outstanding tax liabilities. Expressing concern over this undisclosed information, he contacted Mr. Neylon, who assured him that the liabilities were subject to a payment plan and were being managed, implying no personal concern for Mr. Jayasinghe. Relying on this advice, Mr. Jayasinghe continued his negotiations in Sri Lanka. Ultimately, despite his limited understanding of his legal obligations as a director and his belief in a subsequent Deed of Settlement (June 2023) that he thought released him from all company-related liabilities, the Deputy Commissioner of Taxation pursued personal recovery of the unpaid tax liabilities, leading to the summary judgment application.

Chapter 3: Key Evidence and Core Disputes

Applicant’s Main Evidence and Arguments:

• Affidavit of Christopher John Melber (affirmed 21 March 2025): Provided legal arguments and context for the summary judgment application.
• Affidavit of Namitesh Prasad (Prasad Affidavit) (affirmed 15 November 2024): This affidavit, with its extensive exhibits (Exhibit NP-1), served as the primary factual basis for the plaintiff’s claim. It established:
  • The company’s incorporation date (14 December 2010).
  • The defendant’s appointment as a director (3 January 2017).
  • The service of the Director Penalty Notice (DPN) on the defendant (8 May 2018).
  • The company’s winding-up in insolvency and the appointment of Robert Michael Kirman as liquidator (21 August 2018).
  • The company’s failure to pay PAYG withholding tax by due dates, totalling $5,073,607.72.
• Plaintiff’s Outline of Submissions (dated 9 December 2024 and 31 March 2025): Argued that as a director, the defendant was under a continuing statutory obligation under the Taxation Administration Act 1953 (Cth). They asserted that the concept of a “Special Purpose Director” is not recognised in the Corporations Act 2001 (Cth) and cannot override statutory duties. They further submitted that non-participation in company management, even in “good faith,” is not a valid defence under s 269-35 of the TAA.
• Plaintiff’s List of Authorities (dated 9 December 2025): Cited numerous precedents supporting the legal principles of director liability, summary judgment, and the interpretation of tax administration legislation.

Respondent’s Main Evidence and Arguments:

• Defendant’s Defence to Statement of Claim (dated 31 March 2024): Set out the defendant’s five grounds of defence.
• Affidavit of Sampath Migara Jayasinghe (First Jayasinghe Affidavit) (affirmed 6 December 2024): Detailed his understanding of his role as a “Special Purpose Director” for the Sri Lankan project, his limited involvement in the company’s financial affairs, and his reliance on John Neylon’s assurances. It also mentioned his lack of enquiries into the company’s financial or tax position prior to appointment and his non-recollection of executing ASIC documentation.
• Affidavit of Sampath Migara Jayasinghe (Second Jayasinghe Affidavit) (sworn 1 April 2025): Provided further supporting evidence for his defence.
• Defendant’s Outline of Submissions (dated 31 March 2025) and Submissions in Reply (dated 1 April 2025): Expanded on his five grounds of defence, reiterating his “Special Purpose Director” status, his belief that he was not required to attend meetings or make financial decisions, his good faith reliance on Mr. Neylon’s advice regarding DPNs, and his understanding that a Deed of Settlement had released him from all liabilities. He denied involvement during the period the debts were incurred.

Core Dispute Points:

1. Nature of Directorship: Whether the defendant’s role as a “Special Purpose Director” absolved him of general statutory director obligations under the TAA.
2. Involvement in Management: Whether the defendant’s non-participation in the day-to-day running or financial decisions of the company constituted a defence to director penalties.
3. Reliance on Advice: Whether the defendant’s good faith reliance on John Neylon’s assurances regarding outstanding tax liabilities after receiving the DPN constituted a valid statutory defence.
4. Effect of Deed of Settlement: Whether a Deed of Settlement entered into by the defendant and the company’s liquidator released him from personal liability for tax-related director penalties owed to the Commissioner.
5. Timing of Involvement: Whether the defendant’s denial of involvement during the period the debts were incurred affected his liability given his appointment date.

