Deputy Commissioner of Taxation v Evaton Cosmetics Pty Ltd
[2005] FCA 1937
•13 DECEMBER 2005
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Evaton Cosmetics Pty Ltd [2005] FCA 1937
DEPUTY COMMISSIONER OF TAXATION v EVATON COSMETICS PTY LTD
NSD 2105 OF 2005
EMMETT J
13 DECEMBER 2005SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD2105 OF 2005
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
APPLICANTAND:
EVATON COSMETICS PTY LTD ACN 089 844 922
RESPONDENTJUDGE:
EMMETT J
DATE OF ORDER:
13 DECEMBER 2005
WHERE MADE:
SYDNEY
THE COURT:
1.GRANTS LEAVE pursuant to section 471A(1A)(d) of the Corporations Act 2000 (Cth) for Eva Cheung, being the director of EVATON COSMETICS PTY LTD, to make the Interlocutory Application that was filed in the Sydney Registry of the Federal Court of Australia on 9 December 2005 on behalf of the defendant company.
2.NOTES that the Deputy Commissioner of Taxation is to be paid an amount of $159,439-52 on 13 December 2005 in respect of the company’s Running Balance Account as at 2 December 2005.
3.NOTES that the plaintiff’s costs of these proceedings fixed in the sum of $1,088-18 are to be paid to the Deputy Commissioner of Taxation on 13 December 2005.
4.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, to lodge and pay the defendant company’s activity statement for the period 1 November to 30 November 2005 on or before 21 December 2005.
5.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, shall undertake to cause the defendant company’s income tax return for the income year ended 30 June 2005 to be lodged on or before 21 December 2005 and to pay any outstanding balance, if any, in respect of that income tax return on or before 14 January 2006.
6.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, to execute on 13 December 2005 the Deed Poll in the form which is attached to these Orders, and that Deed Poll once executed will not be revoked.
7.NOTES THAT Mr Scott Pascoe, the Court Appointed Liquidator of the defendant company, is to be paid an amount of $33,216-08 on 13 December 2005, being on account of his Professional Costs and Disbursements associated with the Winding Up of the defendant company.
8.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, to indemnify Sims Partners and Mr Scott Pascoe in his capacity as Court Appointed Liquidator of the defendant company, and hold them harmless in relation to all PAYG Tax attributable to salaries and wages, Superannuation Contributions and the GST attributable to the Sales Revenue earned by the defendant company during the period between 2 December 2005 and 8 December 2005 (inclusive).
9.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, that she shall within seven (7) days from the date of these Orders cause the defendant company to establish a new bank account and also deposit or cause to be deposited into that new bank account an amount being equal to the sum of the amounts referred to in paragraph 8 of these Orders (the amount of such deposit being not less than $15,000-00).
10.NOTES THE UNDERTAKING of Eva Cheung, the director of the defendant company, to cause the defendant company to indemnify Mr Scott Pascoe in has capacity as Court Appointed Liquidator of the defendant company in terms identical to those provided in paragraph 8 of these Orders.
11.ORDERS that the winding up of EVATON COSMETICS PTY LTD as ordered by Registrar Hedge in the Federal Court of Australia on 2 December 2005 is hereby terminated pursuant to section 482(1) of the Corporations Act 2000 (Cth) on 13 December 2005.
12.DIRECTS that the orders not be entered until they are received by the Court in electronic form.
13.DIRECTS that the orders be served upon the liquidator and the plaintiff upon being entered.
DEED POLL
THIS DEED POLL is made at Sydney on 13 December 2005
BY EVA CHEUNG of 157 Pennant Hills Road, Carlingford in the State of New South Wales, Businesswoman (“EVA”) in the following terms:
1.Evaton Cosmetics Pty Limited (“EVATON”) is presently indebted to EVA in the amount of $946,270-00 (“Company Loan Account”).
2.The Company Loan Account is repayable immediately upon demand by EVA.
3.EVA has not as at the date hereof made any demand requiring EVATON to repay the whole or any part of the Company Loan Account and, therefore, the Company Loan Account is not presently due and payable.
4.BY THIS DEED POLL IT IS DECLARED AND AFFIRMED IRREVOCABLY that EVA will not at any time hereafter demand repayment of the whole or any part of the Company Loan Account, unless such demand is made upon terms that the repayment is to be made by way of the issue to Eva or her nominee of additional shares in EVATON and not by way of money consideration, or unless such payment can be made from the current assets of EVATON and at the time of such payment the amount of the current assets exceeds the aggregate of all other unsecured debts of EVATON.
