FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd (No 2) [2017] FCA 663 File numbers: VID 322 of 2017 VID 323 of 2017 VID 324 of 2017 VID 325 of 2017 Judge: DAVIES J Date of judgment: 14 June 2017 Catchwords: CORPORATIONS – application that each of the defendants be wound up on the just and equitable ground pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth), s 461(1)(k) Cases cited: Australian Securities and Investments Commission v ABC Fund Managers [2001] VSC 383; (2001) 39 ACSR 443 Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234; (2013) 93 ACSR 189 Hipages Group Pty Ltd v Reach Aussie Pty Ltd [2017] FCA 112 International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368 Royal v El Ali (No 2) [2016] FCA 1156 Date of hearing: 6 June 2017 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 8 Counsel for the Plaintiff: P G Sest QC with S Linden Solicitor for the Plaintiff: Minter Ellison Counsel for the Defendants: The Defendants did not appear Counsel for the Provisional Liquidators: B Gibson ORDERS VID 322 of 2017 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: A & S SERVICES AUSTRALIA PTY LTD (ACN 165 857 321) Defendant JUDGE: DAVIES J DATE OF ORDER: 14 JUNE 2017 THE COURT ORDERS THAT: 1. A & S Services Australia Pty Ltd ACN 165 857 321 ("the company"), be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) ("the Act"). 2. Andrew Reginald Yeo and Giuseppe Michele Rambaldi, also known as Gess Michael Rambaldi, official liquidators, be jointly and severally appointed liquidators of the company. 3. The plaintiff's costs be paid out of the assets of the company in accordance with the provisions of the Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS VID 323 of 2017 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: ACN 147 341 991 PTY LTD Defendant JUDGE: DAVIES J DATE OF ORDER: 14 JUNE 2017 THE COURT ORDERS THAT: 1. ACN 147 341 991 PTY LTD ("the company"), be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) ("the Act"). 2. Andrew Reginald Yeo and Giuseppe Michele Rambaldi, also known as Gess Michael Rambaldi, official liquidators, be jointly and severally appointed liquidators of the company. 3. The plaintiff's costs be paid out of the assets of the company in accordance with the provisions of the Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS VID 324 of 2017 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: BOLTON & SWAN PTY. LTD. (ACN 153 647 360) Defendant JUDGE: DAVIES J DATE OF ORDER: 14 JUNE 2017 THE COURT ORDERS THAT: 1. Bolton & Swan Pty. Ltd. ACN 153 647 360 ("the company"), be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) ("the Act"). 2. Andrew Reginald Yeo and Giuseppe Michele Rambaldi, also known as Gess Michael Rambaldi, official liquidators, be jointly and severally appointed liquidators of the company. 3. The plaintiff's costs be paid out of the assets of the company in accordance with the provisions of the Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS VID 325 of 2017 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff AND: AINSLIE HARDING & WOOD SOLICITORS PTY LTD (ACN 607 552 741) Defendant JUDGE: DAVIES J DATE OF ORDER: 14 JUNE 2017 THE COURT ORDERS THAT: 1. Ainslie Harding & Wood Solicitors Pty Ltd ACN 607 552 741 ("the company"), be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) ("the Act"). 2. Andrew Reginald Yeo and Giuseppe Michele Rambaldi, also known as Gess Michael Rambaldi, official liquidators, be jointly and severally appointed liquidators of the company. 3. The plaintiff's costs be paid out of the assets of the company in accordance with the provisions of the Act. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DAVIES J: 1 On 3 April 2017, provisional liquidators were appointed to each of A & S Services Australia Pty Ltd ("A & S Services"), A.C.N. 147 341 991 Pty Ltd (trading as DNV Accountants & Business Advisors) ("DNV"), Bolton & Swan Pty Ltd ("Bolton & Swan") and Ainslie Harding & Wood Solicitors Pty Ltd ("AHW Solicitors") (together, "the corporate defendants") pursuant to s 472(2) of the Corporations Act 2001 (Cth) ("the Act"): Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437. The orders were made on the application of the Deputy Commissioner of Taxation ("the DCT") who has now applied to have each of the corporate defendants wound up pursuant to s 461(1)(k) of the Act on the just and equitable ground. The DCT has relied on the evidence it adduced in support of the application for the appointment of the provisional liquidators, a further affidavit of George Khouri sworn 18 May 2017 and also upon the provisional liquidators' report to the Court dated 19 May 2017. There was no opposition to the winding up applications and a winding up order is justified in respect of each of the corporate defendants. 