Readers of the CPA magazine (InTheBlack) may have read a recent article written by Brisbane partner Michael Peldan regarding Director Penalty Notices (DPNs). As an indication of how fast the law can change, between the time the article was submitted and when it was published, the New South Wales Court of Appeal handed down a decision in DCT v Meredith [2007] NSWCA 354.

This case changes one point made in that article, specifically when service of a DPN is deemed to have occurred. According to the ITAA, service of a DPN may be achieved ‘by leaving it at, or sending it by post to, an address that appears from [ASIC or ATO] documents to be, or to have been within the last 7 days, the person’s place of residence or business’.

The article said: ‘It may be possible to argue that the notice was not received for a few days after it was issued, but positive evidence will have to be given proving the actual delivery date of the notice. Generally, once the ATO proves that the notice was posted, the deemed delivery provisions in the relevant Acts will be upheld if there is any doubt and little evidence.’

The Meredith case has changed that position.

The Court of Appeal said: “It is sufficient to.. conclude that the statutory precondition to recover under s222AOE was satisfied be sending the notice by post to the relevant address.” The word to concentrate on is “sending”. The position at the moment appears to be that the deeded timing of receipt of DPNs, and the ability to submit positive evidence of actual receipt under the Interpretations Acts, is not available to directors if the ATO used the option of sending the DPN to the address listed with ASIC. Once the notice is posted it is served.

The practical consequence is that directors have 14 days from when the notice was posted, not when it was received, to take the appropriate action. Given that delivery may take a few days in regional areas and that weekends may intervene, the time remaining for directors to make decisions and act upon the notice may be very limited. They can no longer rely on up to 4 business days deemed service, or the actual date when they did receive the notice.

We have not heard whether this decision will again be appealed or not, but will keep you informed. Undoubtedly there will be commentary issued over the next few months.