Deputy Commissioner of Taxation v Beecham Smallwood Financial Services Pty Ltd

[2010] FCA 490

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Beecham Smallwood Financial Services Pty Ltd [2010] FCA 490

Citation:		Deputy Commissioner of Taxation v Beecham Smallwood Financial Services Pty Ltd [2010] FCA 490
Parties:		DEPUTY COMMISSIONER OF TAXATION v BEECHAM SMALLWOOD FINANCIAL SERVICES PTY LTD ACN 057 701 407
File number:		QUD 45 of 2010
Judge:		LOGAN J
Date of judgment:		14 May 2010
Date of hearing:	14 May 2010
Place:	Brisbane
Division:	GENERAL DIVISION
Category:	No Catchwords
Number of paragraphs:	9
Solicitor for the Plaintiff:	A member of the Australian Taxation Office, appearing pursuant to the Taxation Administration Act 1953 (Cth)
Solicitor for the Defendant:	Hall Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 45 of 2010

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION Plaintiff
AND:	BEECHAM SMALLWOOD FINANCIAL SERVICES PTY LTD ACN 057 701 407 Defendant

JUDGE:	LOGAN J
DATE OF ORDER:	14 MAY 2010
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.The application is adjourned for hearing at 9.30 am on Friday 4 June 2010.

2.An affidavit sworn by a director of the defendant to which is to be exhibited the latest balance sheet and profit and loss account, including such changes, if any, as in the opinion of the directors, are material since the date of preparation of the balance sheet and profit and loss account in respect of assets, income, liabilities and debts, of the defendant is to be filed and served on the plaintiff on or before 28 May 2010.

3.The Defendant is to pay the Plaintiff’s costs, if any, of and incidental to, the adjournment.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 45 of 2010

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION Plaintiff
AND:	BEECHAM SMALLWOOD FINANCIAL SERVICES PTY LTD ACN 057 701 407 Defendant

JUDGE:	LOGAN J
DATE:	14 MAY 2010
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. The Deputy Commissioner of Taxation (the Commissioner) has sought the winding up of Beecham Smallwood Financial Services Pty Ltd (the Company).  The basis for the application is a failure on the part of the Company to comply with a statutory demand.  The foundation for that demand lies in goods and services tax and related penalties, outstanding Pay As You Go instalments and, in respect of each of those, related general interest charges.  The application for winding up was filed on 19 February 2010.  It has been the subject of a number of adjournments before the Registrar since then.  The debt, the subject of the statutory demand, is stated to be $49,411.38.  Whilst I did not have, as one might have hoped, evidence before me today that this sum, or some other sum, is outstanding, it seems common ground that it is outstanding. 

2. The Company is not without assets.  Its assets are, as deposed to by its director, Mr Brett Smallwood, in an affidavit filed on 16 April 2010.  Apart from the debt to the Commonwealth, payable to the Commissioner, which I have mentioned, the only other liability attested to by Mr Smallwood, is a debt in the sum of about $2,182.87, in respect of the hire of a photocopier, used by the business. 

3. The Company, I was informed without objection, carries on business as a service Company to a financial planning business.  It seems, thus, that the only third party with which it deals is the Company from whom the photocopier has been obtained.  Otherwise, it does not deal more generally with the public. 

4. It appears, from the evidence read today, that Mr Brett Smallwood, the director, has been able to prevail upon his parents to provide finance to the Company, dependent upon the fate of an application which his parents have made to BankWest, for the provision of a loan, in an amount up to $60,000.  A letter of 12 May 2010, from BankWest to Mr Desmond Smallwood, Mr Brett Smallwood’s father, states that BankWest has assessed the financial position of Mr Desmond Smallwood and his wife and determined that they qualify for a loan in the sum, or up to the sum mentioned.  The letter further states:

   Although we have indicated that you qualify for the above loan/s, this letter is not an offer for finance.  Before we can formally offer you finance and provide you with a loan contract the following conditions will need to be met to the satisfaction of the Bank.

5. What then follows is a list of bank requirements, including materially, a mortgage over a property at Ipswich, and if the bank so requires, a security assessment and inspection of that property.  I was informed without objection that such an assessment occurred this morning. 

6. There is nothing on the evidence which would suggest that, in the event that the Company were wound up, the liquidator would be able to look to either Mr Desmond Smallwood or his wife for payment of the debts of the Company.  In other words, there is, at the moment, a prospect that the Company’s creditors (and that means, overwhelmingly, the Commonwealth of Australia) will receive payment in full, whereas it is somewhat conjectural in the event of a winding up that the creditors will receive 100 cents in the dollar, having regard to the costs necessarily entailed in a liquidation.

7. The evidence, at the moment, in respect of the Company’s position is not completely satisfactory.  It does, though, at least take one to the position that there is but a small risk, so far as third parties are concerned, of their suffering prejudice if a Company, which prima facie is taken to be insolvent, continues to trade for a short time.  On the other hand, there is the benefit that I have mentioned, potentially there, if the Company is not wound up today. 

8. There is a discretion to exercise in respect of whether or not to proceed to the winding up of the Company today.  I propose making a direction which would require the Company, by its director, to file an affidavit deposing to the current balance sheet and profit and loss account of the Company, together with any changes considered by the director to be material since the date those accounts have been prepared, within fourteen (14) days from today.  It seems that within three weeks from today, the fate of a BankWest loan application will be known. 

9. There are competing considerations as to whether to proceed to winding up today, which are evident enough from what I have already stated.  The Commissioner has rightly emphasised the undesirability of companies taken to be insolvent to be permitted to continue to trade.  On the other hand, there is the prospect of full payment of the Company’s debts, particularly its debt to the Commonwealth, which is of interest to the Commissioner.  Further, that the Company is able to call on a source of finance, albeit from family, does suggest that it is not regarded by those who manage it as unworthy of preservation.  In the circumstances, my opinion is that the public interest is better served by a short adjournment of this application.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Associate:

Dated:        18 May 2010