Deputy Commissioner of Taxation v Essendon Aged Care Pty Ltd
[2000] VSC 414
•28 September 2000
| SUPREME COURT OF VICTORIA |
| Not Restricted |
PRACTICE COURT
No. 6920 of 2000
| DEPUTY COMMISSIONER OF TAXATION | Plaintiff |
| v | |
| ESSENDON AGED CARE PTY LTD | Defendant |
---
JUDGE: | Eames J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 September 2000 | |
DATE OF JUDGMENT: | 28 September 2000 | |
CASE MAY BE CITED AS: | Deputy Commissioner of Taxation v Essendon Aged Care Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 414 | |
---
Appointment of provisional liquidator - Ex parte application - Common Directors of defendant and another company under provisional liquidation - Company running aged care home - Commonwealth subsidy withheld unless provisional liquidator appointed - Aged residents at risk of eviction if business not subsidised - Order granted.
---
APPEARANCES: | Counsel | Solicitors |
For the Applicant/Plaintiff | Mr T. McLean | Baker & McKenzie |
| For the Defendant | Not represented |
HIS HONOUR:
This is an urgent application brought ex parte for the appointment of a provisional liquidator to the respondent. The application is made ex parte and as a matter of urgency because it is put to me, and I accept it to be a valid concern, that were notice to be given of the proceedings, there would be a risk that actions of a detrimental kind would be effected to the assets of the respondent by the Directors and that it is necessary, in the public interest, that that be prevented. As I will later discuss, it emerges that were the assets to be placed at further risk, the likely victims of such activity would be elderly patients of a residential nursing home, called the Essendon Nursing Home, which is conducted either by this respondent company or by another related company with common directors, namely, Essendon Health Care Pty. Ltd.
On 27 September 2000 that company, Essendon Health Care Pty. Ltd. (which I will refer to as "Essendon Health Care"), had a receiver and manager appointed by St. George Bank. Affidavit material before me, includes an affidavit of David Ian Johnston who is employed in the Receivables Management Section of the Australian Tax Office and an affidavit by Robert William Morton, chartered accountant and official liquidator, who has given notice of his willingness to be appointed liquidator to the respondent company.
That material discloses that the appointment of a receiver to Essendon Health Care on 27 September 2000 preceded the application to the court in this case for the appointment of a receiver to the defendant, which is listed for hearing on 25 October 2000. I do not know why there is a difference as to the timing of these events as to the two companies, but the fact of the matter is that the application on behalf of the Deputy Commissioner of Taxation with respect to the present defendant is not listed to be heard until that later date.
Information contained in the affidavit of Mr Morton discloses the common and close relationship between the two companies, that is, the defendant and Essendon Health Care, and the common directors of those companies. Essendon Health Care is the trustee of the Essendon Private Nursing Home Unit Trust, and it is that which apparently operates the nursing home at Fletcher Street, Essendon which has within it a number of resident elderly patients, or clients.
In or about December 1999, the Essendon Health Care employees were transferred under the umbrella of the defendant and it is now suggested (or it has been suggested by one of the directors, yesterday) that there is a contract of sale of the business, between Essendon Health Care and the respondent, with the respondent purchasing the nursing home.
Mr Morton deposes that he is concerned by a series of events and circumstances which suggest that the management of the defendant is acting in a way detrimental to the defendant and will continue to do so unless a provisional liquidator is appointed immediately to protect the assets.
The claim brought by the Deputy Commissioner of Taxation - which appears would be certain to lead to the appointment of a liquidator on the 25th of the month - relates to consistent short-changing of the Australian Taxation Office for a period of some four years, and the sums withheld from the Australian Taxation Office are in excess of $100,000; the debt owed to the plaintiff is of that order. There are additional sums which will fall due in respect of further amounts of taxation.
The affidavit of Mr Morton discloses an unsatisfactory financial situation which it is unnecessary for me to deal with in any detail. It is plain that the directors are not people, themselves, of means, and Mr Morton deposes that the directors appear to have been dealing with the assets of the respondent as though those assets were their own.
In his affidavit, Mr David Johnston deposes that Essendon Health Care is an approved provider pursuant to the provisions of The Aged Care Act 1997 and has been receiving monthly, in advance, residential care subsidy payments from the Commonwealth of approximately $200,000 per month. It is that subsidy which allows the continuation of the business of residential care to the residents.
