Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd [2004] VSC 157

Abbotts Incorporation Services means Abbotts Incorporation Services Pty Ltd.

Antonelli means Antonio Antonelli, formerly employed by the ATO.

ASIC means the Australian Securities and Investments Commission.

Automotive General Industries means Automotive General Industries Ltd, otherwise known as Autogen and majority shareholder in Bendix.

Bendix means Bendix Consolidated Industries Ltd, an alleged predecessor which carried on the furniture business prior to the defendant companies and which was ordered to be wound up by Gobbo J on 21 April 1983 with David Alexander Christopher Crawford appointed as liquidator.

BFE means Bendix (Far East) Pte Ltd, a subsidiary of Bendix.

Bongania means Bongania Pty Ltd, a company allegedly carrying on the retail arm of the furniture business conducted by the defendant companies.

Buckland Products means Buckland Products Pty Ltd, formerly known as Casualife Furniture Pty Ltd, a company alleged to have previously carried on the furniture business and which was ordered to be wound up by Warren J on 25 October 2001 with Turner appointed as liquidator.

Burwood Retail means Burwood Retail Pty Ltd, formerly known as Outdoor Megastore Holdings Pty Ltd, the alleged predecessor in business to Bongania, and which was ordered to be wound up by Hansen J on 13 September 2002 with Scott appointed as liquidator.

Casualife Furniture means Casualife Furniture Pty Ltd, previously known as Tropitone International and subsequently as Buckland Products, which is alleged to have carried on the furniture business after Tropitone International.

CFI means Casualife Furniture International Pty Ltd, the defendant to proceeding 8250 of 2001.

CFI Ltd (HK) means Casualife Furniture International Ltd, a Hong Kong registered company formerly known as Tropitone HK, and chargee over the assets of CFI.

Claremont Kencord means Claremont Kencord Australia Pty Ltd, the holder of all the issued shares in Kencord Manufacturing.

Daly means Christopher Thomas Daly, liquidator of Tropitone Furniture.

Denlea Investments means Denlea Investments Pty Ltd, which operates Searchwide at 4th Floor, 488 - 490 Bourke Street, Melbourne.

Deputy Commissioner means the Deputy Commissioner of Taxation.

Entre Nous means Entre Nous Real Holdings Ltd, a director and shareholder of Sine Nomine and Semper Fidelis, registered in Hong Kong.

First Mainland International means First Mainland International Ltd, a company registered in the British Virgin Islands and the sole shareholder of CFI.

Form 304 means the form required to be lodged with ASIC notifying the change of officeholders.

furniture business means the manufacture and sale of outdoor furniture carried on currently by the defendant companies and alleged to be previously carried on by the predecessors to the defendant companies.

Gerandu means Gerandu Pty Ltd, a company allegedly carrying on the retail arm of the furniture business conducted by the defendant companies.

Gilbert means Henry Alexander Gilbert, chartered accountant of Rundles.

GMI means General Mutual Insurance Co Ltd, a company associated with Bendix and of which Joseph Guss was director.

Gusto Corporation means Gusto Corporation Pty Ltd, the sole shareholder of Bongania, Gerandu and Moolach.

JNF means J.N.F. Pty Ltd, the majority shareholder in Automotive General Industries Ltd which, in turn, was the majority shareholder in Bendix.

Kencord Manufacturing means Kencord Manufacturing Pty Ltd, the defendant to proceeding 8251 of 2001.

Kencord Trading means Kencord Trading Pty Ltd, subsequently known as Tropitone International.

Kotsimbos means Tom Kotsimbos, the director of Abbotts Incorporation Services.

Kwan means Au Wai Kwan, a director of CFI Ltd (HK) and First Mainland International.

Lofthouse means David James Lofthouse, appointed as trustee in bankruptcy of Joseph Guss on 2 February 1999.

Mansell means Richard Gell Mansell, appointed as the receiver and manager of Buckland Products by CFI Ltd (HK) on 19 October 2001.

Mihalopoulos means Anthony Mihalopoulos, a solicitor employed by the ATO.

MMI means Motorists Mutual Insurance Company Ltd, a company associated with Bendix and of which Joseph Guss was a director.

Moolach means Moolach Pty Ltd, a company allegedly carrying on the retail arm of the furniture business conducted by the defendant companies.

NMGP means N.M.G.P. Nominees Pty Ltd, a non-beneficial shareholder in Casualife Furniture, Gusto Corporation, Scandi International, Scandi Qld and Scandi.

OEM means Office Equipment Manufacturers (S) Pte Ltd, a company registered in Singapore and a subsidiary of Bendix.

Outdoor Megastore means Outdoor Megastore Holdings Pty Ltd.

Page means Denise Leanne Page, the director of Denlea Investments.

Scandi International means Scandi International Pty Ltd, registered on 30 April 1998 with Antony Guss the director from 1 May 1998 until the appointment of Marilla Guss as the director from 5 November 1998.

Scandi Qld means Scandi (Qld) Pty Ltd, the alleged predecessor in business to Moolach, and which was ordered to be wound up by Hansen J on 13 September 2002 with Scott appointed as liquidator.

Scott means David Henry Scott, the liquidator of Burwood Retail and Scandi Qld.

Semper Fidelis means Semper Fidelis Nominees Ltd, a shareholder of CFI Ltd (HK) and a director and shareholder of Sine Nomine.

Sine Nomine means Sine Nomine Nominees Ltd, a director and shareholder of CFI Ltd (HK) and Semper Fidelis.

SMET means S.M.E.T. Nominees Pty Ltd, a non-beneficial shareholder in Casualife Furniture, Gusto Corporation, Scandi International, Scandi Qld and Scandi.

Tropitone Furniture means Tropitone Furniture Co Pty Ltd, previously - on registration - known as Pawnee Pty Ltd, which is alleged to have carried on the furniture business after Bendix and which was ordered to be wound up by Senior Master Mahony on 23 August 1991 with Daly appointed as liquidator.

Tropitone HK means Tropitone Furniture Co International (HK) Ltd, a Hong Kong company, subsequently known as CFI Ltd (HK) and chargee over Tropitone International's assets.

Tropitone International means Tropitone Furniture Co International Pty Ltd, formerly known as Kencord Trading, which is alleged to have carried on the furniture business after Tropitone Furniture.

Tropitone USA means Tropitone Furniture Co Inc, a United States company, who licensed Bendix to produce outdoor furniture under the "Tropitone" mark.

Turner means Dennis Anthony Turner, the liquidator of Buckland Products.

Varendran means Rajadurai Nicholas Varendran, former director and secretary of CFI.

Zafiriou means Aris Zafiriou, an employee of the ATO.

63. I have set out in a schedule to this judgment a diagrammatic representation of the various companies said to be involved with the conduct of the furniture business which attempts to illustrate as simply as possible the movement of the furniture business between the companies and the numerous name changes of the companies.

67. There are two proceedings before the Court, each seeking the winding up of the defendant company on the just and equitable ground.[1] Each proceeding is brought by the Deputy Commissioner of Taxation as a creditor. In proceeding 8250 of 2001 the defendant is CFI. In proceeding 8251 of 2001 the defendant is Kencord Manufacturing. The Deputy Commissioner, being concerned with the protection of the revenue, seeks the winding up on the basis that she lacks confidence in the conduct and management of the furniture business conducted by CFI and Kencord Manufacturing and likely future payment by each defendant of its tax-related liabilities. She contends that it is fair and in accordance with the public interest and commercial morality that the companies be wound up.

70. In her submissions, the Deputy Commissioner has set out what is said to be a pattern of conduct over the past twenty years with respect to companies operating the same furniture business under the control of Joseph and Antony Guss, and/or members of their immediate family, which has resulted in significant indebtedness to the Commissioner of Taxation.

73. This pattern has been described as a series of cyclical events whereby a Guss-controlled furniture enterprise becomes indebted to the Commissioner of Taxation; proceedings are commenced by the Deputy Commissioner to wind up that company; however before this occurs, stock in trade, plant and equipment, employees and other assets are transferred to another Guss-controlled company; the former company is wound-up with an unpaid tax debt to the Commissioner of Taxation; and the new company carries on the same furniture business, usually from the same premises and in the same manner as in the past. Afterwards, this pattern repeats itself from the beginning.

76. The Deputy Commissioner contends that the furniture business now operated by CFI and Kencord Manufacturing has been carried on by a succession of companies under the management and control of the Guss family. The Deputy Commissioner referred to a Casualife brochure in use in 2002.[2] On the cover it is stated "Casualife ... first in outdoor furniture", on page one it states "A new name with a big history. For almost 20 years, supplying both domestic and commercial customers throughout Australasia, the Pacific, the Middle East and Far East and elsewhere internationally...". A little further down page one it states "Still under the same family, with a pride that only a family company can have in their product, we have been recognised internationally ... Casualife continues to represent all that we stood for under our former name, but with a broader approach and expanded product range...". Under the address and contact details of Casualife it is stated that all international and contract enquiries should be directed to Head Office, Melbourne. That is followed by "International Agents: Fiji, Hong Kong, Lebanon, Malaysia, New Zealand, Phillipines, Singapore, Thailand and UAE." There is also reference to showrooms in Sydney, Melbourne and Brisbane and to agents in Perth and Darwin. A download of a website (www.casualife.com), conceded by Antony Guss as being one of "our" websites, states that "Casualife is one of the world's leading manufacturers of Outdoor Furniture. Casualife has been manufacturing since 1979...".[3]

79. The defendants maintain that the furniture business conducted by CFI and Kencord Manufacturing is different to those previously conducted by Bendix, Tropitone Furniture and Buckland Products. The defendants argue that Casualife Furniture was involved in two businesses, one as licensee of the "Tropitone" brand of outdoor furniture and one as licensee of the "Casualife" brand of outdoor furniture. Antony Guss testified that CFI now competes with Tropitone USA in the sale of outdoor furniture.

82. The defendants raise issues as to whether the Deputy Commissioner was a creditor within the meaning of s 462(2) of the Corporations Act 2001 ("the Act") when the proceedings were commenced, whether there is any presently unpaid liability, and whether the Deputy Commissioner's lack of confidence is justified or soundly based in the facts, and, if it is, whether it entitles her to the order to wind up. The defendants submit that the relief sought, namely the winding up of the companies, is an inappropriate mechanism for ensuring the ongoing compliance with taxation obligations.

85. An interlocutory process for the appointment of a provisional liquidator was filed in each proceeding at the same time as the originating process, on 9 November 2001. The interlocutory applications were returnable before the Senior Master that day at 2.15 pm. Several affidavits were filed in support of the originating and the interlocutory process. The originating process itself was returnable before the Senior Master on 12 November 2001 at 10.30 am.

88. Each company opposed the appointment of a provisional liquidator. There were many hearings and adjournments, in the course of which numerous affidavits were filed. The Senior Master refused the application on 18 December 2001. At the same time the Senior Master referred the trial of the proceeding to myself as Judge in charge of the Corporations List. He did so on the basis, stated in the Other Matters section of the order, that it was a novel question, appropriate for determination by a judge, whether a creditor, as claimed by the Deputy Commissioner, is able to seek an order that the defendant be wound up on the just and equitable ground on the basis that she lacks confidence in the administration of the defendant to ensure that it meets its tax-related liabilities. It is further stated in the Other Matters section that, there being no case which determines that a Deputy Commissioner has that power, the Court "cannot conclude that a winding up order would be made, the usual pre-requisite to appointment of a provisional liquidator, because to purport to determine the question on this application would or could involve an inappropriate prediction as to how the question will be determined at trial". Hence each application to appoint a provisional liquidator was dismissed, the costs of the application to be costs in the proceeding, and, as mentioned, each proceeding was referred to me for trial.

91. The proceeding first came before me for directions on 8 February 2002. At subsequent directions hearings I made orders requiring the parties to file outlines of their contentions with a view to clarifying the issues. On 31 May 2002, I fixed the proceedings for trial on 19 November 2002, and made orders for the trial including that the proceedings be heard together, and that the evidence in one proceeding be evidence in the other. I also ordered that the winding up application be advertised not less than seven days before the hearing. The applications were duly advertised on 5 November 2002. No person gave notice of intention to appear, or appeared, at the trial.[4]

94. The trial was conducted on affidavit, although some witnesses (who had not sworn an affidavit) gave their evidence in chief viva voce. There were also subpoenas which resulted in the production of documents, and the Court Registry produced many old files for inspection by the parties.

97. In the course of the litigation many affidavits were sworn. In part this resulted from the fact that the Deputy Commissioner's case involved seeking to ascertain the present position of the companies including relatively recent transactions, and the establishment of matters going back to the late 1970's concerning the lineage of the furniture business conducted by the defendants and the corporate entities under or by which it had been conducted, and the relationship of these entities to Joseph Guss and his family and his or their interests. In the result, by the end of the trial, on my count of the affidavits listed in the Court Book index, approximately 75 affidavits had been filed Some were brief and merely cross-referenced to an affidavit filed in the other proceeding. But some affidavits were extensive and some had many exhibits. Some of the deponents swore two or more affidavits. Zafiriou, an employee in the ATO, and Antony Guss each swore 15 or more affidavits.

100. In an endeavour to provide an overview of the evidence, in particular of what the Deputy Commissioner contended was and is the subject furniture business, and the entities which now and in the past have controlled it, counsel for the Deputy Commissioner produced two charts akin to a family tree. The charts contain much factual material all of which is found in the evidence at one point or another. The charts were not tendered but provided in a final form with the Deputy Commissioner's written submissions in final address.[5] I used them as an aid in gaining an overview and a summary of events. The charts are too large and complex to include as a schedule to this judgment. I shall endeavour to explain relevant matters as simply as possible.

103. Of central importance in the case, and to the Deputy Commissioner's lack of confidence, is the present and past involvement of Joseph Guss and members of his immediate family or their interests in the control and management of the furniture business, and the entity or entities which now or in the past have owned or controlled it. There have been several such entities over the years, and they are seen to engage in name changing which adds a complexity to the case. This is exaggerated by the use of similar names. Consequently, I have set out below at some length the historical context and series of companies which precede the defendant companies.

106. The Guss family, to which I make reference in this judgment, is made up of Joseph Guss and his wife Sandra, their son and daughter Antony and Marilla Guss, and Antony's wife Jo-anne Guss.

109. Joseph Guss is a solicitor. He conducts practice on his own account under his name at Level 40, 140 William Street, Melbourne. He has acted as solicitor for the defendants throughout the litigation. He was also a witness, having sworn affidavits. His evidence, and indeed his involvement in relevant matters, is far beyond that of a detached independent legal adviser. He has been a principal player over the years in the various entities, and he was a witness as to facts for the defendants. Furthermore, Joseph Guss has been a director and/or a shareholder in a number of companies, discussed below, which the Deputy Commissioner alleges carried on the same furniture business as the current defendants.

112. Joseph Guss is also an undischarged bankrupt, a sequestration order having been made against his estate by the Federal Court of Australia on 21 December 1998. At a meeting of creditors held on 2 February 1999 Lofthouse was appointed as the trustee of Guss' bankrupt estate in lieu of the Insolvency Trustee Service Australia. Guss appealed from the sequestration order and the taking of steps under the order was stayed. The order itself was not stayed in the sense of being suspended from operation. The stay expired on 8 November 2000. In 2001 Guss relinquished the right as a solicitor to hold trust moneys in connection with his practice. As an undischarged bankrupt he is disqualified from taking part in the management of a company without the leave of the court. No such leave has been given. At the time of the trial Guss had not filed his statement of affairs which means that the automatic discharge period of three years had not commenced to run.[6]

115. Antony Guss is the sole director and secretary of Kencord Manufacturing and is the general manager of both CFI and Kencord Manufacturing. Similarly to Joseph Guss, Antony has also been a director and/or a shareholder in a number of companies, discussed below, which the Deputy Commissioner alleges carried on the same furniture business as the current defendants.

119. I now turn to the witnesses, briefly indicate their role and involvement and make some observations concerning them.

122. For the Deputy Commissioner evidence was given by the following:

(a) Anthony Mihalopoulos, a solicitor in the employ of the Legal Practice of the ATO. As the solicitor with the conduct of the cases he swore several affidavits for the purpose of producing material such as ASIC historical extracts and other copy documents lodged with ASIC, the report as to affairs of Buckland Products obtained from its liquidator Turner, a transcript of the reasons for decision of Mr H Hallenstein M given on 15 August 2001 in the matter of a police prosecution against Scandi International and CFI for failing to lodge sales tax returns, and as to conversations with and matters concerning Page and her involvement with CFI and Kencord Manufacturing. Without overlooking his very brief cross-examination, that is a sufficient reference to his evidence.

(b) Antonio Antonelli, who was employed in the office of the Deputy Commissioner as a tax auditor, until May 2002, since when he has been engaged in his own accounting practice. Antonelli gave evidence as to the defendants' indebtedness to the ATO and provided a detailed outline of the substance of a meeting he and a colleague had with Antony Guss on 7 November 2001. In cross-examination, he outlined his involvement with the defendant companies.

(c) Aris Zafiriou, an employee of the ATO in the debt management and investigation department and is responsible for the collection of tax. Zafiriou gave evidence as to the indebtedness of the defendant companies to tax, providing his own calculations, and the registration status of the defendants with respect to GST and PAYG. In a detailed affidavit Zafiriou also outlined the chronology of the companies said to have carried on the furniture business with details of the relevant transfers of the business and any court proceedings instituted by the ATO. Zafiriou also gave evidence as to other companies said to be associated with the defendant companies or the Guss family, any indebtedness of those companies to the ATO or action taken in response by the ATO, and details concerning the circumstances of incorporation of both those companies and the defendant companies. Zafiriou also introduced into evidence a large number of documents including bank account statements, ASIC extracts and forms, ASIC annual returns, and VicRoads motor vehicle searches.

(d) Tom Kotsimbos, the director of Abbotts Incorporation Services supplied Joseph Guss with several shelf companies, namely Moolach, Gerandu and Bongania. Kotsimbos gave evidence in relation to his dealings with Joseph Guss in relation to these companies.

(e) Dennis Anthony Turner, who was appointed as the liquidator of Buckland Products by Senior Master Mahony on 25 October 2001, having been appointed provisional liquidator on 18 October 2001. Turner gave evidence as to his investigations conducted as liquidator into Buckland Products and his dealings with members of the Guss family.

(f) Denise Leanne Page, the director of Denlea Investments, known as Searchwide, incorporated the defendant companies on the instructions of Joseph Guss. Page gave evidence in relation to her dealings with Joseph Guss and her involvement, as incorporator, with the defendant companies.

(g) Rajadurai Nicholas Varendran gave evidence under subpoena. Varendran was sole director and secretary of CFI from 22 December 2000 until 19 December 2001. Varendran had previously been employed by a number of other companies connected with the Guss family. Varendran gave evidence on a wide range of matters, but particularly as to his role in these companies and as director of CFI.

(h) Richard Gell Mansell gave evidence under subpoena. Mansell is an accountant practising as R G Mansell & Associates. He was appointed as receiver and manager of Buckland Products pursuant to a deed of charge in favour of CFI Ltd (HK) dated 28 February 2001. Mansell gave evidence in relation to the circumstances surrounding his appointment, his role and involvement as receiver and manager, and his dealings with Joseph Guss.

(i) David Henry Scott, is a chartered accountant and a member of Scott Partners Chartered Accountants. Scott was appointed liquidator of Scandi Qld and Burwood Retail by my order on 13 September 2002. Scott gave evidence as to various retail companies carrying on the furniture business which appear to have succeeded Burwood Retail and Scandi Qld and his difficulties in obtaining further information about those companies. He also introduced into evidence the report as to affairs of Burwood Retail and Scandi Qld and various ASIC company extracts and business name extracts.

(j) David James Lofthouse gave evidence under subpoena in relation to his role as the registered trustee in bankruptcy of Joseph Guss after his appointment as such on 2 February 1999.

128. The following witnesses were called by the defendants:

(a) Joseph Guss, who gave evidence over five days, including four days of cross-examination. Due to his central involvement in the matters the subject of the proceedings, his evidence ranged over a wide variety of matters covering an extensive period.

(b) Antony David Guss, who also gave evidence over five days, the vast majority of which was cross-examination, due to his central involvement in the furniture business conducted by members of the Guss family and his role in previous companies said to be associated with the Guss family.

(c) Henry Alexander Gilbert, a chartered accountant and member of the firm Rundles, chartered accountants. Gilbert was responsible for preparing the accounts of Tropitone International, one of the companies said to precede the defendant companies in carrying on the furniture business, for the period 1992 to 2001. Gilbert gave evidence in relation to certain financial matters concerning a number of the companies, and of instructions received from Joseph Guss on matters.

(d) Nazrul Islam, an accountant who was employed by CFI before being appointed a director of that company on 19 December 2001. Islam also does the accounting for a number of other companies connected with Joseph and Antony Guss. Islam gave evidence in relation to his role and involvement in CFI, CFI's relationship with Kencord Manufacturing, and his dealings with Joseph and Antony Guss.

134. At the outset of their submissions, counsel for the defendants addressed the standard of proof, referring to Briginshaw v Briginshaw[7] and Re ABC Coupler and Engineering Co Ltd (No.2).[8] It was submitted that the approach referred to in those cases should be taken in deciding whether the Deputy Commissioner had established her case and whether to grant the relief sought. While the standard of proof remains the balance of probabilities, and not all issues are of equal seriousness and importance, I remain mindful of the statements in those authorities and approach the ascertainment of the facts and my findings and conclusions accordingly.

137. No particular observation is required of Mihalopoulos, Antonelli and Zafiriou, whose evidence covered a range of matters considered by the Deputy Commissioner to be necessary to found her case. I refer to their evidence at various points in the judgment, sometimes but not always referring expressly to them as having given evidence in relation to the matters referred to. Each impressed me as an honest and reliable person and witness.

140. Kotsimbos and Page each conducted a similar business of providing shelf companies and preparing and filing notices and returns with ASIC. Their evidence is referred to at different points in the chronological development of the facts.[9] In the course of those references I mention and deal with differences in the evidence they respectively gave, on the one hand, and that of Joseph Guss, on the other hand. It is not necessary to repeat those references or the findings made and conclusions reached in those parts of the judgment. I found Kotsimbos and Page to be honest and reliable witnesses, and add only this in relation to Page's evidence. As may be seen I generally accept the evidence of Page. I found her account to be consistent with the way in which Joseph Guss conducts matters which is, in relation to other people, to tell them no more of his business than what he thinks is in his best interests, and that is as little as possible giving himself and his interest the maximum room to swerve and manoeuvre.

143. Then there are the liquidators, Turner and Scott, the receiver and manager, Mansell, and the trustee in bankruptcy, Lofthouse. Their evidence is dealt with at respective parts of the chronology of facts. Each was evidently an honest and experienced professional person and I accept their evidence as such, and in preference (in the case of difference) to evidence of Joseph and Antony Guss. Each of them desired to perform his respective office to his best ability but was hampered or prevented from doing so by the obfuscatory delaying tactics, at times wrongful, of which Joseph Guss was the architect and implementer with Antony Guss. At one point Turner turned to ASIC for assistance in having Antony Guss provide a report as to affairs, which brought the cooperation which should have existed at the outset. Antony's conduct in this respect was typical of the non-cooperative conduct of his father and himself which overall is seen to be designed to slow inquiries such as the liquidator's, to divert inquiry and generally to let people know as little as possible, regardless of the right of the inquirer to be informed or of the interest of creditors. Their evidence paints a sorry picture of how persons in such positions can be thwarted in the performance of their duties by recalcitrants. As to Mansell, his appointment and subsequent treatment was cynical and a misuse of him.

146. The remaining witness who gave evidence for the Deputy Commissioner was Varendran. I found him to be honest but ignorant in relation to several aspects of the furniture business, which ignorance supported the Deputy Commissioner's submission that he was a nominee director appointed by Joseph Guss. His evidence conflicted with that of Joseph and Antony Guss on several points, principally his role as the director of CFI and the ongoing nature of the furniture business generally. I accept his evidence. I prefer his evidence to that of Joseph and Antony Guss where their evidence conflicts.

149. Notwithstanding the insistence of Joseph and Antony Guss that he was an actual director of CFI, Varendran stated that he did not exercise the decisions and control that would be expected by a sole director of CFI, rather it was more a "nominee or a nominal capacity". When asked whether by "nominal" he meant "existing in name only", he agreed stating that "I didn't get about the nominal decision-making as a director, I just worked as an accountant". On several occasions he confirmed that he was not "an actual director" and confirmed that Joseph Guss was the final decision-maker. I accept this evidence as accurately stating the situation in fact.

152. I also found his evidence convincing in relation to the continuity of the furniture business carried on by the Guss family. Varendran gave evidence that when CFI took over the furniture business from Buckland Products in March 2001, "there was no change, as such, except that the new company was carrying on the transactions, the business". Later, when asked to describe the furniture business conducted by the Casualife companies, he agreed that it was a family business conducted by the Guss family. Again, for the sake of completeness, I accept all this evidence.

155. His lack of knowledge of the sale agreement dated 28 February 2001 and associated documents and the circumstances in which he came to sign those documents and his lack of dealings with CFI Ltd (HK) all indicate and support his evidence that he was a nominee director.

158. I now turn to the defendants' witnesses commencing with Joseph Guss.

161. According to an ASIC historical extract of Buckland Products, Joseph Guss was born in March 1938. It is evident that his legal and commercial experience covers many years. I had the advantage of observing him give evidence over five days, including four days of cross-examination. That was a considerable advantage to me in arriving at my assessment of him. While evidently intelligent he is by nature a cunning, plotting type of person giving to deviousness. He is the architect of the Byzantine corporate web discussed in this judgment. He seemed to me to lack any moral concern over the trail of unpaid tax and other liabilities left by some of these companies. I found him an unsatisfactory witness, on numerous occasions his evidence being vague, inconsistent, contradictory and untrue. Quite simply I find it difficult to rely on his evidence unless it is supported by acceptable objective material or other cogent evidence. I refer to his evidence throughout the judgment, and at many points in the chronology of facts make findings and state conclusions. At many points those findings concern Joseph Guss. They are numerous and I do not set those matters out at this point in the judgment. For present purposes, in addition to my findings above, I mention only the following matters concerning Joseph Guss.

164. First, on several occasions I found that Joseph Guss had misled ASIC and the public at large in relation to entities carrying on the furniture business. There were delays in lodging forms with ASIC notifying ASIC that the company was trading and delays in changing the relevant details from the company's incorporator to those persons who were in fact conducting the company's business.

167. Secondly, despite maintaining that a fair value was offered for Tropitone Furniture under the settlement agreement with Tropitone International, Joseph Guss gave no evidence as to an assessment of the value of the stock, plant and equipment actually conducted.

170. Thirdly, Joseph Guss gave evidence that Tropitone HK was party to the settlement agreement with Tropitone USA. It was not.

173. Fourthly, his evidence as to the role of CFI Ltd (HK) as chargee over Casualife Furniture, and subsequently CFI, seemed at variance with his conduct of these proceedings. Despite referring to certain persons, namely Lee and Kwan among others, the defendants (for whom he acted as their solicitor) did not produce any evidence on behalf of CFI Ltd (HK). Accordingly, I inferred that any evidence those persons might have given, would not have assisted the defendants.

176. Fifthly, on the matter of the transfer of shares in Casualife Furniture to NMGP and SMET and the beneficial ownership of these shares, I found the evidence of Joseph and Antony Guss to be unconvincing and contradictory, and that their stated ignorance was disingenuous, false and designed to mislead me.

179. Sixthly, despite being CFI Ltd (HK)'s solicitor, on several occasions Joseph Guss failed to provide Mansell with information requested by him as the receiver and manager appointed by CFI Ltd (HK) over Casualife Furniture, with no justifiable reason advanced for not doing so.

182. Seventhly, Joseph Guss' role as CFI Ltd (HK)'s solicitor seemed at variance to the role one would expect of a solicitor acting independently of other parties in a commercial transaction. He prepared the sale agreement, deed of consent and licence agreement for all parties, without, as he said, having "turned his mind" for whom he was acting while maintaining that there was no conflict, as all parties were "ad idem". There was little evidence to suggest that there was discussion of the terms of these documents by the parties or their representatives, and I find that there was none, Joseph Guss simply bringing them into existence.

185. Eighthly, I find that the licence agreement dated 1 March 2001 was produced by Joseph Guss for the purpose of the litigation, backdated to give a veneer of genuineness. Had this licence agreement existed at March 2001, Joseph Guss would clearly have mentioned it in proceedings before the Senior Master in October 2001. Given Joseph Guss' commercial and litigious experience over the past 30 years, I do not accept his submission that it was not mentioned because it was either overlooked or thought unnecessary.

188. The matters outlined above are by no means comprehensive of the areas in which I found the evidence of Joseph Guss unsatisfactory or unconvincing or refused to accept it. Rather, they are some principal points and reflect how I found his evidence in general. It becomes apparent from the detailed facts below that delay and obfuscation are principal tactics employed by Joseph Guss in the course of defending any investigations being conducting into the furniture business in order to buy time and finalise his next moves.

191. I turn now to Antony Guss. Being able to observe him give evidence for a long time was a considerable advantage. Similarly to Joseph Guss, I found his evidence to be unconvincing, inconsistent, contradictory and untrue. The following points below will suffice for now to outline why I hold no faith in the credit or reliability of Antony Guss.

194. First, he gave contradictory evidence in relation to the beneficial shareholders of Casualife Furniture, claiming not to have had any dealings with SMET and NMGP when this was not the case. Had counsel for the Deputy Commissioner not shown him the declarations of trust which provide that SMET and NMGP hold shares on trust for him in relation to Scandi, he would not have acknowledged this. As mentioned in relation to Joseph Guss, I found his evidence to be false and designed to mislead me.

197. Secondly, a number of entities of which he is director have delayed in lodging tax returns or statements. While he claimed that this was due to computer problems, the frequency with which this occurred and the number of years over which this occurred, lessened the reliability of the submission greatly.

200. Thirdly, he misled ASIC, and the general public, in relation to entities carrying on the furniture business. I repeat my previous comments as set above in relation to the credit of Joseph Guss.

203. Fourthly, despite being the general manager of Casualife Furniture Antony Guss claimed to have had no dealings with CFI Ltd (HK) notwithstanding that Casualife Furniture is said to have paid 10 per cent of its export sales to CFI Ltd (HK) in return for export marketing assistance and use of the name "Casualife".

206. Fifthly, despite the deed of consent clearly having been backdated, Antony Guss continued to maintain that it was executed on 1 March 2001.

209. Sixthly, Antony Guss gave evidence that he did not conduct a valuation of the stock of Casualife Furniture due to computer problems, yet nevertheless proceeded with executing the sale agreement with CFI, dated 28 February 2001, and later gave evidence that it became evident after a while that the liability under the sale agreement with respect to the purchase price was likely to be assumed under the liability taken over by CFI with respect to CFI Ltd (HK). In other words, these transactions occurred without a valuation being conducted.

212. Seventhly, Antony Guss gave inconsistent evidence in relation to the transfer of employees from Casualife Furniture to Kencord Manufacturing. According to Antony Guss, Kencord Manufacturing took over from Casualife Furniture on 17 October 2001 despite only meeting with Casualife Furniture's employees on 23 and 31 October 2001 when he offered them new employment with Kencord Manufacturing on the same terms and conditions.

215. Eighthly, despite his position as general manager of Casualife Furniture and having executed the sale agreement and the deed of consent, Antony Guss was unable to detail any discussion during the negotiation of these agreements or outline any changes made to them in any such negotiation. This was while trying to maintain that the documents represented arm's length transactions between independent parties.

218. The points raised above are by no means comprehensive of the discrepancies, inconsistencies, contradictions or falsity contained within Antony Guss' evidence. They are sufficient to indicate why, alongside contradictory evidence from another witness, I often preferred the evidence of the other witness. I find that he and Joseph Guss adopted similar tactics of delay and obfuscation in order to hinder any investigations into the affairs of the companies operating the furniture business.

221. Turning to Islam, I found him also to be an honest witness, although his evidence was somewhat confusing in some areas, in my view largely due to some language difficulties on occasion. Despite the insistence of Joseph and Antony Guss that Islam exercised actual authority over the affairs of CFI, I find that his evidence suggests, and that the truth is to, the contrary, namely that he, like Varendran, was a nominee director. I prefer the evidence of Islam to Joseph and Antony Guss.

