Litchville Pty Ltd, and Grant Gittus Graphics have been trading for over 25 years. Like most small businesses, it had its good times and bad times and its share of cash-flow crises. Over the last few years, changes in the industry and the retirement of some of our long-term clients has resulted in the business being less strong than I would have wished and making a loss for the last two years. Nevertheless, its position in October 2009 was that there were no outstanding creditors, wages were being paid, there was minimal leave entitlements owing to my only other full-time employee, and there was money put aside to cover the current quarter's expected BAS bill. There was even a modest share portfolio in reserve.

What happened next is closely linked to the fate of another company, Geoff Weeks Design.

Geoff had been a client of ours for a long time - possibly 20 years. By 2004, it was clear that Geoff's business was in trouble - his account to us was growing and he had not made regular payments for some time. After discussion, I agreed to continue providing services in the hope that he would trade his way out of trouble and he agreed to try to bring the account back in order. By 2005, it was clear that this was not going to work. Geoff's debt was now in excess of $25,000 and was now threatening the viability of my own business. Geoff made the decision to sell the family home to pay his creditors, then he and his wife would retire to live with his wife's mother. He asked for another some more time to enable him to repaint the house and organise an orderly sale. I agreed. He paid off the sum of $27,103 in 2005. We continued to supply work to Geoff until the ATO, who apparently declined to wait for the sale of the house, appointed Paul Pattison as liquidator, for their debt of $5,600. At the time the liquidation commenced, the total deficit was on the order of $16,000, and it is my understanding that Geoff has subsequently paid in full all the outstanding creditors from the proceeds of the house sale, as he promised.

Paul Pattison has pursued him over the intervening period, claiming $96,691 in fees and $94,000 legal expenses. This matter was settled out of court on 2 October for the sum of $55,000, according to documents sent to me by Paul Pattison.

In October 2009, I received notice from solicitors acting for Paul Pattison that they had commenced proceedings to recover the $27,103 on the grounds that it constituted a preference payment. This came as a great surprise as I had acted in good faith at all times and thought the matter resolved, as Geoff had settled out of court with the liquidator some months earlier. I sought legal advice, and advice from several of my clients who were immediately aware that something was badly wrong. Should they succeed in proving the claim, the company did not have the capacity to pay and would then be insolvent. On my instruction, my solicitor provided financial statements showing the financial status of the company and proposed that they walk away. Unsurprisingly, they declined. I immediately sought advice from an insolvency practitioner, David Coyne at Lowe Lippman. He advised me that, should they be succesful in their claim, the company would be either insolvent, or so close that it would shortly become so. He calculated what the most they would likely receive in a liquidation would be, and suggested I make a final offer of that amount. I did so. They rejected the offer, in effect increasing their claim by saying that GST would be payable as well, and announced their intention to seek judgement as soon as possible.

Under those circumstances, with great reluctance and a degree of personal distress, I decided that there was no viable future for the company, and immediately requested David Coyne to act as liquidator for Litchville Pty Ltd T/A Grant Gittus Graphics.

I wish to make it clear that at the time of liquidation, there were no outstanding trade creditors or staff entitlements (excluding my own.)

I have started a new business: Gittus Graphics Pty Ltd.

I would like to express my thanks to our suppliers and clients, who have been wonderfully supportive through what has been a difficult period.