The Federal Court has ordered the winding up of each of several corporate defendants, including an accounting firm and a firm of solicitors.
On 3 April 2017, the Federal Court appointed provisional liquidators to each of of the following pursuant to s 472(2) of the Corporations Act 2001 (Cth): [2017] FCA 437.
- 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”).
- Ainslie Harding & Wood Solicitors Pty Ltd (“AHW Solicitors”) (together, “the corporate defendants”).
The Court said provisional liquidators reported that based on their investigations to date:
- “dummy” directors were appointed to each of the corporate defendants in order to hide the persons in actual control;
- one of the “dummy” directors acted as a director of the companies throughout the period he was an undischarged bankrupt, and also disqualified by ASIC from acting as a director;
- the corporate defendants have been involved in facilitating “phoenix activity” for clients;
- A & S Services operated the same business that was operated by Armstrong & Shaw; and
- AHW Solicitors operated the same business that was operated by Bolton & Swan.
Among other things, the Court found:
- “there was cogent evidence of systemic non-compliance by all the corporate defendants with respect to their taxation obligations”,
- that “it could readily be inferred on the evidence that the disregard of taxation obligations must have been deliberate”, and that
- “phoenix” operations were involved.
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”. Relevantly, the DCT said there was 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.
The DCT 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 the Court found that a winding up order was justified in respect of each of the corporate defendants.
Furthermore, the Court said 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”.
The result was that the Court said it was:
“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”.
(DCT v A & S Services Australia Pty Ltd (No 2) & Ors [2017] FCA 663, Federal Court, Davies J, 14 June 2017.)
[FJM; [2017] FCA 663; LTN 111, 15/6/17]