2 It is well established that a company may be wound up on the just and equitable ground where there is a justifiable lack of confidence in the conduct and management of a company's affairs and thus a risk to the public interest that warrants protection: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234; (2013) 93 ACSR 189 at [20]–[24]; Australian Securities and Investments Commission v ABC Fund Managers [2001] VSC 383; (2001) 39 ACSR 443; at [119]. It is also well established that the Court may order that a company be wound up on the just and equitable ground where there has been fraud or serious misconduct in the conduct of the company's affairs: International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368 at 371; Royal v El Ali (No 2) [2016] FCA 1156 at [17]; Hipages Group Pty Ltd v Reach Aussie Pty Ltd [2017] FCA 112 at [47]. 3 The DCT's case is that there is a justifiable lack of confidence in the conduct and management of the affairs of each of the corporate defendants because: (a) they have systematically avoided compliance with their taxation obligations, including failing to file income tax returns, pay income tax, report their GST and PAYG withholding amounts and pay their GST and PAYG withholding amounts; (b) they have collectively operated a business of defrauding creditors involving "phoenix" activities for their clients; (c) they have been controlled by Philip Whiteman, who is the de facto director of all of them; (d) they have registered sham or "puppet" directors and shareholders with the Australian Securities and Investments Commission ("ASIC"); and (e) two of the corporate defendants, A & S Services and AHW Solicitors, are "phoenix" companies themselves. 4 In Deputy Commissioner of Taxation v A & S Services Australia Pty Ltd [2017] FCA 437, the Court was satisfied that a prima facie case on each of these claims was made out on the evidence. In summary, the Court found that: (a) there was cogent evidence of systemic non-compliance by all the corporate defendants with respect to their taxation obligations; (b) it could readily be inferred on the evidence that the disregard of taxation obligations must have been deliberate; (c) the evidence strongly indicated that the directors of the corporate defendants were installed by Philip Whiteman, acting under and at his direction; (d) there was cogent evidence that both Armstrong & Shaw Pty Ltd (the predecessor company to A & S Services) ("Armstrong & Shaw") and Bolton & Swan through Mr Whiteman were involved in facilitating a "phoenix" operation for another company, A.G.B.C. Pty Ltd (Deregistered) ACN 111 524 826; and (e) there was evidence to support the DCT's case that AHW Solicitors is a "phoenix" operation of Bolton & Swan and that Mr Whiteman was involved in facilitating the operation. 5 Based on the then available evidence, the Court was unable to form a view that the DCT's claim that A & S Services was a "phoenix" operation of Armstrong & Shaw had a solid foundation in fact. 6 There was no appearance on behalf of the corporate defendants at the final hearing of the winding up applications and the corporate defendants have not adduced any evidence in opposition to the winding up applications. The results of the investigations carried out by the provisional liquidators to date provide further support for a justifiable lack of confidence in the conduct and management of the affairs of the corporate defendants and for the winding up of the companies on the just and equitable ground. The provisional liquidators reported that based on their investigations to date: (a) "dummy" directors were appointed to each of the corporate defendants in order to hide the persons in actual control, namely: (i) AHW Solicitors – Philip Whiteman and Sherife Ymer; (ii) Armstrong & Shaw – Philip Whiteman; (iii) A & S Services – Philip Whiteman; (iv) DNV – Philip Whiteman and Paul Kleores; (v) Bolton & Swan – Philip Whiteman and Sherife Ymer; (b) Mr Whiteman acted as a director of these companies throughout the period he was an undischarged bankrupt, and also disqualified by ASIC from acting as a director; (c) the corporate defendants have been involved in facilitating "phoenix activity" for clients; (d) A & S Services operated the same business that was operated by Armstrong & Shaw; and (e) AHW Solicitors operated the same business that was operated by Bolton & Swan. 7 Furthermore, the provisional liquidators' report lends weight to the DCT's claim that A & S Services is a "phoenix" operation of Armstrong & Shaw and it may now be concluded that the claim does have solid foundation in fact. 8 In the circumstances, I am satisfied that there is a justifiable lack of confidence in the conduct and management of the affairs of each of the corporate defendants and thus a risk to the public interest that warrants protection. Orders to wind up each of the corporate defendants on the just and equitable ground should be made. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate: Dated: 14 June 2017