Chapter 4: Statements in Affidavits

In this case, the affidavits served as crucial instruments for both parties to present their version of facts and frame their legal arguments. The plaintiff relied heavily on the Prasad Affidavit to establish objective facts: the company’s incorporation, the defendant’s recorded directorship, the issuance of the Director Penalty Notice (DPN), the company’s winding up, and the precise quantum of the unpaid PAYG withholding tax. These details, supported by documentary evidence attached as exhibits, provided a robust factual foundation for the plaintiff’s claim, leveraging the “prima facie evidence” provisions of the Taxation Administration Act 1953 (Cth).

Conversely, the defendant, through his First Jayasinghe Affidavit and Second Jayasinghe Affidavit, constructed a narrative around his subjective understanding and limited involvement. He meticulously detailed the circumstances of his appointment as a “Special Purpose Director,” emphasising that his role was solely to facilitate and execute contracts in Sri Lanka, without any decision-making authority over the company’s financial or operational matters. He also elaborated on his reliance on assurances from another director, John Neylon, regarding the DPNs and his belief that a subsequent Deed of Settlement extinguished his liabilities. The strategic intent behind these affidavits was to demonstrate that he lacked the knowledge, control, or intent typically associated with a director, and therefore should not be held personally liable.

However, the effectiveness of these narratives hinges on legal interpretation. The Court’s procedural directions regarding affidavits, particularly in summary judgment applications, underscore the need for “sufficient particulars to enable the defence case to be properly understood.” A bald denial is insufficient; the affidavit must “deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim,” clearly identifying the facts relied upon for the defence. This strict requirement highlights the strategic intent to prevent spurious or ill-defined defences from delaying justice, pushing parties to present a concrete, legally cognisable defence supported by credible facts. The comparison of the two affidavits revealed a stark contrast between the plaintiff’s objective, statutory-based factual matrix and the defendant’s subjective account of his understanding and limited role, setting the stage for the Court’s legal analysis.

Chapter 5: Court Orders

Prior to the final hearing, the Court had the following procedural arrangement:

The plaintiff made an application for summary judgment pursuant to sections 61 and 63 of the Civil Procedure Act 2010 (Vic) and in accordance with Order 22 of the County Court Civil Procedure Rules 2018 (Vic). This application was initiated by a summons dated 15 November 2024.

Chapter 6: Hearing Scene: Ultimate Showdown of Evidence and Logic

The hearing for summary judgment saw a focused confrontation between the plaintiff’s reliance on statutory duties and objective records, and the defendant’s narrative of limited involvement and good faith reliance. The plaintiff, represented by counsel, presented the affidavits of Christopher John Melber and Namitesh Prasad, along with detailed legal submissions. The Prasad Affidavit, particularly, laid out the chronological facts: the defendant’s registered directorship from 3 January 2017, the issuance of the Director Penalty Notice (DPN) on 8 May 2018, the company’s subsequent winding up in August 2018, and the precise, undisputed amount of unpaid PAYG withholding tax liabilities totalling $5,073,607.72. This evidence established a clear prima facie case of liability under the Taxation Administration Act 1953 (Cth).

The defendant, appearing in person, steadfastly articulated his defence. He elaborated on his unique role as a “Special Purpose Director” for the Sri Lankan project, reiterating his belief that this role exempted him from general financial oversight. He described his good faith reliance on John Neylon’s assurances that the tax liabilities were being managed after he received the DPN. He also presented a Deed of Settlement, believing it offered a complete release from all company-related liabilities. The cross-examination of the defendant, though not detailed in the provided text, would have likely probed the inconsistencies between his asserted limited role and the undeniable legal implications of being a registered director.

The judicial reasoning was structured around whether the defendant’s defence possessed a “real prospect of success” under sections 61 and 63 of the Civil Procedure Act 2010 (Vic). The Court had to objectively assess if any of the defendant’s grounds, however genuinely held, could legally displace the statutory obligations imposed on a company director for unremitted PAYG withholding tax. Her Honour Judge Kirton’s decision was ultimately driven by the objective chain of evidence and the clear statutory provisions, rather than the defendant’s subjective understanding of his role.

