Deputy Commissioner of Taxation v S and C Installations Pty Ltd (in liq) ACN 084 602 611 [2007] FCA 1554

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v S and C Installations Pty Ltd (in liq) ACN 084 602 611 [2007] FCA 1554

DEPUTY COMMISSIONER OF TAXATION v S AND C INSTALLATIONS PTY LTD (IN LIQUIDATION) ACN 084 602 611 ANDORS NSD 1129 OF 2007

EMMETT J

12 SEPTEMBER 2007

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1129 OF 2007

IN THE MATTER OF S AND C INSTALLATIONS PTY LTD (IN LIQUIDATION) ACN 084 602 611 BETWEEN: DEPUTY COMMISSIONER OF TAXATION

Plaintiff

AND: S AND C INSTALLATIONS PTY LTD (IN LIQUIDATION)

ACN 084 602 611

Defendant

CHERYL MARIE GOODALL AND STEWART CHRISTOPHER GOODALL

Applicants

JUDGE: EMMETT J DATE OF ORDER: 12 SEPTEMBER 2007

WHERE MADE: SYDNEY

THE COURT NOTES: 1. The undertaking given by the Court by Zoe Robinson to deliver cheques to the Deputy Commissioner of Taxation and Sims Partners, respectively, in the amounts of $283,504.44 and $14,945.15. THE COURT ORDERS THAT: 2. The winding up of S & C Installations Pty Ltd be terminated with effect from today. 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 1129 OF 2007

