FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation, in the matter of G & K Psakis Pty Ltd (in liq) v G & K Psakis Pty Ltd (in liq) (No 2) [2007] FCA 53 IN THE MATTER OF G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) DEPUTY COMMISSIONER OF TAXATION v G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) NSD 1970 OF 2006 LINDGREN J 12 JANUARY 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1970 OF 2006 IN THE MATTER OF G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) Defendant JUDGE: LINDGREN J DATE OF ORDER: 12 JANUARY 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The winding up of G & K Psakis Pty Ltd (in liquidation) ACN 079 939 085 be terminated on today's date. 1. The applicant, George Psakis, pay the costs of the plaintiff, the Deputy Commissioner of Taxation, of the proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1970 OF 2006 IN THE MATTER OF G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: G & K PSAKIS PTY LTD (IN LIQUIDATION) (ACN 079 939 085) Defendant JUDGE: LINDGREN J DATE: 12 JANUARY 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 21 December 2006, on the application of George Psakis, a contributory of G & K Psakis Pty Ltd (in liquidation) ('the Company'), I ordered that the winding up of the Company be stayed until 4.00 pm on 5 January 2007. On that date, I extended the stay until 4.00 pm today. Ancillary orders were made on both occasions. 2 There is before the Court today Mr Psakis's application for the final relief which he sought in the originating process, namely, an order terminating the winding up of the Company. The application is made under s 482(1) of the Corporations Act 2001 (Cth) ('the Act'). This subsection provides that at any time during the winding up of a company the Court may, on application, make an order terminating the winding up on a day specified in the order. The application for such an order may be made by, relevantly, a contributory: s 482(1A)(a). 3 I will not repeat here what I said in reasons for judgment published on 21 December 2006 ([2006] FCA 1832) which were my reasons for staying the winding up on an interlocutory basis. However, I incorporate here what I said in those reasons. 4 There is before the Court today evidence directed to showing that the Company is solvent. That evidence consists of an affidavit of Kerry Psakis sworn 11 January 2007 and an affidavit of Irene Shoullis sworn 11 January 2007. 5 Ms Psakis is a director of the Company and owner of one of the issued shares in the Company. Her husband, George Psakis, the applicant for the order, is also a director of the Company and the owner of the other issued share in its capital. 6 In addition to those affidavits, Mr Psakis relies upon his own earlier affidavit sworn 20 December 2006, which, inter alia, explained how it came about that the winding up order was made on 15 December 2006, even though on that very day the debt on which the plaintiff, the Deputy Commissioner of Taxation ('the Commissioner') was proceeding, was paid. 7 I referred to Mr Psakis's affidavit in my reasons on the interlocutory application, and need now refer only to the affidavits of Ms Psakis and Ms Shoullis. 8 I need not set out all of the evidence directed to establishing solvency. Annexed to Ms Psakis's affidavit is a balance sheet for the Company as at 11 January 2007 and a profit and loss statement for the period 1 July 2006 to 11 January 2007. All creditors of the Company have been paid. The Commissioner has been paid, and indeed the Company is shown as being in credit to the extent of $62,939.08 on its integrated client account. That credit, however, relates to outstanding superannuation obligations of the Company to the Commissioner of approximately $60,000, and is yet to be transferred to the appropriate superannuation account by the Australian Taxation Office ('ATO'). 9 Mr Melrose, the solicitor who appears for the Commissioner, has informed the Court that the Commissioner neither opposes nor consents to the termination of the winding up. 10 On the hearing, there has been read an affidavit of James Foster, an employee of the ATO, which confirms that the debt of $131,703.49 that was referred to in the creditor's statutory demand annexed to the originating process, has been paid. A small sum of $1,198.40 has since accrued and is due and payable, but the Commissioner does not suggest that this should stand in the way of the making of an order terminating the winding up. 11 The balance sheet records a net asset position as at 11 January 2007 of $589,103.30. The profit and loss statement shows a trading profit of $359,781.76 in respect of the period 1 July 2006 to 11 January 2007. 12 I turn now to the affidavit of Ms Psakis. Ms Psakis has been catching up on the billing of the customers of the Company. In the nature of the Company's business of providing freight carriage services, customers cannot be billed immediately the work is completed and Ms Psakis states that there is approximately $40,000 to be billed for work recently completed. She is awaiting the necessary paperwork to be rendered by the drivers so that she can issue invoices to customers. In her affidavit, Ms Psakis also outlines the nature of the current assets of the Company and refers to the sale of a truck of the Company for $120,000, and an offer of $132,000 for one of the Company's side loaders. She asserts that the Company's business is a good business and that she believes it is, and will be shown to be, solvent. 13 Her affidavit goes into further detail as to the Company's financial position, income and outgoings. She estimates that the business generates an income of approximately $43,000 to $45,000 per week, and that outgoings for fuel, running costs, wages and payments to subcontractors total approximately $17,400 per week. 14 In addition, there are continuing fixed costs paid monthly by direct debit from the Company's bank account under certain finance lease agreements and hire purchase agreements. These total $6,046.30 per month. One of the finance lease agreements was in respect of the truck that was recently sold, and the amount required to be paid to Suttons Motors Finance Pty Ltd to pay out that agreement is variously and inconsistently stated in the affidavit to be $32,927.40 and $69,158.52. This will reduce the monthly outgoings by $1,841.99 per month. On the other hand, of course, instead of receiving the full $120,000 without deduction, the Company will have to pay to Suttons Motors Finance Pty Ltd the discharge figure of $32,927.40 or $69,158.52, according to which of the two figures is correct. 15 As at 11 January 2007, the Company had $65,337.02 in its bank accounts and owed nothing to its trade and other creditors. The Company has paid the costs which it was ordered to pay to the Commissioner as petitioning creditor of $2,655.86 and has paid the liquidator $5,000, although apparently his fees will prove to be in the order of only $3,000. When I say 'paid', it should be made clear that cheques drawn by the Company for those two amounts have been provided, and Ms Young, the solicitor who appears for the Company, is instructed that there is ample money in her client's bank account to ensure that the two cheques will be honoured. 16 As noted earlier, the other affidavit is that of Irene Shoullis. Ms Shoullis is of Kamper Chartered Accounts, and has been the accountant for the Company for the last three years. Ms Shoullis expresses the opinion, on the basis of the financial information provided to her, that the Company is solvent. She states that in her opinion the Company has recently experienced cash flow difficulties due to the failure to invoice customers for work completed in a timely fashion, and that this shortcoming has now been rectified. She also says she is satisfied that the Company's business is a good business and is trading at a profit and will continue to do so. She expresses herself as satisfied that the Company is solvent on the basis of the following: (a) cash in bank of $65,337.02; (b) outstanding trade creditors of $nil; (c) outstanding trade debtors of $190,755.25; (d) immediately realisable assets of $392,773.18; (e) ongoing business contracts in place with customers expected to generate income of approximately $43,000-45,000 per week; and (f) ongoing future liabilities and running costs of approximately $15,300 per week. 17 Taking into account the explanation of the circumstances (referred to in my earlier reasons for judgment) that led to the making of the winding up order, and the evidence of solvency, I think that the winding up should be terminated. 18 There will be an order accordingly, and an order that the applicant, George Psakis, pay the costs of the plaintiff, the Deputy Commissioner of Taxation, of the proceeding. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 2 February 2007 Solicitor for the Plaintiff: Ms S Young, Pateman Legal Solicitor for the Defendant: Mr A Melrose, Australian Government Solicitor Date of Hearing: 12 January 2007 Date of Judgment: 12 January 2007