Her Honour meticulously addressed each of the defendant’s five grounds of defence, systematically demonstrating why they failed to satisfy the legal test for having a “real prospect of success”. The decisive evidence was the uncontradicted factual matrix presented by the plaintiff regarding the defendant’s registered directorship and the company’s unpaid tax liabilities. The Judge’s determination was not swayed by the defendant’s personal perception of his role or his reliance on others, which jurisprudence consistently holds insufficient to override clear statutory duties.

The Court articulated its position clearly:

“In relation to the defendant’s first submission that his role as a ‘Special Purpose Director’ of the company solely to negotiate and execute contracts on behalf of the company in Sri Lanka, I accept the Deputy Commissioner’s submission that that the concept of a ‘Special Purpose Director’ is not recognised in the Corporations Act 2001 (Cth). There is no dispute that he was recorded by ASIC as one of the directors of the company.”

This statement was determinative in establishing the defendant’s legal status as a director, irrespective of his internal understanding or the nomenclature used. It cut directly to the heart of the statutory framework governing corporate directorship and liability.

Chapter 7: Final Judgment of the Court

The Court granted summary judgment in favour of the Deputy Commissioner of Taxation.

Her Honour Judge Kirton ordered that:
* Judgment be entered for the plaintiff against the defendant for the amount of $5,073,607.72.
* Interest be awarded pursuant to section 60 of the Supreme Court Act 1986 (Vic).
* Subject to any further submissions on costs, the defendant is to pay the plaintiff’s costs of the proceeding, including reserved costs and the costs of and incidental to the summons, on the standard basis, to be taxed in default of agreement.
* The parties are invited to prepare draft orders to give effect to these reasons.

Chapter 8: In-depth Analysis of the Judgment: How Law and Evidence Lay the Foundation for Victory

Disassembly of Judgment Basis:

Special Analysis:

This case holds significant jurisprudential value by unequivocally reaffirming the objective nature of director duties and liabilities within the Australian corporate and taxation framework. It specifically highlights the principle that internal arrangements or subjective understandings, such as the concept of a “Special Purpose Director,” cannot circumvent statutory obligations imposed by legislation like the Corporations Act 2001 (Cth) and the Taxation Administration Act 1953 (Cth). This judgment serves as a robust precedent against attempts to redefine statutory directorship roles through informal agreements, emphasising that once a person is legally appointed and recorded as a director, the full ambit of legal duties and potential liabilities applies, regardless of their perceived scope of responsibility. It reinforces the “core, irreducible requirement of involvement in the management of the company,” thereby broadening judicial reasoning in cases where directors claim limited engagement.

Judgment Points:

The Court’s ruling contained several noteworthy points. Firstly, it underscored the rigorous application of the summary judgment test—”no real prospect of success”—as per the Civil Procedure Act 2010 (Vic). The judgment clarified that this test, while more liberal than “hopeless” or “bound to fail,” still demands a substantial, non-fanciful prospect of success, and mere arguable cases are insufficient. Secondly, the explicit rejection of the “Special Purpose Director” concept as legally recognised solidifies the objective and formal nature of directorship. Thirdly, the judgment emphasised that private agreements between directors or reliance on another director’s assurances cannot override or mitigate statutory duties, particularly in areas of public interest such as taxation compliance.

Legal Basis:

