Director sues law group for $255k in tax debts

Following his resignation in early 2024, Elias received four director penalty notices from the Australian Taxation Office (ATO) for unpaid superannuation guarantees, GST, and PAYG withholding amounts. The notices hold directors personally liable for certain unpaid debts.

In the months following, there was a series of correspondence between Elias and Smidt about the notices, including the latter’s alleged claim that she had contacted the ATO to arrange a “payment plan”.

Through her then-solicitor, Smidt provided an “irrevocable undertaking” that claimed she and Just Law Group would appoint a small business restructuring partner under the Corporations Act 2001 and would advise the tax office about this course.

In August 2024, the restructuring partner whom Smidt and Just Law Group alleged to have retained confirmed this never occurred. By that stage, the deadline in the irrevocable undertaking had passed.

Before coming to his decision, Justice Mark Leeming considered whether there was power in the irrevocable undertaking, given that Smidt was not an admitted or qualified legal practitioner.

The proceedings then turned to Elias’ claim, under the Australian Consumer Law, that alleged the conduct involved in making and serving the irrevocable undertaking “was misleading or deceptive”.

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Justice Leeming said the first issue was whether this undertaking was in “trade and commerce”, but ultimately was persuaded that it was.

In coming to this conclusion, Justice Leeming referred to a point made by Elias’ representation, that supplying the undertaking was “very closely connected with trade or commerce” because it was part of an exchange relating to Elias’ threat to wind up the business. This would have caused it to cease to conduct its practice in trade or commerce.

Orders under the Australian Consumer Law for default judgment were found to be appropriate in these circumstances.

However, Justice Leeming said Elias has not yet “suffered actual crystallised loss”, even if he was exposed to a liability owed to the ATO.

“I do not think it is appropriate that he obtain in an unqualified way a judgment in the amount of some $225,000 against each of the first and second defendants, leaving him free to execute that judgment in circumstances where, as it happens, none of the liability to which he is exposed has been enforced against him,” Justice Leeming said.

“Putting this another way, it would not be right … for him to succeed in obtaining execution of a judgment debt in his favour against either or both of Smidt and Just Law Group in circumstances where he is merely exposed to a liability to the ATO.”

Elias has been restrained from taking any steps to execute the judgments until he has suffered “actual loss” from the notices.

The case: Elias v Smidt [2025] NSWSC 762