Deputy Commissioner of Taxation v NOPSA Pty Ltd

Background 12 NOPSA's registered office is at 6 King Street, Norwood, South Australia, the office of its former accountant, Solutus Accounting. The principal of that firm is Mr David Capone. Solutus Accounting was retained by NOPSA as its accountant generally and, in particular, to prepare and file its taxation returns, financial statements and business activity statements. NOPSA relied on Solutus Accounting to perform those tasks and has done so from the time of its incorporation in 2011. 13 The evidence discloses that Solutus Accounting has not performed a number of these tasks, dating back, it seems, to the 2013 financial year. In particular, Solutus Accounting does not appear to have performed tasks pursuant to its retainer since the middle of 2014. I make that finding on the basis of the evidence of Mr and Mrs Musolino and, to a lesser extent, in reliance on the affidavit of their new accountant, Ms Zappia. No challenge was made to their evidence on the present application. I add, however, that the Court has not received any evidence from Mr Capone or Solutus Accounting and so I refrain from making any finding which involves an allocation of blame. It would be inappropriate to do so, given that neither Solutus Accounting nor Mr Capone have been given an opportunity to be heard in these proceedings. It is sufficient that I record my satisfaction that tax returns, business activity statements and remittances of tax have not been lodged by NOPSA with the Australian Taxation Office and that by May this year, NOPSA had accrued a liability for unpaid tax in the sum of $182,805.19. 14 Each of the Deputy Commissioner of Taxation and Mr Prior were inclined to be critical of Mr and Mrs Musolino for not themselves, and independently of Solutus Accounting, attending to payment of the tax. It may be that in retrospect it can be said that they could have done more, but the firm impression I have on the evidence is that Mr and Mrs Musolino relied, as so many small business owners do, on their accountant to carry out the accounting functions on their behalf in a responsible and diligent manner and to inform them of their taxation liabilities. 15 On 8 May 2015, the Deputy Commissioner of Taxation caused a creditor's statutory demand to be served on NOPSA. Service was effected by posting the demand and the supporting affidavit to NOPSA's registered address, that is to say, the office of Solutus Accounting at 6 King Street, Norwood. NOPSA did not pay the amount demanded or any part of it and did not secure payment of the debt to the Australian Taxation Office. 16 Accordingly, on 21 July, the Deputy Commissioner applied for the winding up of NOPSA on the grounds of its insolvency. The application was listed for hearing on 26 August. Notice of the application and of the hearing date were published on the ASIC website and copies of the documents were posted to NOPSA, again, at its registered address. 17 NOPSA did not attend the hearing on 26 August and the order for its winding up was made. 18 The explanation which Mr and Mrs Musolino have provided for their being unaware of the winding-up application has not been challenged. It is simply that they had not been informed of the creditor's demand or of the winding-up application by Solutus Accounting and had not otherwise been made aware of it. 19 I accept Mrs Musolino's evidence that she first learnt of the application for the winding up and the order made by this Court on the following day, 27 August, when she received an email from Mr Prior's firm informing her that NOPSA had been placed into liquidation. I also accept Mr Musolino's evidence that he first learned of those events when he was told of them by his wife. In other words, Solutus Accounting had not told them of the application or of the creditors' statutory demand. 20 On the day after learning of the winding up order, Mr Musolino went to 6 King Street, Norwood. He observed that the building had the appearance of being unoccupied with overflowing, uncollected mail and broken windows. It appeared that Mr Capone had abandoned the premises. 21 It is accordingly understandable that that there was no attendance by or on behalf of NOPSA at the hearing on 26 August. 22 It is appropriate to record that Mr and Mrs Musolino had not been inactive in attempts to contact Solutus Accounting before 26 August. Mrs Musolino was accustomed to having contact with Mr Capone periodically, as she did the bookkeeping for the business conducted by NOPSA. She was last able to speak to Mr Capone in April 2015. That was in relation to her concerns that neither NOPSA's nor their own personal taxation returns had been filed. Mrs Musolino deposes, and I accept, that Mr Capone responded at that time with words to the effect that the returns would be prepared shortly. Since that time, Mrs Musolino has attempted to contact Mr Capone on numerous occasions without success. Mrs Musolino was frustrated by the lack of responses from Mr Capone. The email communications from her to Mr Capone evidence that frustration and it is fair to describe her requests and demands of Mr Capone as becoming more and more strident as the weeks went by. 23 Mr Musolino had also made attempts to prompt Mr Capone into action. He did this by a text message sent to Mr Capone on 31 July, to which he received a reply, but his follow-up text messages on 2, 3 and 4 August went unanswered. 24 The Musolinos have since retained another account, Ms Zappia, to attend to their outstanding tax matters. They did that on 28 August. Their retainer of Solutus Accounting terminated at the same time. 25 NOPSA was incorporated on 13 October 2011. Until the order for its winding up on 26 August, NOPSA's sole function was that as trustee of the AJNS Family Trust. NOPSA was also one of the named beneficiaries of that trust. 26 Until 7 November 2014, the AJNS Family Trust was the sole owner of two businesses which traded under the names Natural Organics Plus SA and Silvarock Transport respectively. On 8 November 2014, NOPSA as trustee of the AJNS Family Trust, sold 50% of the business of Natural Organics Plus SA to Red Piazza Pty Ltd, as trustee for the R&R Russo Family Trust. Since that date the business of Natural Organics Plus SA has been conducted by a partnership between NOPSA and Red Piazza Pty Ltd, each in their respective capacities as trustee. 27 By reason of cl 19(c) of the AJNS Family Trust, NOPSA ceased as trustee immediately upon the making of the orders for its winding up. Mr Musolino has since been appointed as trustee of the AJNS Family Trust, and the partnership business continues. That is a business as a wholesaler of fresh produce operating from the Pooraka markets. The business, as I understand it, operates principally in South Australia but also involves activities in the other States of Australia. Mr Musolino is the person who is engaged in the day to day management of both businesses and Mrs Musolino attends to their bookkeeping functions.