224. Islam, in his evidence, rejected the Deputy Commissioner's suggestion that he was in control as director of CFI, stating that "these days everything is coming corporatively [which I have interpreted as cooperatively]". Members of this "cooperative" included himself, Joseph, Antony, Sandra, Marilla and Jo-anne Guss. Similarly to Varendran, he had little knowledge of the sale agreement dated 28 February 2001 and associated documents. I find that Islam, despite his appointment as director, has continued to fill his role as the internal accountant of CFI. Apart from a performance based salary rise of $2000, he has received no greater remuneration or benefits since becoming director of CFI and his area of responsibility, as conceded by him, remains with the day to day accounts of three or four of the Casualife companies. Similarly to Varendran, he is not familiar with CFI Ltd (HK). Hence, when pressed to detail the commercial relationships between CFI, Kencord Manufacturing and the retail companies, his evidence became confusing, due at least in part, to his lack of knowledge or understanding. All this confirms that, like Varendran, Islam was a nominee director of CFI.

227. The remaining witness is Gilbert. I found him to be an honest witness. Among other things, he exposed the role of NMGP and SMET as nominee companies, and said sufficient, in the circumstances, for me to be satisfied on the balance of probabilities that it was on Joseph Guss' instructions that the shares in Casualife Furniture were transferred to those nominee companies, notwithstanding Joseph Guss' pretended ignorance in this area.

The past entities conducting the furniture business

231. I now refer to the entities which the Deputy Commissioner has outlined in her submissions as the succession of companies under the control of Joseph Guss and/or members of his immediate family, which have carried on the furniture business now carried on by CFI and, in part, by Kencord Manufacturing. I refer in particular to the affidavit of Zafiriou sworn on 8 March 2002 which sets out a detailed history of this succession of companies. What I refer to here provides an outline or tree to which other facts and matters will have to be added. I state the facts as I find them to be.

234. These companies are, in chronological order, Bendix (1978 - 1982), Tropitone Furniture (1982 - 1991), and Tropitone International (1991 - 2001). It should be noted that on 1 November 1996, Tropitone International changed its name to Casualife Furniture and on 18 June 2001 to Buckland Products. In addition, Tropitone International was previously known as Kencord Trading.

237. Each of these companies has been the subject of a winding up order on the petition or application of a Deputy Commissioner of Taxation on the ground that it was unable to pay its debts and, at the date of the winding up order, owed a substantial sum to the Commonwealth in relation to its tax-related liabilities. Specifically, Bendix owed $1,212,858 as at 21 April 1983 (the date of winding up), Tropitone Furniture owed $1,421,083.96 as at 23 August 1991 (the date of winding up) and Tropitone International owed $148,659 as at 25 October 2001 (the date of winding up when it was then known as Buckland Products).

244. Bendix was incorporated on 14 August 1935. It was a publicly listed company until the early 1970s when it became a public unlisted company. At the end of 1973, 51 per cent of the share capital of Bendix was owned by Automotive General Industries, the shares of which were owned by JNF. Through the ownership by him and his wife of shares in JNF, Joseph Guss controlled Automotive General Industries, Bendix and their subsidiary companies.

247. Joseph Guss was a director of Bendix from 1966 to 1983 and from 1978 to 1983 was chief executive officer. As at December 1973, Joseph Guss was the chairman of directors of Bendix and Autogen. Sandra Guss was appointed a director of Bendix on 23 October 1978. By the end of 1979, the directors of Bendix were Joseph, Sandra and Morris Guss. Morris Guss retired, and Antony Guss was appointed, as a director on 30 June 1981.

250. By virtue of his position as director, chief executive officer and shareholder, the Deputy Commissioner contends that Joseph Guss had a controlling interest in Bendix.

253. I agree with the Deputy Commissioner's submission and find that by virtue of the Guss majority shareholding and by their positions on the board of directors, the Guss family controlled Bendix and its subsidiaries. The reality and substance is that this control was exercised by or through Joseph Guss.

256. Bendix was a large scale manufacturer of steel office and domestic furniture, storage, hospital and kitchen furniture with factories in Australia, and through OEM, a fully owned subsidiary, in Singapore. OEM, a Singapore company, manufactured office furniture and storage equipment. Bendix and OEM produced outdoor furniture under the "Tropitone" mark from 1978 to 1982 pursuant to a licence agreement dated 24 November 1978 with a United States company, Tropitone USA. This licence agreement was signed by Joseph Guss on behalf of Bendix and OEM. It licensed Bendix and OEM to manufacture products designated by Tropitone USA as existing products and new products in defined geographic areas. The area for Bendix was Australia and its territories, New Zealand, Papua New Guinea, Fiji, New Hebrides, Tahiti and other islands and territories that may be agreed. The area for OEM was Africa, Middle East, South East Asia, Papua New Guinea, Hong Kong, Pacific Islands and other countries and territories that may be agreed. There was provision for Tropitone USA to provide tooling, drawings, advertising materials etc, for payment of a royalty, and a term of 10 years with options.

259. The licence agreement was amended on 25 August 1981 to replace OEM with BFE, another subsidiary of Bendix of which Joseph Guss was one of two directors; the other director was a Singaporean national Poh Geok Tuan. Joseph Guss was the initial director of OEM in 1977; in October 1981 Sandra Guss and Tuan were appointed directors.

262. On 19 November 1981 the Deputy Commissioner commenced an application in this Court to wind up Bendix. At this stage, Bendix owed the Commonwealth $544,410.64 in tax-related liabilities.

265. On 23 April 1982, the Bendix licence agreement with Tropitone USA was varied, whereby, according to Joseph Guss, all the rights under the licence agreement were transferred to Tropitone Furniture (at that stage called Pawnee Pty Ltd ("Pawnee"), its name on registration). Joseph Guss signed on behalf of Bendix and BFE and Antony Guss signed on behalf of Tropitone Furniture. The consideration payable by Tropitone Furniture was $1. On the same day, Tropitone Furniture, with the consent of Tropitone USA, entered into a sub-licence agreement with Bendix, sub-licensing Bendix in respect of the rights under the licence agreement. Another sub-licence was granted on 26 April 1982; Guss could not recall its terms. These sub-licences were terminated in December 1982.

268. On 19 May 1982 the State Bank of Victoria appointed Ernest Harding Niemann and Tim Arthur Jonas as receivers and managers of the property of Bendix pursuant to a debenture given by Bendix on 20 August 1981 as security for monies advanced when it borrowed approximately $1 M from the State Bank of Victoria to finance a new flat panel wood furniture plant.

271. The receivers and managers disputed the validity and enforceability of the variation to the licence agreement dated 23 April 1982, and the sub-licence agreements dated 23 and 26 April 1982. The dispute was settled by an agreement between Tropitone Furniture, Bendix, and the receivers and managers on 7 December 1982. Joseph Guss signed on behalf of Tropitone Furniture as director and on behalf of Bendix as secretary. Antony Guss signed on behalf of both Bendix and Tropitone Furniture as director. The receivers and managers signed both personally and as receivers and managers of Bendix. Pursuant to this settlement agreement, Bendix sold the assets that comprised the furniture business and licence agreements then known as "Tropitone" to Tropitone Furniture for $200,000.

274. The defendants submitted that the settlement agreement was an arm's length transaction entered into in circumstances in which the receivers would have sought the maximum return possible for the bank. The defendants further refute the Deputy Commissioner's submission that "before the date of the winding up of the company, the company was systematically stripped of its assets and the furniture business would find its way into some other (newly incorporated) company which company was under the management and control of the Guss interests...".

277. I accept that the receivers and managers, having been appointed by a third party, the State Bank of Victoria, sought to achieve the best return possible for Bendix. However, in the absence of detailed financial statements, it is not possible to form a firm view some twenty years later, as to whether the settlement amount represented fair value for that which was transferred. I find that it was only due to the active role played by the receivers and managers that such an amount was realised over and above the nominal consideration stipulated in the variation to the licence agreement. Had a transfer taken place on the terms in the licence variation, I would have concluded that the transaction fell within the above description of the Deputy Commissioner.

280. Throughout the latter stages of 1982 Bendix held meetings with its members and its unsecured creditors to propose a scheme of arrangement.

283. On 24 March 1983 the Deputy Commissioner again commenced proceedings in this Court to wind up Bendix. As at that date Bendix owed the Commonwealth $1,212,857.86 in tax-related liabilities. On 21 April 1983, Gobbo J ordered that Bendix be wound up and appointed David Alexander Christopher Crawford as liquidator.

286. Later, in his Account of Receipts and Payments and Statement of Position in Winding Up dated 29 October 1990 and lodged with the National Companies and Securities Commission, the liquidator of Bendix reported that all known assets of Bendix had been realised by the receivers and managers and that there was a nil amount available for unsecured creditors. It was also stated that the amount currently due to preferential creditors entitled to priority over the holders of debentures was $1,122,775, that the total amount owing under and secured by any debenture was $1,202,623, and that the Statement of Affairs had advised preferred and unpreferred creditors' claims of $4,245,744.

289. The defendants submitted that Bendix was a very different business to that conducted by CFI. In his affidavit sworn on 2 September 2002, Joseph Guss deposed to the reasons for Bendix's failure, namely delays in commissioning the plant, a business recession, an increase in the value of the Singapore dollar which affected export returns and the Singapore government's artificial increase in labour costs. The defendants further contend that the liquidation of Bendix was so many years ago that, for the purpose of this case, it should be regarded as stale.

292. At this stage I do not propose to deal with the defendants' submission that Bendix and the defendant companies operate different businesses. Rather, I propose to follow in chronological order the various companies said to have carried on the furniture business and identify the stages at which the business was transferred. I find that the furniture business conducted by Bendix was subsequently carried on by Tropitone Furniture. I find that the licence agreement with Tropitone USA to produce outdoor furniture under the "Tropitone" mark was a significant and substantial aspect of the furniture business of Bendix. It was the rights under this licence agreement, as well as the assets, which were sold to Tropitone Furniture who then continued to exercise those rights. Further, having regard to statements contained in the advertising brochure of the defendants, current for 2002, and statements contained on their website,[10] it is reasonably clear that the Guss family has represented to the public that "Casualife" has operated one continuous business since 1979.

296. This company was incorporated on 7 January 1982 as Pawnee. On 2 June 1982 Pawnee changed its name to Tropitone Furniture. Joseph Guss was managing director of Tropitone Furniture from 1982-1990 and owned 75 per cent of the company. Antony Guss owned 25 per cent and subsequently became the company's general manager. Morris and Antony Guss were both appointed directors on 23 April 1982 with Joseph and Sandra Guss later being appointed on 23 July 1982, whereupon Morris Guss resigned.

299. By virtue of Joseph Guss being managing director of Tropitone Furniture and with both Antony and Joseph Guss being the shareholders, the Deputy Commissioner contends that the Guss family had a controlling interest. I find this to be the case.

302. After the settlement agreement with Bendix and the receiver and manager, Tropitone Furniture continued to carry on the "Tropitone" business both in Australia and overseas. The business was based at 50 Buckland Street, Clayton. Tropitone Furniture was largely financed by third party borrowings supported by mortgages of real estate provided by Joseph and Sandra Guss, namely their property at 3722 Nepean Highway, Portsea, to the Geelong Building Society ("GBS"). On 25 September 1991 and 11 November 1991 GBS commenced proceedings against Joseph and Sandra Guss as guarantors of the GBS debt since Tropitone Furniture had defaulted in payment, claiming the sum of $827,716.29 (which, by an amended statement of claim in October 1994 had increased to $1,248,591.27), and seeking possession of the mortgaged premises. GBS obtained judgment under the mortgage and on 5 February 1995 exercised its power of sale over the Portsea property and sold the property at auction for $1,650,000. The sale was settled on 5 April 1995. Notwithstanding this sale, there remained a deficiency in the amount owed to GBS. Consequently, on 21 December 1998 Joseph Guss was made a bankrupt at the suit of GBS (as substitute creditor) in respect of the balance of the GBS debt. As mentioned at [18], the operation of the order was stayed until 8 November 2000 due to an appeal. As also mentioned, the three years at the end of which his bankruptcy will be automatically discharged has not yet commenced to run as Guss has not filed his statement of affairs.

305. In 1995 the National Australia Bank Ltd ("the NAB") sued Joseph and Sandra Guss as guarantors of Tropitone Furniture, claiming $1,357,000.

308. It is worth noting the chronology of events in relation to dealings between Tropitone Furniture and the ATO, as provided by Ann Felgate, Director Debt Management, Revenue Collection of the ATO from 1984, when it was brought to the ATO's notice that Tropitone Furniture had a number of outstanding sales tax and group tax returns, to 1991. During these seven years there was a stream of demands for payments by the ATO in relation to Tropitone Furniture, followed by promises to pay by Antony and Joseph Guss, the proposal of schemes of arrangement, the commencement of winding up proceedings, interlocutory proceedings, requests for extensions and last minute payments.[11]

311. The defendants argue that this chronology highlights that the companies were not simply "dumped" upon the winding up petitions being presented, but continued to make payments. In response to all the statutory demands, the defendants submit that these actions of the ATO do not go to the merits of the present applications but, rather, evidence the proper working of the conventional enforcement procedures.

314. I accept that the chronology provided by Felgate represents accurately, over the period from January 1984 until June 1991, the dealings between the ATO and the Guss family and Tropitone Furniture. Indeed, in their submissions, the defendants have not sought to dispute the contents of this chronology, rather how the chronology should be interpreted. The chronology indicates that the ATO sent numerous notices under s 364(2) of the Companies (Victoria) Code in relation to outstanding group, sales and payroll tax owed to the ATO by Tropitone Furniture. This would often be followed by a delay of some months during which the parties negotiated various repayment proposals until ultimately winding up proceedings were instituted by the ATO, at which point a full or part payment of the amount owing would be made. It is reasonable to infer from the matters in the chronology that such payments were made to avoid the institution of legal proceedings and generally after having exhausted avenues for delay. While it is nevertheless true that Tropitone Furniture made certain payments to the ATO, given the delay usually between the receipt of the s 364(2) notice and the payment, and the proximity of the payment to the lodgment by the ATO of winding up applications, I find that these payments were made reluctantly and only to avoid the winding up of Tropitone Furniture.

317. On 26 June 1985 on a debt of $149,958.44 the Deputy Commissioner commenced an application to wind up Tropitone Furniture. On 22 August 1985 Tropitone Furniture paid the Commissioner of Taxation $142,222.52.

320. The following year, on 14 August 1986, the Deputy Commissioner again commenced proceedings in the Supreme Court of Victoria to wind up Tropitone Furniture. As at this date, Tropitone Furniture owed the Commonwealth $9,816.47 in income tax-related liabilities and other accrued amounts. A further winding up application was commenced on 7 November 1986 by the Deputy Commissioner on a debt of $256,897.96.

323. On 17 February 1987 the Deputy Commissioner served a notice under s 364(2) demanding payment of $227,883.06 concerning unpaid sales and group tax. On 26 February 1987 Tropitone Furniture paid the Commissioner of Taxation $102,633.66.

326. On 22 March 1988, Tropitone Furniture renewed the licence agreement dated 24 November 1978 for a further term of five years from 24 November 1998. A dispute later arose between Tropitone Furniture and Tropitone USA and by letter dated 11 April 1988 Tropitone USA purported to terminate the licence agreement alleging that Tropitone Furniture had not paid monies due and was insolvent. These claims were disputed. Negotiations subsequently occurred between the companies but the matter did not settle and there was litigation, as outlined below.

329. On 20 May 1988 the Deputy Commissioner served a s 364(2) notice on Tropitone for $77,075.13 for unpaid group tax and penalties. On 16 June 1988 Tropitone Furniture paid $64,897.53, which paid the primary amount owing, but not the penalties.

332. On 21 August 1990 the Deputy Commissioner served a s 364(2) notice on Tropitone for $1,038,592.03 owing in sales tax and penalties. For most of this month Joseph Guss was in hospital, undergoing operative treatment for a brain tumour. Shortly after leaving hospital Joseph and Sandra Guss were asked to sign a further guarantee in favour of the NAB in the sum of $250,000. They agreed to do so subject to the terms and conditions of a deed dated 12 September 1990 referred to in the next paragraph.

335. Without paying the amount owing for tax, on 12 September 1990, pursuant to a deed between Joseph and Sandra Guss (as guarantors), Tropitone Furniture and Kencord Trading, provision was made whereby in the event of Tropitone Furniture defaulting in respect to any of its obligations to GBS or the NAB or an application to wind up being lodged or in a number of other circumstances, Tropitone Furniture assigned the rights under the "Tropitone" licence and sold its assets to Kencord Trading, which was incorporated on 7 October 1987. Kencord Trading later changed its name to Tropitone International on 19 September 1990.

338. At the time of executing this deed, the directors of Tropitone Furniture were Joseph Guss, and Anthony Guss and the directors of Kencord Trading were also Joseph and Antony Guss. Prior to the transfer of shares to SMET and NMGP,[12] the shareholders in Kencord Trading were Antony, Joseph and Jo-anne Guss with one share each. In these circumstances, when the deed was executed, I find that Kencord Trading was owned and controlled by these members of the Guss family. Antony Guss executed the deed on behalf of Kencord Trading and Joseph Guss signed on behalf of Tropitone Furniture, and Joseph and Sandra Guss signed for themselves. As at 12 September 1990 Tropitone Furniture was carrying on the furniture business from 465 Warrigal Road, Moorabbin. Kencord Trading subsequently operated the furniture business from those same premises until 29 June 1992.

341. In recitals to this deed it was stated that Tropitone Furniture had requested Joseph and Sandra Guss to extend their guarantee to the NAB, by a further sum of $250,000, to a total of $1,342,800, and that they had agreed to do so on the terms and conditions in the deed.

344. Clause 4 of the deed contained the default provisions. They were specified in paras (a) to (o). I mention only a few, breach by Tropitone Furniture of the GBS or NAB borrowing obligations, and the lodgment of an application for winding up of Tropitone Furniture. In any of these circumstances:

(a) all of Tropitone Furniture's rights under the licence or other agreements with Tropitone USA shall and shall be deemed to be forthwith transferred to Kencord Trading;

(b) Tropitone Furniture sells to Kencord Trading its stock, plant and equipment, jigs and tooling, office furniture and equipment and motor vehicles; and

(c) assigns all rights in uncompleted orders.

350. The consideration payable by Kencord was specified in cl 5 as follows:

(a) for the assets in (b) above, the lower of cost, realisable or book value, such consideration to be payable at the expiration of five years from the date of assessment of the value of the assets sold;

(b) alternatively, at their discretion Joseph and Sandra Guss may assume such of the indebtedness to the NAB or GBS as equals the consideration payable or to the extent they elect.

356. Clause 6 provided that any of the guarantors or Kencord Trading shall have the right to an assignment of the lease of the property at 465 Warrigal Road, Moorabbin from Tropitone Furniture, on the occurrence of any of the events described in cls 4 and 5.

359. Clause 7 provided that on the provisions of cls 4 and 5 coming into operation, the assets referred to in (b) above shall be valued in accordance with cl 5, and that if Tropitone Furniture still carried on any aspect of its business it did so only as trustee for Kencord Trading and shall indemnify Kencord Trading in respect of all matters.

362. By cl 8 Tropitone Furniture appointed Kencord Trading and the guarantors its attorneys to sign any documents and do any thing in their opinion necessary to better give effect to the intent and provision of the deed.

365. Finally, cl 10 provided that in the event of the guarantors being called on to pay "any moneys" under their guarantees consequent on default of Tropitone Furniture, "any moneys" owing by the guarantors to Tropitone Furniture shall be deemed waived.

368. Based on the terms of the deed, no consideration was payable for the transfer of rights under the licence agreement dated 24 November 1978, or for the rights in incomplete orders, or for the cancellation of loans, or for the assignment of lease. At this date, Tropitone Furniture owed $1,342,800 to the NAB, approximately $800,000 to the GBS and approximately $1M to the Commissioner of Taxation. At all times Kencord Trading operated the furniture business from the same premises as Tropitone Furniture, namely 465 Warrigal Road Moorabbin.

371. The defendants referred to statements of counsel for the Deputy Commissioner that: "in any event at this time (September 1990) the furniture business through the licence agreements and the relationship established with the American company, Tropitone Inc, the goodwill was all tied up in the name Tropitone". The defendants submitted that this statement goes to a core issue, namely that the subsequent loss of the name "Tropitone" was a cataclysmic event which puts to rest the Deputy Commissioner's submission that there has been one continuous business. The defendants noted in their submissions that at the date of this agreement there had already been a notice of the termination of the licence agreement by Tropitone USA's letter dated 11 April 1988.

374. The effect of the deed was that, upon the occurrence of an event specified in cl 4, the furniture business would move from Tropitone Furniture to Tropitone International. The purpose, I find, was not merely that, but to preserve the business and its assets from the reach of creditors. The provision in cl 10 for the waiving of debts of Joseph and Sandra Guss is to be understood in this context. The effect of that provision was to remove them from the reach of a liquidator of Tropitone Furniture. Further, the waiver in cl 10 did not depend on any relationship in any amount called and any amount waived. I find that the transaction was not a commercial transaction between two arm's length parties having received independent legal advice. The lack of consideration for certain items has been highlighted by the Deputy Commissioner above. Then, while disputes between Tropitone USA and Tropitone Furniture may have first arisen in April 1988, the disputes were not resolved until court settlements in July 1996, with Tropitone Furniture, and subsequently, Tropitone International, continuing to trade under the "Tropitone" licence agreement. Thus, while the defendants' submission is correct that Tropitone Furniture had already received a notice of the termination of the licence agreement by Tropitone USA, I find that it was the intention of both Tropitone Furniture and Tropitone International to continue to trade and conduct the furniture business under the Tropitone licence agreement until the disputes were brought to a head and resolved.

377. On 24 October 1990 Tropitone Furniture owed the Commissioner of Taxation $1,153,619.18 for unpaid sales and group tax and penalties. A payment of $59,000 was made by Tropitone Furniture to the ATO on 11 January 1991 to cover tax arrears. This payment was assisted by the increased borrowing of $250,000 from the NAB.

380. On 28 February 1991 the Deputy Commissioner served a notice on Tropitone Furniture under s 460(2) of the Corporations Law ("the Law") demanding payment of $883,087.27. The defendants have noted that this represents a reduction in debt of $155,504.76 from the debt at 21 August 1990.

383. On 14 June 1991 the Deputy Commissioner commenced an application to wind up the company on a debt of $859,498.00. On 23 August 1991 Senior Master Mahony ordered that the company be wound up and appointed Christopher Thomas Daly liquidator.

386. The lodging of the application to wind up was an event of default within the meaning of cl 4 of the deed of 12 September 1990. In consequence, if not earlier by reason of some other event of default, cls 4 and 5 and other provisions of the deed were triggered into operation.

389. Following the making of the winding up order, Joseph Guss advised Daly that Tropitone International claimed ownership of all the assets of Tropitone Furniture pursuant to the deed dated 12 September 1990.

392. The liquidator disputed Tropitone International's claim and on 7 November 1991 Tropitone International commenced a proceeding against Tropitone Furniture in this Court for an injunction prohibiting Daly, as liquidator, from selling the assets of Tropitone Furniture allegedly owned by Tropitone International.

395. On 9 January 1992 Tropitone Furniture entered into a settlement agreement with Tropitone International pursuant to which Tropitone Furniture assigned all its interest in its chattels to Tropitone International for $150,000, of which $80,000 was set aside to pay Seitel Pty Ltd, the lessor of the property who was claiming unpaid rent and storage costs from Tropitone Furniture. The settlement was approved by Acting Master Williams on 22 January 1992. Joseph Guss signed the settlement agreement on behalf of Tropitone International.

398. The defendants acknowledged that the compromise with Daly did not refer to goodwill in the name "Tropitone", however they submitted that at this stage Tropitone USA had purported to terminate the right to use the Tropitone name, and that all that remained was a potential dispute with Tropitone USA.

401. Contrary to the Deputy Commissioner's submission that this typified a pattern whereby assets were stripped from a company before winding up and transferred to another Guss controlled company, the defendants submitted that the compromise agreement was subject to the presumption of regularity and validity. The defendants noted that the Deputy Commissioner had not explained how this transaction was not at arm's length and again refuted the Deputy Commissioner's submission that the business was "transferred" to another company. Furthermore, the defendants contend that Joseph and Sandra Guss were the principal losers out of the Tropitone Furniture failure having had their house sold and Joseph Guss being made bankrupt.

404. It is not possible for me, twelve years after the event, to decide whether $150,000 was a fair valuation of the Tropitone Furniture business. Clause 5 of the deed provided that the purchase price was "the lower of cost, realisable or book value". It is not known how the figure of $150,000 was arrived at and whether the three valuations above were carried out. There is no contemporaneous evidence of the value of the stock, plant and equipment, office furniture and equipment, and motor vehicles. Indeed there is no evidence of any assessment having been carried out. Nor was a cogent attempt at a valuation attempted before me. These matters support my finding that the deed of 12 September 1990 was not a transaction between two independent parties.

407. The settlement agreement, as conceded by the defendants, did not include goodwill. The defendants submitted that this was because Tropitone USA had threatened to terminate the licence agreement and all that remained was a potential dispute. However, it should be noted that the first indication of the possible termination of the licence agreement was by way of a letter from Tropitone USA on 11 April 1988. Court proceedings were not instituted by Tropitone USA until November 1993, almost two years after the settlement agreement. Notwithstanding the dispute with Tropitone USA, Tropitone Furniture continued to exercise its rights under the licence agreement, and the fact that Tropitone International continued to do so up until the court proceedings and the resulting settlement agreement in relation to those court proceedings in July 1996, indicates that Tropitone International always intended to exercise those rights under the licence agreement. Thus, while I accept the defendants' submission, I also take into account that Tropitone International intended to exercise, and did exercise, its rights under the Tropitone licence agreement for a number of years and thus gained a significant benefit.

410. As to the defendants' submission that Joseph and Sandra Guss were the principal losers out of the failure of the Tropitone Furniture business, I simply note that upon deregistration, Tropitone Furniture owed the Commissioner of Taxation $1,421,083.96 (see below).

413. To pay the amount under the settlement agreement, Tropitone International borrowed $150,000 from Tropitone HK, a Hong Kong company (now known as CFI Ltd (HK)). The Deputy Commissioner noted that no evidence was adduced as to this actual payment having been made and submitted that this was a deliberate attempt by Joseph Guss to structure the furniture business so as to avoid and defeat creditors. This was by the introduction of a secured creditor (on 9 January 1992) into the structure of the furniture business, under his control, which by virtue of the charge over the assets of the furniture business could dictate the fate of those assets in the event of another insolvency, and could exercise rights and powers superior to those of a liquidator in that event. The effect of this is highlighted by the appointment of Mansell as receiver and manager in October 2001 of Buckland Products (see below). Gilbert testified that he did not sight, in preparing any financial statements for Casualife Furniture, any source documents evidencing this debt of $150,000.

416. However, the defendants in their submissions noted that the Deputy Commissioner's reference to "no evidence" referred to bank records. The defendants pointed to Tropitone International's general ledger and books of account which indicate a secured loan of $150,000, and submitted that pursuant to s58B of the Evidence Act, an entry in a book of account is prima facie evidence of the matters, transactions and accounts therein recorded. According to the evidence of Gilbert, the opening entry of the loan account was an advance in the sum of $150,000 on 9 January 1992, which he posted in the general ledger on 31 May 1992. Gilbert also deposed from his own knowledge that Tropitone International's books of account for the period June 1992 to February 2001 record the balance of the loan account as being, respectively, $214,327; $67,168; $188,895.39; $247,341.49; $279,475.83; $413,364.02; $445,627.38; $469,767.68; $496,950.08; and $507,672.78. Balance sheets for the years ended 30 June 1992 to 30 June 1999 appear to confirm these figures.

419. On 9 January 1992 Tropitone International contemporaneously created a charge/mortgage debenture over its assets in favour of Tropitone HK as security for the loan and all future monies owing. This was lodged with ASIC on 21 February 1992.

422. I am not convinced either way as to the genuineness of the $150,000 loan. On the one hand, one would have expected to see a source document, perhaps even a loan agreement, evidencing the loan and setting out the repayment terms and conditions. On the other hand, the existence of the books of account and the general ledger and the amounts set out therein leave me with some doubt in my mind. In the end it is for the Deputy Commissioner to prove her case and I find that she has failed to satisfy me that the loan of $150,000 is not as it purports to be.

425. In November 1993, the relationship between Tropitone USA and Tropitone International had completely broken down with Tropitone USA commencing proceedings in the High Court of Singapore to restrain Tropitone International from manufacturing, exporting, distributing, marketing, advertising, selling or offering for sale furniture bearing the name "Tropitone". Further proceedings were issued by Tropitone USA against Tropitone International in the High Court of Singapore in April 1994 where Tropitone USA sought an order expunging "Tropitone" from the trade mark register. These proceedings were settled by a settlement agreement on 20 July 1996. According to the evidence of Joseph Guss, this provided that from 1 November 1996 Tropitone International and Tropitone HK would not use the name "Tropitone" in any part of the world, that by 1 January 1997 it would change its catalogues so as not to contain any "Tropitone" trade marks, and that after 29 July 1998 it would change its catalogues so as not to contain any Tropitone USA item numbers.

428. I have read the settlement agreement referred to above and note that it restrains Tropitone International from manufacturing, exporting, importing, distributing, marketing, advertising, selling or offering for sale or dealing with outdoor furniture bearing the name "Tropitone" or any confusingly similar name. I find no reference to Tropitone HK in the settlement agreement with the only parties being Tropitone USA and Tropitone International.

431. Tropitone Furniture's debt to the Commissioner of Taxation was not paid and on 4 March 1994, upon Tropitone Furniture being deregistered, the Commissioner of Taxation wrote off the tax-related liabilities due from Tropitone Furniture to the Commonwealth in the sum of $1,421,083.96.

434. On 7 August 1996 Tropitone HK advanced US$50,000 to Tropitone International. Antony Guss gave evidence that this was an advance for cataloguing due to the change of name and rebranding.

437. On 13 September 1996 there was a consent order in proceedings in the Federal Court of Australia before Ryan J in respect of the Tropitone name in favour of Tropitone USA. This was based on the settlement agreement dated 20 July 1996 which resolved the Singapore proceedings.

440. On 1 November 1996 Tropitone International changed its name to Casualife Furniture and on 5 November 1996 Tropitone HK changed its name to CFI Ltd (HK), also registered in Hong Kong. CFI Ltd (HK) became the registered proprietor of the Australian trade mark "Casualife" effective from 21 August 1996 and is also the registered, or in the course of becoming the registered, proprietor of the Casualife trade mark in approximately 15 - 20 countries. There is no licence or royalty agreement between Casualife Furniture or CFI Ltd (HK) in respect of the use of the name "Casualife", rather Casualife Furniture paid a fee of 10 per cent of its export sales to CFI Ltd (HK) which allegedly covered this and export marketing assistance provided by CFI Ltd (HK). A schedule of the secured loan account between Casualife Furniture and CFI Ltd (HK) provided by Antony Guss to Turner sets out a series of advances, repayments and "commissions payable on export sales" for the years 1996 to 2001. In cross-examination, when pressed by the Deputy Commissioner as to whether these commissions were actually paid to CFI Ltd (HK), Joseph Guss explained the schedule as follows:

"Not that specific amount [of $10,722.70 purported to have been paid on 28 February 2001]. As I told you this morning, advances and commissions were debited to the loan account and payments or repayments, or I will call it payments, to the credit of the loan account were effected at various times so that what happened was that advances and commissions as a total became the debt and then there are repayments of part of that debt at various times. Now, that's the only way I can answer that question. There's not specific $10,722 that's been paid, it's a payment on account of the debt, or as part of the debt, if I could call it that way".

444. The defendants submitted that the operation of the loan account by CFI Ltd (HK) is consistent with it being the owner of the intellectual property in the trade marks and Casualife Furniture (and later CFI) being the marketing arm. CFI Ltd (HK) thus has an interest in seeing Casualife Furniture, and subsequently CFI, succeed to add value to its intellectual property.