The Court’s decision was firmly grounded in specific statutory provisions:
* For Summary Judgment: Sections 61 and 63 of the Civil Procedure Act 2010 (Vic) established the power to grant summary judgment if a defence has “no real prospect of success,” read in conjunction with the overarching purpose of section 7(1) to facilitate efficient dispute resolution. Rule 22.05 of the County Court Civil Procedure Rules 2018 (Vic) outlined the defendant’s evidential burden in responding to such applications.
* For Tax-Related Liabilities and Director Penalties: Section 255-1 of Schedule 1 to the Taxation Administration Act 1953 (Cth) defined tax-related liabilities. Section 255-5(2) allowed for their recovery in a competent court. Critically, sections 269-10(1) and 269-15(1) defined the director’s obligations regarding PAYG withholding tax and superannuation guarantee charge. Section 269-20(1) imposed the penalty on directors for non-compliance, with the penalty amount specified in section 269-20(5). The requirement for a Director Penalty Notice (DPN) was found in section 269-25. Sections 269-35 outlined available defences, with section 269-35(5) specifically precluding “good faith reliance” on another’s advice.
* Corporate Law: The Corporations Act 2001 (Cth) implicitly governed the legal definition of a director and their overarching duties, despite the defendant’s attempted “Special Purpose Director” designation. Sections 436A-436C related to the appointment of administrators and the winding up of a company as a way to potentially remit penalties.
* Interest: Section 60 of the Supreme Court Act 1986 (Vic) provided the basis for awarding interest.

Evidence Chain:

The plaintiff’s victory was built upon an unbroken chain of objective evidence:
1. ASIC Records: Unchallenged evidence of the defendant’s official registration as a director of the company from 3 January 2017.
2. Company Financial Records: Evidence demonstrating the company’s failure to remit PAYG withholding tax by the due dates, establishing the underlying tax liability.
3. Director Penalty Notice (DPN): Proof that a DPN was validly issued to the defendant on 8 May 2018, fulfilling the statutory prerequisite for commencing recovery proceedings.
4. Company Winding Up: Documentation confirming the company was wound up in insolvency in August 2018, indicating that the conditions for remitting the director penalty had not been met by the due date.
These pieces of evidence, primarily presented through the Prasad Affidavit and its exhibits, created a strong prima facie case of the defendant’s personal liability that his subjective defence could not dislodge.

Judicial Original Quotation:

Her Honour Judge Kirton, in her analysis, directly addressed the defendant’s core arguments with authoritative statements:

“Second, the defendant’s second submission that as a ‘Special Purpose Director’, he was not to have responsibility in the day to day running of the company or in any financial matter or financial decision without consent of the directors of the company, is not a defence under the TAA. While I accept the defendant’s evidence that he was advised at the time of his appointment as a ‘Special Purpose Director’ that he would have no capacity to effect the financial decisions and management of the company nor have any decision in the day to day running of the Company, or in any financial matter or financial decision without consent of the directors of the company, the defendant was at all relevant times, a director of the company by law and subject to director obligations. I accept the Deputy Commissioner’s submissions that any agreement between directors cannot operate to override the statutory duties and obligations of a director.”

This statement was determinative because it directly dismantled the defendant’s central defence. It acknowledged his subjective belief but firmly stated that private arrangements or understandings between directors cannot negate the objective statutory duties and liabilities imposed by law. The legal status of a director, as recorded and defined by legislation, takes precedence over any internal, informal, or “special purpose” designations.

Analysis of the Losing Party’s Failure:

The defendant’s defence failed for several critical reasons:
1. “Special Purpose Director” Not Recognised: The Court found that the concept of a “Special Purpose Director” is not legally recognised under the Corporations Act 2001 (Cth). Once appointed and recorded as a director by ASIC, the defendant assumed full statutory duties and obligations, irrespective of his internal understanding or the limited scope he believed his role entailed.
2. Non-Participation Insufficient Defence: The argument that he was not required to be involved in the day-to-day running or financial decisions of the company was not a valid defence under the TAA. Directors have an “irreducible requirement of involvement” in company management, and deliberately choosing not to participate is not a “good reason” to escape liability under s 269-35(1) of Schedule 1 to the TAA.
3. Reliance on Neylon’s Advice Not a Statutory Defence: His good faith reliance on John Neylon’s assurances about the DPN and outstanding tax liabilities was explicitly not an available statutory defence under s 269-35(5) of Schedule 1 to the TAA. Directors are required to take active steps (discharge liability, appoint administrator, or wind up company) within 21 days of receiving a DPN, which the defendant failed to do.
4. Deed of Settlement Ineffectual Against Commissioner: The Deed of Settlement did not provide a release from tax-related director penalties. The plaintiff (Deputy Commissioner of Taxation) was not a party to that Deed, and the Deed did not address the specific statutory liabilities under the TAA.
5. Liability from Appointment Date: The defendant’s liability as a director commenced from his appointment date (3 January 2017). His denial of involvement during the period the debts were incurred was irrelevant, as the director penalty regime makes directors liable for certain outstanding liabilities from the time they are under the obligation, even if they join after the due day, if they remain under the obligation for 30 days.

