Deputy Commissioner of Taxation, in the matter of Great Barrier Reef Airways Pty Ltd ACN 094 925 998
[2005] FCA 615
•29 APRIL 2005
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation, in the matter of Great Barrier Reef Airways Pty Ltd ACN 094 925 998 [2005] FCA 615
DEPUTY COMMISSIONER OF TAXATION, IN THE MATTER OF GREAT BARRIER REEF AIRWAYS PROPRIETARY LIMITED ACN 094 925 998 (Administrator Appointed)
QUD 30 OF 2005
DEPUTY COMMISSIONER OF TAXATION, IN THE MATTER OF MOORE’S AIRSPRAY PROPRIETARY LIMITED ACN 010 883 735
QUD 33 OF 2005
DOWSETT J
29 APRIL 2005
TOWNSVILLE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 30 OF 2005
IN THE MATTER OF GREAT BARRIER REEF AIRWAYS PROPRIETARY LIMITED ACN 094 925 998 (Administrator Appointed)
DEPUTY COMMISSIONER OF TAXATION
PLAINTIFFJUDGE:
DOWSETT J
DATE OF ORDER:
29 APRIL 2005
WHERE MADE:
TOWNSVILLE
THE COURT ORDERS THAT:
1.Great Barrier Reef Airways Pty Ltd ACN 094 925 998 be wound up in insolvency, under the provisions of the Corporations Act 2001 (Cth).
2.Anthony James Jonsson be appointed Liquidator for the purposes of the said winding up.
3.The applicant’s costs of the application fixed in the sum of $938.11 be reimbursed as a priority out of the funds in the liquidation.
4.To the extent necessary the Court dispenses with the need to comply with s 470 of the Corporations Act 2001 in connection with the filing of the affidavit of lodgement with the Australian Securities and Investments Corporation.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 33 OF 2005
IN THE MATTER OF MOORE’S AIRSPRAY PROPRIETARY LIMITED
ACN 010 883 735
DEPUTY COMMISSIONER OF TAXATION
PLAINTIFFJUDGE:
DOWSETT J
DATE OF ORDER:
29 APRIL 2005
WHERE MADE:
TOWNSVILLE
THE COURT ORDERS THAT:
1.Great Barrier Reef Airways Pty Ltd ACN 094 925 998 be wound up in insolvency, under the provisions of the Corporations Act 2001 (Cth).
2.Anthony James Jonsson be appointed Liquidator for the purposes of the said winding up.
3.The applicant’s costs of the application fixed in the sum of $938.11 be reimbursed as a priority out of the funds in the liquidation.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 30 OF 2005
IN THE MATTER OF GREAT BARRIER REEF AIRWAYS PROPRIETARY LIMITED ACN 094 925 998 (Administrator Appointed)
DEPUTY COMMISSIONER OF TAXATION
PLAINTIFFIN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
QUD 33 OF 2005
IN THE MATTER OF MOORE’S AIRSPRAY PROPRIETARY LIMITED
ACN 010 883 735
DEPUTY COMMISSIONER OF TAXATION
PLAINTIFF
JUDGE:
DOWSETT J
DATE:
29 APRIL 2005
PLACE:
TOWNSVILLE
REASONS FOR JUDGMENT
I am hearing two applications to wind up related companies, Great Barrier Reef Airways Proprietary Limited (“Great Barrier Reef Airways”) and Moore’s Airspray Proprietary Limited (“Moore’s Airspray”). I am told that the companies have common shareholdings and common directorates. Moore’s Airspray is involved in, as the name suggests, aerial crop spraying; Great Barrier Reef Airways operates a tourist undertaking. I am told that whilst Moore’s Airspray has traded, and is trading profitably, notwithstanding the fact that it has failed to comply with a statutory demand, Great Barrier Reef Airways is not trading profitably. It seems that Moore’s Airspray has been propping up Great Barrier Reef Airways. The application to wind up Moore’s Airspray was filed on 10 February 2005. The application concerning Great Barrier Reef Airways was filed on 7 February 2005. Great Barrier Reef Airways is in the hands of voluntary administrators. The matters have previously been adjourned.
A recent creditors’ meeting of Great Barrier Reef Airways agreed to a further adjournment of the application to wind it up upon the basis of a proposed deed of arrangement involving both companies. An outline of the terms of the deed appears as exhibit PJM4 to the affidavit of Peter John Morris filed on 28 April 2005. The arrangement relates solely to the debts of Great Barrier Reef Airways, but funds are to be provided by directors of Great Barrier Reef Airways ‘or related entities’. The sum required is $120,000. I have been told that such moneys will come from Moore’s Airspray. I am also told that Moore’s Airspray has entered into a contract for the sale of its business to two South Africans for the sum of $350,000. It will fund the arrangement from the proceeds of sale. In the course of argument, I was told that those acting for Moore’s Airspray have indicated a wish that the existence of the insolvency proceedings not come to the attention of the proposed purchasers.
