Court Decisions - Director's Penalty Notice and Partnership Dispute

Director's penalty notice

In Deputy Commissioner of Taxation v Falzon the Queensland Court of Appeal considered whether it was appropriate to set aside a director's penalty notice.

The director argued that he had made payments to the ATO that were more than sufficient to clear the amount claimed and that the ATO had wrongly allocated those amounts to other debts.

The director claimed that the ATO had initially allocated the payments to the liabilities covered by the DPNs and had later incorrectly reallocated the payments to leave an unpaid balance. He also argued that the DPNs were invalid because they included incorrect amounts.

The Court of Appeal held that:

• The application was 'very late' however it would be allowed.

• As the initial internal allocations had not been communicated to the taxpayer there was no reason why the Commissioner could not later re-allocate them.

• The right claimed by the director to later specify an allocation of payments even after the ATO had allocated them did not exist at common law.

• The DPNs 'made it perfectly clear' that each stated liability represented a separate liability of the company.

The misstatement of one asserted unpaid liability did not invalidate that notice in relation to the other, correctly stated liabilities.

The director was unsuccessful.

Partnership dispute

In Booker v You Run the Business Pty Ltd the Federal Court was asked to wind up a company through which two husband and wife partnerships owned another company that was the franchisor of fifty three bookkeeping franchises.

Following an application to have the holding company wound up the dispute was referred to mediation - however that mediation ended in a further dispute. One of the parties claimed it had accepted an unconditional offer to sell its interest for $150,000 however the other party claimed that the offer had always been subject to a review of the business' financial statements.

The Federal Court held inter alia that there was no concluded agreement for the sale and purchase of the interest - it was clear that settlement was contingent upon the purported vendors being satisfied with the financial accounts.