On 27 September, in a meeting with the Compliance Officer of the Aged and Community Care branch of the Department of Health and Aged Care, Mr Johnston was advised that the Department had suspended payment of the subsidy which was due on 1 October of this month, but he has been advised, however, that were a provisional liquidator to be appointed to the defendant, so that with respect to both companies Mr Morton was in a position to control and supervise the application of their funds, then the Department would be likely to look favourably at restoration and payment of that monthly subsidy.
The significance of that is twofold. Firstly, it would ensure that the business will continue, and therefore ensure that the value of the business as a going concern will be protected, and that, in turn, will immediately and in the longer term protect the residents. If the sums by way of subsidy are not paid then the business is likely to collapse, and the residents are likely to find themselves evicted, a circumstance which has a plain public interest component, and one which both justifies an urgent ex parte application and justifies the grant of an appointment of a provisional liquidator if all other requirements for the appointment of a provisional liquidator are otherwise met.
As to the first question whether it is a real prospect that on the hearing of the winding up proceedings this company would be wound up, the evidence before me leads to one emphatic conclusion, that that would undoubtedly be so, and as to whether it is appropriate in all the circumstances that it is proper and desirable that a provisional liquidator be appointed, once again the material before me suggests that it is highly desirable that that course be adopted.
I have been referred to a decision of McClelland, J. in Tickell v. Crest Insurance Company of Australia Limited (1984) 2 A.C.L.C. 493, a decision in which the question arose whether the appointment of a provisional liquidator would lead to the circumstance that government funds would be thereby provided, so as to preserve the goodwill of the business and to serve the legitimate expectations of the policyholders of that business. That consideration regarded as a relevant factor, demonstrating a public interest in the appointment of the provisional liquidator. If authority was needed for that proposition, then that case is such, but it seems to me, frankly, that in the circumstances it really does not need authority for that to be stated as a proposition which should accord support.
In all of the circumstances, therefore, it is appropriate that the orders which are sought be made subject to this: I have received through counsel and through Mr Johnston on behalf of the relevant Department an undertaking on behalf of the applicant in the usual terms as to damages and it is subject to that undertaking, which should appear in the order when it is redrafted under "Other Business", I will make the orders in the terms of the draft order handed to me and which I will now initial.
It does not have a specific provision for the order to be signed by a judge - - -
MR McLEAN: No, Your Honour, I was going to ask you if we could go through the order. There are a couple of things, Your Honour. The first is that the interlocutory application upon which this matter is now based hasn't been filed yet, so I think they will have to give an undertaking that it be filed as soon as practicable, and that can be put in the undertaking section.
HIS HONOUR: Yes, thank you.
MR McLEAN: Can I take Your Honour to Paragraph 6 where the provisional liquidator has liberty to apply; in my submission it's appropriate to give it to the company as - - -
HIS HONOUR: I agree. It is actually written into mine and I thought that was appropriate that it should be so.
MR McLEAN: Also, Your Honour, I think that we need to put in a provision there, dispensing with compliance with those parts of the Corporations Law Rules which say that we are to bring on the interlocutory application if not served on the other side and give them - so if we can just put that in as Paragraph 7 -- -
HIS HONOUR: Yes, if you put the appropriate sections in - - -
MR McLEAN: - - - and then the direction, and could we - I anticipate that that can be done at my instructing solicitor's office ASAP.
HIS HONOUR: I will sign it tonight if you can get it completed.
MR McLEAN: Will we ring Your Honour's associate?
HIS HONOUR: Yes. How long do you think it is likely to be?
MR McLEAN: I apologise to the Court and to my instructor - - -
HIS HONOUR: That's all right. It is presumably on word processor - - -
MR McLEAN: I'm between secretaries at the moment. If I wasn't, it would be done quicker, but probably 20 minutes, I would think.
HIS HONOUR: If you keep sacking secretaries, that is the problem you get.
MR McLEAN: They go on and work for Silks because they get more money and it's easier work.
HIS HONOUR: I will await that and deal with it when it comes. The sooner the better if you can, obviously.
MR McLEAN: Yes, Your Honour.
HIS HONOUR: No other matters?
MR McLEAN: No other matters, Your Honour.
HIS HONOUR: We will adjourn the Court sine die.
---
0
0
0