In argument, it was pointed out that the statement of assets and liabilities of Moore’s Airspray which is in evidence includes as an asset the purchase price payable pursuant to the contract. This caused me to ask whether or not that meant that the statement of assets and liabilities involved double counting. My question was based upon the assumption that the purchase price of $350,000 was to be paid in exchange for the assets and undertaking of Moore’s Airspray. I was told, however, that in fact only about $50,000 in tangible assets are to be acquired pursuant to the contract; the balance being for what is traditionally described as “goodwill”. Moore’s Airspray has other substantial assets, including aircraft. I then queried the likelihood of anybody agreeing to pay $300,000 for the goodwill of a company which was about to go into liquidation. From a commercial point of view, it seemed to me unlikely. The desire that the existence of these proceedings not come to the attention of the purchasers also caused me to have grave concerns about the matter. As a result, I required counsel appearing for the administrators of Great Barrier Reef Airways and counsel appearing for the Commissioner (who is the applicant in both proceedings), draw these matters and my concerns to the attention of the parties, including appropriately senior officers in the Department of Taxation. The matter was adjourned until this morning for that purpose.
Today, counsel who appears for the administrators of Great Barrier Reef Airways and for Moore’s Airspray has renewed his application for a further adjournment of these proceedings. However, the Commissioner now wishes to proceed and, subject to the provisions of s 440A of the Corporations Act 2001 (Cth) (the “Corporations Act”) he, as applicant, would normally be considered to be entitled to prosecute his applications. Subsection 440A (2), provides as follows:
‘The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up.’
Fairly clearly, the interests of the creditors of Great Barrier Reef Airways in any adjournment depend upon the viability or otherwise of the proposed arrangement. Section 440A of the Corporations Act, of course, has no application to Moore’s Airspray as that company is not in administration. However the proposed arrangement depends upon Moore’s Airspray paying moneys pursuant thereto. Its capacity to do so will depend very much upon its not going into liquidation. If it goes into liquidation, then it seems that the proposed scheme of arrangement with respect to Great Barrier Reef Airways must fail, or at least be very much in doubt.
The contract is, in any event, conditional upon a number of matters. Firstly, it is subject to finance being granted by any financial institution in a sufficient amount within a period of 60 days from the date of the contract. As I understand it, that clause has not yet been satisfied. The contract is also conditional upon the purchasers, ‘James Hopwood and Sally Hopwood, or nominee’ obtaining business immigration visas. I have no information as to what has happened with respect to that condition. The contract requires that Moore’s Airspray continue to provide tuition and assistance to the purchasers for a period of three months prior to the date of completion and for some reasonable time thereafter. This, presumably, is an obligation to be undertaken by those standing behind Moore’s Airspray, rather than by the company itself.
The contract is also conditional upon Mr Hopwood obtaining a commercial pilot’s licence valid in Australia, South African Reserve Bank clearance being available and the sale of a business in South Africa. Again, I have no information as to the status of any of these conditions. For my part, I am unable to see that the contract offers any reasonable certainty for the creditors of either company. Although it may be the only hope for creditors of Great Barrier Reef Airways, that offers no reason for declining a winding up order in connection with Moore’s Airspray. Indeed, I wonder whether the interests of the creditors of that company do not demand a winding up order to prevent their interests being compromised in favour of the creditors of Great Barrier Reef Airways.
I should also say, as I said yesterday, that I have some concerns about the desire to keep knowledge of these proceedings from the purchasers. There may well be a risk that anybody knowingly concerned in the transaction will be exposed to civil liability for any misrepresentation made in connection with the sale, either pursuant to the Trade Practices Act 1974 (Cth) or otherwise.
Given that the Commissioner now wishes to proceed with the application to wind up Moore’s Airspray, I see no reason to refrain from doing so. It follows that the proposed arrangement concerning Great Barrier Reef Airways is unlikely to proceed. I am satisfied that it is not in the interests of that company’s creditors that the administration continue. I am rather satisfied that the long-term best interests of the creditors are more likely to be satisfied by a winding up order.
In respect of Moore’s Airspray, there will be an order in terms of the draft.
In the case of Great Barrier Reef Airways, there has been a failure to comply with s 470 of the Corporations Act. To the extent of any such failure, I am satisfied that it is an irregularity which has caused no injustice to any person It is therefore appropriate that time be abridged to the extent necessary. There will otherwise be an order in terms of the draft.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate:
Dated: 17 May 2005
In QUD 30 of 2005
Counsel for the Plaintiff: Mr W Elliott Solicitor for the Plaintiff: Australian Taxation Office Counsel for the Defendant: The Defendant did not appear. Dates of Hearing: 28-29 April 2005 Date of Judgment: 29 April 2005 In QUD 33 of 2005
Counsel for the Plaintiff: Mr W Elliott Solicitor for the Plaintiff: Australian Taxation Office Counsel for the Defendant: Mr Baulch Solicitor for the Defendant: Gayler Cleland Towne Dates of Hearing: 28-29 April 2005 Date of Judgment: 29 April 2005
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