447. According to Varendran, Antony Guss is the general manager of Casualife Furniture, Joseph Guss is the chief executive officer and Marilla Guss is the marketing manager.

450. There is an issue as to the identity of the beneficial owners of Casualife Furniture, and to that issue I now turn. The identity of the beneficial owners was not expressly disclosed to me. Joseph, Antony and Jo-anne Guss transferred their one issued share each to NMGP and SMET. According to an ASIC historical extract dated 26 November 2002, NMGP held one share (not beneficially) and SMET held two shares (not beneficially). According to the same ASIC historical extract, there was a further allotment of shares resulting in NMGP holding one share (not beneficially) and SMET holding 99 shares (not beneficially). The date of this further allotment is unclear. These companies were incorporated on 30 and 28 June 1976 respectively. According to Antony Guss, Kencord Trading had originally been set up as an investment vehicle which is why he and Jo-anne had held a share each, but when the nature of its business changed to what subsequently became Casualife Furniture and Buckland Products, Jo-anne's share was transferred.

453. Joseph Guss gave evidence that he only heard of the transfer of shares from himself and Antony Guss to SMET and NMGP whilst present in Court in these proceedings. Further, he was unable to identify the beneficial owners or the beneficial shareholders in SMET and NMGP. Antony Guss initially gave evidence that he did not know the companies SMET and NMGP; he had never had any dealings with SMET and NMGP; he does not know the identity of the beneficial shareholders of SMET and NMGP, rather that they are investment vehicles which have nothing to do with him. Subsequently, when pressed in cross-examination, Antony Guss admitted that they are two companies that had been introduced to him by Rundles accountants. He said that the shares had been transferred in 1990 or 1991, "something in those areas". Antony Guss also said that he was unaware who held the shares in Casualife Furniture beneficially after the transfer of shares from himself and Joseph Guss to SMET and NMGP and that he was unaware of the identity of the beneficial owners of Casualife Furniture at the time Casualife Furniture entered into the sale agreement dated 28 February 2001, referred to below.

456. According to Gilbert, SMET and NMGP were formed and owned by Rundles, and used for the benefit of clients and members of the firm. The companies act as a bare trustee and hold the legal title to shares in companies, but not the beneficial title. Gilbert testified that Joseph Guss had requested him to transfer his and Antony Guss' shareholding in Casualife Furniture to SMET and NMGP pending further instructions. Gilbert said that he is still awaiting those instructions.

459. Gilbert also gave evidence that Joseph and Antony Guss had requested that SMET and NMGP hold 25,000 shares in Scandi for Antony and Marilla Guss. SMET and NMGP also hold shares in Scandi International and Gusto Corporation and Scandi Qld.

462. Continuing with Antony Guss' evidence in cross-examination, he was shown two declarations of trust dated 29 November 1995, relating to the shares in Scandi. Scandi was registered on 24 August 1992, with Antony as the sole director and secretary, as stated in the ASIC historic extract dated 13 November 2002. According to that extract Scandi had 50,000 issued shares held beneficially by SMET and NMGP as to 25,000 shares each. The declarations of trust are in identical form save that one is given to Antony Guss by SMET, and the other is given to Marilla Guss by NMGP. Each acknowledges that the beneficiary has paid the trustee $25,000 with which the trustee has acquired 25,000 shares of $1 each in Scandi.

465. After being shown the declarations of trust and notwithstanding his earlier evidence that he had not had any dealings with SMET and NMGP, Antony Guss conceded that he and Marilla Guss were the beneficial owners of 25,000 shares each in Scandi through SMET and NMGP, despite the ASIC extract recording SMET and NMGP as holding the shares beneficially. Antony Guss confirmed that Rundle had set up the declaration of trust in respect of the ownership of shares in Scandi but said that he had not seen "a declaration of trust such as this in respect to any of the other companies". He said he had not remembered the declaration of trust.

468. The current directors of NMGP are Peter James Davison, a partner of Rundles, Noel Colin Rundle, a former partner and now consultant, and Henry Alexander Gilbert as at 26 September 2002. The current directors of SMET are Henry Alexander Gilbert and Marilyn Lynette Gilbert, Henry's wife, as at 26 September 2002. According to an ASIC historical extract dated 26 September 2002, Davison and Henry Gilbert each hold, non-beneficially, one share in NMGP and Marilyn and Henry Gilbert each hold, beneficially, one share in SMET.

471. This structure is consistent with the fact that SMET and NMGP are nominee companies available for use by clients as such. It was suggested to Antony Guss in cross-examination that by a similar declaration of trust he beneficially owned the shares in Casualife Furniture, the shares in which were held by NMGP and SMET. He answered that he had never seen a declaration of trust "such as this in respect to any of the other companies". He said that he never really turned his mind as to who were the owners of Casualife Furniture. He said he was running the company, and "fairly much doing as I saw fit" as "no imposition [was] put on me by anybody else". Antony Guss admitted that he was in control and that he did what he wanted to do in the conduct of the company. He treated himself as the owner by virtue of being the only director. He said that general meetings were generally done in the accountant's office, there was virtually nobody there, there were no shareholders, it was done on a piece of paper. He said that he had never really turned his mind to who owned the company.

474. The Deputy Commissioner submitted that this evidence further indicates that those who manage and control the defendant companies, along with the companies which preceded them, were members of the Guss family.

477. I find the evidence of Joseph and Antony Guss on the matter of the transfer of shares to, and the beneficial ownership of shares held by, SMET and NMGP to be unconvincing and, at times, contradictory. To be blunt, I found that their stated ignorance on these matters to have been disingenuous and false, designed to mislead me. I accept Gilbert's evidence. I find that Joseph and Antony Guss are well aware where the beneficial ownership of their companies lies. Let us, for instance, keep in mind the evidence of Antony Guss that he conducted the business of Casualife Furniture as though he were the owner whilst the shares were held by NMGP and SMET. Given the relationship between Rundles and Joseph and Antony Guss, who have procured the accounting services of Rundles over a period of time, I do not believe that Antony Guss was not aware of the beneficial ownership. SMET and NMGP are companies owned by Rundles and used for the benefit of clients, in this case Joseph and Antony Guss and their family interest. Antony Guss' evidence is contradictory at times, having stated initially that he had not had any dealings with SMET or NMGP, despite later conceding that he and Marilla Guss are the beneficial owners of 25,000 shares each in Scandi through SMET and NMGP. Absent the declarations of trust being able to be put to him, he would not have acknowledged that. He would have blustered through his evidence with lack of memory, ignorance and obfuscation at the forefront. I find on the balance of probabilities that the Guss family owned and controlled Casualife Furniture and the other companies in whom SMET and NMGP were shareholders. If the fact was, as the evidence of Joseph and Antony Guss sought to establish, that a person or persons other than themselves or other members of the Guss family owned and controlled Casualife Furniture, it is significant that no such person came into court to explain the position of the company and save it from winding up. After all, what disadvantage could there have been in doing that?

481. This company was incorporated on 7 October 1987 as Corpivic (No. 122) Pty Ltd.

484. From 21 August 1990 to 21 December 1998 Joseph Guss was a director, ceasing on 21 December 1998 due to his bankruptcy. Afterwards, Antony Guss, who had been appointed on 8 October 1987, continued as a sole director until its winding up. By virtue of these positions, the Deputy Commissioner contends that the Guss family has a controlling interest in Buckland Products. The shareholders are NMGP (1 per cent) and SMET (99 per cent), neither of which hold their shares beneficially. Previously Joseph, Antony and Joanne Guss had been shareholders. Gilbert was unable to explain the circumstances in which SMET and NMGP came to acquire the shares as Rundle's records did not go back that far. However, Gilbert testified that he would have received instructions from Joseph Guss in relation to the acquisition of those shares by SMET and NMGP. The instructions would have been to hold the shares "in our nominee companies pending instructions [as] to who they were beneficially held for". Gilbert subsequently did not receive any instructions as to who they were beneficially held for. It was not common to wait seven years for such instructions. Gilbert doubted that he requested instructions. If no instructions ever were forthcoming "we would discuss it with the - principally the Guss family". There was no indication by Gilbert of any other person with whom the issue would be discussed.

487. I repeat my previous observations in relation to SMET and NMGP and the ownership and control of Casualife Furniture, subsequently Buckland Products.

490. As noted already, the company changed its name several times: first, on 9 September 1988 to Kencord Trading; secondly on 19 September 1990 to Tropitone International; thirdly, on 1 November 1996 to Casualife Furniture. From 30 June 1992 to 31 January 2000, the furniture business was operated from 46-50 Buckland Street, Clayton. Thereafter, the furniture business was moved to 1-3 Winterton Road, Clayton.

493. Similar to the problems experienced by the ATO with Tropitone Furniture in respect of its taxation payments, the ATO issued a series of demands for payment by Casualife Furniture (and its successor Buckland Products). On 8 December 2000, the Deputy Commissioner by letter inquired as to the failure of Casualife Furniture to remit employee tax instalment deductions for the period 1 July 1999 to 30 June 2000 and enclosed an estimate of liability of $105,840. I note at this stage that while the failure to pay the above deductions over that period formed the basis of the subsequent winding up, the Deputy Commissioner notes that Casualife Furniture has not remitted any monies by way of employee tax instalment deductions during the period 1 July 2000 to the winding up on 23 October 2001.

496. On 18 December 2000 Casualife Furniture provided the ATO with an annual reconciliation statement disclosing a PAYG group tax debt of $116,330.19 for the year ending 30 June 2000. This statement was late, as conceded by the defendants.

499. On 14 February 2001 the Deputy Commissioner served a statutory demand on Tropitone International (by this time known as Casualife Furniture) in respect of tax liabilities for $148,659.00 in relation to outstanding group tax and sales tax for the financial year 1999/2000. The defendants submit that the delays in lodging sales tax returns were brought about by the introduction of new software which has since been replaced.

502. Throughout their submissions the defendants have submitted that the delay in lodging returns, in particular sales tax returns or BAS returns, of certain companies, namely Casualife Furniture and the retail companies Gerandu, Bongania, and Moolach (see below) may be explained by problems with the accounting program used by those companies. Varendran, Islam and Antony Guss gave evidence that problems with a computer accounting program necessitated a replacement program, leading to delays in lodging returns. While I accept that there may be some truth in this, the obligation to pay tax in a timely manner applies to all taxpayers and is essential for the due collection of the revenue of the Commonwealth in accordance with its laws. I also refer to my findings at [207] where I reject the submission that the delays of Bongania, Gerandu and Moolach were to be accounted by some computer problems. Further, the defendants' submission is somewhat weakened by the prior record of the furniture business conducted by Tropitone Furniture in relation to payment of its taxation responsibilities. This has been amply illustrated by the Felgate chronology highlighted above.

505. By an agreement dated 28 February 2001 Casualife Furniture purportedly sold certain assets to the defendant CFI, and by another deed dated 28 February 2001 CFI purportedly charged its assets in favour of CFI Ltd (HK), until 5 November 1996 known as Tropitone HK. The sale agreement was conditional upon entering into a deed of consent, which was subsequently entered into and dated 1 March 2001. A licence agreement was also executed. I will refer to these agreements again later, for the present noting that the Deputy Commissioner submitted that this is a repeat of the structure which previously operated in relation to Casualife Furniture with the additional protection of a licence agreement.

508. An application to set aside the statutory demand, filed on 9 March 2001, was dismissed by the Senior Master on 21 June 2001. An appeal against his decision was dismissed by Warren J (as her Honour then was) on 16 August 2001.[13] An appeal against that decision was dismissed on 19 June 2003.[14] For the reason that the time for compliance with the statutory demand had expired, the appeal heard by Warren J must have failed (as it did) and the appeal to the Court of Appeal must also have failed (as it did). The Court of Appeal ordered that the respondent's costs of the hearing, which were fixed, be paid by Joseph Guss, the solicitor on the record for the appellant.

511. On 18 June 2001 there was a further name change from Casualife Furniture to Buckland Products.

514. In August 2001 the "Manusoft" accounting computer system was acquired and loaded onto CFI's computer server, however, as at 14 November 2001, full commissioning remained to be effected.

517. On 6 September 2001 the Deputy Commissioner filed a proceeding to wind up Buckland Products on the basis of non-compliance with the statutory demand and alleging an indebtedness of $148,659. On 18 October 2001, on the Deputy Commissioner's application, Dennis Anthony Turner was appointed provisional liquidator of Buckland Products pending the determination of the proceeding.

520. On the next day, 19 October 2001, Joseph Guss advised Turner that Mansell was about to be appointed as receiver and manager of Buckland Products and later that day, CFI Ltd (HK), in exercise of its powers under the deed of charge dated 28 February 2001, appointed Mansell.

523. The Deputy Commissioner claims that the appointment of Mansell was not to take possession of the assets of Casualife Furniture for the purpose of realising them for the benefit of the secured creditor. The nature of the assets left in Casualife Furniture, namely unascertained amounts said to be owing by Scandi Qld and Burwood Retail, and some causes of action, and the failure of CFI Ltd (HK) to provide Mansell with the means of carrying out his duties, made that clear. Rather, the effect of Mansell's appointment was to interpose another controller of Casualife Furniture's property between Turner and the Guss interests and to obstruct attempts by Turner to ascertain the true position of Casualife Furniture and perform his duty.

526. On the other hand, the defendants contend that the appointment of Mansell is consistent with a secured creditor seeking to protect itself consequent upon there being a change in status of the chargee, rather than an overt step that would prevent the liquidator from exercising all his powers.

529. I defer ruling on these submissions as to the purpose of Mansell's appointment as receiver and manager until later when I discuss the role of CFI Ltd (HK) as chargee over Casualife Furniture. For the moment I merely note my view that the objective facts support the conclusion contended for by the Deputy Commissioner.

532. By notice of appeal dated 24 October 2001, Buckland Products appealed against the order of the Senior Master made on 18 October 2001.

535. In view of Mansell's appointment, on 25 October 2001 Senior Master Mahony ordered that Buckland Products be wound up and appointed Turner liquidator. An appeal against the order to wind up as well as the appeal against the appointment of the provisional liquidator was heard by Habersberger J on 11 December 2001. The former appeal was dismissed on 23 September 2002; it is unclear from the judgment what order was made in relation to the appeal against the order appointing the provisional liquidator.[15]

538. It was at this stage, on or around 22 October 2001, that Antony Guss informed Turner that the business of Casualife Furniture had been transferred in February or March 2001. No mention was made of this sale agreement at hearings before the Senior Master on 10, 11, 17 and 18 October 2001 on the application to wind up Buckland Products. Under cross-examination before me Antony Guss stated that he did not withhold the sale agreement nor instruct that it not be brought to the Court's attention. The Deputy Commissioner submitted that the sale agreement was consciously and deliberately withheld from the Court to avoid knowledge of Casualife Furniture's (now Buckland Product's) insolvency.

541. After his appointment as liquidator, Turner wrote to Mansell on 25 October 2001 requesting proof of the debt claimed to be owed to CFI Ltd (HK) by Casualife Furniture and proof of any monies advanced in reduction of the debt.

544. On the same day, Turner wrote to Antony Guss informing him that he would be inspecting the books and records of Buckland Products (Casualife Furniture) the following day. In particular, Turner requested that he be provided with the name of the purchaser of the business or assets of Casualife Furniture and any documents evidencing this purchase.

547. On 29 October 2001 Turner, along with another member of his staff, attended the Winterton Rd premises, the registered office of Casualife Furniture (now Buckland Products). One of the documents inspected was the sale agreement which provided that the purchaser was one of the defendant companies, CFI.

550. A review by Turner of Buckland Products' accounts for the period from 30 June 1995 to 30 June 1998 showed that the carrying value of stock at cost was in the range of $490,000 to $687,000. A draft balance sheet at 30 June 1999 indicated the carrying value of stock on hand was $675,000. Consequently, Turner judged that at the time the sale agreement was entered into, the carrying value of stock at cost of Buckland Products would also be in that range.

553. In his affidavit sworn on 9 November 2001, Turner noted that since 1 March 2001, CFI has been carrying on the business formerly conducted by Buckland Products, however no consideration for the stock has been paid to Buckland Products. Accordingly, Turner expressed the conclusion that Buckland Products was clearly insolvent and that he was unable to determine whether a fair value had been attributed to the assets of the company for the purpose of the sale agreement. The Deputy Commissioner contended that the transfer of the furniture business from Casualife Furniture to CFI was at an undervalue and on uncommercial terms in circumstances where Casualife Furniture owed the Commissioner a significant tax-related liability.

556. On 13 November 2001, Antony Guss completed the Buckland Products' report as to affairs.

559. On 16 November 2001, Turner wrote to Mansell, the receiver and manager of Buckland Products, requiring the right to remove and copy all of the records of Buckland Products. Numerous attempts were made by Turner to arrange a time to inspect the premises to remove the records but these proved unsuccessful. On 4 December 2001 Turner was informed by Mansell that Antony Guss had delivered to him an incomplete set of books and records. Turner requested that a complete set of books be delivered by 10 December 2001.

562. Following service of the statutory demand, Buckland Products made no payment in reduction of its tax liability, which remained at the amount demanded of $148,659.00 plus interest. There is now no realistic prospect of the Deputy Commissioner receiving any amount in reduction of the debt.

565. In an affidavit sworn on 12 December 2001 Aris Zafiriou stated that Buckland Products' current liability was $160,410.60.

569. Some remarks should also be made about this company, CFI Ltd (HK). The directors of the Hong Kong registered entity are Kwan and Sine Nomine. The shareholders of CFI Ltd (HK) are Sine Nomine and Semper Fidelis. In turn the directors and shareholders of Sine Nomine are Entre Nous and Semper Fidelis, and the directors and shareholders of Semper Fidelis are Sine Nomine and Entre Nous.

572. The address of CFI Ltd (HK), namely 3rd Floor Jonsim Place, 228 Queen's Road East, Wanchai Hong Kong, is the same address as that of Aal & Zyleman Co Ltd, a management service company that advertised the sale of First Mainland International, the current shareholder of CFI; Kwan, director of CFI Ltd (HK) and First Mainland International; Sine Nomine, director and shareholder of CFI Ltd (HK); Semper Fidelis, the shareholder of CFI Ltd (HK); and Entre Nous, director and shareholder of Sine Nomine and Semper Fidelis.

575. The Deputy Commissioner gave notice of these proceedings to CFI Ltd (HK), and Kwan acknowledged receipt of the notice on behalf of the company. However, CFI Ltd (HK) did not seek to appear or to assert any interest in these proceedings and Joseph Guss did not do so on its behalf. The defendants submitted that what CFI Ltd (HK) has chosen to do, or not to do, is its business and beyond the control of the defendants.

578. Notwithstanding the above entities and the contrary evidence of Joseph and Antony Guss, the Deputy Commissioner submitted that the Guss interests control CFI Ltd (HK) and that CFI Ltd (HK) operates merely as a sales agent for CFI in Hong Kong. In support, the Deputy Commissioner submitted that CFI Ltd (HK) (or Tropitone HK as it then was) was not a party to the court proceedings in Australia[16] and Singapore[17] between Tropitone International, Joseph, Antony and Marilla Guss, and Tropitone USA, nor to the subsequent settlement agreement, noted by the orders as being between the parties to the proceeding. Notwithstanding this, the name of Tropitone HK was changed to CFI Ltd (HK). The Deputy Commissioner submitted that the change of name was on the initiative of the Guss family to comply with the undertakings given to the Court by Tropitone International and those Guss members. Although Joseph Guss deposed that Tropitone HK was a party to the settlement agreement, I have examined the consent judgment dated 20 July 1996 and find no reference to CFI Ltd (HK), or to Tropitone HK as it then was; see my earlier conclusion at [118].

581. The defendants submitted that the above propositions of the Deputy Commissioner were not established on the evidence. They submitted that the change of name was Tropitone HK's own commercial decision and its development of the "Casualife" trade marks. The defendants submitted, in accordance with the evidence of Joseph Guss, that Joseph Guss had general authority to deal with the legal affairs of CFI Ltd (HK) in Australia, and that he has taken instructions from "people [he] deal[s] with at their office". The directors who allegedly gave him that authority were Kwan and a Mr Pan. Subsequently Joseph Guss stated that he has received instructions from Mr Pan, Ms Lee, Ms Ng and Kwan at various points. The defendants submitted that there is no evidence that Guss interests control CFI Ltd (HK).

584. As justification for her claim, the Deputy Commissioner referred to a claim made by CFI Ltd (HK) on 25 July 2000 for goods seized pursuant to a warrant executed to recover an amount owed by Casualife Furniture to Pamela Knopp under an order of the Magistrates Court at Dandenong made on 15 November 1999. The goods were two presses located at the factory of Casualife Furniture. The claim was prepared by Joseph Guss, and signed by Antony Guss on behalf of CFI Ltd (HK). Joseph Guss recalled in evidence that Antony Guss asked him about the signature and stated that he believed that he told him that he could sign it. Antony Guss stated that he signed the document because Joseph Guss had authorised him to do so. When asked what authority Joseph Guss had, Antony Guss replied that "... we all knew that the goods were under a debenture". He further stated that "I didn't ask to see any piece of paper or any fax, if that's what you mean; I took him on his words". He conceded that he did not speak to CFI Ltd (HK) or receive any instructions from them to put in a claim. He further stated that he did not believe it was prudent to speak with CFI Ltd (HK). The claim gave as the address of CFI Ltd (HK) the address of Searchwide, the incorporator of CFI. I reject the evidence of Joseph Guss that Page gave him permission to use that address. The defendants submitted that the preparation of the claim form, and his handling of the matter, was consistent with him being the Australian solicitor for CFI Ltd (HK). After preparing this claim, Joseph Guss instructed Mr Pilkington of counsel to appear on behalf of CFI Ltd (HK) before the Magistrates' Court at Dandenong on 25 January 2001 and requested Varendran to give evidence on behalf of CFI Ltd (HK). The claim was refused with costs. After instituting an appeal against the decision of the Magistrate, Joseph Guss instructed Mr C D Johnson of counsel to appear at the hearing of the appeal before Balmford J. I was informed that an appeal was instituted against the decision of Balmford J, I infer by Joseph Guss, and was dismissed by the Court of Appeal in November 2001.

587. Further, Mansell, the receiver and manager of Casualife Furniture, was appointed by CFI Ltd (HK) but gave evidence that he received his instructions from Joseph Guss on 18 October 2001 and, despite repeated requests for CFI Ltd (HK)'s accounting and contact details from Joseph Guss, he has not received them.[18] Despite having acted on behalf of CFI Ltd (HK) in relation to the appointment of Mansell, Joseph Guss has produced virtually no correspondence from himself to CFI Ltd (HK). Mansell gave evidence that he had never been in contact with anyone from CFI Ltd (HK).

590. Varendran said in evidence that he had had no dealings with CFI Ltd (HK), nor had he seen any data or information prepared by CFI Ltd (HK), nor were any accounts or financial data for the CFI Ltd (HK) secured loan account ever provided to CFI Ltd (HK). Islam stated that he did not have much of an idea about CFI Ltd (HK) but he was aware that there were sales agents in Hong Kong, Korea and the United Kingdom. The existence of such sales agents is consistent with the statements in Casualife's brochure, Exhibit O.

593. Joseph Guss gave evidence that CFI Ltd (HK) provided export marketing assistance to CFI but was unable to state who provided this assistance. Joseph Guss' file with respect to his retainer to act on behalf of CFI Ltd (HK) in respect of Mansell's appointment as receiver and manager of Buckland Products does not contain any written correspondence from Joseph Guss to CFI Ltd (HK) and vice versa other than a handwritten note from "Anita Lee" stating "Mr Guss we send you the seal originals [being the execution pages of the deed of appointment and deed of indemnity] × 2". For example, there were no written instructions to Joseph Guss from CFI Ltd (HK) in relation to the drafting of the deed of consent dated 1 March 2001 (discussed below) despite Joseph Guss preparing the deed of consent for all parties: CFI Ltd (HK), CFI and Casualife Furniture. Further, Joseph Guss gave evidence that CFI paid Mansell's invoice for his services as receiver and manager and that he had not rendered an account to CFI Ltd (HK) for his services as solicitor in relation to Mansell's appointment. Joseph Guss also stated that he paid Ausinfo an amount of $63.80 with his personal credit card for the placement of an advertisement in the Government Gazette notifying of Mansell's appointment as receiver and manager. Again, however, the defendants submitted that this is consistent with Joseph Guss being the Australian solicitor for CFI Ltd (HK).

596. Antony Guss stated that he did not have any dealings with CFI Ltd (HK) as Joseph Guss mostly dealt with them, despite him being general manager and that CFI Ltd (HK) providing assistance, funds for the production of manufacturing catalogues and introductions. Antony Guss assumed that Xia was on a retainer with CFI Ltd (HK), as well as being a director of CFI, as most of his dealings in Hong Kong and China were with Xia. Antony Guss also gave evidence that a debit entry for $64,842 was an advance paid by CFI Ltd (HK) to Casualife Furniture to assist Casualife Furniture with marketing and rebranding with respect to the change of name from Tropitone to Casualife. Antony Guss stated that it was a "friendly advance, obviously, or they wouldn't have given us the funds" and agreed that it was not a normal sort of commercial situation. Notwithstanding this, the defendants submit that this situation is consistent with CFI Ltd (HK) being the licensee and owner of the trade mark, and having a commercial interest in ensuring the commercial promotion of the "Casualife" mark.

599. In relation to the deed of charge dated 9 January 1992, Joseph Guss stated that no date for payment of, or the rate of, interest was agreed with Tropitone HK (as it then was) with respect to item 4 in the schedule to the deed, but expects that the principal sum is payable on demand. Antony Guss stated that he was unable to say what interest rate was struck in accordance with item 4 in the schedule to the deed of charge and was unaware whether an agreed rate had been reached.

602. Finally, I note that cl 8 of the licence agreement dated 1 March 2001 between CFI Ltd (HK) and CFI (discussed below) required that CFI affix to any goods sold by it bearing the trade mark or name "Casualife", a notice stating that: "Casualife is a trademark of Casualife Furniture International Ltd". For present purposes it suffices to note that CFI's current 2002 catalogue and its website do not bear this notice or make any reference to CFI Ltd (HK).

605. Very little evidence has been given about the conduct of the business of CFI Ltd (HK). It is a singular feature of the case, as the Deputy Commissioner pointed out, that CFI Ltd (HK) did not come into court to establish its existence independent of Joseph and Antony Guss, or otherwise to assert any interest in the proceedings, despite receiving notice of them. Such evidence would also have supported the case of Joseph and Antony Guss. Joseph Guss stated that at different times he has received instructions on behalf of CFI Ltd (HK) from several persons, namely Kwan, Lee, Ng and Pan. Of course, it was for the defendants to conduct their case as they saw fit, but on the evidence it is clear that there were persons who could have been called in relation to the interest of CFI Ltd (HK) and its independence from the Guss family, but were not.

608. CFI Ltd (HK) is a company intimately involved with the conduct of the business of the defendant companies. It is the registered proprietor of the trade mark "Casualife" in Australia, and indeed, in other countries overseas. It also holds a charge over the assets of CFI and over the assets of Casualife Furniture, the latter charge being created prior to the name change to CFI Ltd (HK).

611. I find, on the balance of probabilities and having regard to the following matters in particular, that the Guss family own and control CFI Ltd (HK). First, the addresses of CFI Ltd (HK), the management service company which advertised the sale of First Mainland International, Kwan, Sine Nomine, Semper Fidelis and Entre Nous are all identical. The only natural person capable of identification is Kwan, who is a director of CFI Ltd (HK) and First Mainland International. I infer that the adoption of this corporate structure was designed to conceal the Guss family's interest in CFI Ltd (HK). This is a factor but not critical to the above conclusion.

614. Secondly, the change of name from Tropitone HK to CFI Ltd (HK) on 5 November 1996, four days after Tropitone International changed its name to Casualife Furniture, subsequent to the settlement agreement between Tropitone International, Joseph, Marilla and Antony Guss (as respondents) and Tropitone USA (as applicant) suggests that this was at the initiative of the Guss family rather than an independent decision taken by CFI Ltd (HK). I agree with the Deputy Commissioner's submission. Tropitone HK was not a party to the court proceedings in Australia and in Singapore, nor to the subsequent consent judgment dated 20 July 1996 and was not bound by their terms. I reject the evidence of Joseph Guss that Tropitone HK was a party to the settlement agreement.

617. Thirdly, Varendran, as director of CFI from December 2000 to December 2001, gave evidence that he had not had any dealings with CFI Ltd (HK) and that he had not seen any data or information prepared by CFI Ltd (HK), nor to his knowledge was financial information provided to CFI Ltd (HK). Given the sale agreement, licence agreement, deeds of charge and consent are dated 28 February and 1 March 2001, during the period of Varendran's directorship, I find it difficult to accept that the director of CFI could have little or no knowledge of a company which is chargee over his own company's assets and is licensor over a trade mark used by his own company. Islam too stated that he did not have much of an idea about CFI Ltd (HK). This begs the question as to who does have knowledge of CFI Ltd (HK) and how the series of agreements executed in February and March 2001 came into being. Clearly it was not at the instigation of Varendran, CFI's director at the time. I did not hear from anyone at CFI Ltd (HK) who might have instigated or agreed to this commercial arrangement. Rather, the evidence indicates that these agreements were drafted by Joseph Guss for all parties, acting as CFI Ltd (HK)'s solicitor but, on his evidence, without having turned his mind as for whom he was acting, without having received any written instructions from CFI Ltd (HK), without any written records of subsequent round table meetings or discussions between the parties, and presented to Varendran and Kwan as a fait accompli. These agreements are discussed in further detail below. I find that these agreements were brought into existence by Joseph Guss for his own purpose, and the lack of consultation with the parties and the apparent ease with which these agreements were executed supports the inference that the Guss family, particularly Joseph Guss, own and control CFI Ltd (HK). This is strengthened by the fact that CFI has not received any notice of breach from CFI Ltd (HK) for failing to attribute the use of the trademark "Casualife" in its publications to CFI Ltd (HK). The inference to be drawn, and I draw it, is that there have been no notices of breach of the licence agreement because Joseph Guss and/or other members of the Guss family own and control CFI Ltd (HK).

620. Fourthly, I note the submission of the Deputy Commissioner that CFI Ltd (HK)'s true role was that of a sales agent. That accords with the evidence of Islam which I generally accept. However that may be, the lack of correspondence between CFI Ltd (HK) and Joseph Guss, as CFI Ltd (HK)'s solicitor, both generally and in relation to the appointment of Mansell, including that Joseph Guss did not produce any written instructions from CFI Ltd (HK) despite the execution of the sale agreement and associated agreements in February and March 2001, supports the conclusion that the company is controlled by the Guss family with decisions made at Joseph Guss' discretion and instigation.

623. This conclusion is further supported by the fact that Mansell, despite having repeatedly requested accounting and contact details for CFI Ltd (HK), has still not received them. It was reasonable and only to be expected that Mansell would want such details so as, in particular, to be in a position to communicate with his appointor. It is barely conceivable that an appointor, acting bona fide in a commercial situation, would not want to have communication with its duly appointed receiver, let alone shy away from such communication. Why would the solicitor for such an appointor not meet a requirement such as those made by Mansell? In particular, why did Joseph Guss not provide the requested information, and not even state a reason for not doing so? For the moment I put aside the other difficulties which Mansell faced in seeking information; I deal with that later. The reason for Guss' refusal, as I find it to have been, cannot have been because he had acted for the chargor and chargee. The explanation, in my view, lies elsewhere. It is that for reasons known to Joseph Guss he did not want Mansell to contact the appointor. Apart from being consistent with Joseph Guss' observed tendency to tell people as little as possible of his affairs, even to the point of deception, the probable explanation for his conduct was a concern as to what Mansell may discover if he had communications with the appointor. In this connection it is to be noted that Mansell wrote to CFI Ltd (HK) in Hong Kong at the address in the deeds of appointment and indemnity but received no reply. It is a most singular and extraordinary thing that an appointor would not reply to his appointee.