Reference to Comparable Authorities:

• Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27: Provided foundational principles for summary judgment, defining “real prospect of success” as a non-fanciful chance, and clarifying that it is a more liberal test than “hopeless.”
• Trkuljia v Google LLC (2018) 263 CLR 149: Further elaborated on the summary judgment test, reiterating that while more liberal, it still requires a genuine possibility of success, not merely an arguable case.
• Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163: Cited for the principle that a determination in favour of summary judgment must be made cautiously and only when there is no real question to be tried.
• Hausman v Abigroup (2009) 29 VR 213; [2009] VSCA 288: Highlighted that an affidavit in opposition to summary judgment must provide sufficient particulars and cannot rely on bald denials.
• Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87: Affirmed the principle that summary judgment powers should be exercised with caution.
• Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473: Cited for the common use and reliance on certificates and prima facie evidence provisions in tax proceedings.
• Kolichis v Deputy Commissioner of Taxation [2014] WASCA 76: Reinforced the application of prima facie evidence provisions in tax cases.
• Deputy Commissioner of Taxation v Lawson (2017) ATC 20-644; [2017] VSC 789: Provided further context on prima facie evidence and the principle that agreeing to divide responsibilities among directors does not amount to a “good reason.”
• Deputy Commissioner of Taxation v Epov [2008] NSWSC 1085: Stated that displacing prima facie evidence requires more than simply pleading that the quantum of the tax debt is incorrect.
• Deputy Commissioner of Taxation v Raskovic (2009) 75 ATR 359; [2009] NSWSC 281: Supported the principle that merely disputing the debt’s quantum is insufficient to displace prima facie evidence.
• Deputy Commissioner of Taxation v Lewer [2001] VSC 114: Provided a general reference point for tax-related cases.
• Lee v Deputy Commissioner of Taxation; Silverbrook v Deputy Commissioner of Taxation [2020] NSWCA 95: Confirmed the reliability of prima facie evidence in tax matters.
• Deputy Commissioner of Taxation v Vasiliades [2015] FCA 412: Reiterated that a certificate is prima facie evidence but not conclusive, though it may be determinative if not challenged by evidence.
• Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72: Emphasised the evidentiary weight of Commissioner’s certificates.
• Deputy Commissioner of Taxation v Hooper (2005) 58 ATR 522; [2005] VSC 69: Discussed the effect of certificates as prima facie evidence.
• Snell v Deputy Commissioner of Taxation [2020] NSWCA 29: Referenced for the concept of “thinks” in DPN issuance and the insufficiency of internal agreements to override statutory duties.
• Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 199 CLR 370: Cited for the nature of a DPN as a temporal condition, not imposing liability, and the liability of directors for unremitted amounts.
• Deputy Commissioner of Taxation v Clarke (2003) 57 NSWLR 113: Established that leaving responsibility to another person and non-participation in management are not “good reasons” for escaping director liability.
• Deputy Commissioner of Taxation v Holton [2016] VCC 516: Supported the principle that dividing responsibilities among directors does not amount to a “good reason” to escape liability.

