Deputy Commissioner of Taxation v The Plantation Shop Pty Ltd
[2010] FCA 561
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v The Plantation Shop Pty Ltd
[2010] FCA 561
Citation: Deputy Commissioner of Taxation v The Plantation Shop Pty Ltd [2010] FCA 561 Parties: DEPUTY COMMISSIONER OF TAXATION v THE PLANTATION SHOP PTY LTD A.C.N. 109 257 089
DEPUTY COMMISSIONER OF TAXATION v PLANTATION TOURS PTY LTD A.C.N. 109 876 664File number(s): QUD 124 of 2010
QUD 126 of 2010Judges: GREENWOOD J Date of judgment: 28 May 2010 Catchwords: CORPORATIONS – consideration of an application to wind up each company – consideration of an application to adjourn each winding up application to enable a meeting of creditors to consider a Deed of Company Arrangement Legislation: Corporations Act 2001 (Cth), ss 459E, 459C(2)(a), 440A(2) Date of hearing: 28 May 2010 Date of last submissions: 28 May 2010 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Counsel for the Plaintiff: Plaintiff appeared by its solicitor Solicitor for the Plaintiff: Ms A Scott, Australian Taxation Office Counsel for the Defendant: No appearance Solicitor for the Defendant: No appearance Counsel for the Applicant for Leave to Appear, Grahcom Pty Ltd: Mr M Black Solicitor for the Applicant for Leave to Appear, Grahcom Pty Ltd: Piper Alderman, Solicitors
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 124 of 2010
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: THE PLANTATION SHOP PTY LTD
A.C.N. 109 257 089
DefendantJUDGE:
GREENWOOD J
DATE OF ORDER:
28 MAY 2010
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Grahcom Pty Ltd be refused leave to appear.
2.The application by Grahcom Pty Ltd to adjourn the hearing of the Deputy Commissioner of Taxation’s application be dismissed.
3.THE PLANTATION SHOP PTY LTD ACN 109 257 089 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).
4.Nick Jim COMBIS, an official liquidator, be appointed liquidator of the company.
5.The plaintiff’s costs be fixed in the sum of $1,139.85 and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 126 of 2010
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PLANTATION TOURS PTY LTD
A.C.N. 109 876 664
DefendantJUDGE:
GREENWOOD J
DATE OF ORDER:
28 MAY 2010
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.Grahcom Pty Ltd be refused leave to appear.
2.The application by Grahcom Pty Ltd to adjourn the hearing of the Deputy Commissioner of Taxation’s application be dismissed.
3.PLANTATION TOURS PTY LTD ACN 109 876 664 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).
4.Nick Jim COMBIS, an official liquidator, be appointed liquidator of the company.
5.The plaintiff’s costs be fixed in the sum of $1,139.85 and reimbursed in accordance with section 466(2) of the Corporations Act 2001 (Cth).
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 124 of 2010
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: THE PLANTATION SHOP PTY LTD
DefendantJUDGE:
GREENWOOD J
DATE:
28 MAY 2010
PLACE:
BRISBANE
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 126 of 2010
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: PLANTATION TOURS PTY LTD
Defendant
JUDGE:
GREENWOOD J
DATE:
28 MAY 2010
PLACE:
BRISBANE
EX TEMPORE REASONS FOR JUDGMENT
These are two related applications before the Court today in which the Deputy Commissioner of Taxation seeks, firstly, an order that a company called The Plantation Shop Pty Ltd (“Plantation Shop”) be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth) (the “Corporations Act”), and related orders and, secondly, an order that a company called Plantation Tours Pty Ltd (“Plantation Tours”) be wound up in insolvency.
The ground relied upon in support of each order is a failure by each company to comply with a statutory demand made under s 459E of the Corporations Act and the Court, of course, must presume that the company is insolvent by operation of s 459C(2)(a) of the Corporations Act. No application, apparently, was made to set aside the statutory demand in each case.