IN THE MATTER OF S AND C INSTALLATIONS PTY LTD (IN LIQUIDATION) ACN 084 602 611 BETWEEN: DEPUTY COMMISSIONER OF TAXATION

Plaintiff

AND: S AND C INSTALLATIONS PTY LTD (IN LIQUIDATION) ACN 084 602 611

Defendant

CHERYL MARIE GOODALL AND STEWART CHRISTOPHER GOODALL

Applicants JUDGE: EMMETT J

DATE: 12 SEPTEMBER 2007

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 I have before me an application for termination of the winding up of S and C Installations Pty Ltd (the Company). The Company carries on, or did until the order for its winding up, the business of installing aluminium windows and doors into mainly commercial buildings. Its directors are the applicants, Cheryl Marie Goodall and Stuart Christopher Goodall. Mrs Goodall is also the secretary of the Company. They are each shareholders and are the only shareholders of the Company. They have been the only directors of the Company since it was formed on 2 October 1998. 2 On 17 August 2007 the Court ordered that the Company be wound up, that Scott Pascoe be appointed liquidator of the Company and that the costs of the plaintiff, the Deputy Commissioner of Taxation, be fixed in the amount of $1292.44. The applicants do not dispute that the Company is indebted to the Deputy Commissioner for Taxation, but point to extenuating circumstances that led to no steps being taken to oppose the winding up order. 3 Mrs Goodall has been employed by the Company as its bookkeeper since October 1998, when the Company began trading. The Company's external accountant from mid July 2005 to late October 2006 was Mr Gary Mares, of Gary D Mares & Associates. Mr Mares was instructed to prepare the Company's tax returns for the 2004-2005 and 2005-2006 financial years, using information supplied by Mrs Goodall. However, during 2006 Mrs Goodall became increasingly worried about the Company's tax returns, there being apparently little action on the part of Mr Mares. In October 2006, Mrs Goodall approached Mr Terry Grace of Pinnacle Business, St Marys and instructed him to assist her with the Company's financial affairs and to assume responsibility as the Company's external accountant. Mrs Goodall arranged for delivery to Mr Grace all of the Company's records that had previously been held by Gary D Mares & Associates. 4 In addition, in recent years, Mrs Goodall has been under some personal pressure. During 2005 her sister was unwell and Mrs Goodall gave her assistance on a regular basis. During the same year her mother also became increasingly unwell. As a result of their indispositions, Mrs Goodall found it necessary to spend much more time with them than she would otherwise have done and was therefore unable to spend as much time as she should have looking after the affairs of the Company. In particular, during 2005 Mrs Goodall was not always able to work on a regular basis or on her regular days and sometimes could only work for several hours, two days a fortnight. It is unfortunate that the affairs of the Company in those circumstances were neglected. People who are involved in the carrying of business through limited liability companies must appreciate the very serious responsibilities that are imposed upon them. As I have said, the circumstances are extenuating, but nevertheless that is no excuse if a company gets into difficulty. 5 As a result of the time that Mrs Goodall spent in caring for her mother and sister, she got behind in maintaining the Company's books. In addition she took on other personal responsibilities in connection with her children's school. She has said, however, that when her duties with the children's school finish in mid September she will be in a position to fulfil her duties as the Company's secretary and bookkeeper properly and diligently. Mrs Goodall has assured the Court that the Company's tax returns in future will be prepared and submitted on time. Since engaging the services of Mr Grace, the Company has been able to get its tax returns up to date. The tax return for the year ended 30 June 2007 has already been prepared and is ready for submission. The Company's business activity statements are also presently up to date. 6 The statutory demand that led to the winding up application was apparently served on 1 March 2007. Unfortunately, adequate steps were not taken to meet that demand. The Company entered into negotiations with Westpac Banking Corporation to borrow money to enable the debt then due to the Commissioner to be paid. However, for various reasons arrangements were not put in place and on 22 June 2007 the originating process was served at the Company's registered office. Mrs Goodall became aware that 17 August 2007 had been fixed for the hearing of the winding up application. However, on that day her husband was hospitalised for a minor procedure and in the circumstances, she overlooked the fact that that was the day for the hearing. It was not until 20 August 2007, when she received a telephone call from an employee of the liquidator, that she realised that the winding up orders had been made. 7 The aluminium windows and doors that are installed by the Company are produced by three suppliers, Specialised Windows Pty Ltd, Picton Windows Pty Ltd and Oracle Aluminium and Glass Products Pty Limited (Oracle). Approximately 50 of the windows and doors installed by the Company are supplied by Oracle. Mr and Mrs Goodall, together with their business partners, Victor Paul Barbara and Kim Barbara, are the directors of Oracle. 8 Since 28 August 2007, Oracle has paid several debts of the Company. Mr and Mrs Goodall have also arranged for the repayment of loan accounts owing by them to the Company. As a consequence, they have been able to provide to their solicitor, Ms Zoe Robinson, bank cheques for the sum of $283,509.44 payable to the Deputy Commissioner of Taxation and the sum of $14,945.15 payable to Sims Partners, the firm of which the official liquidator, Mr Pascoe, is a member. They are the debts presently owing to the Commissioner and to the liquidator in the event that the winding up of the Company is terminated. 9 Mr Grace has prepared accounts for the Company for the period 1 July 2007 to 28 August 2007. The balance sheet as at that latter date shows that the Company has total current liabilities of $356,475.74 as against total current assets of $550,209.53. Mr Grace has also prepared a projected balance sheet of the Company as at today, on the assumption that the debts to which I have referred have been discharged. That balance sheet shows that the Company has total current assets of $261,067.10 as against total current liabilities of $67,333.31. Mr Pascoe has been furnished with a copy of the evidence that has been provided to the Court and has indicated to the applicant's solicitors that he has no reason, from the material available to him, to doubt the veracity of what has been said concerning the financial affairs of the Company. 10 The applicant's solicitors have notified Australian Securities and Investments Commission (the Commission) of this application and the Commission has indicated that it does not wish to attend or be heard. It is clear enough from the financial information provided by Mr Grace that the Company is trading profitably. The accounts that he has prepared show, that for the year ended 30 June 2007, the Company had profits from ordinary activities before tax of some $203,000 and that for the period 1 July 2007 to 28 August 2007 the Company had profits from ordinary activities before tax of $50,786.02. 11 I am satisfied from the material before me that the Company is solvent and that it is appropriate to accede to the application made on behalf of the directors and shareholders of the Company. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.