Executed as a Deed Poll on the date and at the place first mentioned in this document.
SIGNED SEALED & DELIVERED )
By the said EVA CHEUNG ) ______________________
in the Presence of: ) EVA CHEUNG____________________________
JASON RICHARD MATTHEWS
Justice of the Peace in and forthe State of New South Wales
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
NSD2105 OF 2005
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
APPLICANTAND:
EVATON COSMETICS PTY LTD ACN 089 844 922
RESPONDENT
JUDGE:
EMMETT J
DATE:
13 DECEMBER 2005
PLACE:
SYDNEY
REASONS FOR JUDGMENT
On 2 December 2005, a Registrar of the Court ordered that Evaton Cosmetics Pty Limited (‘the Company’) be wound up. The registrar appointed Scott Pascoe as liquidator of the Company and fixed the costs of the plaintiff, the Deputy Commissioner of Taxation, in the amount of $1,088.18.
By interlocutory process filed on 9 December 2005, application was made by Eva Cheung, the only director of the Company, for, inter alia, an order that the winding-up of the Company be terminated, pursuant to s 482 of the Corporations Act 2001 (Cth) (‘the Act’).
The Company was established by Ms Cheung in 1991. It carries on a cosmetic retail business at nine different locations throughout the metropolitan area of Sydney. It has formal arrangements in relation to most of the premises from which it carries on its business. In addition, Ms Cheung owns real property from which some of the businesses are conducted. The Company currently employs 38 staff at its various stores and five additional staff involved in warehouse and administrative operations. All 43 staff would be unemployed if the business of the Company ceased to operate.
The evidence before me indicates that the Company’s business is profitable. For the 12 months ended 30 June 2005, the Company’s net profit was in the order of $63,000, based on total sales exceeding $3 million. For the period to 30 November 2005, the business has earned profits in excess of $36,000 on the basis of turnover of in excess of $1,495,000. The balance sheet of the Company as at 30 November 2005 shows net assets of $253,298. However, those figures show that the Company’s current liabilities exceeded its current assets by some $294,348. The current liabilities include a sum of $946,270 owing to Ms Cheung, the only director and shareholder of the Company. If that liability is excluded, the Company would be comfortably solvent. The present liabilities of the Company, apart from the director’s loan account and bank facilities, amount to some $252,649. Ms Cheung has undertaken to ensure that the Company is provided with funds that will enable it to pay all unsecured creditors immediately.
The predicament in which the Company presently finds itself results from unsatisfactory negotiations with the Deputy Commissioner in relation to the Company’s liabilities for tax. The Deputy Commissioner has served at least two statutory demands on the Company. Following those demands, negotiations were entered into. The evidence suggests that it may well be that it was as a result of a misunderstanding that there was no attendance before the Court on 2 December 2005, when the winding-up order was made. The Company has moved promptly and diligently to make this application once it became aware that a winding-up order had been made.
I am satisfied, from the evidence, that arrangements have been put in place with the Commonwealth Bank of Australia for cheques to be issued to pay all unsecured creditors. Those cheques are to be delivered to the Company's solicitor, who has undertaken to the Court to dispatch them to the named payees within 24 hours of receipt. Ms Cheung has also agreed to indemnify the liquidator in respect of any liability that he may personally have incurred as a consequence of the business being carried on during the time since the winding-up order was made.
Ms Cheung has also proffered undertakings to the Commissioner to ensure that outstanding tax is paid and that the Company’s obligations for the filing of returns will be complied with promptly. Finally, Ms Cheung has undertaken to execute a deed poll forthwith, whereby she undertakes not to make a demand for repayment of any part of her loan account unless such demand is made upon terms that repayment is to be effected by the issue and allotment of new shares in full satisfaction of the debt or unless the payment can be made from the current assets of the Company and at the time of such payment the amount of the current assets exceeds the aggregate of all unsecured debts of the Company. In all of the circumstances, I am satisfied that it is appropriate that the winding-up of the Company be terminated today in order to preserve what appears to be a profitable business.
Ms Cheung, however, should be reminded of the serious responsibilities that she has under the Act by causing her business to be carried on through a limited liability company. There are certain advantages, fiscal and otherwise from carrying on business in that way. However, any shareholder and director must be constantly aware of the need to fulfil obligations and responsibilities diligently and promptly.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.
Associate:
Dated: 3 February 2006
Solicitor for the Applicant:
Australian Tax Office
Solicitors for the Defendant:
Frontier Law
Solicitors for the Liquidator:
Blake Dawson Waldron
Date of Hearing:
13 December 2005
Date of Judgment:
13 December 2005
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