626. I conclude, taking this and the above factors into account, in the overall context, that the reason Mansell suffered this treatment was because Joseph Guss did not want him to acquire knowledge as to CFI Ltd (HK), its operation and ownership. Any knowledge could have led to investigation by Mansell or Turner to whom it might have been communicated.

630. The Deputy Commissioner submitted that the furniture business has four retail arms: one in Surrey Hills, Sydney, two in Melbourne at 1 Winterton Road, Clayton and 181 Burwood Road Hawthorn, and one in Windsor, Queensland. According to Islam, the Sydney retail arm is carried on by Bongania, which was previously carried on by Burwood Retail, formerly known as Outdoor Megastore. Gerandu currently carries on the Hawthorn business in Melbourne, which was previously carried on by Burwood Retail. Moolach currently carries on the Queensland retail arm, which was previously carried on by Scandi Qld.

633. The defendants submitted, and Islam gave evidence that, the only retail business conducted by CFI is that conducted at the Clayton premises in Melbourne. No evidence has been adduced that the other retail businesses are part of the business conducted by CFI. Rather, these businesses are discrete stand-alone businesses, although certain central administrative functions of the three companies, Bongania, Moolach and Gerandu, are carried out on their behalf by CFI, for example, the processing of wages using the "Winpay licence". Islam gave evidence that CFI supplies furniture to the other three retail companies at wholesale price. Islam was unable to state what agreement was in place with the three retail companies and how much profit CFI made. I note that his evidence in this section was confusing.

636. In contrast, the abovementioned companies are said to provide further support for the Deputy Commissioner's lack of confidence in the conduct and management of the Guss furniture business. The following points are made. First, the Deputy Commissioner submitted that the Guss family had engaged in deliberate conduct to conceal the fact that the Guss family remained in control of the furniture business and that the business had been transferred. Secondly, the Deputy Commissioner repeated her contention in respect of Casualife Furniture, namely that the identity of the beneficial owners of the retail companies is to outward appearances unknown or not stated, in order to conceal the fact that the Guss family control the companies. Thirdly, each of the three retail companies had delayed submitting its BAS returns. Fourthly, Antony Guss, according to the ATO's computer records, is a director of all three retail companies which are indebted to the Commissioner of Taxation. Further, the Commissioner of Taxation is said to have instituted action for breach of statutory obligations against three companies: Scandi Qld, Burwood Retail and Casual Classics.

639. The deliberate conduct to conceal the fact of the Guss control over the retail companies and the fact that the businesses were transferred is said to consist in the fact that Bongania, Moolach and Gerandu commenced to operate and trade under the control of the Guss family, while the documents lodged with ASIC still indicated that the original incorporators remained in control.

642. The defendants submitted that the Deputy Commissioner has not shown whether any transfers have taken place, and if so, how these transfers are wrongful.

645. In response to a request of Joseph Guss on 17 September 2001, Kotsimbos of Abbots Incorporation Services supplied two pre-30 June 2001 shelf companies, namely Bongania (incorporated 12 June 2001) and Gerandu (incorporated 15 June 2001). On 18 September 2001 Kotsimbos delivered to Joseph Guss the relevant forms to be lodged with ASIC whereby Antony Guss would become the sole director and secretary.

648. In response to a request from Joseph Guss in October 2001, Kotsimbos supplied another pre-30 June 2001 shelf company, Moolach (incorporated 29 June 2001). On 24 October 2001 the change of officeholder forms were delivered to Joseph Guss whereby Antony Guss would become the sole director and secretary.

651. According to the affidavit of David Henry Scott, the liquidator of Burwood Retail, Gerandu took over the conduct of the Hawthorn retail arm from Burwood Retail around 1 October 2001. A business name search indicates that as of 1 October 2001, Gerandu became the registered proprietor of the business name "Outdoor Megastore" in Victoria, the previous proprietor of which was Scandi. Antony Guss insisted that only the business name, and not the business was transferred, and that Gerandu "started up on its own in a similar vein" from the same premises and with some of the same staff.

654. A similar conflict exists in relation to Moolach, with Scott alleging that Moolach took over the Queensland retail arm of the business around 1 November 2001 from Scandi Qld. This appears to be confirmed by a business name search. Again Antony Guss insisted that only the business name was transferred.

657. The defendants submit that a dealing involving Scandi, namely the sale of business names, is of no relevance to the liquidations of Scandi Qld and Burwood Retail.

660. On or around 23 October 2001, CFI's payroll software was upgraded whereby licences were obtained by Gerandu and Bongania to use the payroll software of the furniture business licensed to "Casual Life Furniture" in respect of 25 employees each. On or around 7 November 2001 Moolach obtained a similar licence in respect of 25 employees.

663. Furthermore, as at 8 November 2002, the ASIC historical extract of these three companies still showed Kotsimbos as director and secretary. In his affidavit sworn on 13 November 2002, Kotsimbos stated that he has never been involved with any of these companies.

666. However, in cross-examination Kotsimbos acknowledged that in December 2001, Joseph Guss had instructed Abbots Incorporation Services to amend documentation and lodge forms with ASIC showing the change of officeholders. This was not done. The defendants further note that annual returns were lodged with ASIC on 1 February 2002 for the three companies which showed the appointment of Antony Guss and the resignation of Kotsimbos. Antony Guss signed these on 30 January 2002 in his capacity as director. However, in their evidence Joseph and Antony Guss each said that the other of them was responsible for preparing the returns. But, as no Form 304s had been lodged, the annual returns remained unprocessed by ASIC.[19]

669. On 11 December 2002 Mihalopoulos was informed by letter from ASIC that the 2001 annual returns for Moolach, Gerandu and Bongania were received on 1 February 2002. The letter attached correspondence with the companies which discloses the following. On 16 March 2002 each annual return was returned to the respective company with a requisition for further information regarding officer details, due to the non-lodgment of Form 304s indicating the change of director from Kotsimbos to Antony Guss. ASIC did not receive a response to those requisitions, or to any of its follow up letters dated 25 April 2002 and 24 July 2002.[20]

672. Antony Guss stated that he received the first letter to Moolach dated 16 March 2002 but was unaware of the second letter to Moolach dated 25 April 2002. In relation to the ASIC correspondence to Gerandu, Antony Guss admitted receiving all of the letters. Antony Guss confirmed that Joseph Guss was having discussions with ASIC to try to get the forms done correctly.

675. On 12 December 2002 (in the latter stage of the trial) Rundles sent a letter to ASIC on behalf of Bongania, Moolach and Gerandu outlining their attempts to instruct Abbots to effect a change of directors, shareholders and registered office and enclosed the amended annual returns.

678. The Deputy Commissioner submitted that had this not arisen during these proceedings ASIC would not have received a response.

681. I find that the initial delay in submitting the relevant ASIC forms was due to the failure of Kotsimbos and Abbots Incorporation Services to implement Joseph Guss' instructions in December 2001. However, I find that Joseph and Antony Guss subsequently delayed submitting the relevant ASIC forms throughout the course of 2002, notwithstanding having received several letters from ASIC requesting further information regarding officer details. I accept the submission of the Deputy Commissioner that, but for these proceedings, the delay in providing that information to ASIC would have been longer.

684. In relation to the identity of the beneficial owners of the retail companies, the following is known. The annual returns of Bongania, Moolach and Gerandu indicate that Gusto Corporation is the sole shareholder of each.[21] In turn, the shareholders of Gusto Corporation are SMET and NMGP with six shares each, however these shares are not beneficially held. The identity of the beneficial owners of these shares is not "stated", although in their submissions the defendants claim that it is incorrect to state that the beneficial owner of the retail companies and Gusto Corporation is unknown. As to that submission, I note that while Antony Guss is the sole director of Gusto Corporation, he, as previously noted, was unable to identify the person or persons beneficially entitled to shares held by SMET and NMGP.

687. In this regard, I repeat my previous findings in relation to the association between SMET and NMGP and the Guss family.

690. In relation to the delay in submitting BAS returns, the Deputy Commissioner outlined in her submissions a series of statements by Antony Guss. Initially Antony Guss gave evidence that he believed that BAS statements of Gerandu and Moolach had been lodged as he had seen some cheques go through to the ATO. After being requested to produce the statements for Gerandu and Moolach, he stated in cross-examination the following day, 11 December 2001, that a cheque had been issued with respect to Gerandu in February 2002. On finding this cheque he assumed that everything had been done and that payments had been made by Bongania, Moolach and Gerandu for all quarters. The Deputy Commissioner requested that the BAS returns be produced overnight.

693. On 12 December 2002 the cross examination of Antony Guss resumed. He said that "everything is now regularised and had been lodged". He had gone back to the office last night to check the records. He confirmed having the previous night seen a copy of the BAS for Bongania, Moolach and Gerandu for the quarter ended 31 December 2001 and cheque butts for cheques in payment of the amount due by each company for that quarter. Copies of the cheque butts, each dated 28 February 2002, became Exhibit CC. He produced the copy BAS. He said that someone at the company had posted them to the ATO. He had checked whether the cheques had been cleared through the bank account, and could not find that they had. In that situation he had that morning attended at the post office and paid the amount due by each company for the quarter. He produced the Australia Post receipt which records the payment of the amounts shown on the cheque butts in Exhibit CC, and the other amounts referred to below. He said that he would stop payment on the earlier cheques.

696. Then, as to the BAS and payment for the quarters ended March, June and September 2002, Antony Guss said that he found the statements of Bongania, Moolach and Gerandu for each of those quarters last night in a file in Varendran's old office. He signed them and had attended at the post office that morning (12 December 2002) and paid by cheque the amount payable for each company, including the amount payable for the December 2001 quarter. He then posted to the ATO a copy of the BAS for Bongania, Moolach and Gerandu for the December 2001 quarter and the BAS those companies for the quarters ending March 2002, June 2002 and September 2002.[22]

699. Counsel for the defendants submitted that the delay in lodging the BAS could be explained by problems experienced with the installation of a new computerised accounting system. I accept that the retail companies experienced some computer problems, as a result of using the payroll software of the furniture business. But I do not account that they account for the delays, and I reject the submission. On the evidence it is clear that the delay was due to oversight at best, or was deliberate at worst, in the latter case for the purpose of deferring payment. I find that the cheque for the December 2001 quarter was not presented, and there is no evidence that the BAS for that quarter was returned in the mail as not received by the addressee. I am not satisfied, on the balance of probabilities, that the payment was made or the BAS sent. Those findings together with the returns for the following three quarters having been left lying, in the face of the known obligation to the Commissioner of Taxation, an obligation which cannot be overlooked, leads me to the conclusion that the delay was deliberate. The delay, overall, was not for one quarter but one year. Even if the December quarter was disregarded, it was nine months. Furthermore, the defendants' submissions are weakened by the chronology of events outlined below in relation to Burwood Retail, Scandi Qld and Casual Classics which disclose a history and context of failures to pay PAYG withholding amounts, lodge BAS and income tax returns.

702. On 3 December 2001 the ATO served a statutory demand dated 30 November 2001 on Burwood Retail for $19,119.25 for PAYE deductions between 1 October 1998 and 31 March 2000, interest and penalties. Zafiriou stated in his affidavit sworn 5 December 2001 that Burwood Retail had failed to pay tax instalment deductions for the period 1 April 2000 to 30 June 2000, PAYG withholding amounts for the period 1 July 2001 to 31 October 2001, failed to lodge BAS for the period 10 October 2000 to 30 September 2001 and had not lodged income tax returns for the years ended 30 June 1997, 1998, 1999 and 2000.

705. On 4 December 2001 the ATO served a statutory demand dated 30 November 2001 on Scandi Qld for $14,810.43 for PAYE deductions in the period 1 June 1998 to 31 March 1999, interest and penalties. According to Zafiriou's affidavit, Scandi Qld had not lodged BAS for the period 1 October 2000 to 30 September 2001, not met its obligations for PAYG withholding amounts for the period 1 July 2001 to 31 October 2001, and not lodged income tax returns for the years ended 30 June 1995, 1996, 1997, 1998, 1999, and 2000.

708. Each company filed an application to set aside the statutory demand. The Senior Master dealt with the applications on 13 June 2002. As to Burwood Retail, the application was dismissed. As to Scandi Qld, he ordered that the statutory demand be varied by reducing the sum demanded to $14,479.33, and declared that the demand had effect as varied from the date of its service. The effect of the order was that the application was dismissed.

711. On 19 June 2002 Burwood Retail and Scandi Qld filed a notice of appeal against the Senior Master's orders, and an interlocutory process for an order under s 59F(2)(a)(i) of the Act extending the time for compliance with the statutory demand until seven days after the hearing and determination of the appeals. On 20 June 2002 Byrne J heard and refused the applications to extend time. I heard the appeals and dismissed them on 23 August 2002.[23] On 3 September 2002 each company filed and served a notice of appeal.

714. I interpolate that also in his affidavit Zafiriou stated that Casual Classics, a company which Antony Guss referred to as an importer, failed to pay its tax instalment deductions for the period 1 May 1999 to 30 June 2000 and to meet its obligations for PAYG withholding amounts for the period 1 July 2001 to 31 October 2001, failed to lodge BAS for the period 1 April 2001 to 30 September 2001, and failed to lodge income tax returns for the years ended 30 June 1998, 1999 and 2000.

717. On 27 June 2002, the Deputy Commissioner commenced proceedings to wind up Burwood Retail and Scandi Qld on the ground of insolvency based on the failure to comply with the above statutory demands. On 4 September 2002 the Senior Master made orders from which each party appealed. I heard the appeals on 13 September 2002. I ordered that each company be wound up and appointed Scott as liquidator but, for the particular reasons stated in my judgment, stayed the operation of the order until 27 September 2002.[24] On that day I refused an application to extend the stay to 25 October 2002. The companies obtained an interim stay from the Court of Appeal which on 30 September 2002, having heard an application for a stay pending the hearing and determination of the appeals in the statutory demand proceedings, dismissed the stay applications.[25]

720. On 18 June 2003 the Court of Appeal heard and dismissed the appeals of Buckland Products, Burwood Retail and Scandi Qld against the orders that they be wound up.[26] The Court of Appeal ordered that Joseph Guss, the solicitor on the record, pay the respondent's costs of the hearing, in each case fixed at $1500, for the reason that once the companies were ordered to be wound up, s 471A of the Act meant that Joseph Guss no longer had authority to prosecute the appeals. I have referred to this at [144]. As at the date of the winding up orders, Antony Guss was the sole director of Scandi Qld, Burwood Retail and Buckland Products.

723. Reports dated 1 November 2002 signed by Antony Guss indicate that Burwood Retail had nil assets and unsecured creditors of $651,367.13, of which the ATO claims a disputed amount of $19,119.25, and that Scandi Qld has nil assets and unsecured creditors of $242,908.78, of which the ATO claims a disputed amount of $14,479.33.

726. The Deputy Commissioner's submissions note the evidence of Antony Guss that there was no transfer of business between Scandi Qld and Moolach, and between Burwood Retail and Gerandu. However, the retail premises of Burwood Retail and Scandi Qld must, she submits, have operated with assets in the nature of shop fittings, office furniture, cash registers, and telecommunications equipment. These are not the subject of the sale agreement dated 28 February 2001 as schedule 2 to that agreement describes the plant and equipment the subject of the agreement as plant and equipment located at 1 Winterton Road, Clayton. However, as set out above, the report as to affairs of Scandi Qld and Burwood Retail disclosed nil assets.

729. I have considered the submissions of the Deputy Commissioner and the defendants in relation to whether the businesses of Scandi Qld and Burwood Retail were transferred to Moolach and Gerandu. The Deputy Commissioner outlined a number of questions which the defendants have not answered satisfactorily, in particular the whereabouts of the assets of Burwood Retail and Scandi Qld as described by the Deputy Commissioner above. The probability, I find, is that the following transfers of business took place: from Scandi Qld to Moolach and from Burwood Retail to Gerandu. In reaching this conclusion I have taken into account the fact that Moolach and Gerandu are now the proprietors of the business name "Outdoor Megastore" in Queensland and Victoria respectively, the fact that Antony Guss conceded that Gerandu started up "in a similar vein" from the same premises and with some of the same staff, the delay in submitting returns for Moolach and Gerandu and the fact that the report as to affairs of Burwood Retail and Scandi Qld does not disclose any assets which one would expect to see, for example cash registers and telecommunications equipment. The probability is that such assets are now being used by Moolach and Gerandu in the conduct of their business.

732. This is a matter to which I shall return as it goes to the core of the Deputy Commissioner's submissions that the defendant companies should be wound up on the basis that she lacks confidence in the conduct and management of the companies. This lack of confidence is due, in part, to the prior record of the Guss family in conducting the furniture business with other entities. I have also not overlooked the relevance of the proceedings against Burwood Retail and Scandi Qld in relation to the confidence, or lack thereof, in the Guss family conducting the furniture business.

736. Having outlined the historical context in which the defendants companies were incorporated, it is convenient to commence reference to these entities by noting some details concerning them.

740. This company was registered in Victoria on 15 December 2000. The registration was procured by Searchwide, on instructions from Joseph Guss on 14 December 2000 to incorporate a shelf company under that name. Joseph Guss said that he was not sure who gave him instructions to incorporate the company, but recalled discussing it with Varendran and Antony Guss. Searchwide provides corporate secretarial and legal support services including incorporating companies and lodging documents for registration with bodies such as ASIC. The proprietor of the business is Denlea Investments, the sole director and owner of which is Denise Leanne Page. She received the instructions from Joseph Guss. As, however, he gave no instructions regarding office-holders, shareholders and addresses for the principal place of business and registered office, she incorporated the company with herself as sole director, secretary and shareholder and with her office as the only address. There were 12 issued shares, fully paid to $1 each. Joseph Guss paid her account on 18 December 2000. He was unable to say who reimbursed him for the costs of incorporation, stating that "it would be either Casualife Furniture ... I believe I was reimbursed out of Hong Kong". Although Joseph Guss claimed that he thought that, in or around December 2000 he had given Page details of the change of directors and that the Form 304 had been lodged, I find this not to be the case. It is a matter for a client as to when to activate a shelf company, and it was not extraordinary for a client to take several months to provide all the information required by Page to transfer her name from the ASIC records and complete the company register. In these circumstances, and in accordance with her usual practice, she retained the company seal and company register pending receipt of such instructions.

743. On 30 April 2001, following advice from ASIC of her obligation to do so, Page prepared and lodged an annual return for the company. The return showed her as the sole director, secretary and shareholder and with her office as the registered address and principal place of business. The return reflected Page's belief at the time, including that the company was a shelf company which did not trade. For that reason she did not speak to Joseph Guss as to the contents, or the filing, of the return. In fact the company was active but she had not been so advised.

746. I find that Page was unaware, when the annual return was lodged, that on 10 April 2001 Searchwide had lodged with ASIC for registration a fixed and floating charge granted by the company and dated 28 February 2001, together with a Form 309 (Notification of Details of a Charge) and a Form 350 (Certificate of Compliance with Stamp Duties Law). The charge was sealed by the company and on its behalf signed by Varendran as director/secretary. He also signed the forms as director/secretary. The forms were dated 9 April 2001. The chargee was CFI Ltd (HK). I refer below to the other documents that were signed by CFI on or around 28 February 2001. Page was not advised of these matters.

749. The Deputy Commissioner submitted that the failure to advise Page of CFI's trading status and the maintenance of her as director and secretary, whilst Varendran had fulfilled this role, constituted deliberate conduct to conceal the Guss interests in CFI and the transfer of the furniture business. The defendants concede that there was delay in filing the Form 304, however it was always the intention that the transfers/appointments in respect of the defendant companies, would be effective from the date of the intended acquisition. The defendants reject the suggestion that the delay would conceal matters from the Deputy Commissioner or anyone else.

752. The Deputy Commissioner's submission did not take adequate account of the filing of notice of the charge. That indicated that the company was active and had a director and secretary other than Page. It is of course understandable that Joseph Guss ensured that the notice was lodged; that is, to avoid the consequences of non-registration. There is also some substance in the defendants' submission that, ultimately, the operation of the business and the officeholders would have been revealed to, or would have been discovered by, ASIC. Yet it remains the fact that there was a delay in lodging the forms. While it may be suspected that a motivating factor for the delay was to delay the discovery of the furniture business having been transferred to CFI, I merely take the fact of the delay into account as a factor in my assessment of the Guss family in their conduct and operation of the furniture business.

755. As noted previously, by a sale agreement and a separate deed of charge both dated 28 February 2001 CFI respectively purchased stock, plant and equipment and motor vehicles from Casualife Furniture (subsequently Buckland Products), by assuming Casualife Furniture's liability to CFI Ltd (HK) under its deed of charge dated 9 January 1992. These were assets used in the conduct of the furniture business hitherto conducted by Casualife Furniture.

758. The sale agreement was executed by Varendran as director of CFI and by Antony Guss as director and Sandra Guss as secretary of Casualife Furniture. The agreement notes the address of CFI as being care of 4th Floor, 488 Bourke Street Melbourne, the address of Searchwide, the company incorporator. The address of Casualife Furniture is given as 1 Winterton Road Clayton.

761. According to Varendran, Joseph Guss brought him the agreement already signed by Antony and Sandra Guss, and Joseph Guss would have affixed CFI's seal. He could not recall any round table meeting between Joseph, Antony and Sandra Guss, and himself in relation to the sale agreement. Joseph Guss said that he drew the sale agreement and that he had not thoroughly turned his mind to who he was acting for, but had prepared the agreement as being the agreement between the parties. Antony Guss said that he, Varendran and Joseph Guss were involved in discussions concerning the sale agreement but could not remember any changes which any of the parties desired.

764. The sale agreement provides for the purchase of certain stock, plant and equipment, and motor vehicles. The agreement provides for the acquisition of the stock of Casualife Furniture at the lower of cost or realisable value (cl 2(a)). The purchase price for the plant and equipment was the difference between the "market value for existing use" and the "estimated auction realisation value" pursuant to a valuation to be prepared by Gray Eisdell Matthews Pty Ltd ("Gray Eisdell Matthews") provided the purchase price is not less than $90,000 (cl 3(a)). The evidence of Antony Guss is that a stocktake was apparently done but a valuation was never completed due to computer problems. The most recent figure for the value of the stock provided was that disclosed in the financial statements for the year of income ended on 30 June 1999 as an amount of $675,000. On 29 March 2001, pursuant to Antony Guss' instructions, Gray Eisdell Matthews carried out a valuation of the plant and equipment sold by Casualife Furniture to CFI. The market value for existing use was found to be $171,095 and the estimated auction realisation value was $74,215. On these figures the amount to be paid for plant and equipment was $96,880.[27] Property in the stock, plant and equipment was deemed to pass to the purchaser on 1 March 2001, upon the execution of the deed of consent (cl 8). The plant and equipment of CFI is located at 1 Winterton Road, Clayton (sch 2)

767. Clause 6 of the agreement deals with payment of the purchase price for the stock and the plant and equipment. Subcl (a) provides that payment is satisfied by CFI assuming Casualife Furniture's liability to CFI Ltd (HK) under Casualife Furniture's deed of charge dated 9 January 1992. Subcl (b) provides that if there is a balance of purchase price owing after any such assumption of liability to Casualife Furniture, it shall be paid by CFI in five annual instalments. Subcl (c) provides for an election by CFI to pay the purchase price in cash rather than through assuming Casualife Furniture's liability. Having executed the deed of consent and deed of charge, CFI elected that the purchase price payable would be satisfied by assuming Casualife Furniture's liability to CFI Ltd (HK) under Casualife Furniture's deed of charge.

770. The Deputy Commissioner analysed the consideration payable under the sale agreement for the various assets and undertakings comprising the furniture business. First, under cl 7(b), Casualife Furniture transfers to CFI any service (for example electricity, gas, water) and licence to occupy the premises for no consideration. Secondly, under cl 9 and cl 10, Casualife Furniture transfers to CFI the goodwill, business names, trade marks, common law rights in the name "Casualife", telephone and internet listings for no consideration. Thirdly, under cl 12, Casualife Furniture transfers the hire purchase and lease agreements for motor vehicles with CFI undertaking to meet the liabilities. Fourthly, under cl 13, all stock or parts listings of the stock, the costing records and stocktake record in respect of such stock, the customer and sales records, and the records, discs, and computer programmes in respect thereto are transferred to CFI for no consideration. Fifthly, under cl 17, Casualife Furniture agrees to a restraint of trade operating for a period of five years and transfers all right and title to and interest in the designs for no consideration.

773. The Deputy Commissioner submitted that there was insufficient consideration under the sale agreement as no consideration was provided for the transfer of the goodwill in the furniture business, the name `Casualife', the designs of the furniture products and all rights and entitlements thereto. On the available evidence, the purchase price for stock, plant and equipment was $797,655 ($675,000 + $122,655), although my calculations indicate the figure as $771,880 ($675,000 + $96,880), which exceeds Casualife Furniture's liability to CFI Ltd (HK) in the sum of $507,672.78 plus interest. The difference in my calculations is attributable to the difference referred to in the footnote to [228].

776. The defendants submitted that, taking the Deputy Commissioner's figure of $797,655, the resulting deficiency in Buckland Products' assets at the time of liquidation after allowing the claims of all unsecured creditors of $312,294.73, as noted in the report as to affairs of Buckland Products signed by Antony Guss and dated 13 November 2001, was $22,266.68. (I interpolate that the accuracy of these figures is not clear.) Included among the creditors are Antony, Joseph, Marilla and Sandra Guss for a total of $28,492.49 for superannuation. The defendants submitted that this deficiency could turn out to be a surplus if any of the contingent assets are realised or some of the claims of unsecured creditors are not admitted. The defendants further submitted that the amount of $22,266.68 does not support the Deputy Commissioner's claim of an elaborate scheme to defraud and defeat creditors. I now consider those submissions.

779. The contingent assets as stated in the report as to affairs were:

(a) County Court Proceeding No.97034916 against R Johnstone & Ors involving a claim for damages amounting to $200,000;

(b) Supreme Court Proceeding No.7161/99 against Sunce (Corporation) Pty Ltd involving a counter claim for damages amounting to $380,102 less a claim for $24,248.63;

(c) Magistrates Court Proceeding No.PO2104019 against Abes Group Pty Ltd involving a claim for damages amounting to $35,966.16 less a claim for $17,654.91;

(d) A potential claim against Manufacturing Software (Aust) Pty Ltd for damages; and

(e) A potential claim against Totek Computer Systems Pty Ltd.

785. The list of unsecured creditors showed 19 creditors in a total dollar amount claimed of $234,405.47. The evidence concerning them, although brief, gave me no concern for optimism as to the likely success of the claims if prosecuted. More importantly, however, Buckland Products is insolvent, the liquidator does not have funds or an indemnity to enable him to prosecute a claim, and the probability is that none of the claims will be prosecuted or result in a return to the company. Indeed, in a letter dated 18 March 2002 from Mansell to CFI Ltd (HK), Mansell stated that "I advise that it appears that other than the completion of the calculation of the value of the stock under the Agreement (sale of assets) dated the 28th February 2001, there is only some debtors the value of which would not be significant and legal actions with claims exceeding $600,000. To progress these legal actions will require substantial funds and the company does not appear to have the financial means to proceed".

788. Then, the report as to affairs disclosed five debtors to a total amount of $2744.80, two of the debtors being Scandi Qld and Burwood Retail in amounts said to be unascertained. Given that Scandi Qld and Burwood Retail are in liquidation, and that the liquidations are insolvent, the chance of their "unascertained" debts being paid to Buckland Products is effectively non-existent.

791. Antony Guss gave evidence that it became evident after a while that all of the purchase price under the sale agreement was likely to be assumed under the liability taken over by CFI. The defendants point out that CFI Ltd (HK) was at all times the proprietor of the Casualife trade mark and that there was no independent goodwill held by Casualife Furniture in the name "Casualife", and deny that any assets were assigned for which consideration is lacking. The defendants submit that the Deputy Commissioner failed to provide any evidence to cast doubt upon the commerciality of the transaction.

794. It appears clear from the evidence that the sale agreement was far from an ordinary commercial transaction entered into between parties at arm's length. This is evident from the lack of negotiation between the director of CFI, Varendran, and the director of Casualife Furniture, Antony Guss, as to the terms of the agreement and the lack of independent legal advice for CFI and Casualife Furniture. As to whether the business was sold at an undervalue, one cannot say for certain as no valuation of the stock was ever undertaken. However, it is difficult to believe that an independent arm's length purchaser would agree to purchase a business without having a valuation of the current stock. The submission that the business was sold at an undervalue is further strengthened having regard to the assets outlined by the Deputy Commissioner above, which were transferred for no value. I have not overlooked the defendants' submission that Casualife Furniture held no independent goodwill in "Casualife" but deal with this below in relation to the licence agreement.

797. Turner, as liquidator of Casualife Furniture, has deposed that the bank statements for Casualife Furniture do not show any amounts received during the relevant period which would represent the purchase price paid for the business.

800. Under cross-examination, Joseph Guss conceded that the businesses carried on by CFI and Casualife Furniture were "in general terms the same"; with substantially the same plant, equipment and stock; with the same name under which it conducts its operations except for the word "International"; with CFI selling and marketing the business under the name "Casual Life"; with substantially the same employees, subject to some retirements; occupying the same premises, the lease of which was held by Gusto Corporation, a company of Antony Guss; with substantially the same motor vehicles; with hire purchase agreements taken over by CFI under the sale agreement; and that CFI now conducts the business.

803. Joseph Guss, however, denied that the business had been transferred, saying that "one business stopped and another started", that "legally a business wasn't transferred" and that what was transferred were "assets pursuant to the sale of assets agreement".

806. However, the Deputy Commissioner notes the evidence of Joseph Guss that the furniture business was a going concern in the hands of Casualife Furniture at 28 February 2001, and that it has been a going concern in the hands of CFI since 1 March 2001.

809. I accept the Deputy Commissioner's submission that the business of Casualife Furniture was transferred to CFI, based upon the matters conceded by Joseph Guss in cross-examination. The Guss family may have attempted to portray this transaction as a mere sale of assets, but in truth, the substance, the ultimate effect and purpose of the agreement was to shift the furniture business previously conducted by Casualife Furniture to CFI.

812. Under the deed of charge also dated 28 February 2001, CFI Ltd (HK) agreed with Casualife Furniture and CFI that in consideration for the registration of a charge in favour of it over CFI, it would assume liability for some or all of the purchase price payable by CFI under the sale agreement**.** Varendran signed on behalf of CFI and Joseph Guss affixed the seal**.** Varendran testified that he did not have any dealings with CFI Ltd (HK) in relation to the deed of charge. The charge was registered on 10 April 2001 and allotted number 794742. As at 28 February 2001 the amount owing under Casualife Furniture's deed of charge was approximately $507,672.78 and accrued interest. This indebtedness has been assumed by CFI pursuant to the sale agreement.

815. The Deputy Commissioner queried the effectiveness of the charge as a result of previous court proceedings. On 15 November 1999 the Magistrates' Court at Dandenong ordered Casualife Furniture to pay the amount of $10,632.80 to Pamela Knopp. On 16 December 1999 solicitors for Knopp requested the issue of a warrant to seize property to recover $19,013.85, the amount owing at that time under the order, including interest and costs. Pursuant to the warrant that issued, the Sheriff seized two presses at Casualife Furniture's premises on 4 May 2000. On 25 July 2000 CFI Ltd (HK) issued an adverse claim for the presses, claiming that they were charged in favour of CFI Ltd (HK) under a charge registered on 21 February 1992. The Sheriff subsequently issued an interpleader summons and the matter was heard and determined in the Magistrates' Court on 25 January 2001.

818. The Magistrate, Mr Coburn M, refused CFI Ltd (HK)'s claim to the presses and ordered it to pay Knopp's costs of $1,000. He found that CFI Ltd (HK) had not discharged the onus of demonstrating on the balance of probabilities that the charge was current, effective and being relied upon. A Master of this Court subsequently ordered that two questions of law were raised by an appeal from these orders, namely whether having regard to the whole of the evidence, a Magistrate could have concluded that a charge over the property of Casualife Furniture in favour of CFI Ltd (HK) was not still effective or current and, if the charge was effective, in what circumstances (if any) would that inhibit the property the subject of the charge being sold pursuant to a warrant of execution.

