Deputy Commissioner of Taxation v Vensys Australia Pty Limited
[2008] FCA 1170
•1 August 2008
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Vensys Australia Pty Limited
[2008] FCA 1170
DEPUTY COMMISSIONER OF TAXATION v VENSYS AUSTRALIA PTY LIMITED
NSD 581 OF 2008
EMMETT J
1 AUGUST 2008
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 581 OF 2008
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND:
VENSYS AUSTRALIA PTY LIMITED
Defendant
JUDGE:
EMMETT J
DATE OF ORDER:
1 AUGUST 2008
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The Commissioner’s costs of today be paid by the Defendant fixed in the sum of $2,711.75.
2.The proceedings be adjourned to 18 August 2008.
THE COURT NOTES THAT:
3.The costs referred to in Order 1 have been paid.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 581 OF 2008
BETWEEN:
DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND:
VENSYS AUSTRALIA PTY LIMITED
Defendant
JUDGE:
EMMETT J
DATE:
1 AUGUST 2008
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This proceeding first came before me on 20 June 2008. The matter was referred to me, as Corporations Duty Judge, by a Deputy Registrar. The proceeding consists of an application by the plaintiff, the Deputy Commissioner of Taxation (the Commissioner), for a winding up order in respect of the defendant, Vensys Australia Pty Limited (the Company). There is no dispute about the indebtedness of the Company to the Commissioner. However, the principals of the Company have been negotiating for the sale of shares in the Company, or its business, to HTC Global Services Australia Pty Limited (HTC).
On 20 June 2008, I adjourned the hearing of the winding up application to 27 June for further hearing, and ordered the Company to pay the Commissioner’s costs thrown away by the adjournment. I noted certain undertakings that were given to the Court by Mr Venkatesh Paditham, a principal of the Company. The undertakings related to the payment of funds into the Company’s solicitors’ trust account, to be held on behalf of the Commissioner. On 27 June 2008, I again adjourned the hearing of the winding up application to today. Further undertakings were giving by Mr Paditham, and again the Company was ordered to pay the Commissioner’s costs of that day.
When the matter came on for hearing again this morning, counsel for the Company asked that the proceedings stand down to this afternoon, so that further evidence could be filed to indicate the state of progress in relation to the sale of the shares in the Company. On 31 July 2008, an agreement was entered into purportedly between the Company and HTC. The agreement purported to be binding on the parties. However, the agreement provided, in essence, for the Company to commit itself to the vesting of its share capital in HTC. The agreement contemplated an initial payment of $600,000, as acquisition consideration.
The language of the agreement demonstrates that it was drafted by a non-lawyer or a lawyer with little comprehension of the law. The language rather suggests that the intention was that the holders of shares in the Company will sell them to HTC. On the other hand, the vendor is the Company, suggesting that the Company will sell its business. The proceeds of sale are to be applied in discharging outstanding debts of the Company but without any recourse to the Company in respect of those debts. Thus the intention is that, when the agreement with HTC is settled, the Company will have only current liabilities which, on the material present before me, are approximately $35,000. Other liabilities totalling some $776,000 will have been discharged without recourse to the Company.
Since the matter was last before me, $25,000 has been paid directly to the Commissioner and $75,000 has been paid into the Company’s solicitors’ trust account in respect of the debt due to the Commissioner of about $578,000 of tax owed by the Company. In addition, the Company has a BAS liability of nearly $55,000 as at 31 July 2008. A sum equal to that debt has also been paid into the Company’s solicitor’s trust account.
When the matter was called on for hearing this morning, counsel for the Company indicated that Mr Paditham was endeavouring to negotiate with HTC for an increase in the initial payment of consideration from 600,000 to $675,000. When the matter came back before me this afternoon, counsel for the Company filed an affidavit in which Mr Paditham asserts that, since yesterday, he has been able to negotiate an increase in the initial payment to $675,000. However, there is no admissible evidence as to the circumstances of that negotiation. The terms of the agreement signed between the Company and HTC contemplate that a formal sale or acquisition agreement will be entered into by no later than 15 August 2008. If that does not occur, HTC has the right to terminate the current agreement at any time prior to entry into such a sale or acquisition agreement.
As I have said, the Company’s current creditors are owed about $35,000. There is evidence before me that supports a conclusion that the Company’s income is likely to exceed those debts, in the sense that it has a positive cash flow. The Company presently has outstanding debtors of in excess of $180,000. On that basis, the material supports a conclusion that the community would not be prejudiced by an adjournment of another couple of weeks to enable the proposed sale and acquisition agreement to be put in place. On the basis of the evidence before me that there is a binding agreement between HTC, on the one hand, and interests associated with the Company, on the other, that will involve an initial payment of consideration of at least $675,000, to be paid no later than 25 August 2008, I propose to adjourn the hearing of the winding up application to 18 August 2008.
If a formal agreement along the lines that I have previously indicated is in place by 15 August 2008, and the evidence indicates that the Company’s cash flow continues to be positive, I would be disposed to adjourn the further hearing of the winding up application until very shortly after 25 August 2008. That adjournment would be on the basis that, if the agreement, postulated to be entered into on 15 August 2008, is consummated to the extent that there is a payment of $675,000, that payment together with the money already held by the Company’s solicitors would enable its debts to the Deputy Commissioner and in respect of superannuation to be paid in full. It would, of course, be a term of any further adjournment that any additional costs incurred by the Commissioner be paid by Mr Paditham.
I will order the Company to pay the Deputy Commissioner’s costs in the sum of $2,711.75, and I note that that sum has now been paid by Mr Paditham to the Deputy Commissioner.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 3 September 2008
Counsel for the Applicant: Mr F.F.F. Salama Solicitor for the Applicant: Australian Taxation Office Legal Services Branch Counsel for the Respondent: Mr J.T. Svehla Solicitor for the Respondent: Cutler Hughes & Harris Date of Hearing: 1 August 2008 Date of Judgment: 1 August 2008
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