A company called Grahcom Pty Ltd (“Grahcom”) has filed a Notice of Intention to Appear on each application and seeks the leave of the Court to appear for the purpose of opposing the winding‑up order in each case. Grahcom seeks an order adjourning each application until a second creditors’ meeting of each company is held on 17 June 2010 so as to consider, and if thought fit, approve, a proposed Deed of Company Arrangement between each company and a company called Sunfarm Pty Ltd which proposes to contribute $40,000 to a general fund under each deed for distribution to creditors. Grahcom seeks the adjournment orders under s 440A(2) which is in these terms:
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.
Grahcom says that the Court ought to be satisfied that it is in the interests of each company’s creditors for the company to continue under administration, especially for the purposes of an adjournment, having regard to the affidavit of Mr Graham Edward Hayes who says that in the event that each or either company is placed in insolvent administration, the creditors are unlikely to receive any dividend, whereas under the proposed Deed of Company Arrangement the creditors, after the payment of fees due to the Deed administrator, will receive between 10 and 15 cents in each dollar.
The background facts deposed to by Mr Hayes are these.
Mr Hayes is involved in the affairs of Plantation Shop and Plantation Tours and provides strategic management and consultancy services to the director of those companies, who is his daughter.
Plantation Shop was incorporated in 2004 and operates a retail shop at the premises of the tourist attraction known as “The Big Pineapple” at Woombye in the State of Queensland. Mr Graham Hayes is a director of Grahcom. In 2004, the Plantation Shop entered into an agreement with Mr Graham Hayes who was then the trustee of a trust called the “Juice Trust” by which the Plantation Shop premises at the Big Pineapple were made available by way of rental at an amount of $10,000 per month payable to the trustee of the trust. In July 2008, Grahcom was incorporated, or formed, and the debt owed to the trustee of the Juice Trust by Plantation Shop was assigned to Grahcom and Mr Hayes as trustee assigned the lease to the new trustee Grahcom.
The unpaid rent at the date of assignment was approximately $540,000. An amount of $50,000 of this debt has since been paid. The balance, however, remains a debt due and payable to Grahcom. Mr Graham Hayes is owed, personally, an amount of $25,000 by Plantation Shop as expenses for providing consultancy services to the Plantation Shop pursuant to an oral agreement with the company. Mr Hayes then says by way of summary in his affidavit that the debts of Plantation Shop are $735,000 owing to Grahcom and Mr Hayes personally, under the arrangements I have just described; an amount of approximately $45,000 owing to trade creditors of the company; and an amount of approximately $95,000 owing to the Australian Taxation Office.
I will return to the debts said to be owed to the Deputy Commissioner of Taxation in a moment. Accordingly, the total liabilities of the Plantation Shop are said to be $875,000 of which the debt owed to Grahcom and Mr Hayes is approximately 84% of the total liabilities.
The position in relation to Plantation Tours is that in 2004 Plantation Tours entered into an agreement with the trustee of the Juice Trust for the exclusive use of the trains and animals through which the company operates its tours. That equipment is owned by the trustee of the Juice Trust and not Plantation Tours. Pursuant to this agreement, Plantation Tours was to pay $8,000 per month to the trustee.
After the incorporation of Grahcom, the debt owed to the trustee of the Juice Trust by Plantation Tours was assigned to Grahcom. The amount payable to the trustee at the assignment date was approximately $432,000. Approximately $50,000 of this debt has been paid and the balance remains outstanding, according to Mr Hayes, as a debt due and payable to Grahcom. In addition, Grahcom is owed rent for the period July 2008 to May 2010, and that amount is approximately $184,000. Accordingly, the unpaid rent owed by this company is approximately $590,000.
It follows from these events and facts that neither Plantation Shop nor Plantation Tours has paid the rent due under the various agreements and arrangements for very many years. Mr Hayes says in para 44 of his affidavit that the current liabilities of Plantation Tours are an amount of $3,000 owing to trade creditors; an amount of approximately $590,000 owing to Grahcom and Mr Hayes personally; and an amount of approximately $195,000 owing to the Australian Taxation Office.
The statutory demand of the Deputy Commissioner of Taxation addressed to Plantation Shop as at 2 February 2010 reflected a claimed debt not subsequently challenged of $51,731.62, and that statutory demand of the same date addressed to Plantation Tours recited an amount of $279,959.53.