821. Balmford J heard the appeal on 9 October 2001, and gave judgment on 22 October 2001.[28] Her Honour concluded that the Magistrate had been entitled to conclude as he did and, accordingly, dismissed the appeal with costs. I was informed that an appeal against this decision was dismissed by the Court of Appeal in November 2001.

824. It is difficult to accept that CFI could accept a charge over its assets of an amount exceeding $500,000 and yet for CFI's director to have had no dealings whatsoever with the chargee. Again, this indicates that this was not an arm's length transaction. I also note that at no point in the above proceeding did CFI Ltd (HK) present any evidence or seek to appear, a fact which is repeated in these proceedings. It is a reasonable inference that any evidence that CFI Ltd (HK) could have led, would not have been of assistance additional to that presented to me.

827. CFI was also a party to two instruments dated 1 March 2001 which are said to further effect a tying up of the assets the subject of the sale agreement.

830. By cl 1 of a deed of consent dated 1 March 2001 between CFI, Casualife Furniture and CFI Ltd (HK), CFI Ltd (HK) as the chargee consented to the sale agreement between CFI and Casualife Furniture, as required thereunder, and agreed to the assumption by CFI of an amount up to the principal sum ($507.410.17 subject to applicable exchange rate variations) less $50,000 of the purchase price as payable by CFI under the sale agreement. By cl 3 CFI agreed that part of the purchase price payable by it to Casualife Furniture may be paid by CFI assuming the liability of Casualife Furniture to CFI Ltd (HK) under their charge dated 9 January 1992 ("the first charge") to the extent of the amount calculated in accordance with cl 1 and which assumed liability shall represent a debt owing to CFI Ltd (HK) by CFI under the charge between them dated 28 February 2001 ("the second charge"), and shall be secured thereby. Clause 4 provided that the assets sold to CFI under the sale agreement shall, upon CFI obtaining possession, be deemed to be charged in favour of CFI Ltd (HK) under the provisions of the second charge.

833. The deed of consent was executed by Antony and Sandra Guss for Casualife Furniture, and by the directors by Kwan both personally and as signatory for Sine Nomine, both directors of CFI Ltd (HK). Varendran executed the deed for CFI but said that he could not remember when he signed. Based on the evidence of Joseph Guss and Varendran, I find that Joseph Guss prepared the deed of consent for all parties. Joseph Guss said that he remembered discussing amendments to the deed of consent with Antony Guss and Varendran, but he could not specifically recall any discussion. Antony Guss testified that he did not have a lot to do with this document as it was mainly done by Joseph Guss.

836. The Deputy Commissioner submits that the given date of the deed of consent of 1 March 2001 cannot be correct for the following reasons. The deed of consent referred to the registered charge number 794742, but that number was only allocated by ASIC on 10 April 2001 when the certificate of entry for the charge was issued. The deed of consent could only have been drawn after ASIC allocated the charge number, and hence could not have been executed before 10 April 2001. Thus, as the transfer of property under the sale agreement could not occur prior to the execution of the deed of consent, the property in the business previously conducted by Casualife Furniture could not have passed to CFI until, at the earliest, 10 April 2001. Varendran agreed that this must be correct. The Commissioner submitted that having regard to this misleading of the Court as to the effective date of the transfer of the business by Antony Guss, little weight should be given to his evidence.

839. It is unknown whether Turner, as liquidator, or Mansell, as receiver and manager, received a copy of the deed of consent. Antony Guss did not recall providing a copy of the deed of consent to anyone prior to referring to it in his affidavit sworn in these proceedings on 21 November 2001.

842. It is clear, and I find, that the deed of consent was backdated. The fact that Joseph Guss prepared this document for all parties reinforces my previous findings that the sale agreement and other associated documents, were not ordinary transactions entered into between arm's length parties. I am not persuaded, on the balance of probabilities, that any particular negotiation occurred between the parties, as ordinarily would occur. The defendants could not recall any specific amendments.

845. A licence agreement was also entered into between CFI Ltd (HK) (as licensor) and CFI (as licensee) on 1 March 2001, which allowed CFI to use the trade mark "Casualife" for the purpose of the marketing and sale of outdoor furniture. CFI Ltd (HK) has been the registered proprietor of the trade mark "Casualife" in Australia since August 1996 when the name "Casualife" started as a result of the settlement agreement between Tropitone International and Tropitone USA. Similarly to the deed of consent, the licence agreement must be taken as having been backdated, for the same reason above, although Antony Guss said that it was executed on that date. The licence agreement was prepared and drawn by Joseph Guss on behalf of both parties. In cross-examination Joseph Guss stated that he could not see any conflict in him acting because "everybody was, in the end, ad idem about all the provisions; there was no conflict". The licence agreement was signed by Varendran as director of CFI and by Kwan as director, and as authorised signatory for Sine Nomine, his co-director, of CFI Ltd (HK). Varendran was unable to recall the circumstances in which he came to sign this document.

848. The Deputy Commissioner submitted that the existence of the licence agreement and the rights and entitlements of CFI Ltd (HK) and CFI purportedly dealt with thereunder, are inconsistent with the provisions of the sale agreement, in particular cl 9 which provides that Casualife Furniture agrees to transfer to CFI any business name or trade mark of or incorporating the name "Casualife", all common law rights in and to the name "Casualife" and any goodwill therein and all telephone, fax, fax, email or internet number listings or sites incorporating the name "Casualife". Further, Casualife Furniture has held the name since its name change on 1 November 1996, prior to when Tropitone HK became CFI Ltd (HK), and therefore asserted a contemporaneous right in the name "Casualife" at a time when no goodwill existed. The Deputy Commissioner noted that no agreement between Casualife Furniture and CFI Ltd (HK) had been produced to evidence any licence of the name "Casualife" and submitted that there was no such agreement, or alternatively, that there was no need to document it. In either case, this is said to lead to the inference that Casualife Furniture and CFI Ltd (HK) were not dealing at arm's length.

851. The Deputy Commissioner submitted that the licence agreement was a recent invention as a response to the Deputy Commissioner arguing before the Senior Master in November and December 2001 that there was no provision for any consideration for the goodwill of Casualife Furniture under the sale agreement. It will be recalled that the sale agreement, and consequently the associated agreements including the licence agreement, were not mentioned before the Senior Master.[29] The licence agreement provides that upon the winding up of CFI, all rights of CFI in the trade marks cease.

854. This submission is further supported by the fact that a Casualife brochure in use in 2002, fails to make attribution to, or recognise rights in, CFI Ltd (HK) in relation to the name "Casualife". Antony Guss conceded that it was a term of the licence agreement to make such attribution. He said that they had not received any notice of breach and could not recall the term being negotiated.

857. The Deputy Commissioner also referred to cl 5 of the licence agreement which states that CFI is to pay CFI Ltd (HK) a licence fee equal to 5 per cent of the net sales of CFI, payable in US dollars. "Net sales" is defined in that clause as meaning the gross sales of CFI minus certain components, including freight, insurance and GST, VAT or other sales tax. Clause 6 of the agreement provides that the licence fees and any other monies owing by CFI are deemed to be secured under the deed of charge. Antony Guss gave evidence that CFI "didn't pay any money for this". The defendants submitted that there is no evidence that the licence to use the name "Casualife" required an upfront fee as opposed to a royalty fee.

860. Joseph Guss denied that the licence agreement is a recent invention. The defendants submit, citing several authorities, that the backdating of a document does not necessarily affect its validity and will only give rise to an inference that the arrangement was a sham if it is not "what it purports to be". The defendants referred to Sharment Pty Ltd v Official Trustee in Bankruptcy,[30] in which Lockhart J stated that: "a transaction is no sham merely because it is carried out with a particular purpose or object. If what is done is genuinely done, it does not remain undone merely because there was an ulterior purpose in doing it". The reason the licence agreement (as well as the deed of consent) was not produced to the Senior Master was said to be due to the "problem inherent in all urgent interlocutory applications where affidavits are produced quickly and to meet the issues of the day".

863. Antony Guss gave evidence that he and Varendran negotiated the terms of the licence agreement for CFI with Joseph Guss, on behalf of CFI Ltd (HK), however it is clear from his evidence that he had no real knowledge of its terms. Antony Guss was unaware that the licence agreement specified geographical areas, and stated that CFI did not pay any money to CFI Ltd (HK) for the licence, notwithstanding that cl 5 provided for a licence fee payable by CFI to CFI Ltd (HK) for an amount equal to 5 per cent of CFI's net sales.

866. On 31 January 2001 CFI registered the business name "Casual Life" commencing as at 22 January 2001, the nature of the business being described in the application for registration as the manufacture of outdoor furniture, with the place of business at 1 Winterton Road, Clayton. The Deputy Commissioner submitted that this registration is inconsistent with CFI Ltd (HK)'s purported proprietary right in the name "Casualife" and the terms of the licence agreement. No evidence has been produced evidencing the consent of either Casualife Furniture or CFI Ltd (HK). The Deputy Commissioner submitted that the ease with which CFI registered the business name at the time leads to the inference that Casualife Furniture, CFI Ltd (HK) and CFI were and are managed and controlled by the Guss family. Antony Guss gave evidence that the name with the two "Ls", "Casual Life", was available on the internet and that he wanted to secure registration.

869. As set out above, the Deputy Commissioner has raised a number of questions concerning the object and effect of the licence agreement, namely the apparent inconsistency of it alongside the sale agreement, the last minute notice of the licence agreement to the ATO, the tying up of the goodwill in the name "Casualife" by CFI Ltd (HK), the absence of any similar agreement between Casualife Furniture and CFI Ltd (HK) and doubts as to whether the terms of the licence agreement were adhered to by CFI. The defendants did not adequately answer these matters. I find, similar to the deed of consent, that the licence agreement was backdated for those same reasons mentioned.

872. I have taken into account Varendran's inability to remember the circumstances in which he signed the licence agreement as director of CFI. I have noted the inconsistency highlighted by the Deputy Commissioner between the existence of the licence agreement and cl 9 of the sale agreement. I note that Casualife Furniture held the name prior to the name change from Tropitone HK to CFI Ltd (HK). I have also taken into account that no evidence has been produced of a licence agreement between Casualife Furniture and CFI Ltd (HK) although Casualife Furniture is said to have paid a fee in respect of export sales. In this regard I note that according to Joseph Guss Casualife Furniture had paid a fee of 10 per cent of its export sales which covered licence fees, whereas in the current agreement with CFI, the amount payable is 5 per cent of the net sales of CFI.

875. Further, CFI has used the name "Casualife" in its current brochures without attributing the name to CFI Ltd (HK), as required by a term of the licence agreement, and has not received any notices of breach from CFI Ltd (HK). I find it difficult to accept the defendants' submission that the failure to mention the licence agreement in previous proceedings before the Senior Master was due to "the problem inherent in all urgent interlocutory applications where affidavits are produced quickly and to meet the issues of the day". The licence agreement is a significant document, setting out important rights and obligations of CFI and CFI Ltd (HK). I do not believe it was a matter that the defendants overlooked, or considered unnecessary to raise.

878. I have taken into account the lack of licence fees paid by CFI to CFI Ltd (HK) pursuant to the agreement. I have also considered the ease with which CFI registered "Casual Life", notwithstanding the existence of the licence agreement and CFI Ltd (HK) being the registered proprietor of the trade mark "Casualife".

881. I have considered all these matters in relation to the object and effect of the licence agreement. It has the effect of ensuring that all goodwill in the name "Casualife" remains with CFI Ltd (HK) and, hence, that in the event CFI is wound up, CFI Ltd (HK) or another entity will be able to carry on the Casualife furniture business. Regarding the evidence overall, I find that the agreement was not signed on the date it bears but much later in the course of, and for the purpose of this litigation. This leads me to conclude that the licence agreement was prepared by Joseph Guss as an afterthought and that it does not reflect the true commercial relationship between CFI and CFI Ltd (HK).

884. Since 1 March 2001, CFI has carried on the furniture business. Joseph Guss conceded in cross-examination that the business carried on by Casualife Furniture and CFI (before and after the sale agreement) was "in general terms" the same business.

887. The Deputy Commissioner submitted that the four documents were signed on a date later than they bear, and that they reflect an attempt to divert the assets of the furniture business so as to deny the benefit of them to her and other unsecured creditors of Buckland Products. She submits that by these instruments the Joseph Guss interest has sought to quarantine and control the furniture business assets, as they were and are. The defendants submit that the agreements are subject to the presumption of regularity and that it is a matter for the liquidator of Casualife Furniture to decide whether to challenge them. In answer, of course, is this, that the point is not that the agreements do not operate according to their terms, but that the purpose and operation of the document is to remove the furniture business from the reach of unsecured creditors.

890. Varendran said that "there was no change as such" when CFI took over from Casualife Furniture, "except that the new company was carrying on the transactions, the business". Varendran also described the furniture business conducted by the Casualife companies as a family business of the Guss family.

893. I find that the furniture business now carried on by CFI is the same furniture business as was operated by Casualife Furniture. I have raised concerns with aspects of the four documents and I need not repeat those concerns. These are matters which I take into account in reaching my final decision on whether the Deputy Commissioner is justified in her submission that the defendants should be wound up since she has lost confidence in the conduct and operation of the furniture business.

896. In October 2001 Joseph Guss contacted Page. He required forms to be lodged with ASIC urgently which would, as Page said, have the effect of activating the company from its status as a shelf company. The person to be appointed as director was about to travel overseas and it was imperative for the necessary forms to be signed before he departed. Page requested the new director's consent. On or around 21 October 2001 she received by facsimile a consent from Varendran to act as director of the company with effect from 22 December 2000. It seems clear enough that he was also to act as secretary. Varendran confirmed in his affidavit sworn on 21 November 2001, that he had been the sole director and secretary since 22 December 2000. Page prepared the appropriate Form 304 accordingly, resigning as director and secretary and appointing Varendran in her place with effect on 22 December 2000. Page also prepared the necessary forms for transfer of the shares and change of address of the registered office and principal place of business, however the name of the transferee of the shares and details of addresses were left blank as she had no instructions as to those matters.

899. The share transfer form provided by Page stated that the consideration for the transfer was $12 and that the date of purchase of the shares by the transferee was 22 December 2000, and it was signed by Page on that day. The transfer and the other forms were collected by Joseph Guss on the following Monday, who completed the form by inserting as transferee -

"First Mainland International Ltd. Pasea Estate, Road Town Tortola, British Virgin Islands."

903. Joseph Guss then arranged for First Mainland International to execute the transfer in November 2001. Joseph Guss' evidence is that he knew where to send the instrument of transfer of shares because he had instructions from First Mainland International to do so. Ms Lee in Hong Kong provided those instructions.

906. After the forms were collected by Joseph Guss, Page did not keep a copy as her practice was to copy them when they were returned for lodging with ASIC. Joseph Guss did not return the forms, duly completed, for lodging. Accordingly, she did not see the forms again.

909. The Form 304 was lodged with ASIC on or around 31 October 2001, and certainly by 14 November 2001, having been signed by Varendran and dated 22 December 2000. I find that Joseph Guss lodged the form with ASIC or caused it to be so lodged. The defendants have conceded that the Form 304 was not lodged when it should have been lodged with the result that an offence occurred under s 205B of the Act. However, Joseph Guss deposed that he believed this had been attended to by Page.

912. I repeat my previous findings in relation to the relevance and importance of the delay in lodging ASIC forms. In addition, I find that it was the launch of these proceedings on 9 November 2001 that was the reason that the forms were ultimately lodged.

915. An ASIC historical extract dated 14 November 2001 recorded the change of director and secretary, but Page remained recorded as the shareholder and her office as the registered office and principal place of business.

918. A subsequent ASIC historical extract recorded that on 14 November 2001 forms advising of the change of registered office and principal place of business from Page's office to 1-9 Winterton Road, Clayton, were lodged with ASIC, the cessation date of the former being 20 November 2001 and the latter 31 October 2001. The fact is that the company never conducted any business from Searchwide's office. I also find that Page was unaware that, prior to her removal as an officeholder, CFI might have been operating as a business. Indeed Antony Guss, as general manager of CFI, acknowledged in writing on 13 November 2001 that Page had taken no part in the conduct of the business of CFI.

921. It appears that the transfer of shares occurred some time in November. Page was the transferor and has deposed in her affidavit sworn on 14 November 2001 that whilst she had prepared the share transfer form and that Joseph Guss had collected it, she had not lodged the form as it had not been returned by Joseph Guss. ASIC historical extracts dated 7 and 14 November 2001 show Page as the shareholder of CFI. The attestation clause for the transferee was completed by the insertion of "November 2001" as the time of signing and "Au Wai Kwan" as director, and opposite that the words "For and on behalf of First Mainland International Ltd" and under those words the signature of (it would seem) Kwan. I say "it would seem" as Kwan did not give evidence. According to the ASIC historical extract dated 7 May 2002, the change of officeholders form was received by ASIC on 31 October 2001, processed on 7 November 2001 and effective from 22 December 2000.

924. The Deputy Commissioner submitted that the role of First Mainland International is to conceal that the Guss family are the beneficial owners of CFI. As First Mainland International is registered in the British Virgin Islands it is not possible to see a record which states who has the ultimate holding interest in CFI, as the directors and shareholders are not required to be disclosed under the laws of the British Virgin Islands. In this context, the Deputy Commissioner noted that Kwan is a director of First Mainland International, and also of CFI Ltd (HK). Kwan's address, as previously noted, is the same address as that of Aal & Zyleman Co Ltd, the management service company that advertised the sale of First Mainland International, CFI Ltd (HK), Sine Nomine, Semper Fidelis and Entre Nous.

927. The defendants submitted there is no evidence that Guss interests control First Mainland International. According to the evidence of Antony Guss, he believed that First Mainland International was a company in Hong Kong, that he was unaware of the relationship between CFI Ltd (HK) and First Mainland International, and that he does not know who beneficially owns the shares in First Mainland International. Antony Guss also stated that he was unaware if Kwan was an employee of Aal & Zyleman Co Ltd and that he heard in court that Kwan was a common director to First Mainland International and CFI Ltd (HK).

930. To summarise Joseph Guss' evidence, it will be recalled that he stated that he was not sure who instructed him to incorporate CFI, but recalls discussing it with Varendran and Antony Guss; he could not remember specifically who reimbursed him for the incorporation costs, stating that "I would have thought ultimately - I can't remember specifically who did it but it would be either Casual Life Furniture - I can't remember exactly. I don't really remember but I believe I was reimbursed out of Hong Kong"; he arranged for the execution of the share transfer by collecting the form from Page with details of the transferee left blank; he caused the details of First Mainland International to be inserted in the share transfer; he sent the share transfer to First Mainland International and knew where to do so because of instructions from a Ms Lee at the office in Hong Kong; the share transfer was actually sent by him to Hong Kong as the director of First Mainland International was there.

933. In my view the likelihood is that the Guss family own and/or control First Mainland International, based on their ownership and/or control of the defendants, CFI Ltd (HK) and the companies which previously carried on the furniture business. I have hesitated to make that as a finding due to the lack of firm evidence as a result of the laws of the British Virgin Islands not requiring disclosure of directors and shareholders of companies. That Kwan is a director of First Mainland International appears only from the share transfer from Page, and not from any company search or other reliable information. Further, as noted at [176] Kwan did not give evidence. There was no explanation for him not doing so. One would assume, from the statement in the transfer, that he was a director. But the issues in the case were wider than the narrow point as to whether he was a director. There is the fundamental question as to ownership and control of the entities in the group. That leads me to the question why was he not called. It is reasonable to suppose that he could have given evidence as to the beneficial ownership of First Mainland International. If that be so, as I consider it is on the probabilities, the inference is open that his evidence would not have assisted the defendants on this issue, and supports an inference of the likelihood mentioned earlier. In all the circumstances I draw the inference, and conclude, that the likelihood first mentioned is the fact.

936. The ASIC historical extract also records that on 19 December 2001 Varendran ceased to be director and secretary of the company and that on that date Xia of Shanghai, China, and Islam of Ormond in Victoria, were appointed as directors and Islam as secretary of the company. Islam has been employed since 13 August 2001 as an accountant at CFI. He also does the accounting for Kencording Manufacturing, Bongania, Moolach, Gerandu and Casual Classics.

939. The Deputy Commissioner submitted that neither Varendran as director from 22 December 2000 to 19 December 2001, nor Islam and Xia as current directors from 19 December 2001, represent the directing and controlling mind of CFI. Rather, they were said to be nominee directors, with the Guss family maintaining control. Indeed, Varendran conceded that his role was "more sort of a nominee or nominal capacity" as he worked just as an accountant, not as an actual director. Rather, Joseph Guss was the final decision maker of the defendant. This is disputed by Joseph Guss. Antony Guss also said in evidence that, in relation to corporate matters, he was subject to Varendran's control, but that he was in control of investment decisions and would have consulted Varendran on anything significant. In relation to these proceedings, Antony Guss instructed Joseph Guss to file a notice of appearance on behalf of CFI whilst Varendran was overseas. Joseph Guss stated that he confirmed these instructions upon Varendran's return.

942. A close glance at Varendran's evidence indicates some gaps in his knowledge. First, he had no knowledge of the operations or directors of CFI Ltd (HK), despite the existence of the charge in favour of CFI Ltd (HK). He cannot remember First Mainland International. He had no knowledge of the business conducted by Kencord Manufacturing or of recording any transactions for Kencord Manufacturing. Although he was a signatory for CFI with the ANZ bank, Varendran did not sign any cheques.

945. Prior to his appointment as director of CFI, Varendran was the accountant for Casualife Furniture and associated companies. Varendran expanded on the "associated companies" to state that this was Tropitone Furniture. However I assume that he meant Tropitone International as, referring to Tropitone Furniture, he noted that the name was changed to Casualife Furniture. As the previous chronology notes, Tropitone International subsequently became Casualife Furniture. He also worked for Scandi Qld, Scandi International and Outdoor Megastore.

948. It is interesting to note that Varendran in his evidence stated that the business of Casualife Furniture was the same business as that of Tropitone Furniture, namely the manufacture of aluminium outdoor furniture and the sale of outdoor furniture.

951. The Deputy Commissioner submitted that the Guss family has a controlling interest in CFI (and Kencord Manufacturing for that matter) for the following reasons. First, Antony Guss is and was a de facto director of both CFI and Kencord Manufacturing at all times by being the general manager of each company. Antony Guss is also Kencord Manufacturing's director. Secondly, Antony and Joseph Guss represented the mind and will of the companies as (a) the companies' incorporator, Page, had no knowledge of CFI's acquisition of the furniture business from Buckland, nor of CFI and Kencord Manufacturing conducting the furniture business, nor of CFI creating a charge over its assets in favour of CFI Ltd (HK); through (b) the apparent directorships of Varendran, Xia and Islam; (c) the current shareholder of CFI is a shelf company registered in the British Virgin Islands with the same address as CFI Ltd (HK); (d) Joseph, Sandra, Marilla and Antony Guss are all signatories of the ANZ bank accounts held by CFI and Kencord Manufacturing; (e) the current shareholder of Kencord Manufacturing is owned and controlled by Antony and Joanne Guss; and (f) Varendran stated in evidence that Joseph Guss was the final decision maker of CFI and its CEO, while Antony Guss was the general manager.

954. The defendants submitted that Varendran was a director of CFI and consciously exercised power in that regard and highlighted several examples of his poor recollection throughout the proceedings. The defendants further submitted that Islam, who takes his responsibilities seriously, stated that Xia visits the premises every two to three months and that he speaks over the phone to him. Islam also testified that he, as a director, acts cooperatively with Antony, Joseph, Marilla, Joanne and Sandra Guss. However, Islam himself said that he was not familiar with the sale agreement and charge, and that Antony Guss was responsible for employing the employees. Islam was also unable to point to any minutes of board meetings held by CFI or specify any board meetings which he had attended. Islam gave evidence that he had no idea who First Mainland International's directors and shareholders were and confirmed that he has never reported to First Mainland International as there had not been any shareholder meetings.

957. Antony Guss testified that Islam had real or actual control strategically in the business affairs of CFI, but not on a day-to-day basis.

963. Prior to the trial Joseph Guss had given written notice that the defendants would not rely on the affidavits which had been sworn by Islam. I was so advised by the Deputy Commissioner's counsel on the first day of the trial. On 10 December 2002, the 13th day of the trial, in the course of the defendants' case, I was informed that the defendants sought leave to rely on the Islam affidavits and a further affidavit by him. The application was opposed on the basis that the case had been conducted on the basis the original affidavits were not relied on. I permitted the affidavits to be relied on. In my view the Deputy Commissioner was not likely to be, and was not, prejudiced by this grant of leave.

966. Based on his evidence, Islam had little involvement in the instruction and preparation of CFI's defence in these proceedings. This has been handled by Joseph Guss. Varendran confirmed that he did not instruct Joseph Guss in relation to the defence to these proceedings.

969. I accept the Deputy Commissioner's submission that the Guss family control CFI. I make this finding on the basis that I consider Varendran, and subsequently Xia and Islam, were merely nominee directors of CFI with the real decision making power residing in the Guss family, in particular Joseph and Antony Guss. The lack of knowledge of Varendran about the operations or office holders of other associated entities, for example the chargee CFI Ltd (HK), the shareholder First Mainland International, and the manufacturer of the outdoor furniture Kencord Manufacturing, and indeed his own admission, confirm this to be the case. Xia did not provide any evidence to the Court. Islam is not familiar with the sale agreement and charge, despite being the director of the purchaser, CFI, and in his evidence was unable to specify any board meetings and that there has never been any shareholder meetings. I reject the evidence of Antony Guss that Islam exercised real control over the business of CFI.

973. Part of the Deputy Commissioner's lack of confidence in the management and conduct of the business operated by the defendant companies, is said to consist in the continuing refusal by CFI to acknowledge its taxation debts. The Deputy Commissioner submitted that but for these proceedings, the defendants would not have performed any of their taxation obligations with respect to the filing of returns and payment of tax.

976. As at 9 November 2001, CFI, despite having commenced business on 1 March 2001, had not lodged BAS with the ATO, had not registered with the ATO for PAYG purposes and had not paid any amounts for GST or PAYG. Antony Guss conceded this was the case. It was only after the commencement of the proceedings that this has been rectified.

979. There is some dispute as to when CFI was registered for GST. According to Antonio Antonelli, CFI was registered for GST from 1 February 2001. Antony Guss contends that CFI applied for registration for GST and an Australian Business Number ("ABN") in January 2001 and, by way of notice dated 9 February 2001, the ATO confirmed that the registration for both was effective from 15 December 2000. Correspondence from the ATO confirms that the registration was effective from this date.

982. In relation to the BAS, Antony Guss deposed that CFI had lodged the BAS for the quarters ending 30 March and 30 June 2001 and paid the required tax on 14 November 2001 ($1,213 and $1,424 respectively). Payment advices from the ATO appear to confirm this was the case. The delay in payment was said to be due to glitches in CFI's computer system with new accounting software having been loaded onto the CFI's computer server in or about August 2001, due to problems with the previous accounting software installed by Buckland Products. This was also supported by Varendran and Islam. Previously, CFI had been keeping records manually or by using Excel spreadsheets.

985. Antony Guss also gave an assurance that CFI would be able to pay the BAS liability for the quarter ended 30 September 2001, estimated to be between $15,000 and $20,000. Due to the abovementioned computer problems, Antony Guss stated that it was not possible to give an accurate BAS liability for that quarter.

988. On 28 November 2001 Antony Guss forwarded the BAS to the ATO for the quarter ended 30 September 2001 and CFI paid the required tax. This was one month overdue because of computer problems. This was calculated at $21,319. This was after having been given three weeks by Antonelli on 7 November 2001 to file the outstanding BAS returns. The defendants note that these proceedings were instituted on 9 November 2001, the day after Antonelli visited CFI's offices, notwithstanding Antonelli having allowed the defendants three weeks to lodge the BAS returns. In respect of the BAS for the quarters ended December 2001, March 2002, June 2002 and September 2002, CFI paid $17,748 on 28 February 2002, $13,851 on 26 April 2002, $16,667 on 26 July 2002 and $9,079 on 25 October 2002 respectively.

991. On 28 November 2001 CFI also paid the amount due in respect of PAYG withholdings for CFI's employees up to and including the period ended 31 October 2001. This was calculated at $21,571 for the period July to October 2001 and sent under cover of a letter dated 28 November 2001 to the ATO. Details of CFI's bank account exhibited to Antony Guss' affidavit sworn on 6 December 2001 indicate that the amount of $21,571 was banked by the ATO on 5 December 2001. No further monies are said by Antony Guss to be payable to the ATO.

994. The amount of $21,571 is disputed by the Commissioner. Aris Zafiriou in his affidavit sworn on 7 March 2002 contends that the amount due to the Commissioner is $75,370.80 for the period of 1 May 2001 to 31 February 2002. This was calculated by multiplying the company's average monthly group tax liability of $9,694.19 by the 10 months (May 2001 to February 2002) and subtracting the payment of $21,571 made by the company on 28 November 2001. As justification for this, Zafiriou first referred to the Australia and New Zealand Banking Group Ltd's ("ANZ") records of CFI which disclosed that from early May 2001 to the end of November 2001, CFI paid the wages of at least ten factory staff and five administrative/sales staff. Secondly, the annual reconciliation statement provided by CFI to the ATO stated that the company's PAYG withholding tax liability for the year ending 30 June 2000 was $116,330.19. Thus the company's average monthly PAYG withholding tax liability for the year ending June 2001 is said to be $9,694.19 ($116,330.19 divided by 12).

997. This calculation is disputed by the defendants who note that that calculation does not factor in two payments of $9,435 made by CFI on 6 March 2002 and 13 May 2002. When these payments are factored in, Zafiriou said that the outstanding balance was $56,429.24. The defendants submit that the assumption of CFI making net monthly wage payments of $9,694.19 is wrong, having regard to the ANZ bank statements and PAYG payment summaries. These reveal that the debt would have been in the sum of $25,645.

1000. Zafiriou disputed CFI's calculation for a number of reasons. First, ANZ bank records for CFI establish that the company has been the payer of wages for both CFI and Kencord Manufacturing since early May 2001 to end November 2001. Secondly, since CFI has been carrying on Buckland Products' business and has held all of the assets of the furniture business since March 2001 and has paid the wages for both CFI and Kencord Manufacturing since early May 2001 to end of November 2001, an inference may be drawn that CFI has continued to pay the wages for the period commencing December 2001 to end February 2002.

1003. In relation to PAYG remittances, the Deputy Commissioner claims that as at 9 November 2001 CFI owed the Commissioner of Taxation $55,741.55 in respect of PAYG remittances over the period from 1 May 2001 to 23 October 2002. Since the date of issue, CFI has paid sums reducing that particular indebtedness as at 9 November 2001 to an outstanding amount of $26,899.95.

1006. It was only on 14 November 2001 that Antony Guss instructed Rundles to apply on behalf of CFI for registration for PAYG purposes. Antony Guss claimed that he had previously believed that the BAS statements included registration for PAYG. A letter from the ATO exhibited to Varendran's affidavit sworn on 15 December 2001 indicates that CFI's PAYG registration was effective from 1 July 2001, backdated from the date of issue of 4 December 2001.

1009. As at 21 November 2001, Antony Guss deposed that CFI had forwarded by post to the ATO the employment declaration forms signed by the employees: Nazrul Islam, Rebecca D'Souza, Caterina Blascetti, Marilla Guss, Antony Guss and Sandra Guss (on a casual basis). CFI had also applied on some unspecified date, to be registered with the employees' superannuation fund Professional Retirement Fund. Since the end of November 2001, CFI has filed taxation returns and made payment of tax on or about the due dates.

1012. On 12 August 2002 CFI lodged with the ATO the PAYG payment summary for the year ended 30 June 2002 in respect of which deductions amounting to $59,219 are said to be remitted to the ATO. The 12 group certificates for the 12 employees that CFI had employed during that year accompanied the payment summary.

1015. Antony Guss, in his affidavit sworn on 2 September 2002, stated that CFI has paid all amounts due in respect of GST and PAYG up to 30 June 2002, and in a further affidavit sworn on 31 October 2002, states that CFI has paid all amounts due in respect of GST and PAYG up to 30 September 2002.

