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

Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd [2004] VSC 157 - VSC 2004 case summary — Zoe

[75]

(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.

[192]

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?

[227]

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.

[238]

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).

At a glance

Court

Decision date

Before

Source

Judgment (670 paragraphs)

Parties

Legislation Cited (16)

Cases Cited (11)