In his affidavit, Mr Hayes says that based on the estimated current financial position of Plantation Shop – and in these remarks he speaks of the position of both companies – the estimated financial position of the companies will result in a dividend to creditors of between 10 and 15 cents in the dollar should the Deed of Company Arrangement be implemented as opposed to a likely nil dividend to creditors should the company be placed in liquidation. Each company was placed in administration on 13 May 2010. The principal difficulty with Mr Hayes’ affidavit even in the context of the proposed application is that it must be demonstrated to the satisfaction of the Court that it is in the interests of creditors that the company remain under administration.
Some of the factors that inform that question are these.
Mr Hayes has acted as or says that he has been the strategic management and consultancy advisor to these companies. The period is not made clear but nevertheless that is the level of engagement pursuant to which he acts or has acted and in doing so presumably he advises his daughter as the director on these matters. As to the question of the proposed dividend which will be likely to be paid under the implementation of the Deed of Company Arrangement, the affidavit reflects Mr Hayes’ own view which, in one sense, of course, is not dispassionate or an independent and unconnected view.
For example, there is no report or affidavit or certificate or statement from an independent accountant who can say that he or she has looked at the financial affairs of either company and formed a preliminary, although qualified, view that a dividend in an insolvency would be X and a dividend under a proposed Deed of Company Arrangement would be Y. The facts recited in Mr Hayes’ affidavit reveal that the company had engaged in very substantial long term non‑compliance with its obligations under commercial arrangements to pay lease payments to the trustee of the Juice Trust.
This systemic failure to pay rental from essentially 2004 has continued unabated with apparently no step taken by the trustee to assert or enforce the commercial obligations which the companies undertook to discharge on a regular monthly basis. Further, the uncontested facts show that each company has engaged in substantial non‑compliance of its obligations under the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth) to pay debts due to the Deputy Commissioner of Taxation which, of course, are debts due to the Commonwealth of Australia by operation of the legislation, on behalf of the people of Australia.
At para 9 of his affidavit Mr Hayes postulates, as I have indicated, that the likely dividend under the Deed will be between 10 and 15 cents in the dollar, but that seems to be Mr Hayes’ own postulation. The further matter, of course, is the role of the Administrator of each company in these applications. The Administrator has taken the position that he will abide by the decision of the Court. Some emphasis is sought to be attached to the fact that the Administrator is not agitating questions on these applications. Nevertheless, the position is that the Administrator says that he will abide by a decision of the Court. He seems not to take a particular position.
One matter however that is relevant to the exercise of the discretion is that the Administrator was told at a certain point in time that he would be provided with a copy of the proposed Deed of Company Arrangement by 10am on 27 May 2010. Later that day he wrote a letter to the Australian Taxation Office in which he said he had not yet seen the Deed which of course was the same day in any event. However, on the afternoon of that day he had still not seen the Deed and on 28 May 2010 he advised the Australian Taxation Office that he, as Administrator, had not been provided with a copy of the proposed Deed of Company Arrangement prior to the Australian Taxation Office providing a copy of it to him.
For all of these reasons, I am not satisfied that it is in the interests of the creditors that each company remain in administration. Part of the reason for that is that having regard to the substantial non‑compliance or failure of the companies to perform their commercial obligations and their non‑compliance in discharging their obligations to pay tax under a law of the Commonwealth, I am not confident that either of these companies has discharged its obligations under the Corporations Act and it therefore falls to the liquidator to examine the question of whether or not there has been avoidable preferences made or dispositions or dealings with assets of the companies in a way which is in conformity with the Corporations Act. Accordingly, I refuse the adjournment. I also refuse leave to appear to Grahcom and I propose to make orders for the winding‑up of each company.
For the sake of the transcript, the Court will note that the material read on the application is that material recited in the document described as “material to be read in the matter of Plantation Tours Pty Ltd”. I propose to make orders in terms of the draft orders 1, 2 and 3 in that matter. In addition then in the matter of the Plantation Shop Pty Ltd the record will reflect that the material to be read falling on the application is that material recited in the document headed “Material to be Read”, and I make orders in terms of orders 1, 2 and 3 in the draft which will be initialled by me and they will be the orders of the Court.
I certify that the preceding twenty‑two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate:
Dated: 28 May 2010
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