1018. Ultimately, in my view, it is not necessary to resolve the discrepancies between amounts said to be owed, when amounts were paid and when the companies were registered. The case is not decided on these points. I note that a number of payments were late. This was said to be due to computer problems. I repeat my previous findings that any such problems did not absolve the defendants from paying tax in a timely manner. At the very least, the defendants ought to have contacted the ATO prior to the deadline to advise of such computer problems as may truly have existed and worked out an alternate deadline. That did not occur. It is the responsibility of taxpayers to ensure that timely returns are submitted to the ATO. I find that it was the onset of these proceedings which provided the motivation for the defendants to submit their returns and ensure that subsequent returns were filed on time. Looking to the future, the defendants' prior record of payment of tax provides me with little comfort that this will continue.

1022. Joseph Guss stated in evidence that CFI commenced trading on 1 March 2001 and later engaged four employees on 1 July 2001 (not including Antony Guss). These persons were sales and administrative personnel and were: Nazrul Islam, Rebecca D'Souza, Caterina Blascetti and Marilla Guss. Sandra Guss was employed on a casual basis.

1025. There is evidence of Antony Guss that prior to 1 July 2001 CFI paid Casualife Furniture a fee for services performed by Casualife Furniture's employees for work done in connection with the business of CFI. This included administrative and sales personnel and factory staff. Islam said in evidence that CFI is the employer of the administrative/marketing personnel and that Kencord Manufacturing is the employer of the factory personnel.

1028. Antony Guss stated that between 1 March 2001 and 30 October 2001 CFI paid Casualife Furniture, or to third parties at Casualife Furniture's direction, the following amounts for the provision of labour: (a) $96,043.75 for 1 March 2001 to 30 June 2001; and (b) $82,986.27 for 1 July 2001 to 17 October 2001. A sum of $20,191.90 was also paid by CFI to Casualife Furniture for the provision of services from 1 March 2001 to 30 June 2001. This was allegedly pursuant to cl 5 of the sale agreement which provided that Casualife Furniture should complete all work in progress. Another payment of $39,723.07 was also to have been made on account of the sale agreement.

1031. At a meeting on 23 October 2001 between Antony Guss and staff of Casualife Furniture, Antony Guss advised the appointment of a liquidator, that it looked as though the business would close and he offered new employment with a new company on the same terms and conditions. The meeting finished with a consensus that the employees would commence employment with the new company. There was a further meeting with employees on 31 October 2001. In the result, the administrative staff of Casualife Furniture were offered employment at CFI and the factory staff of Casualife Furniture were offered employment with Kencord Manufacturing, and employment was taken up on that basis. As Antony Guss described the functions of CFI and Kencord Manufacturing, no formal agreement existing as to this, Kencord Manufacturing manufactured the furniture using materials and components supplied by, and machinery owned by, CFI. Further, the furniture produced was sold to CFI. Hence, Kencord Manufacturing has no assets.

1034. Islam's evidence in relation to the undocumented labour hire agreement between Kencord Manufacturing and CFI is unclear. Apparently Antony Guss, as public officer of Kencord Manufacturing, informed Islam around 18 October 2001, who at that stage was not a director of CFI, that Kencord Manufacturing "would remain as a labour supply company" to CFI, continuing on from Casualife Furniture, now Buckland Products. No negotiations occurred as to labour, wages or salaries or profit.

1037. This evidence, which I accept, further supports my previous findings in relation to Islam and Xia being nominee directors. Were Kencord Manufacturing and CFI two independent companies, such negotiations would have occurred. As it was, I find that Antony Guss asserted the particular form of the relationship between the two companies, with Islam complying with those instructions.

1040. The Deputy Commissioner pointed to the absence of records of the payments of $96,043.75 and $82,986.27 having been made. Rather, the ANZ bank statements for both the accounts of Casualife Furniture and CFI over the period December 2000 to November 2001 indicate that CFI had been paying all wages since early May 2001 to date and was therefore liable for PAYG withholdings. The ANZ bank statements show that Casualife Furniture paid the wages of employees up until approximately 26 April 2001 with CFI subsequently paying the wages of Casualife Furniture's employees up until 4 December 2001. The Deputy Commissioner helpfully set out a table in its submissions showing the payments made by each company.[31] Furthermore, reconstructions of these transfers from CFI indicate that the payments were made to employees of Casualife Furniture, namely: Kemal Ozergen, Bruce Talbot, Evan Knower, Anu Tennekoon, Giuseppe Bernado, George Farmakiotis, John Kerr, Richard Davidson, Bill Koutsoubos, Abul Badea and Bradley Dearling.

1043. Bank statements for Vasilios (Bill) Koutsoubos show that he received his salary deposit from "Casualife" up to and including 26 April 2001, and thereafter he received his salary deposit from "Casualife Int", up to and including 15 November 2001.

1046. The Deputy Commissioner claimed, both before me and earlier before the Senior Master in December 2001, that CFI is responsible for tax instalments deducted from the employees' wages and salaries since the sale agreement until the date of liquidation of Casualife Furniture (subsequently Buckland Products) with respect to the wages and salaries paid by CFI in that period. This is clear from a reading of s 12-35 of schedule 1 of the Taxation Administration Act 1953 which provides that "an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)".

1049. The defendants submitted that CFI was the payer of "net" wages and not "gross" wages and hence is not liable to make these payments for the purposes of s 12-35. In his evidence Joseph Guss explained that "net wages" was "the amount that was advised to it as being the net wages after PAYG tax is deducted to those employees as an agent for Buckland". Joseph Guss stated that Buckland Products was responsible for the gross wages, or amounts above and beyond the net wage, and that payments made by CFI were payments on Buckland Products' behalf as their agent.

1052. This issue does not require resolution for present purposes as CFI tendered an amount of $25,645 by cheque under cover of a letter dated 27 November 2002 which it calculated as the appropriate amount. The Deputy Commissioner, whilst not conceding that this amount is correct, having calculated the amount at $45,000, relies on this payment as supporting her claim that but for the commencement of these proceedings, the defendants would not have performed any of their taxation obligations.

1055. The Deputy Commissioner submitted that Casualife Furniture was deliberately left on the record as employer after the sale agreement with CFI by Joseph and Antony Guss, knowing that Casualife Furniture did not have the financial means to meet the accrued and accruing taxation, superannuation and leave entitlements of the employees. Furthermore, the employees were transferred from Casualife Furniture only after significant leave and superannuation entitlements had accrued in Casualife Furniture together with outstanding PAYG deductions.

1058. Antony Guss admitted in evidence that he did not inform the employees that the assets of Casualife Furniture had been transferred. Casualife Furniture's report as to affairs, dated 13 November 2001 and signed by Antony Guss, notes in schedule F amounts owing to employees by way of superannuation and leave. This amounts to $77,844.26 accrued in respect of Casualife Furniture's employees, including during the period from 1 March 2001 through to the end of October 2001. The Deputy Commissioner submitted that this was a deliberate course of conduct which involved the hiving off of future debt to be incurred with respect to employee superannuation, leave entitlements and tax instalment deductions for the period March 2001 to October 2001 and that such conduct defrauded the ATO, the employees and the VWA.

1061. The Deputy Commissioner also submitted that employees have been placed in Kencord Manufacturing, which is a shell, to defraud and to avoid employment creditors such as the ATO and the VWA. The defendants submit that no allegation of having defrauded employees was put to Antony Guss and that the Deputy Commissioner cannot now put this as part of her case. The defendants also note that neither VWA, nor any employees supported the Deputy Commissioner's case, or were called to give evidence by the Deputy Commissioner.

1064. Both Joseph and Antony Guss rely on the informal undocumented arrangement between Casualife Furniture and CFI after the entry into the sale agreement to justify Casualife Furniture retaining itself as the employer on record up to 23 October 2001. This arrangement was said to have been negotiated by Antony Guss and Varendran. This arrangement between CFI and Casualife Furniture involved Casualife Furniture (and later Kencord Manufacturing) continuing to manufacture using machinery and raw materials which belonged to CFI, and CFI paying Casualife Furniture's employees directly (at the direction of Casualife Furniture as submitted by the defendants) for the provision of labour. Joseph Guss claimed that this was required because Casualife Furniture was obliged under the sale agreement to complete various work in progress. There was no sale transaction on finished items and at all times CFI retained title in the raw materials.

1067. Antony Guss gave evidence that after the sale agreement, Casualife Furniture continued to manufacture furniture products up until Kencord Manufacturing took over on 17 October 2001. The manufacturing was conducted using approximately 14 factory staff using the plant and machinery free of charge at the factory area. There was no sale transaction from Casualife Furniture to CFI on finished items of furniture. Rather, CFI paid to Casualife Furniture an amount relating to the provision of labour. In fact, CFI paid those employees directly out of CFI's bank account with the payments journalled to Casualife Furniture. The plant, equipment and machinery the subject of the sale agreement remained at the same premises and did not move. Antony Guss justified this by saying that Casualife Furniture was able to release a significant amount of debt and looked forward to spreading its wings out of the seasonal nature of the outdoor furniture business. After Kencord Manufacturing took over on 17 October 2001, Casualife Furniture "wasn't there, it wasn't doing anything".

1070. The Deputy Commissioner pointed to other irregularities in Antony Guss' evidence. First, it was submitted that Kencord Manufacturing could not have taken over the manufacturing arm from Casualife Furniture on 18 October 2001, as contended by Antony Guss, as Antony Guss only first met with Casualife Furniture's employees on 23 October 2001 (with a subsequent meeting on 31 October 2001) when he offered them new employment with Kencord Manufacturing on the same terms and conditions. Furthermore, with Turner being appointed as provisional liquidator, and subsequently as liquidator, on 18 and 25 October 2001 respectively, Antony Guss was not authorised, and did not obtain authorisation from Turner, to deal with Casualife Furniture's employees. The defendants submit that Turner's authorisation was not required.

1073. I find that CFI paid the wages of Casualife Furniture's employees since early May 2001 until the commencement of the proceedings. This is clear from the bank statements and the reconstruction transfers. Consequently, CFI was responsible for PAYG withholdings. I do not accept the distinction submitted by the defendants between responsibility for "net wages" and "gross wages". I find this to be artificial. I find that the defendants deliberately left the employees in Casualife Furniture, after having transferred all assets to CFI under the sale agreement and without informing the Casualife Furniture employees, in order to quarantine future debt to be incurred with respect to employee superannuation, leave entitlements and tax instalment deductions. The report as to affairs of Casualife Furniture notes a not insignificant amount of $77,844.26 accrued in respect of employee entitlements. The wages paid by CFI to the employees were undoubtedly made to ensure that the employees continued to work for what was otherwise a shell company, and without providing for their additional entitlements.

1077. This company was registered in Victoria on 15 March 2001 by Page of Searchwide upon instructions from Joseph Guss received by her on 9 March 2001. As Page received no instructions regarding the details of office holders, shareholders and the addresses for the principal place of business and registered office, she simply incorporated the company in the name requested with herself as sole director, secretary and sole shareholder. After incorporating Kencord Manufacturing, Page forwarded her account to Joseph Guss, which, at 14 November 2001, remained unpaid. I find that Page was unaware, until being informed by Anthony Mihalopoulos on 31 October 2001, that Kencord Manufacturing was operating as a business. Antony Guss acknowledged in writing on 13 November 2001 that Page had taken no part in the conduct of the business of Kencord Manufacturing.

1080. Since then, Page has received instructions from Joseph Guss to prepare the necessary forms to transfer her name from the company records and appoint Antony Guss as sole director and secretary, transfer the shares held in her name and complete the company register. According to both Page and Antony Guss, these forms were to be collected and lodged on 14 November 2001 with the change effective from 15 March 2001.

1083. Similarly to the submissions with respect to CFI, Bongania, Moolach and Gerandu, the Deputy Commissioner submitted that this failure to notify the incorporator of its trading status, or notify ASIC of the change in officeholders, was done to conceal the fact that the Guss interests controlled Kencord Manufacturing and that the business had been transferred.

1086. However, both Antony and Joseph Guss said that they believed that the appropriate ASIC forms showing Antony Guss' appointment as director had been lodged by Searchwide in accordance with Joseph Guss' instructions.

1089. I repeat my previous findings in relation to CFI. While I am not prepared to find that it was the defendants' intention, by the delay in lodging the Form 304, to conceal the Guss interests in Kencord Manufacturing or that the furniture business had been transferred, it yet was a delay in complying with the statutory requirement and in that sense I take it into account in my assessment of the Guss family in their conduct and operation of the furniture business.

1092. The shareholding of Kencord Manufacturing consists of six issued ordinary shares. They are held by Claremont Kencord the sole director of which is Antony Guss and the shareholders in which are Antony and Joanne Guss. The transfer of the shares appears to have occurred some time in November. Page was the transferor and she deposed that as at 14 November 2001 she was the sole member of Kencord Manufacturing and that she had prepared the necessary forms to transfer the shares held in her name which were to be collected by Joseph Guss later that day. The share transfer form, exhibited to Antony Guss' affidavit sworn on 21 November 2001 shows the transfer date as 15 March 2001 and is signed by Page but unexecuted by the transferee. An ASIC historical extract dated 7 May 2002 indicates that the change of officeholders form was received by ASIC on 15 November 2001, processed by ASIC on 21 November 2001 and effective from 15 March 2001.

1095. I find that by virtue of their shareholding and the position of Antony Guss as director of Kencord Manufacturing, the Guss family own and control Kencord Manufacturing.

1098. According to Antony Guss, Kencord Manufacturing has carried on the manufacturing part of the furniture business formerly conducted by Casualife Furniture (or Buckland Products) since 17 October 2001, and since 1 March 2001 CFI has conducted the distribution or selling side of the business. Prior to 17 October 2001, Kencord Manufacturing did not carry on any form of trading and had no employees. The evidence of Antony Guss, as set out by the Deputy Commissioner in her written submission,[32] is that Kencord Manufacturing is a manufacturer of furniture employing the factory employees; it uses raw materials supplied by CFI; it uses machinery owned by CFI; it sells its services for production to CFI (labour hire); no formal arrangement exists between the two companies; Kencord Manufacturing has taken over Casualife Furniture's factory employees and the manufacturing of the outdoor furniture; and the property and raw materials remain the property of CFI. Islam has also given evidence that Kencord Manufacturing has no assets, that CFI pays the wages and salaries directly, and that Kencord Manufacturing supplies labour on a similar basis as Casualife Furniture had done so previously.

1101. It should also be recalled that Varendran, who was CFI's sole director, gave evidence that he did not recall any transaction concerning Kencord Manufacturing, he was not aware as to the business conducted by Kencord Manufacturing or its directors, and he was not aware that it commenced trading on 17 October 2001. Varendran left CFI in August 2001 but stayed on three days a week as a consultant for the remainder of 2001.

1104. Islam said that Kencord Manufacturing employs the factory employees but that CFI is the manufacturer. Secondly, Kencord Manufacturing supplies labour to CFI and CFI pays the employees their wages directly. However, there is no profit for Kencord Manufacturing in this arrangement. Kencord Manufacturing has no assets. Islam said that Antony Guss, as public officer of Kencord Manufacturing, and himself, entered into that arrangement. He further stated that he believed this was entered into on 18 October 2001, before he was a director of CFI. He subsequently clarified his evidence and stated that Antony Guss simply informed him in his day-to-day function, that Kencord Manufacturing would keep supplying labour to CFI. There was no negotiation about this.

1107. The Deputy Commissioner submitted, and the defendants deny, that Kencord Manufacturing's continued ability to meet its liabilities as employer depended upon CFI's willingness and preparedness to do so. Further, the only explanation for the placement of employees in Kencord Manufacturing was to defraud and avoid employment creditors, such as the ATO and the VWA, by isolating employer liability in a company which had no assets and which liability could be avoided through Kencord Manufacturing being placed in liquidation if and when that is deemed necessary. The defendants submit that there is no reasonable basis upon which to draw such an inference, citing the statements of Dixon CJ in Jones v Dunkel that:[33]

"... the law which this passage attempts to explain does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied."

1111. The defendants further submit that the argument fails to take into account the potential personal liability of directors under s 222AOC and s 222AOD of the Income Tax Assessment Act 1936, which attaches to insolvent trading, and that this operating structure is not such as to prevent liability from reaching Antony Guss as director of Kencord Manufacturing.

1114. I repeat my findings made in relation to CFI and the payment of the Casualife Furniture employees. I find that the placement of the Casualife Furniture employees in Kencord Manufacturing was made for a similar purpose to the retention of the same employees with Casualife Furniture after the sale agreement and up until their transfer to Kencord Manufacturing. I accept Islam's evidence that Kencord Manufacturing has no assets. I accept the Deputy Commissioner's submission that the purpose of placing employees in Kencord Manufacturing was to enable employment creditors such as the ATO and the Victorian WorkCover Authority to be avoided, by quarantining such liability in a shell company.

Payments and amounts owing by Kencord Manufacturing

1118. Part of the Deputy Commissioner's lack of confidence in the management and conduct of the business operated by the defendant companies consists in the continuing refusal by Kencord Manufacturing to acknowledge its taxation debts.

1121. As at 14 November 2001, Kencord Manufacturing had not registered for, or paid, PAYG with the ATO, despite trading and engaging personnel. Consequently, Kencord Manufacturing was indebted to the Deputy Commissioner for PAYG withholdings amounting to $4,268.79 in respect of PAYG remittances for the period 23 October 2001 to 9 November 2001. Since then Kencord Manufacturing has paid sums in respect of PAYG reducing that particular indebtedness as at 9 November 2001 to nil. On 26 November 2001 Islam, on behalf of Kencord Manufacturing, paid the amounts due in respect of PAYG deductions for its employees up to the period ended 31 October 2001 and enclosed its PAYG Instalment Activity Statement. An amount of $1,490 was paid to the ATO. Islam confirmed that such an amount was paid from Kencord Manufacturing's bank account on 26 November 2001.

1124. It was only on 14 November 2001 that Antony Guss instructed Rundles to apply on behalf of Kencord Manufacturing for registration for PAYG purposes. Antony Guss claims that he had previously believed the BAS statements included registration for PAYG purposes.

1127. In his affidavit sworn on 21 November 2001 Antony Guss stated that he had received duly signed employment declaration forms from all employees save for one, and forwarded them to the ATO. These employees were: Abdul Badea, Frank Bec, Richard Davidson, George Farnakiotis, John Kerr, Evan Knower, Bill Koutsoubos, Kemal Ozergen, Bruce Talbot, Anu Tennakoon and Des Wallace.

1130. Antony Guss further stated in that affidavit that Kencord Manufacturing had lodged its BAS for the quarters ended 30 June and 30 September 2001. Nazrul Islam confirmed that the statements for the quarters ended 30 June and 30 September 2001 were nil returns and that no monies were payable to the ATO. While the defendants have submitted that Kencord Manufacturing paid $1,490 on 26 November 2001 in respect of its BAS for the quarter ended September 2001, this amount was in relation to PAYG not BAS. In relation to the BAS quarters ended December 2001, March 2002, June 2002 and September 2002, Kencord Manufacturing paid $8,921 on 28 February 2002, $11,867 on 26 April 2002, $11,850 on 28 July 2002 and $12,276 on 25 October 2002. No monies are now said to be due and owing. Antony Guss further stated that Kencord Manufacturing had applied to be registered with the employees' superannuation fund Professional Retirement Fund.

1133. In affidavits sworn on 2 September 2002 and 31 October 2002 Antony Guss stated that Kencord Manufacturing had paid all amounts due in respect of GST and PAYG up to 30 June 2002 and 30 September 2002 respectively. The defendants submitted that Kencord Manufacturing had never been in default in lodging BAS statements or PAYG summary statements and in making the payments.

1136. Antony Guss conceded that 14 persons were employed by Kencord Manufacturing since 17 October 2001 and that he could not be certain that the company was registered for GST. He stated that Kencord Manufacturing was obtaining additional employment declaration forms to complete and return to the ATO. These employees had previously been employed by Buckland Products. As previously noted in the section relation to CFI, Antony Guss held a meeting with the then staff of Buckland Products on 23 October 2001 and explained that Buckland Products was likely to close down and offered employment with a new company on the same terms and conditions. The result was that administrative staff became employees of CFI, and factory staff became employees of Kencord Manufacturing.

1139. On or about 14 August 2002, Kencord Manufacturing lodged its PAYG payment summary for the year ended 30 June 2002 with the ATO. The summary, dated 12 August 2002, was for the amount of $34,872. Twelve group certificates for the twelve employees employed by Kencord Manufacturing during that year accompanied the payment summary.

1142. I repeat my findings in relation to the late payments made by CFI. I find that it was the onset of these proceedings which provided the motivation for the defendants to submit their returns and ensure that subsequent returns were filed on time, rather than a willingness to ensure that Kencord Manufacturing met its taxation obligations.

Other submissions undermining confidence in the Guss controlled furniture business

1146. The Deputy Commissioner relied on a number of other proceedings and events as further justifying her lack of confidence in the conduct and management of the Guss controlled furniture business. I shall briefly list these.

1150. The Deputy Commissioner referred to prosecutions against Casualife Furniture before the Magistrates' Court on 15 August 2001 where Casualife Furniture (later Buckland Products) was prosecuted on 14 charges due to its failure to lodge sales tax returns for the period May 1999 to June 2000.[34] The Court, constituted by Mr Hallenstein M found the charges proved, ordered Casualife Furniture to comply with the Taxation Administration Act, imposed a total fine of $39,500 and ordered it to pay costs of $991.70. At all relevant times, Antony Guss was a director of Casualife Furniture.

1153. The Deputy Commissioner also referred to a prosecution against Scandi International on seven charges of failing to lodge sales tax returns. The charges were also heard by Mr Hallenstein M on 15 August 2001; he found the charges proved, and fined the company $18,500 with costs of $991.70. Antony Guss was a director of Scandi International from 1 May 1998 up until 5 November 1998, when his sister, Marilla Guss, replaced him. Shares in Scandi International are held equally, but not beneficially, by NMGP and SMET, a matter which I referred to at [128] - [130].

1156. There was an appeal in each case. The appeal with respect to Casualife Furniture has not proceeded by reason of the company being wound up. The Scandi International appeal was heard in the County Court on 4 March 2002; the fine was reduced to $6,250 with costs of $1,650. In cross-examination, Zafiriou conceded that since then the required sales tax returns have been lodged and tax paid for the period in question.

1159. The defendants concede that in relation to the prosecution of Casualife Furniture, the order of Mr Hallenstein M must stand unless there is a successful appeal. However they submit that the Court should take note of the outcome of the Scandi International appeal in assessing the weight to be attached to that prosecution. The defendants repeated their submission that the delays were due to computer problems experienced by Casualife Furniture which impacted on its ability to submit accurate returns.

1162. I take these proceedings into account, as well as the result of the subsequent appeal. The comments previously made in relation to the matter of computer problems apply here. I consider these matters to be a factor to consider in assessing whether the Deputy Commissioner is justified in having lost confidence in the conduct of the defendants' furniture business with the result that they should be wound up.

1166. There is a reference to adverse findings by Ashley J in Guss v Geelong Building Society (in liq)[35], where his Honour in dealing with costs, considered matters concerning the credibility of Joseph Guss in particular but also of Antony Guss. His Honour made some severe findings concerning Joseph Guss, of a deliberately untruthful answer in evidence, and of not discovering a document and permitting the trial to proceed on a false basis for six of its nine days.[36] I do not consider it appropriate to act on these findings in the determination of the present cases. I reject the Deputy Commissioner's submission in this respect and do not take account of the findings of Ashley J.

1170. The Deputy Commissioner referred to judgments of Menhennitt J in proceedings to wind up GMI and MMI,[37] and to the judgment of Kaye J in Bendix Consolidated Industries Ltd v Federal Commissioner of Taxation[38] to establish historic facts. In the end there was no dispute as to these factual matters.

1173. As previously mentioned, Joseph Guss was a director of GMI and MMI. The Registrar of Companies in early 1973 informed Joseph Guss that unless substantial capital was introduced to MMI, an inspector would be appointed. Capital having not having been introduced, on 23 January 1973 an inspector was appointed by the Governor in Council to investigate the affairs of MMI. On 4 September 1973 Robert Clive Tadgell was appointed to investigate the affairs of GMI.

1176. On 24 December 1973 the board of directors of Bendix resolved to enter into an agreement whereby Bendix would purchase from Automotive General Industries the entire share capital of GMI for $350,000 and that Bendix would apply for the issue of 400,000 ordinary shares of $1 each in the share capital of GMI. The Board further resolved to enter into an agreement with MMI for the purchase by MMI of the business of `Bendix Furniture' for the sum of $700,000 subject to certain adjustments. It was noted that MMI would transfer its insurance assets and liabilities to GMI.

1179. A series of cheques then passed between Bendix, Automotive General Industries, GMI and MMI with Bendix acquiring the whole of the issued capital of GMI and GMI issuing Bendix 300,000 redeemable preference shares. Subsequently, Bendix held 850,000 ordinary shares and 300,000 redeemable preference shares in GMI and it gained access to the tax losses of MMI. MMI then commenced to carry on the business of "Bendix Furniture" from premises occupied by Bendix and with the latter's employees in the same manner as in the past.

1182. On 24 December 1973, the inspector reported to the Governor in Council on his investigation and concluded that MMI could not pay its debts and should be wound up. In a further report on the same date the inspector concluded that GMI, which could not pay its debts, should be wound up.

1185. On 12 March 1974 the Attorney General for the State of Victoria commenced proceedings in the Supreme Court of Victoria for the winding-up of MMI and GMI. On 24 May 1974 Menhennitt J ordered that the companies be wound up on the ground of insolvency and appointed Alan Murray Horsburgh as liquidator.[39]

1188. On 10 April 1975 MMI (in liq), Bendix and Horsburgh as liquidator entered into a sale agreement dated 10 April 1975, pursuant to which Bendix agreed to re-purchase the furniture business from MMI (in liq) for $300,000. The agreement was approved by Menhennitt J on 11 June 1975.[40]

1191. On 25 February 1976, Horsburgh, as liquidator of GMI, reported pursuant to s 235(2) of the Companies Act 1961 as to GMI's affairs since being wound up, including its hopeless insolvency.[41]

1194. The Deputy Commissioner relies in particular on certain of the statements of Menhennitt J in his rulings and the judgment as to winding up, as evidence that Joseph Guss' approach to litigation has not altered over the course of some 30 years. It is helpful to set out the following parts of the judgment:[42]

"I summarise what I have said about the past conduct and my conclusions as to the future conduct of General Mutual by saying that what I have stated as to the past conduct of the company, and in particular Mr Guss, and my conclusion that it is likely to typify the conduct of that company in the future, strongly reinforces the conclusion I have reached that the Attorney-General has satisfied me that General Mutual should be wound up, and I so find."

1198. The reference to Mr Guss was a reference to Joseph Guss.

1201. Menhennitt J then referred to MMI, noting that on the balance sheet it was significantly insolvent. Noting too a submission that it was currently trading profitably and that no creditors were unpaid, hence that it should be permitted the opportunity to trade itself out of that deficiency into a state of solvency, Menhennitt J said:[43]

"Insofar as this submission involves me looking to the future and looking to the possibility, or indeed even the probability that it will make profits hereafter, the authority which I have been referred, In re European Life Assurance Society (1869) L.R. 9 Eq. 122 at 128 makes it clear that the fact that it is carrying on profitably now, and even if it will carry on profitably hereafter, is irrelevant. However, there are much more important considerations."

1205. After referring to the "reality of the situation" Menhennitt J referred to the considerations to take into account in deciding whether MMI should be wound up:[44]

"However, there is another consideration which I regard as of very great importance. There is, I think, very good ground for very real fear that if General Mutual were wound up and Motorists Mutual were not, something might happen to such assets as Motorists Mutual (now Bendix Furniture) has. In my view there is a very real risk, having regard to the past conduct of both of these companies, that an attempt might be made to undo in some way what was done on 24 December 1973. ... The whole case was conducted primarily and firstly in terms of endeavouring to save Motorists Mutual, Bendix Furniture, from winding up. And the more that was put in the forefront, the more it seemed to me that the apprehension expressed by the Attorney-General as to the possibility of any funds there going elsewhere in the group was a well-founded one. That I regard as being at least equally important with the inevitability of the company eventually being wound up, but it points to the conclusion that it should be wound up now, rather than allow time to go by before the liquidator in General Mutual in effect winds it up, because of non-payment of debts."

1209. His Honour ultimately concluded that he was satisfied that it was just and equitable that MMI be wound up, and he made orders for the winding up of both companies.

1212. Further, in the further report of Horsburgh dated 25 February 1976 referred to at [366], in relation to GMI Horsburgh referred to the winding up order on 24 May 1974 and noted that a statement of affairs of the company at that date "shows for creditors and shareholders an estimated deficiency of $1,782,161". He noted that the company appealed against the winding up order and that on 10 October 1975 the High Court dismissed the appeal with costs to be paid from the assets of the company. The solicitors for the company were Evans Guss and Holt who "have now claimed that their costs and disbursements in the appeal are payable by the liquidator from the assets of the company in full and in priority". The report continued:

"4. The proceedings were on the basis that it was an appeal by the company. However, the company can act only through its directors. I am not informed whether or which directors in fact authorised the appeal. In other proceedings Joseph Guss claimed he was in control of the company. I do not know whether this continued after 24 May 1974.

5. On 24 May 1974 the company was hopelessly insolvent on any realistic commercial assessment of the statement of affairs submitted. Yet knowing this situation, the directors or director proceeded with the appeal, presumably in the knowledge that no matter what the result might be the taxed costs would be ordered to be paid from the company's assets. Joseph Guss is apparently the sole proprietor of Evans Guss and Holt.

6. The success or failure of the appeal could make no difference to the financial reality that the company was hopelessly insolvent. The end result is that the whole costs of the appeal will have to be paid, in priority or otherwise, from funds which would otherwise be available for creditors.

7. It does appear that the law or practice which led to the company's costs of appeal being at the expense of the unfortunate creditors, and apparently with no liability to directors, can only tend to encourage reckless irresponsibility on the part of directors in such circumstances.

8. In this matter it must be questioned whether the directors or director acted honestly in the discharge of the duties of the office, and consideration might well be given to the resultant damage."

1220. The defendants submitted that these insurance company matters are over 30 years old, are stale and therefore have no relevance to the present proceedings. The defendants also deny that, by failing to introduce any further capital to MMI, Joseph Guss engaged in some wrongdoing. Further, the judgments are incapable of sustaining any conclusion as to the operation of CFI or Kencord Manufacturing.

1223. Of course the proceedings in relation to GMI and MMI are over 30 years old. However, they disclose conduct which has continued up until the present proceedings, that is a disregard for creditors of the furniture business from time to time and a tendency to appeal any decision to wind up an entity conducting the furniture business. The consequence is delay, cost and difficulty for the liquidator.

1227. The Deputy Commissioner alleges that there has been continual obfuscation and delay on the part of Joseph and Antony Guss. This is said to be illustrated by a number of examples.

Lofthouse - Joseph Guss trustee in bankruptcy

1231. This concerns the failure to provide information to his trustee in bankruptcy, Lofthouse, in particular his statement of affairs (as to which a request was made pursuant to s 77C of the Bankruptcy Act), and books and records pursuant to his obligations to do so under s 77 of the Bankruptcy Act. Lofthouse requested information from Joseph Guss, Antony Guss and Rundles.

1234. I add that in his evidence Lofthouse said that in the normal course of administering a bankruptcy the bankrupt would surrender his passport. That, I note, would be in compliance with s 77(a)(ii) of the Bankruptcy Act which provides that a bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause, forthwith after becoming a bankrupt give to the trustee his passport, if any. Joseph Guss did not give his passport to Lofthouse. As a result Lofthouse alerted the Federal Police as to the bankrupt leaving the country without the necessary authority. This is known as the passenger automatic systems alert. I should add that Lofthouse did not say in evidence that Joseph Guss had a passport, and there was no evidence that any issue had arisen as to Joseph Guss leaving Australia.

1237. On 24 February 1999 Lofthouse wrote to Antony Guss stating that he was trustee of the bankrupt estate of Joseph Guss. He asked Antony to confirm the basis of Joseph Guss' current employment with Casualife Furniture as a consultant, as disclosed by Joseph Guss, and to provide all details pertaining to the disposal of Joseph Guss' one share in Casualife Furniture, together with the timing of the disposal. Lofthouse stated that he required the information to assist him with his investigation into Joseph Guss' affairs. Antony Guss did not reply to this letter.