Implications

1. Director Responsibilities are Non-Negotiable: If you are formally appointed as a company director, regardless of any internal agreements or “special purpose” designations, you bear the full weight of statutory duties. Your personal understanding of your role will not override the law.
2. Ignorance is Not a Defence for Statutory Duties: Claims of limited involvement or reliance on others’ assurances are insufficient to escape statutory penalties, especially in areas like taxation. Directors are expected to be diligent and informed.
3. Prompt Action on Official Notices is Crucial: Receiving a Director Penalty Notice (DPN) or similar official communication requires immediate and specific legal action. Ignoring or relying on informal advice can lead to severe personal financial repercussions.
4. Private Agreements May Not Bind Third Parties: Deeds of Settlement or other private agreements, while important between the parties involved, may not be binding on government bodies like the Deputy Commissioner of Taxation if they are not a party to the agreement. Always ensure all relevant creditors are included or that the agreement explicitly addresses all liabilities.
5. Objective Legal Status Trumps Subjective Belief: What the law and official records state about your role (e.g., as a registered director) holds more weight in court than your personal perception or understanding of that role. True self-protection stems from the early understanding and mastery of legal rules.

Q&A Session

1. Q: What exactly is a “Director Penalty Notice” (DPN) and why is it so important?
   A: A DPN is a formal notice issued by the Deputy Commissioner of Taxation to a director of a company, informing them of the company’s unpaid tax liabilities (like PAYG withholding tax or Superannuation Guarantee Charge) and the director’s personal liability for those amounts. It is crucial because once a DPN is issued, the director has a limited timeframe (typically 21 days) to take specific actions (such as paying the debt, appointing an administrator, or winding up the company) to avoid personal liability. Failure to act within this window often means the director becomes personally liable for the company’s tax debt.

2. Q: Can I limit my responsibilities as a director if I’m only appointed for a specific project or purpose?
   A: This case highlights that legally, no. While you might be appointed with a “special purpose” or a limited scope of duties within a company’s internal structure, the law (specifically the Corporations Act 2001 (Cth)) does not recognise such limitations for your statutory duties and liabilities as a registered director. Once you are formally recorded as a director, you are typically subject to all the legal obligations that come with that role, regardless of any private agreements or understandings.

3. Q: If I rely on another director’s advice about tax matters, does that protect me from personal liability?
   A: Generally, no, especially regarding statutory tax obligations. This judgment confirms that relying on another director’s assurances, even in good faith, is explicitly not a defence under the Taxation Administration Act 1953 (Cth). Directors have an independent duty to ensure the company complies with its tax obligations. This means you cannot simply delegate or ignore such responsibilities and expect to be exempt from personal liability if the company fails to comply.

Appendix: Reference for Comparable Case Judgments and Practical Guidelines

1. Practical Positioning of This Case

Case Subtype: Director Penalty Regime – Unpaid PAYG Withholding Tax
Judgment Nature Definition: Final Judgment

2. Self-examination of Core Statutory Elements

⑨ Civil Litigation and Dispute Resolution
Core Test:
* Has the Limitation Period expired? This case did not directly deal with limitation periods for the tax debt itself but rather the defendant’s liability for a penalty arising from the company’s non-compliance. The timing of the DPN and subsequent actions were critical for the director’s personal liability.
* Does the Court have Jurisdiction over the matter? The County Court of Victoria has jurisdiction to hear claims for recovery of tax-related liabilities.
* Has the duty of Discovery/Disclosure of evidence been satisfied? While not explicitly an issue in the judgment, summary judgment applications require parties to present their evidence (often by affidavit) to the satisfaction of the Court, effectively a condensed form of disclosure for the purpose of the application.

3. Equitable Remedies and Alternative Claims

If dealing with [Civil / Commercial / Property / Family / Estate] matters:
* Promissory / Proprietary Estoppel:
* Did the other party make a clear and unequivocal promise or representation (e.g., John Neylon’s assurance that tax liabilities were being managed, or his letter appointing Mr. Jayasinghe as “Special Purpose Director”)?
* Did you act in detrimental reliance on that promise (e.g., continuing negotiations in Sri Lanka, not taking other steps to address the DPN)?
* Would it be unconscionable for the other party to resile from that promise (e.g., the Deputy Commissioner seeking to recover penalties despite Mr. Jayasinghe’s reliance on Neylon’s word)?
* Result Reference: While the defendant’s belief in the Deed of Settlement was deemed not supported at law to bind the Commissioner, a Promissory Estoppel argument could theoretically be explored if the Commissioner had made direct promises that induced detrimental reliance. However, in this case, the promises were from another director, not the Commissioner, making it difficult to bind the Commissioner.
* Unjust Enrichment / Constructive Trust:
* Has the other party received a benefit (money or labor) at your expense? Is it against conscience for them to retain that benefit without payment?
* Result Reference: Not directly applicable here, as the Commissioner is recovering a statutory penalty, not a benefit unjustly received from the defendant. The Commissioner’s claim is rooted in legislative liability, not equitable principles of unjust enrichment.

