Deputy Commissioner of Taxation v E Plus Holdings Pty Ltd

[2006] FCA 948

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v E Plus Holdings Pty Ltd [2006] FCA 948

INSOLVENCY – CORPORATIONS – application by liquidators to appoint administrators – application for leave pursuant to s 448C(1) of the Corporations Act 2001 (Cth).

Corporations Act 2001 (Cth) – s 436B(2), Division 14, Part 5.3A, s 448C(1)(g), s 437A, s 438A and s 439C

Dean-Willcocks v Yeshiva Properties Number 1 Pty Ltd (Provisional Liquidator Appointed) & Ors 48 ACSR 525
Skafcorp Ltd (Administrator Appointed) & Anor v Jarol Pty Ltd & Ors 44 ACSR 138
Re Chilia Properties Pty Ltd (Administrator Appointed) 23 ACSR 548

DEPUTY COMMISSIONER OF TAXATION V E PLUS HOLDINGS PTY LTD
QUD548 OF 2005

GREENWOOD J
25 JULY 2006
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD548 OF 2005

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPLICANT
AND:	E PLUS HOLDINGS PTY LTD ACN 084 534 878 RESPONDENT
JUDGE:	GREENWOOD J
DATE OF ORDER:	25 JULY 2006
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.Jason Bettles and Susan Carter be given leave pursuant to s 448C of the Act to consent to, and be appointed as, and act as administrators of E Plus Holdings Pty Ltd ACN 084 534 878; and

2.The costs of and incidental to this application be costs in the winding‑up.

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	QUD548 OF 2005

BETWEEN:	DEPUTY COMMISSIONER OF TAXATION APPLICANT
AND:	E PLUS HOLDINGS PTY LTD ACN 084 534 878 RESPONDENT
JUDGE:	GREENWOOD J
DATE:	25 JULY 2006
PLACE:	BRISBANE

EX TEMPORE REASONS FOR JUDGMENT PRONOUNCED AT 3.15PM

1. I have before me an application by the liquidators, Mr Morgan Lane and Mr Michael Peldan, of E Plus Holdings Pty Ltd, ACN 084 534 878, for an order that leave be granted to appoint Mr Jason Bettles and Ms Susan Carter as administrators of the company in liquidation. 

2. The application was initially made pursuant to s 436B(2) of the Corporations Act 2001 (Cth) (‘the Act’). Although that subsection contemplates that a liquidator of a company may appoint himself or herself as administrator of the company (in liquidation) under the section with the leave of the Court, the present application for leave is made on the footing that the proposed administrators are in partnership with the liquidators and are, thus, partners of an officer of the corporation for the purposes of Division 14 of Part 5.3A, s 448C(1)(g).

3. Accordingly, leave from the prohibition contained in s 448C(1) is required to act as administrators. On 16 March 2006, Dowsett J made orders that the company be wound up in insolvency under the provisions of the Act and that Messrs Lane and Peldan be appointed liquidators for the purposes of the winding‑up. The day-to-day administration of the liquidation of the company is being undertaken by Jason Bettles and Susan Carter.

4. On 3 May 2006, the liquidators prepared a report to creditors for the purposes of a meeting held on 18 May 2006.  The liquidators have formed the view that the company is insolvent.  The major asset of the company is a dealership agreement with Telstra whereby the company has been appointed to maintain the telephone systems of business customers of Telstra on the Gold Coast.

5. Upon liquidation of the company, Telstra enjoys a right under the contract to terminate the agreement but has chosen not to do so in order to allow creditors an opportunity to consider a proposed Deed of Company Arrangement by which the directors of the company would provide a fund of $100,000.00, plus external administration costs, to the trustees of the deed to enable unsecured creditors to receive a dividend in respect of claims reflected in the proofs of debt lodged with the liquidators.

6. An amount owed to the directors, Martin Holland and Averil Holland of $280,000.00 would be subordinated to the non-priority, unsecured creditors, which, at the date of the report of 3 May 2006, constituted $659,503.00, which also reflects the total deficiency in resources as compared with the available assets. 

7. Mr Lane has sworn an affidavit dated 23 June 2006 and filed on 27 June 2006 in which he deposes to a belief, on the part of the liquidators, that it is in the interests of creditors for the proposed administrators to be appointed.

8. The liquidators say that Telstra has advised that it is willing to allow the creditors to consider the proposed deed of company arrangement.  However, if no proposal is to be put forward, or should the proposal be rejected, then Telstra would immediately terminate the agreement.  If the Telstra agreement is terminated there is then little value in the business as a going concern, and, consequently, there is little prospect of a sale as a going concern.

9. If the deed of company arrangement is accepted the day-to-day management will be handed back to the director.  If the deed is rejected, day-to-day management will revert to the liquidators. 

10. At the meeting of creditors on 18 May 2006 Mr Bettles outlined the proposal for the deed of company arrangement. Creditors raised no objection to the appointment of administrators. The administrators will assume the control of the company's business property and affairs pursuant to s 437A of the Act, form their own opinion pursuant to s 438A of the Act of whether it would be in the interests of the directors of the company to execute a deed of company arrangement, and convene a meeting to enable the creditors to resolve, pursuant to s 439C, whether the company should execute the proposed deed of company arrangement.

11. The liquidators believe that the company can trade profitably without the burden of unsecured debt and that it is likely that the creditors will receive a higher return or dividend than they would receive in the event that the company remains in liquidation.  In making these observations in relation to the factual matters and the principles governing leave, I have been referred to and have had regard to the decisions of Dean-Willcocks v Yeshiva Properties Number 1 Pty Ltd (Provisional Liquidator Appointed) & Ors 48 ACSR 525; Skafcorp Ltd (Administrator Appointed) & Anor v Jarol Pty Ltd & Ors 44 ACSR 138; and Re Chilia Properties Pty Ltd (Administrator Appointed) 23 ACSR 548.

12. Accordingly, I will make orders in terms of paragraphs 1 and 2 of the application, as amended, to reflect that the application is made pursuant to s 448C(1) of the Act.

13. The order of the court is that:

    (a)Jason Bettles and Susan Carter be given leave pursuant to s 448C of the Act to consent to, and be appointed as, and act as administrators of E Plus Holdings Pty Ltd ACN 084 534 878; and

    (b)       The costs of and incidental to this application be costs in the winding‑up.

    I certify that the preceding thirteen (13)
    numbered paragraphs are a true copy of the
    Reasons for Judgment herein of the
    Honourable Justice Greenwood.

    Associate:

    Dated:  25 July 2006

Counsel for the Applicant:
Solicitor for the Applicant:
Date of Hearing:	25 July 2006
Date of Judgment:	25 July 2006