1240. On 25 February 1999 Lofthouse wrote to Rundles, as Joseph Guss' accountant, requiring that all books and records in their possession that relate to the bankrupt, Joseph Guss, directly, and to any entity or company in which he held or holds shares, directorships, or was employed by now or in the past. Lofthouse also sought advice as to Rundles' awareness of the bankrupt resigning as a director of Casualife Furniture and requested complete details of the disposition of Joseph Guss' share in Casualife Furniture and the status of the current shareholding in that company. The information was required urgently. Lofthouse wrote again on 15 March 1999.

1243. On 1 April 1999 Rundles replied requesting advice from Lofthouse in the following terms:

"(1)Would you please advise the specified place and the specified period or specified time on a specified day, being a place, and a period or a time and day, that are reasonable in the circumstances on which you require compliance with your request for production.

(2)Would you please also specify what books or classes of books that you require us to produce."

1248. The only thing that can be said in favour of Gilbert, who signed this letter, is that the letter was prepared by Joseph Guss and Gilbert merely passed it on.

1251. By a letter to Rundles dated 12 April 1999 Lofthouse reiterated that he required copies of all historical and current accounting, financial and secretarial records pertaining to both Joseph Guss personally together with all his associated entities, past and current. He requested the information be provided by 5pm on 19 April 1999 to his office.

1254. By a letter dated 23 April 1999 Rundles sought an undertaking from Lofthouse to pay Rundles' reasonable photocopying expenses to provide copies of the requested documents. Rundles also noted that other than to request copy documents, Lofthouse had not replied to their letter of 1 April 1999. Lofthouse did not provide the undertaking.

1257. In a letter dated 17 May 1999 to Antony Guss, Lofthouse referred to his letter dated 24 February 1999, noted the absence of a reply, and requested that Antony Guss provide him with full details of the terms of employment of Joseph Guss including any benefits provided and details of the transfer of Joseph Guss' shareholding in Casualife Furniture.

1260. Antony Guss replied by a letter dated 28 May 1999. Understanding that the sequestration was stayed by the Full Federal Court on 20 May 1999, he "was advised that no further response is required".

1263. The file discloses no further action. It remains the situation that none of Lofthouse's requests have been satisfied. Subject to that, Lofthouse said in evidence that he had "some records, in particular associated with ... a bank account, but generally" books and records had not been produced.

1266. The defendants submitted that the failure to provide Lofthouse with requested photocopies was due to the failure of Lofthouse to provide an undertaking to pay the reasonable costs of such photocopying.

1269. For his part, Lofthouse said in evidence that he believed the reason he did not agree to pay the copying charges was that he regarded it as the obligation of the bankrupt to provide the information and that there were no funds in the estate. I accept Lofthouse's evidence and further find that Joseph Guss was aware of these matters and that the request for copying charges was a deliberate step taken with a view to hindering Lofthouse in his duties as trustee.

1272. I further find that there was a failure by Joseph Guss to comply with the obligation on him under s 77(a) and (g) of the Bankruptcy Act to provide all books in his possession, and to "aid to the utmost of his or her power in the administration of his or her estate." I find that his inaction was deliberate for the purpose of delaying or obfuscating Lofthouse's investigations.

Mansell - receiver and manager of Buckland Products Pty Ltd

1276. This concerns the failure to provide Mansell, as receiver and manager of Buckland Products, with details of CFI Ltd (HK)'s accounting, books and records, and contact details despite repeated requests for the provision of such information.

1279. By a facsimile to Joseph Guss dated 26 October 2001, Mansell requested either the contact details of CFI Ltd (HK) or the information sought by Turner in an attached facsimile dated 25 October 2001, namely documents evidencing the debt claimed to be owed to CFI Ltd (HK) by Buckland Products, including particulars of any monies advanced by CFI Ltd (HK), and any payments made by Buckland Products to CFI Ltd (HK) in reduction of the debt claimed.

1282. By a facsimile to Joseph Guss dated 2 November 2001, Mansell reiterated his request for the contact and accounting details of CFI Ltd (HK). This facsimile refers to a letter from Joseph Guss dated 31 October 2001 and also to a schedule of account prepared by Buckland Products. Although that letter is not in evidence it is a reasonable inference that it contained or referred to the schedule.

1285. On 16 November 2001 Mansell wrote to Antony Guss requesting the records of Buckland Products and stating that he would attend the premises of Buckland Products on 19 November 2001 to collect the records, or if inconvenient, that they be delivered to Mansell's office on that same day. He also required any records held by Buckland Products' accountants and Joseph Guss.

1288. In a subsequent letter to Antony Guss dated 30 November 2001, Mansell noted that Antony Guss had not called him after receiving his facsimile of 16 November 2001 as advised by telephone message on 19 November, and that it was not until Joseph Guss called him on 29 November 2001 that he received a response. Mansell confirmed his request to Joseph Guss that he required all bank statements, cheque books, deposit books, cash books, general ledgers and journals, a copy of financial accounts for previous years, documents that support the disposal of all property of the company, files that support any legal action taken by the company and against the company, working papers, minute books and company registers. He enclosed a list to assist. The records should be delivered to his office by 5pm on 3 December 2001. Mansell stated that "As advised, I have responsibilities under the Corporations Law, which I am required to meet, and the delay in delivering the records is now causing me to fail in my requirements. I am also concerned that it may appear that I am assisting any delay to the liquidator carry out his functions". The liquidator had requested access to the records and that request "should be complied with".

1291. Antony Guss delivered some records to Mansell. But the balance of the records were not provided and on 5 December Mansell wrote to Antony Guss requesting advice as to when he would receive the balance of the records. Antony Guss spoke to Mansell who then sent a further letter, also dated 5 December 2001, to Antony Guss in which he noted Antony's failure, pursuant to his undertaking to either call Mansell or deliver records. He stated that "I do not have funds with which to enforce what I am entitled to under the law, and find myself in a position whereby I can neither comply with the reasonable request of the liquidator nor meet my obligations under the Corporations Law". Accordingly, he had given the liquidator permission to collect the records.

1294. By a letter to Joseph Guss dated 6 December 2001, Mansell requested documents which had not been delivered, specifically the banking records from July 2000 to February 2001, the original of valuation and contract of sale of the business, general ledgers and all hand written accounting records. He also requested a copy of the accounting and contact details for CFI Ltd (HK), which he still did not have despite his requests for them. On the matter of the contact details he said that "without it I find this administration extremely difficult as I am faced with decisions but I am unable to discuss it with my appointor. In this regard I query if you have a conflict acting for the Mortgagee and Mortgagor".

1297. In a facsimile on 10 December 2001 Antony Guss told Mansell that he had assembled additional documents and would deliver them tomorrow.

1300. By a letter to Antony Guss dated 18 December 2001, Mansell referred to a facsimile from Antony Guss, noted that Antony Guss would contact him when a case was over and said that he had had time to meet the obligation in relation to the records. He failed to see why the accounting person who holds the records could not deliver them to him.

1303. On 20 December 2001 Antony Guss responded to Mansell by letter stating that due to these current proceedings, which had consumed over a month of time, it had been impossible to compile the remaining records of Buckland Products and to finalise costing of the uncompleted stock. Antony Guss stated that he would be taking annual leave and that he would "give the above outstanding matters priority on my return later in January". Antony Guss blamed the delay in providing this information on the ATO and Turner.

1306. By facsimiles dated 30 January 2002 and 4 February 2002 to Mansell, Joseph Guss informed Mansell of proceedings against Buckland Products heard by Mr Hallenstein M, details of the charges brought against Buckland Products, the outcome of those proceedings and the further action, by way of appeal, which had been taken.

1309. On 18 March 2002 Mansell wrote to Joseph Guss. He enclosed a letter to his client, and requested that Joseph Guss arrange for his client to pay his fees, and a response. In the letter to CFI Ltd (HK) Mansell enclosed his account pursuant to his indemnity, and, among other things, advised that he had been unable to obtain all the books and records of the company due to Antony Guss' engagement in legal proceedings up until December 2001 and his vacation in January 2002; noted that Antony Guss had not completed, to the best of his knowledge, the calculation of the value of the stock of Buckland Products under the asset sale agreement; said that debtors were not significant and there were legal actions with claims exceeding $600,000, but he required substantial funds to progress the claims, which funds the company did not have. He was concerned that the receivership did not appear "able to achieve a return to you of your debt or part thereof". He would need funding to take legal actions and to resolve the issue relating to the value of the stock to be paid under the sale agreement. He would appreciate their thoughts.

1312. By a letter dated 19 June 2002 to Joseph Guss, Mansell stated that neither he nor CFI Ltd (HK) had responded to his letters dated 18 March 2002, that he intended to take action pursuant to the indemnity and would review the matter with the intention of retiring. On 19 June 2002 Mansell wrote directly to CFI Ltd (HK). He enclosed his letter dated 18 March 2002, stated that he intended to take action under the deed of indemnity if his invoice was not paid within seven days, and that unless he received a response to his letter he intended to retire.

1315. On 25 June 2002 Joseph Guss spoke to Mansell who, it would seem from a diary note, said that he needed to talk to CFI Ltd (HK).

1318. On 30 July 2002 Mansell wrote to Joseph Guss. He stated that "another month has passed and while I have sympathy for your issues, at the end of the day my issue is with Casualife Furniture International Limited. As advised, in the absence of communication I will take the action I previously referred to".

1321. In a subsequent undated letter to Joseph Guss, Mansell noted that despite Joseph Guss' advice in June 2002 that CFI Ltd (HK) would attend to Mansell's fees, nothing had happened. He advised that he did not intend to wait any longer, enclosed his invoice to August 2002, and stated that unless that and his previous invoices were paid by 18 September 2002, he would take action without further notice.

1324. In a final letter dated 26 August 2002 to Joseph Guss, Mansell noted advice of Joseph Guss in June 2002 that the appointor was sending funds per his invoice, that he still had no funds and requested advice as to what was happening.

1327. Mansell said in evidence that he received payment of his first account not long after 18 September 2002. Joseph Guss sent the cheque with a letter dated 23 September 2002; he said that it was a CFI Ltd (HK) cheque drawn on an Australian bank account.

1333. Mansell never received a response from CFI Ltd (HK). He never received a written response from Joseph Guss as to his requests for information and funds save for the part payment of his fees. He never received all the books and records pursuant to his requests. He never had contact with any person from CFI Ltd (HK) or received from it any document evidencing the debt in its favour. He said in evidence that as receiver and manager he had been stymied by the failure to provide books and records, and a lack of instructions and funds from CFI Ltd (HK). Mansell was not cross-examined. I accept his evidence. The non-cooperation he received was singular and unexplained by any credible evidence of Joseph or Antony Guss. It seems clear, and I find, that Mansell was treated in this way for the purpose of delaying and impeding investigations into the affairs of Casualife Furniture by Turner, its liquidator. The effect was noted by Mansell in his correspondence. Joseph and Antony Guss were clearly aware of the effect of the delay in providing the requested information. I find that a further purpose was to avoid Mansell acquiring knowledge as to CFI Ltd (HK).

Turner - liquidator of Buckland Products Pty Ltd

1337. This concerns the failure to provide Turner, as liquidator of Buckland Products, with adequate details of the company's books and records. Turner swore three affidavits in which he set out his actions, in particular to see the books and records and ascertain relevant information to enable him to perform his duties, from his appointment as provisional liquidator. The following day Mansell had been appointed, and that appointment operated to impede his actions. Nevertheless, in the period up to his appointment as liquidator he had some discussions with Antony Guss who made some documents available for his inspection. Following his appointment as liquidator he sought to pursue the task. On 25 October 2001, Turner's solicitors wrote to Mansell requesting that he provide copies of documents evidencing the debt claimed to be owed to CFI Ltd (HK) by Buckland Products, including particulars of any monies advanced by CFI Ltd (HK), and any payments made by Buckland Products to CFI Ltd (HK) in reduction of the debt owed. The solicitors also wrote to Antony Guss advising of his appointment as liquidator and informing him that Turner and his staff would attend the company's premises the following day to inspect the books and records of the company.

1340. When the company appealed against the winding up order he ceased further investigation, and did no further work until the appeal was dismissed on 23 September 2003. That evidence was an overstatement as the appeal was instituted on 30 October 2002 and his affidavit sworn on 14 December 2002 refers to ongoing actions of his solicitors directed at Turner being able to collect and inspect the books and records, and to having obtained from the ANZ bank copies of statements of Buckland Products' bank account. At the time of the trial he had "recently" reviewed the file "as to strategies going forward, bearing in mind that the company is without funds". Turner was cross-examined as to the actions he had taken.

1343. Without further elaboration of his affidavit I refer to Turner's position in a somewhat summary way.

1346. Turner said in evidence that he had requested from Antony Guss a full stock costing and the records he had sighted both at the Dandenong premises and at the receiver and manager's premises. He said that the books and records were deficient in certain areas and that he asked Antony Guss verbally to provide them to him. These have not yet been provided. The stock costing related to the value of the stock for the purpose of the sale agreement, in particular whether a fair value had been attributed to the value of the stock for the purpose of that agreement. That was an issue he wished to investigate, and which he had thus sought information upon. He had not received a valuation of the stock. Turner also deposed in an affidavit that despite repeated requests on his behalf, the company had failed to provide details of the debt owed to CFI Ltd (HK) or the purported transfer consideration of the business. Turner, in cross-examination, stated that he had difficulty obtaining the report as to affairs from Antony Guss so he sought the assistance of ASIC. This resulted in Antony Guss telephoning him afterwards and agreeing to prepare the report as to affairs.

1349. I find that Antony Guss delayed the investigation by Turner into the affairs of Casualife Furniture. Antony Guss was aware of Turner's need for specific information yet failed to ensure that he received it. It is a reasonable inference that Joseph Guss was aware that Antony was so acting.

Scott - liquidator of Burwood Retail Pty Ltd and Scandi (Qld) Pty Ltd

1353. This concerns the failure to provide Scott, the liquidator of Burwood Retail and Scandi Qld, with relevant details of the transfer of the businesses. Scott deposed that he had attempted to obtain from Antony Guss details of the fact that Burwood Retail and Scandi Qld had ceased to carry on their businesses which had apparently been taken over by Gerandu and Moolach, and details of the transfers of the businesses, including all contracts of sale. Antony Guss had informed him that there were no transfers. Scott also deposed that he was in receipt of limited books and records provided by Antony Guss but that there were no records relating to the transfers of the businesses. Further, the report as to affairs of Scandi Qld and Burwood Retail failed to include any reference to those transfers. He was but barely cross-examined.

1356. The defendants denied that the business was transferred and state that no such documents exist.

1359. At [217] I found that the following transfers of business had occurred: from Burwood Retail to Gerandu, and from Scandi Qld to Moolach. The failure by Antony Guss to provide Scott with details of these transfers typifies Antony and Joseph Guss' dealings with liquidators, exemplified in their conduct in relation to Mansell and Lofthouse, namely to delay the provision of relevant information, necessary for their investigations, for as long as possible.

1363. Lastly, through the abuse of legal process constituted by the constant appeal of decisions from the Senior Master to a judge to the Court of Appeal without any basis to delay the investigation of transactions carried out: see Burwood Retail Pty Ltd v Deputy Commissioner of Taxation; Scandi (Qld) Pty Ltd v Deputy Commissioner of Taxation,[45] Deputy Commissioner of Taxation v Burwood Retail Pty Ltd,[46] Buckland Products Pty Ltd v Deputy Commissioner of Taxation,[47] Buckland Products Pty Ltd v Deputy Commissioner of Taxation[48] and Buckland Products Pty Ltd v Deputy Commissioner of Taxation.[49] The Deputy Commissioner submitted that the purpose of the protracted proceedings was to frustrate or delay the investigation of transactions carried out while the companies were under the control of the Guss interests.

1366. Based on the evidence of the liquidators, the trustee in bankruptcy and receiver and manager above, I find that on numerous occasions, Joseph and Antony Guss have failed to provide necessary and relevant information in a timely manner. This has led to delays and has held up investigations into the affairs of a number of the companies controlled by the Guss family. I find that there was deliberate delay and obfuscation on the part of Joseph and Antony Guss, being well aware of the effect of this delay. Had such information been provided and provided in a timely manner, the liquidators and receiver would have been in a much better, and appropriate, position to determine the state of the companies' affairs. Furthermore, this conduct appears to be a consistent trait in the conduct of the furniture business by Joseph and Antony Guss. Delaying tactics are also evident in the prosecution of appeals without merit.

1370. Turning now to the points of law raised by these proceedings, it seems clear that there are principally two issues to be resolved. First, whether the Commissioner has standing as a contingent creditor to bring the proceedings; and secondly, whether the defendants should be wound up on the just and equitable ground.

1373. I turn now to the first question as to whether the Deputy Commissioner is a contingent creditor.

The Deputy Commissioner's standing to bring the proceedings

1377. Section 461 of the Act provides the general grounds upon which a company may be wound up by the Court. Subsection (1) states: "The Court may order the winding up of a company if ... (k) the Court is of the opinion that it is just and equitable that the company be wound up." Section 462 prescribes the requisite standing to apply for winding up under s 461. Subsection (2) provides: "Subject to this section, any one or more of the following may apply for an order to wind up a company ... (b) a creditor (including a contingent or prospective creditor) of the company."

1380. It is upon these grounds, namely that the Deputy Commissioner is a contingent creditor of the defendants, that she brings these proceedings.

1384. To establish standing as a creditor, whether actual, contingent or prospective, of the defendant companies, the Deputy Commissioner puts forward three principal sources of authority.

1387. First, Division 255-5 of Schedule 1 to the Taxation Administration Act prescribes the general rules about the collection and recovery of unpaid tax-related liabilities incurred after July 2000. This enables the Commissioner or a Deputy Commissioner to sue in his or her official name in a court of competent jurisdiction to recover the amount of a tax-related liability that remains unpaid after it has become due and payable. The amount of a tax-related liability that is due and payable is a debt due to the Commonwealth and payable to the Commissioner.

1390. The Deputy Commissioner submitted that this power has been interpreted widely by the courts, referring to Bluehaven Transport Pty Ltd v Commissioner of Taxation[50] where Williams J held that: "The power to `recover' unpaid tax entitles the Commissioner to obtain satisfaction of the debt through any available legal proceedings. Payment consequent upon winding up proceedings is obtaining satisfaction in a permissible legal manner."[51] Accordingly, the Deputy Commissioner is said to be empowered with the rights and remedies available to any creditor, including those rights and remedies under the Act.

1393. Secondly, the Deputy Commissioner submitted that under s 462(1)(b) of the Taxation Administration Act, the Deputy Commissioner was an actual creditor of CFI, and in the case of Kencord Manufacturing, the Deputy Commissioner was either an actual creditor, or alternatively, a contingent or prospective creditor at the time of the filing of the applications on 9 November 2001. It is further submitted that the Deputy Commissioner will remain a contingent or prospective creditor of the defendant companies for as long as the defendant companies continue to trade and employ staff and pay wages, since the defendant companies are required by the Taxation Administration Act to withhold and pay amounts to the Deputy Commissioner (see s 12-35 and s 16-70 of the Taxation Administration Act).

1396. In final submissions, the Deputy Commissioner noted that the defendants themselves had conceded that her standing as a creditor is to be determined at the date the proceedings were commenced. The Deputy Commissioner distinguished the authorities relied upon by the defendants in relation to the effect of payment before a hearing, upon the likelihood of obtaining a winding up order. Those cases are said to reflect the principle that such a creditor will generally have no interest in the winding up. However, the Act recognises that contingent creditors will have an interest in the winding up where, despite the initial debt relied upon to gain standing having been paid, other debts remain unpaid.

1399. Thirdly, the Deputy Commissioner relied upon her general power of administration of the Taxation Administration Act (see s 3A and s 63) which should be construed widely for the purpose of administering the overall tax system. The Deputy Commissioner referred to Hutchins v Commissioner of Taxation[52] in which Black CJ accepted that s 8 (Commissioner shall have administration of Act) and s 208 (Any tax unpaid may be sued for and recovered in court) of the Income Tax Assessment Act 1936 impliedly authorised the Commissioner to do what is reasonably necessary to recover income tax that is a debt due to the Commonwealth and payable to the Commissioner. His Honour stated: "The authorisation is very general and the acts so authorised will necessarily include decisions to recover tax by proving in the estates of bankrupt taxpayers and decisions made to attend and vote at meetings of creditors where tax is owed by the debtor."[53] Similar comments were made in Precision Pools & Qld Pool and Spa Const. Pty Ltd v Commissioner of Taxation.[54]

1402. The Deputy Commissioner submitted that this responsibility of administering the taxation system entails, in part, the constraint of tax avoidance, and the regulation of the due payment of tax as between all taxpayers.

1405. Alternatively, or in addition to the above grounds, the Deputy Commissioner submitted that for present purposes she is in fact the Commonwealth of Australia, the proceedings being brought through her agency, since it is to the Commonwealth that the taxation debts are due. In support of this proposition, the Deputy Commissioner referred to Commonwealth Bank v Inglis[55] and ASIC v Edensor Nominees,[56] in which it was held that the Commonwealth Bank and ASIC were taken to be "the Commonwealth".

1408. Finally, the Deputy Commissioner noted that the defendants' allegation that the Deputy Commissioner had brought the proceedings for an improper purpose or unfairly were not pressed at trial, and that no argument was put forward as to the basis upon which the Court could make such a finding.

1412. The defendants submitted that the Deputy Commissioner was not empowered to bring these proceedings and that the proceedings should be dismissed. The defendants contend that neither of the defendant companies is presently indebted to the Deputy Commissioner, having filed BAS and remitted the monies to the Deputy Commissioner that it assessed as being liable. Whilst having conceded that the Deputy Commissioner's standing as a creditor is to be determined as at the date of commencement of the proceedings, the defendants referred to authorities which are said to support the refusal of a winding up order once payment has been made. Further, the authorities relied upon by the Deputy Commissioner to support the proposition that the Deputy Commissioner has the power to commence liquidation proceedings without having obtained a judgment, rely on the subject debt being presently due and owing. In other words, they are not authority for the commencement of such proceedings in relation to a contingent or prospective liability.

1415. The defendants further submitted that the Deputy Commissioner does not have the power to bring the present proceedings as Division 255-5 of the Taxation Administration Act only empowered the Deputy Commissioner to take proceedings to recover debts due to the Commonwealth after they have become due and payable. Since all tax-related obligations had now been met by the defendants, they submit that in continuing the proceedings the Deputy Commissioner is acting outside the scope of her statutory powers, such proceedings not being incidental or consequential to the power to recover debts presently due and owing to the Commonwealth.

1418. Furthermore, no general supervisory power in relation to the proper administration of the companies exists or, alternatively, the Deputy Commissioner is only authorised to do that which is reasonably necessary to recover tax due to the Commonwealth. Should the Deputy Commissioner need to recover tax from the defendants for any future debts, the Deputy Commissioner has other means at her disposal, for example, the power to conduct audits, raise assessments, issue statutory demands and take recovery proceedings. It is submitted that the present proceedings exceed what is "reasonably necessary" to recover any debts which may exist.

1422. As stated above, the defendants conceded that the Deputy Commissioner's standing as a creditor is to be determined at the date the proceedings were commenced. At that time CFI was indebted to the Commissioner and Kencord Manufacturing had not made any PAYG withholdings, and both companies had not registered themselves as employers or submitted any BAS.

1425. Consequently, at the time of filing the writ against CFI, the Deputy Commissioner was a creditor of CFI, and at the time of filing the writ against Kencord Manufacturing, the Deputy Commissioner was either a creditor of Kencord Manufacturing, or, at least, a contingent creditor of Kencord Manufacturing.

1428. These omissions were later rectified by the defendants, save for a dispute between the Deputy Commissioner and CFI as to an amount of $19,355 (the difference between the amount alleged to be owed to it by the Deputy Commissioner and the amount paid by CFI).[57] It is the effect of these payments, namely whether the Deputy Commissioner can maintain the proceedings and obtain the relief sought, which is the subject of dispute between the parties.

1431. Notwithstanding the above payments, the Deputy Commissioner has advanced its case largely on its standing as a contingent creditor of the defendants, submitting that she remains a contingent creditor while the defendants continue to trade and employ persons and pay wages. To the contrary, the defendants submitted that the effect of the payments is that there is no longer any debt presently due and owing and that the Deputy Commissioner is not entitled to the relief sought.

1434. It is clear from a review of the authorities that the powers given to the Deputy Commissioner under Division 255-5 of Schedule 1 to the Taxation Administration Act are broad, and do not require the Deputy Commissioner to sue the defendants for judgment before recovering the unpaid tax: see Bluehaven Transport Pty Ltd v Deputy Commissioner of Taxation; Shaladis Pty Ltd v Deputy Commissioner of Taxation;[58] Hutchins v Commissioner of Taxation. Further, the Deputy Commissioner's general power of administration under the Taxation Administration Act has been held by the courts to be a wide power: see Precision Pools & Qld Spa Const. Pty Ltd v Commissioner of Taxation.

1437. The High Court dealt with the meaning of "contingent creditor" in Community Development Pty Ltd v Engwirda Construction Co.[59] In that case, the respondent presented a petition to the Supreme Court of Queensland under the equivalent provision in the Companies Acts 1961 to 1964, for the winding up of the appellant. The respondent claimed to be either a creditor or a contingent creditor of the appellant to the value of $28,000 in respect of work done in the construction of a block of units upon the appellant's land. In support of the respondent's claim to have standing, it produced a construction contract between the parties, which contained a Scott v Avery clause providing for arbitration upon any dispute or difference arising under the contract, including the withholding of payment certificates before any court proceeding could be commenced. The dispute between the parties centred on the entitlement of the respondent to the final certificate of payment.

1440. Kitto J rejected the contention that the respondent was a creditor, insisting that the respondent's right to maintain the petition depended upon it being a contingent creditor and upon it not being debarred by the Scott v Avery clause from presenting the petition. His Honour referred to the decision in Re William Hockley Ltd[60] where Pennycuick J defined "contingent creditor" as "a person towards whom under an existing obligation the company may or will become subject to a present liability on the happening of some future event or at some future date."[61] Kitto J went on to comment that: "The importance of these words for present purposes lies in their insistence that there must be an existing obligation and that out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen."[62] In the circumstances of Community Development, the building owner was bound from the time the contract was made to pay money to the builder upon a contingency, regardless of how complex that event may be (for example, the making of an award by an arbitrator in the respondent's favour). That sufficed to make the builder a contingent creditor of the owner. In his judgment Owen J commented that:

"In the present case the appellant was, at all material times, under a contractual obligation to pay to the respondent the amount, if any, which might be found by an arbitrator to be due to it under the building contract. Whether or not that obligation would ultimately result in a debt becoming payable by the appellant to the respondent was dependent on a contingency, namely the making of an award in the respondent's favour by an arbitrator acting under cl 26 of the building contract. In these circumstances I am of [sic] opinion that the respondent was, at the date of the presentation of the petition, a contingent creditor of the appellant. It follows that the respondent was entitled to present the winding up petition..."[63]

1444. Barwick CJ and Windeyer J agreed with Kitto and Owen JJ. The appeal was dismissed with costs.

1447. Some parallels may be drawn between Community Development and the current circumstances. Rather than an existing contractual obligation, here there is an existing statutory obligation upon the defendants to pay certain amounts to the Deputy Commissioner at certain intervals. This obligation will arise through the simple effluxion of time provided that the defendants continue to trade and to engage employees. For so long as that is the case the liability to the tax accrues and is payable at the prescribed time.

1450. The defendants relied on a number of cases for the proposition that a creditor ceases to be a creditor once the payment of the debt has been accepted: see Re William Hockley Ltd; Motor Terms Co Pty Ltd v Liberty Insurance Ltd;[64] DMK Building Materials Pty Ltd v Baker Timbers Pty Ltd.[65] It should be noted that in Re William Hockley, the petitioning creditor had presented the petition a day after the debtor company had paid the appropriate amount to the sheriff. Furthermore, that payment was in full satisfaction of any and all debts that had arisen, and no further debts would arise between the parties. Pennycuick J ruled that in these circumstances the petitioning creditor had presented the petition after it had in fact lost its standing to do so.

1453. Similarly, in Motor Terms, Menzies J held that while payment to a petitioning creditor after presentation of the petition and before the making of the order might result in the court choosing not to exercise its discretion to make a winding up order, nevertheless the circumstance of payment would not put an end to the petition or affect the jurisdiction of the court to hear and determine the petition. In DMK Building Materials, Needham J interpreted this statement to mean that a summons to wind up a company will not necessarily be dismissed merely because the defendant has paid off the debt.

1456. In my view, the above authorities reinforce the Deputy Commissioner's submission that it has standing to bring and maintain the proceeding to wind up the defendants.

1460. I turn now to the question of the relief sought by the Deputy Commissioner and whether it is appropriate to order that the defendant companies be wound up.

1464. The Deputy Commissioner bases her claim for a winding up order on three grounds:

(a) she lacks confidence in the conduct and management of the companies and in particular the conduct and management of the furniture business conducted by the companies;

(b) fairness requires that the companies be wound up on the just and equitable ground; and

(c) the just and equitable ground raises questions of public interest and commercial morality and it is conductive to commercial morality and in the public interest to wind-up the companies:

(i) so that the affairs of the company can be wound-up and brought under the control of a liquidator; and

(ii) so that further commercial immorality can be prevented.

1470. The Deputy Commissioner has outlined in her submissions the general principles of law which apply in this area. I shall only briefly refer to this as the principles are well settled.

1473. It is clear that each of the categories of persons mentioned in s 462(2) of the Act, including creditors, may apply on any ground on which a company may be wound up, including the just and equitable ground. See Port Kennedy Golf Country Club Pty Ltd & Ors v Port Kennedy Resorts Pty Ltd & Ors.[66]

1476. In relation to the first ground of her claim, citing the decision of Loch v John Blackwood Ltd,[67] the Deputy Commissioner noted that lack of confidence in the conduct and management of a company's affairs lies at the foundation of applications for winding up on the just and equitable ground. In that case Lord Shaw of Dunfermline said that:

"...this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up".[68]

1480. The Deputy Commissioner also referred to the decision in Strapp v Surge Holdings Pty Ltd,[69] where Katz J, citing Thomas v Mackay Investments Pty Ltd,[70] observed that the classes of conduct which will justify a winding up order on the just and equitable ground are not closed and that there is no necessary limit to the generality of the words "just and equitable". Indeed, Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd[71] stated that "Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances."[72] It is not restricted to situations in which equity would intervene, as the terminology used by Parliament is intended to confer a wide jurisdiction on the courts; Flexuto Pty Ltd v Bosnjak Holdings Pty Ltd.[73] See also comments by Austin J in Gregor v British-Israel - World Federation[74] for further authority that the existing categories of cases should not be treated as rigid or comprehensive.

1483. There was also a reference to Australian Securities Commission v Rohyeh Rohani & Ors[75] where Beaumont J accepted that the test in this area was accurately stated by Powell J in In r_e Netsor Pty Ltd_,[76] namely that:

"...the words `just and equitable' where appearing in sec. 222(1)(h) of the Act are words of the widest import, as also do I accept that the words are not to be confined by the creation of categories within which a case must be brought in order that it be held to be `just and equitable' that a company be wound up ...; but, this notwithstanding, it seems to me that the facts or conduct which make it, in any case, `just and equitable' that a company be wound up must be facts or conduct which have a direct and immediate relationship to, or bearing upon, the management or administration of the affairs of the subject company or the conduct of its business."[77]

1487. The Deputy Commissioner submitted that what is just and equitable will depend upon the circumstances of each case. In ASIC v IP Management Group Pty Ltd[78] Harper J held that the engagement in misleading and deceptive conduct was a circumstance which could form a basis for a winding up order.