4. Access Thresholds and Exceptional Circumstances

Regular Thresholds:

• Director Penalty Notice (DPN) Period: The 21-day period after a DPN is given is a hard threshold for a director to take action (discharge liability, appoint administrator, or wind up company) to remit the penalty. Failure to act within this period generally results in personal liability.
• Statutory Definition of Director: Being a legally registered director by ASIC is a hard threshold for the imposition of director duties and liabilities.

Exceptional Channels (Crucial):

• Director Penalty Regime Defences (s 269-35 TAA): While the defendant’s specific arguments failed, the TAA itself provides statutory defences, such as:
  • The director did not participate in the management of the company for certain reasons (e.g., illness).
  • The director took all reasonable steps to ensure compliance (e.g., initiated processes for payment, administrator, or winding-up).
  • It would have been unreasonable to take such steps.
  • Suggestion: Do not abandon a potential claim simply because you do not meet the standard time or conditions. Carefully compare your circumstances against the exceptions above, as they are often the key to successfully filing a case. For instance, if the defendant could prove incapacitating illness preventing any action, the outcome might be different.

5. Guidelines for Judicial and Legal Citation

Citation Angle: It is recommended to cite this case in legal submissions or debates involving:
* Summary judgment applications in the County Court of Victoria, particularly regarding the interpretation of “no real prospect of success.”
* Disputes concerning director duties and liabilities under the Taxation Administration Act 1953 (Cth), especially regarding PAYG withholding tax.
* Cases where a director attempts to limit their statutory responsibilities through internal agreements or “special purpose” designations.
* Arguments concerning the insufficiency of “good faith reliance” on co-directors’ advice as a defence to statutory penalties.

Citation Method:
* As Positive Support: When your matter involves directors attempting to circumvent statutory obligations through informal roles or agreements, citing this authority can strengthen your argument that such attempts are legally ineffective. It is also useful when demonstrating that reliance on others’ advice is not a valid defence to DPNs.
* As a Distinguishing Reference: If the opposing party cites this case, you should emphasise the unique factual matrix (e.g., evidence of severe and incapacitating illness preventing any action by the director, or direct binding communication from the Commissioner rather than a co-director) of the current matter to argue that this precedent is not applicable.

Anonymisation Rule: Do not use the real names of the parties; strictly use professional procedural titles such as Plaintiff / Defendant.

Conclusion

This judgment powerfully underscores that directorship is a position of objective legal responsibility, not subjective interpretation. Internal arrangements, such as the creation of a “Special Purpose Director,” cannot dilute the stringent statutory duties governing taxation compliance. For all current and aspiring directors, this case serves as a critical reminder: legal obligations, once formally incurred, demand active, informed, and compliant engagement.

Everyone needs to understand the law and see the world through the lens of law. The in-depth analysis of this authentic judgment is intended to help everyone gradually establish a new legal mindset: True self-protection stems from the early understanding and mastery of legal rules.

Disclaimer

This article is based on the study and analysis of the public judgment of the County Court of Victoria (Deputy Commissioner of Taxation v Sampath Migara Jayasinghe CI-24-01719), aimed at promoting legal research and public understanding. The citation of relevant judgment content is limited to the scope of fair dealing for the purposes of legal research, comment, and information sharing.

The analysis, structural arrangement, and expression of views contained in this article are the original content of the author, and the copyright belongs to the author and this platform. This article does not constitute legal advice, nor should it be regarded as legal advice for any specific situation.

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