1490. In relation to the second ground of her claim, the Deputy Commissioner referred to the decision in Guerinoni v Argyle Concrete & Concrete Supplies Pty Ltd,[79] which in turn cited the House of Lords decision in O'Neill v Phillips,[80] in which Lord Hoffman was concerned with an application under s459(1) of the Companies Act 1985 (UK), a section that is broadly comparable to our s 461(1)(f). His Lordship regarded his approach to the concept of "unfairness" as running parallel to that adopted in Ebrahimi v Westbourne Galleries Ltd to provide content to the concept of "just and equitable" as a ground for winding up. His Lordship held that fairness was the criterion by which to decide whether the court has jurisdiction to grant relief. Based on the legislative history, Parliament had chosen this concept of fairness to free the court from technical considerations of a legal right and to confer a wide power to do what appeared just and equitable.

1493. Lord Hoffman applied the same reasoning to the concept of unfairness in s 459, as the House of Lords in Ebrahimi v Westbourne Galleries Ltd[81] adopted in giving content to the concept of "just and equitable" as a ground for winding up. There Lord Wilberforce stated that:

"The `just and equitable' provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way."[82]

1497. The Deputy Commissioner submitted that in these proceedings, fairness carried both general and specific application. It is general in the sense of the Commissioner's duty to administer the tax laws and thereby to provide certainty and an equitable regime. It is specific in the sense that, in conducting the furniture business, the defendant companies employ workers who have superannuation and leave entitlements and have PAYG deducted from their wages and salaries, and in relation to which they take credit from the ATO.

1500. The test for unfairness was stated by Nourse J in Re R A Noble & Sons (Clothing) Ltd,[83] quoting the dictum of Slade J in Re Bovey Hotel Ventures Ltd,[84] as being "...whether a reasonable bystander observing the consequences of their conduct, would regard it as having prejudiced the petitioner's interests".

1503. In relation to the third ground of the Deputy Commissioner's claim, I was referred to Deputy Commissioner of Taxation v Woodings,[85] a case not too dissimilar from the present. In that instance, Wallwork J held that the Court could order the winding-up of a company on an application by the Deputy Commissioner of Taxation under s 477A of the Corporations Law on the ground of commercial morality. Mr Morris had been involved in two businesses that were passed on through a series of companies as each company became insolvent, thereby leaving debts to the Commissioner of Taxation. One of the businesses ended up with Toucan Display Systems (Aust) Pty Ltd, of which Morris was a de facto director. Toucan appointed an administrator and the creditors voted in favour of a deed. The Deputy Commissioner applied for an order under s 447A to set aside the deed and wind up the company. Section 447A allowed the Court to make such order as it thought appropriate about how Pt 5.3A is to operate in relation to a particular company. The Deputy Commissioner submitted that it was in the public interest that the company be wound-up because Morris had engaged in a course of conduct in relation to this company and others, from which the court should infer that he and those associated with him, had systematically refused to pay the petitioner moneys owing to him and, if the company was allowed to continue, they would continue to do so in the future. It was further contended that Morris and his associates had been directors of a series of companies which companies, having accumulated significant debts to the Commissioner of Taxation, had been systematically stripped by selling their undertakings to other Morris-controlled companies leaving an indebtedness to the Commissioner of Taxation when those companies were extinguished. The Deputy Commissioner submitted that it was in the public interest to wind up the company to prevent further commercial immorality.

1506. Wallwork J was satisfied that the company should not be allowed to continue to operate under Morris' direct or indirect control, and that in such a public interest case an order should be made winding up the company to prevent further manipulation of it by Morris.

1509. Public interest was also relied upon by the Court in ASIC v Pegasus Leveraged Options Group Pty Ltd & Anor.[86] Davies AJ quoted[87] a statement of Owen J in ASIC v Chase Capital Management Pty Ltd,[88] in which ASIC relied primarily on public interest considerations, that such considerations "justif[y] intervention where, among other things, it is required for investor protection and where there has been regular or repeated breaches of the Law". However, Davies AJ said that the Court should identify the aspects of the public interest that would be promoted by the making of a winding-up order. Davies AJ made the winding up order on the basis of investor protection due to repeated contraventions of the Corporations Act and mismanagement of and misconduct in the conduct of the affairs of the corporation.

1512. Mason JA (as he then was) in Re Data Homes Pty Ltd,[89] after reviewing a number of authorities which had considered matters of public interest and commercial morality, stated that:

"... it should not be assumed that there is any sharp dividing line between considerations which are detrimental to commercial morality and those which are opposed to the public interest. They clearly overlap. Nor should it be assumed, as the appellant would have it, that each is a narrow concept ... There is as little reason for confining considerations of commercial morality to the investigation of misconduct in the affairs of the company as there is for restricting the public interest to the pecuniary interests of existing and future creditors."[90]

1516. A final case referred to in the Deputy Commissioner's submissions is ASIC v Barrack Mortgage Managers Pty Ltd; ASIC v Credit Alliance Pty Ltd; ASIC v W G Herle Pty Ltd.[91] In that case, ASIC had sought an order winding up the defendant companies on the just and equitable grounds. Master McLaughlin ordered that the companies be wound up and set out in his judgment the factors which he had considered. These included the involvement of an undischarged bankrupt in the management of the companies; nominal directors who had been denied the capacity to act as such and denied access to books and records of the companies; the failure to file annual reports; and the cessation in trading of one of the companies and the transfer of its assets to another company leaving only debts. The Master concluded that it was in the public interest that each of the companies be wound up so that the public could be protected from the conduct.

1519. The authorities indicate that there must be a justifiable lack of confidence in the conduct and management of the defendant companies affairs. The Deputy Commissioner further submitted that matters of commercial morality and public interest are relevant in considering whether to grant such an order. This includes the obvious public interest in the due collection of revenue of the Commonwealth in accordance with its laws. The question is whether such a lack of confidence has been established.

1523. Much of the general principles of law referred to in the Deputy Commissioner's submissions is not disputed by the defendants. However, the defendants submitted that the Deputy Commissioner must establish that compulsory liquidation is just and equitable at the time the order is made. In this regard they referred to the decision in Re Fildes Bros Ltd[92] in which Megarry J stated that:

"... the question whether it is just and equitable to wind up the company is one which must be answered on the facts which exist at the time of the hearing. If on the facts existing when the petition was presented it was then just and equitable to wind up the company, but subsequently it has ceased to be so, I do not think a winding up order should be made... No doubt if there were cogent grounds for complaint at the time when the petition was presented, but they afterwards melted away, there may be consequences in relation to costs; but a winding up order under this head must be based on subsisting facts and not on past history."[93]

1527. The defendants also referred to a number of texts which argue that the just and equitable ground is generally inappropriate for a creditor: see Gower's Principles of Modern Company Law;[94] McPherson: The Law of Company Liquidation;[95] Australian Corporations Law.[96] The first two texts were cited by Master White in Re Petrochemical Industries Ltd[97] in refusing to appoint a provisional liquidator.

1530. The rationale is mentioned in Callaway: Winding Up on the Just and Equitable Ground where it is stated that:[98]

"Before the amendment to paragraph 222(2)(c) providing for the Court to take into account prospective and contingent liabilities in determining whether a company is unable to pay its debts, a wider jurisdiction in cases of commercial insolvency was claimed for the Court on the just and equitable ground. Unsecured creditors have also relied upon the just and equitable ground in cases where all the assets of the company are subject to a floating charge and its business is being carried on for the substantial benefit of the debenture holders. These authorities are no longer of the same importance having regard to the terms of sub-section 225(1) and the law relating to fraudulent trading. It is still the practice however to allege in a creditor's petition that it is just and equitable that the company be wound up."

1534. The defendants submitted that even if it is technically possible for a creditor to apply to wind up a solvent company under the just and equitable ground, this ground is relied upon primarily by contributories in a quasi-partnership situation, as in Ebrahimi v Westbourne Galleries Ltd. No authority is said to exist for the proposition that a creditor can successfully petition for a winding up order on the just and equitable ground, in the absence of insolvency.

1537. The defendants referred to certain texts and authorities for the proposition that there are fundamentally three situations in which orders have been made on the just and equitable ground: (a) where initially it is, or later becomes, impossible to achieve the objects for which the company was formed; (b) where it has become impossible to carry on the business of the company; and (c) where there has been serious fraud, misconduct or oppression in regards to the affairs of the company. See McPherson: Winding up on the Just and Equitable Ground[99] where, however, it is noted that the classifications adopted by various commentators on this subject are by no means uniform.

1540. Furthermore, the defendants submitted that the Court must evaluate and balance the competing rights and interests of all parties, and consider whether the company is conducting "an expanding, prosperous and efficient business", to quote Hardie J in Re William Brooks and co Ltd.[100] While this is undoubtedly correct, it is unlikely that the defendants fall within his Honour's description given their record on tax. Further, in that case his Honour made a winding up order notwithstanding that the company was conducting a business that fell within that description.

1543. The defendants submitted that, in relation to Kencord Manufacturing, its taxation affairs have always been in accordance with the taxation requirements and that there is no reason to doubt that this will continue to be so. In the case of CFI, the defendants conceded that the first two BAS were late, however since December 2001, the defendants submit that there is no dispute, with the possible exception of the moneys said to be owing under s 12-35 of the Taxation Administration Act, that it has lodged all returns when required and paid the required tax thereunder and that there is no reason to doubt that it will continue to do so. This is disputed by the Deputy Commissioner who relies on the history of non-payment of group and sales tax by companies controlled by the Guss interests. The Deputy Commissioner submitted that once these proceedings are over the same course of conduct will continue.

1546. The defendants noted that solvency is a very important consideration when considering an application to wind up a company under s 461: Re Narla Prospecting Pty Ltd.[101] See also the comments of Warren J, as her Honour then was, in ASIC v ABC Fund Managers[102] where she stated that while insolvency was not a pre-condition to the making of an order for the winding up of a company, to make such an order with respect to a prosperous or at least solvent company is an extreme step requiring a strong case. Her Honour was satisfied that such a strong case had been made and that it was entirely appropriate for ASIC, acting in the public interest, to bring such an application.

1549. In relation to lack of confidence in the management of the companies, the defendants agree that the general principles in Loch v John Blackwood apply. Those principles have been subsequently cited and approved in numerous cases. An example is In re Netsor Pty Ltd. Winding up should not be used, subject to certain exceptions, to regulate the internal affairs of a company by disciplining wayward directors: Re Kitson & Co Ltd.[103] The defendants have again referred me to McPherson: Winding Up on the Just and Equitable Ground[104] where it is stated that the nature and degree of misconduct required must be such that it:

"... not only justifies a loss of confidence in the probity and ability of those who control the affairs of the company, but does so to such a degree that confidence cannot adequately be restored by the operation of other available remedies, thus rendering it just and equitable that the company itself should be brought to an end."

1553. The defendants noted that Joseph Guss was not a director of either CFI or Kencord Manufacturing and submitted that he is not involved in the management of the defendants. Further, the Deputy Commissioner had not shown how Islam and Xia, as directors of CFI, are not suitable persons for the management and control of the companies.

1556. Furthermore, and/or alternatively, even if the Deputy Commissioner established that Joseph Guss was involved in the management of the defendants, much of the Deputy Commissioner's case is said to rely on historical and irrelevant facts. The activities of the Guss family who happen to be connected to the defendants, where those activities relate to other previous companies, are irrelevant.

1559. The defendants submitted that irregularities in the conduct of a company's business do not make it just and equitable to wind up the company unless the conduct is of incurable proportions. Even fraud in the conduct of a company is not necessarily sufficient unless the company is systematically carrying on fraudulent practices. In Menard v Horwood & Company Ltd,[105] the High Court upheld a decision of Street CJ in Eq who had refused to wind up a company on the basis of one transaction or one series of transactions. In his reasons for judgment Street CJ in Eq stated that:[106]

"If I thought that the proper inference to be drawn from the facts was that there was fair ground for anticipating systematic or recurring dishonesty in the future the case might be different, but I do not think that that would be a fair inference."

1563. Consequently, the defendants submit that any improprieties which are not of an incurable nature should be dealt with by other more appropriate means, namely by the ATO or someone funding Turner, the liquidator, to exercise his powers to investigate transactions or apply to have them set aside.

1566. The defendants also submitted that the authorities relied upon by the Deputy Commissioner largely related to applications by ASIC or another public authority expressly charged with the power to regulate corporate conduct. Referring to comments by Santow J in Roy Morgan Research v Wilson Market Research[107] that "The public interest in bringing insolvent companies to winding up can be pursued by others, in particular the Australian Securities Commission...," the defendants submitted that the Deputy Commissioner, as a creditor, cannot rely on the public interest in the same way as ASIC. In that case though, the applicant had an untried claim for unliquidated damages. His Honour stated that:[108]

"... insolvent companies, even if generally insolvent, are not to be put to the equivalent of citizens' arrest; particularly when the `citizen' most likely to do this has yet to satisfy the requirements for standing. Otherwise the threat of winding up can so easily be used as a source of unfair pressure to achieve that end, or other unfair commercial advantage. The Australian Securities Commission and other `prescribed agencies' can adequately represent the citizens' interest in taking such companies off the register, along with genuine creditors pursuing their own interest."

1570. Another case referred to was ASIC v Chase Capital Management Pty Ltd[109] where Owen J held that "The public interest justifies intervention where, among other things, it is required for investor protection and where there has been regular or repeated breaches of the Law". His Honour noted that the Court should identify the aspects of the public interest that would be promoted by making the winding up order. Similar comments, which I have previously noted, were made in ASIC v Pegasus Leveraged Options Group Pty Ltd & Anor.

1573. Another case involving an application to wind a company up on the just and equitable ground is ASC v AS Nominees,[110] where Finn J examined whether he should grant the application of the ASC to wind up a solvent company. His Honour noted that the role of the ASC, like all other agencies of government, obliged it to act in the public interest within its sphere of responsibility. Consequently, when bringing an application to wind up a company, the ASC could not be seen in the same light as an ordinary creditor or contributory when so applying. Its powers and purposes are not those of a private citizen and it does not pursue a private self-interest.

1576. The defendants sought to distinguish this case on the basis that in AS Nominees there had been ongoing breaches of the law and that a winding up order was made to protect the investing public. This is said not to be the case here.

1579. A further case of relevance is ASIC v ABC Fund Managers. Warren J (as her Honour then was) noted that a factor relevant to the making of a winding up order was that by continuing to operate the schemes, the defendants would have continued to breach the Corporations Act. A further factor in the winding up was the nature of the transactions, namely a series of round robin lending and investment transactions, which she ultimately held to be a "sham". Her Honour cited ASIC v Austral Timber Pty Ltd,[111] in which Byrne J considered an application to wind up the defendants on the just and equitable ground where the defendants were involved in a tax minimisation scheme. Byrne J ultimately concluded that the relevant scheme was part of a sham entered into to defraud the ATO. Warren J stated (and subsequently found) that "... if the circumstances of a particular matter are sufficiently serious such as defrauding the Australian Tax Office as occurred in Austral Timber it is entirely appropriate for the court to conclude that a transaction or arrangement is a `sham'".[112]

1582. While conceding that issues of public interest may in some cases be relevant, the defendants submitted that the Deputy Commissioner had relied on authorities relating to ASIC or the Attorney General performing express statutory functions in protecting the investing public. The Deputy Commissioner had not provided any authority indicating how the public interest is relevant to her application where what is sought is the regulation of taxpayers.

1585. Lastly, the defendants submitted that a winding up order should not be made if there is an alternative remedy that ought reasonably to be pursued: Re Dalkeith Investments Pty Ltd;[113] Charles Forte Investments Ltd v Amanda.[114] The Deputy Commissioner possessed a number of other powers to enable her to protect the revenue, for example to conduct audits, issue assessments or statutory demands, or institute recovery proceedings. The Deputy Commissioner submitted that this incorrectly elevated what is simply a matter which is relevant to the exercise of the discretion in an appropriate case to a rule restricting its exercise. In light of the prior history of the Guss interests, any such rule could not apply here.

1589. There is little dispute in the parties' submissions as to the applicable principles of law. Rather, the question requiring resolution is whether, in the circumstances, it is just and equitable that the defendant companies be wound up. The principal basis on which the Deputy Commissioner supports her claim for a winding up order is that she lacks confidence in the conduct and management of the defendant companies, more particularly the conduct and management of the furniture business conducted by the companies.

1592. The following propositions may be extracted from the cases. First, the liquidation of the defendant companies must be just and equitable at the time of the order. Secondly, the categories of case in which the Court may order winding up on the just and equitable ground are not closed. The words "just and equitable" are to be interpreted broadly. Thirdly, in the case of a solvent company, which on the facts at least CFI is, if not Kencord Manufacturing, a strong case is usually required often requiring systematic or recurring conduct of a type supporting an order for winding up. Fourthly, the Deputy Commissioner's claim of a lack of confidence must be grounded on the conduct of Joseph and Antony Guss who own and/or control the defendant companies and who have carried on the furniture business for the past thirty years under different entities. Fifthly, and following on, there must be a sufficient nexus between the facts and conduct that makes it just and equitable that the defendant companies be wound up, and the management and administration of the defendant companies' affairs.

1595. I accept the submission of the Deputy Commissioner that there is a public interest factor to be taken account of in these circumstances, on the Deputy Commissioner's submission that is the systematic refusal of Guss controlled entities to pay the ATO moneys owing to it, and the conduct whereby such entities, having accumulated debts to the ATO, have been stripped of their assets for minimal or no consideration leaving an indebtedness to the ATO. However, there is a need to identify the aspects of the public interest that would be promoted by a winding up order, such as in the present circumstances, the due collection of revenue by the ATO in accordance with the laws of the Commonwealth.

1598. I have set out at length, in what has seemed to me to be sufficient detail, the history of the furniture business conducted by the Guss family, in particular Joseph and Antony Guss. This has been necessitated in large part by the way in which the Deputy Commissioner has presented her case and the grounds on which she relies to support her claim for an order to wind up the defendant companies. The Deputy Commissioner's lack of confidence is grounded in the overall conduct and management of the ongoing furniture business conducted by Joseph and Antony Guss over the past thirty years, not simply their conduct and management of the defendant companies. The Deputy Commissioner considers, given the Guss' history of avoiding their taxation obligations and indebtedness to the ATO, and the history of the furniture business being transferred from one Guss-controlled entity to another Guss-controlled entity when it is expedient to do so with the result that unsecured creditors are left lamenting, that it is highly likely that such conduct will continue in the future, and relies on that as justifying her lack of confidence in the conduct and management of the defendant companies.

1601. It is of central importance not to overlook that the defendants are actually engaged in business activity and have employees. CFI is solvent and for present purposes at least I proceed on the basis that Kencord Manufacturing is solvent, although it stands in a peculiar and potentially precarious position in view of its lack of assets and reliance on CFI. Further, I am prepared to assume that the furniture business, the long history of which is a portent in this regard, will continue in the future. I am prepared to assume that it will be successful. I have regard, in that respect, to the longevity of the business and the determination of the Guss' to continue the business which in itself manifests confidence in it. Yet, to be realistic, the strength of that assumption must be tempered by reflection on the unhappy history of failure of the entities through which the business has passed. Although, in the circumstances it is important to distinguish between the corporate entities and the business, in view of the survival of the business notwithstanding failure of the entities.

1604. I bear in mind that the defendants and other Guss family companies have brought themselves into compliance with their taxation obligations, and I have regard to the submission that that, it may be expected, will continue to be the position in the future. And I have regard to the like submission made in respect of obligations under the Corporations Act to file notices with ASIC. I also have regard to the submission that winding up is not to be ordered by way of punishment or discipline on account of past errors or faults of those involved in the conduct and management of the companies that conducted the furniture business, and I do not approach the determination of the cases in that way. I also have regard to the submission that the correct approach to these companies, conducting business as they are, and having brought their affairs into line, is to let them continue in their endeavours. Then, in the event of any future failure to meet a taxation obligation, the Deputy Commissioner can take such enforcement or other action as she may be advised to take in the circumstances.

1607. Overall, I have regard to all of the submissions, including those not expressly referred in the above paragraphs, as to why these ongoing companies should not be wound up.

1610. It is, as has been observed, a strong thing, or requires a strong case, to wind up a company that is conducting an established business, is solvent, and has apparent reasonable future prospects. I approach the determination of the case on that basis. I repeat too that in determining the issues raised in the evidence and submissions of counsel, including matters concerning the credit and reliability of witnesses in particular Joseph and Antony Guss, I have, and had, regard to the seriousness of those matters and of the findings made.

1613. In the end, however, all of these matters are to be weighed in the balance. The facts and circumstances set out in this judgment describe an unhappy approach to corporate, directorial or management responsibility. The facts and circumstances, and the findings, are so many that I do not set them out again. They disclose patterns of conduct, and reflect on the commercial morality, of those who have conducted and managed the entities which have conducted the furniture business over the years. As a matter of substance, those entities have conducted a furniture business of the same kind, namely the manufacture and sale of outdoor furniture. Doubtless over time there have been changes in the conduct and organisation of the business, an obvious example being changes to the product range, and there was the change of name to Casualife. Changes of that nature may be expected as a business is a dynamic and not a static thing. But what has not changed is that the business is that of the manufacture for sale of outdoor furniture and that throughout it has been owned or controlled via corporate entities by the Guss family. I have found that the outdoor furniture business has come down from Bendix, the change from the Tropitone name to the Casualife name not being decisive in this respect in my view.

1616. What is discerned, overall, is that in the hands of the Guss family successive entities have been used for the purpose of conducting an outdoor furniture business, and that as one entity has collapsed, and been wound up with a debt to the Commissioner of Taxation (and others), it has been found that the assets have been shifted to another entity which is found to be conducting the business, and the pattern repeats itself. An extra factor, first added in 1992, is that the entity presently conducting the business has granted a charge over its assets to another entity in the Guss family armoury of entities. In the result, the wound up company has lost the plant and equipment with which to conduct the business, the estate of the company is insolvent, and, if any assets are left behind the liquidator has no funds with which to pursue recovery. I am well satisfied, and I so find, that all of this has been, and remains, a structure deliberately created by Joseph Guss for the purpose of ensuring the ongoing control of the business by the Guss family, come what may.

1619. That is the dominant interest. There is, I find, in the conduct of these companies by Joseph Guss and his family a lack of commercial morality manifested by the repeated preparedness to shift the business around without meeting the obligation to pay tax. Quite simply, in my view, the attitude and conduct of Joseph Guss and the Guss family involved in this respect has been disgraceful. Nothing in their evidence before me, or in the evidence overall, indicated that the attitude of Joseph and Anthony Guss to creditors, and to the first priority to paying creditors, had changed. I find that their attitude has not changed and that they would conduct the defendant companies, and the related companies, in the same way if they thought they could get away with it. In this respect I considered their attitude towards creditors to be uncaring and brazen.

1622. I have concentrated on the position of the Deputy Commissioner as a creditor but the position is that other creditors are seen to exist in the liquidated companies.

1625. Other patterns of conduct are seen. The approach to tax seems almost to be a game played with the ATO. In this game the ATO is required to be vigilant and to apply pressure to achieve payment. Even then the current entity conducting the furniture business will be wound up leaving a tax debt. More recently, the Guss approach in the conduct of companies has been seen to be extended to the tardy provision of Business Activity Statements. I accept the submission of the Deputy Commissioner that, were it not for these proceedings, the defendants and the related companies would not have brought their tax obligations into compliance, or if not in perfect compliance so near thereto that I do not take account of any failure that may exist in that respect. I find that without the pressure of litigation the Guss controlled companies would return to their old ways.

1628. A pattern of conduct is also seen in the tardy compliance with the obligation to file notices with ASIC. I repeat my findings in that respect.

1631. Then, there is a range of other factors. On becoming a bankrupt Joseph Guss resigned as a director of Casualife Furniture. Remember that he is a solicitor of experience. He has not performed his obligations as a bankrupt, as Lofthouse described. Further, in relation to the affairs of the defendants, he is more than a consultant as he stated. I find that he has a central and directing role and control in the company. It may be that to the present he has been content to remain bankrupt, as he has not taken the step that would trigger the commencement of the period on the expiration of which his bankruptcy would cease. But his continuing status as a bankrupt cannot, and does not, mask the truth of his role in these companies. He controls the companies with Anthony.

1634. This leads me to refer to the role of Varendran and Islam as directors. As I have found, they were in the nature of nominal directors, in effect fronts for Joseph and Antony Guss. They reflect the preparedness of the Guss' to introduce into the scheme of things names other than their own to the directorial stage. The effect of doing this was, and is, intended to be to distance the Guss' from apparent control of the relevant entities. The same thing has occurred, I find, in relation to the beneficial shareholding in Casualife Furniture, as to which Joseph and Anthony Guss gave false evidence, as I have found, CFI and CFI LTD (HK).

1637. In addition to debts owing to the Commissioner of Taxation and other persons when the companies formally conducting a furniture business were wound up, there is a further factor which bears on what was left behind in the estate of the liquidated company. The point to be mentioned here is the disposition of assets out of the company at an undervalue. I have analysed and made findings as to these matters commencing with the action of the Bendix receivers to obtain a better return for Tropitone Furniture through to the undervalue in the 28 February 2001 sale agreement. Consistently, the purpose and effect is to transfer the business for the least consideration. This is, of course, to be regarded in context with all the other factors.

1640. In arriving at my decision I take all the above matters into account as well as the many findings and conclusions in the course of my judgment. I add specifically, in addition to generally referring to my findings concerning the credit and reliability of Joseph and Antony Guss, that the licence agreement dated 1 March 2001 was brought into existence for the purpose of the litigation.

1643. Taking all matters into account, and all that has been submitted by counsel, I conclude that the Deputy Commissioner's lack of confidence in the conduct and management of the defendants is justified having regard to the history of the furniture business conducted by the Guss family. The history discloses a disdain for the obligation to pay tax and commercial morality in the conduct of a business. The Deputy Commissioner's lack of confidence in the defendants' likely observance of their taxation obligations is well justified in the circumstances. For that reason and also because it would be fair to do so, it is appropriate to order winding up. If the defendant companies were not wound up they would continue operating in the public domain under the same Guss control who would, I find, continue to engage by these entities in the same type of impugned conduct. I am also of the view that it is in the public interest and conducive to commercial morality that the companies be wound up, both to prevent the perpetration of further commercial immorality and for the benefit of having the companies under the control of a liquidator.

1646. In each case there will be an order that the company be wound up. I will hear counsel as to the liquidator to be appointed, the initial interlocutory process for appointment of a provisional liquidator having proposed Turner and Scott in the alternative, and a consent not appearing on the file. I will also hear counsel as to costs.

currently currently currently currently formerly conducted by previously conducted by previously previously

conducted by conducted by formerly known as formerly known as currently

formerly known as previously conducted by previously conducted by subsidiary previously conducted by

[1] Corporations Act 2001, s 461(1)(k).

[4] At an earlier hearing before me, on 19 April 2002, a solicitor had appeared for Victorian WorkCover Authority ("VWA"), an apparent creditor, on whose behalf an affidavit had been affirmed by Victor Frederick Scarcebrook on 13 December 2001. There was no subsequent appearance before me by VWA. I was informed that VWA had withdrawn as a supporting creditor, and the affidavit was not relied on. For this reason the affidavit was excluded from the Court Book.

[5] The written submissions of the parties remain with the Court file.

[6] Bankruptcy Act 1966 (Cth) s 149(4).

[7] [1938] HCA 34; (1938) 60 CLR 336 at 343-344 per Latham CJ and 361 per Dixon J.

[8] [1962] 1 WLR 1236 at 1243 per Buckley J.

[9] As to Kotsimbos see [189] - [201]. As to Page see [271] - [279] and [330] - [335].

[12] This transfer is referred to at [125] - [134]. As to the time of the transfer, I note that in a letter from Minter Ellison, acting for GBS, to the Insolvency Trustee Service Australia dated 14 January 1999, it is stated that according to an affidavit filed in Federal Court proceedings, Antony and Joseph Guss transferred their share each to SMET and NMGP in the 1991/92 financial year following the issue of proceedings against Joseph Guss by GBS.

[13] Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2001] VSC 286.

[14] Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 86.

[15] Buckland Products Pty Ltd v Deputy Commissioner of Taxation [2002] VSC 410.

[16] VG 330 of 1996 in the Federal Court of Australia.

[17] Suit No 2213 of 1993 in the High Court of Singapore.

[18] Mansell's actions are referred to in detail at [390] - [409].

[22] The BAS and Australia Post receipts are Exhibit Y.

[23] Burwood Retail Pty Ltd v Deputy Commissioner of Taxation; Scandi (Qld) Pty Ltd v Deputy Commissioner of Taxation [2002] VSC 349.

[24] Deputy Commissioner of Taxation v Burwood Retail Pty Ltd; Deputy Commissioner of Taxation v Scandi (Qld) Pty Ltd [2002] VSC 417.

[25] Unreported, Ormiston and Batt JJA, 30 September 2002.

[26] Buckland Products Pty Ltd v Deputy Commissioner of Taxation; Burwood Retail Pty Ltd v Deputy Commissioner of Taxation; Scandi (Qld) Pty Ltd v Deputy Commissioner of Taxation [2003] VSCA 85.

[27] There was a reference in the cross-examination of Antony Guss to a figure of approximately $130,000 and that was repeated in the Deputy Commissioner's written submission, para 169(a). Without explanation the figure does not seem correct.

[28] Casualife Furniture International Ltd v Knopp [2001] VSC 395.

[30] [1988] FCA 179; (1998) 82 ALR 530 at 538.

[33] [1959] HCA 8; (1959) 101 CLR 298 at 305.

[34] The Police v Scandi International Pty Ltd and Casualife Furniture Pty Ltd, unreported, 15 August 2001.

[35] [2001] VSC 288.

[37] Re General Mutual Insurance Co Ltd and Re Motorists Mutual Insurance Co Ltd [1979] VicRp 48; [1979] VR 484 which reports preliminary findings on the hearing of the petitions to wind up. These rulings are also reported at (1974) CLC 40-118 which report includes part of the subsequent reasons for judgment of Menhennitt J in concluding that the companies should be wound up.

[39] The order is at Court Book 1340 - 1341.

[40] The order is at Court Book 1359 - 1360.

[45] [2002] VSC 349 at [34] and ff.

[46] [2002] VSC 417 at [21].

[47] [2001] VSC 286.

[48] [2002] VSC 410.

[49] [2003] VSCA 86.

[50] [2000] QSC 268.

[52] (1996) 65 FCR 269.

[54] (1992) 37 FCR 544.

[55] [1969] HCA 44; (1969) 119 CLR 334.

[58] [2000] QSC 501.

[59] [1969] HCA 47; (1969) 120 CLR 455.

[60] [1962] 2 All ER 111.

[62] [1969] HCA 47; (1969) 120 CLR 455 at 459.

[64] (1967) 116 CLR 117 at 194.

[66] [2000] WASC 205.

[67] [1924] AC 783.

[69] [1999] FCA 545.

[70] (1996) 22 ACSR 294.

[71] [1973] AC 360.

[73] [2001] NSWCA 97.

[74] [2002] NSWSC 12.

[76] (1982) 1 ACLC 73.

[78] [2000] VSC 576.

[79] [2000] WASC 170.

[80] [1999] UKHL 24; [1999] 1 WLR 1092.

[81] [1973] AC 360.

[83] [1983] BCLC 273 at 290.

[85] (1995) 13 ACLC 469.

[86] [2002] NSWSC 310.

[88] [2001] WASC 27; (2001) 36 ACSR 778 at 793.

[89] [1972] 2 NSWLR 22.

[91] [1999] NSWSC 272.

[92] [1970] 1 All ER 923.

[97] (1989) 15 ACLR 636.

[99] (1964) 27 Modern Law Review 282 at 285.

[100] (1962) 79 WN (NSW) 354 at 368.

[101] [1992] FCA 341; (1992) 10 ACLC 1310.

[102] [2001] VSC 383; (2001) 39 ACSR 443.

[103] [1946] 1 All ER 435.

[104] (1964) 27 MLR 282 at 301.

[105] [1922] HCA 39; (1921) 31 CLR 20.

[107] (1996) 14 ACLC 925 at 932.

[109] (2001) 36 ASCR 778 at 793.

[110] [1995] FCA 1663; (1995) 133 ALR 1.

[111] (1999) 17 ACLC 1679.

[113] (1985) 3 ACLC 74.

[114] [1964] Ch 240.