Deputy Commissioner of Taxation v Vensys Australia Pty Limited (Administrators Appointed) (No 4)
[2008] FCA 1794
•31 October 2008
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Vensys Australia Pty Limited (Administrators Appointed) (No 4) [2008] FCA 1794
Corporations Act 2001 (Cth), s 440A
DEPUTY COMMISSIONER OF TAXATION v VENSYS AUSTRALIA PTY LTD
NSD 581 of 2008
EMMETT J
31 OCTOBER 2008
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 581 of 2008
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
PlaintiffAND: VENSYS AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED)
ACN 098 228 847
Defendant
JUDGE:
EMMETT J
DATE OF ORDER:
31 OCTOBER 2008
WHERE MADE:
SYDNEY
THE COURT ORDERS:
1.Pursuant to s 459R(2) of the Corporations Act 2001 (Cth), that the period within which this winding‑up application may be determined be extended up to and including 28 November 2008.
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
PlaintiffAND: VENSYS AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED)
ACN 098 228 847
Defendant
JUDGE:
EMMETT J
DATE:
31 OCTOBER 2008
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The defendant (the Company) seeks a further adjournment of the hearing of the winding-up application brought by the plaintiff, the Deputy Commissioner of Taxation. The Company moves either under s 440A(2) of the Corporations Act 2001 (Cth) or under the Court’s inherent jurisdiction. Section 440A(2) provides that 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. The Company is under administration. That situation arose last week in circumstances that I did not regard as totally satisfactory (see Deputy Commissioner of Taxation v Vensys Australia Pty Limited (No 3) [2008] FCA 1793).
Be that as it may, an administrator has now been appointed and some preliminary work has been done in the putting forward of a proposal for a deed of company arrangement. The principal asset of the Company is an arrangement that it has with Oracle Corporation Australia Pty Limited (Oracle). The arrangement constitutes an intangible asset of the Company. It is slightly ephemeral, in the sense that the arrangement may be brought to an end contractually by Oracle on 30 days’ notice.
The administrator has endeavoured to ascertain whether Oracle would be disposed to continue the current arrangement with the Company or a prospective buyer of the Company’s undertaking. While Oracle has not given any firm indication that it would be prepared to continue the current arrangement, it has at least not indicated that it would cease to deal with the Company or give 30 days’ notice if a deed of company arrangement was put in place. Understandably enough, Oracle has indicated that it would need to know something about a prospective buyer of the Company’s business or any buyer of shares in the Company before being prepared to commit itself to continuing the present arrangement.
A possible deed of company arrangement is being considered along the following lines. A creditors’ fund would be established comprising all property of the Company as at the date of the deed, including debtors, which are reasonably significant. There would also be a payment by prospective buyers of the business or the shares in the Company, of $150,000. Participating creditors who were entitled to be paid in the fund would not include the present director and his wife, to whom the Company’s indebtedness for loans amounts to approximately $300,000. Employee entitlements owing to the director and his wife would also be excluded. The proposal is that the day-to-day running of the Company would then be returned to its director. The intention is that prospective buyers would become shareholders and directors. The administrator is presently holding signed transfers from the present shareholders to that end.
It is in that context that the question arises as to whether the Court should adjourn the hearing of the Deputy Commissioner’s winding-up application. The Deputy Commissioner is opposed to the adjournment and is ready to proceed with the winding-up application. The Company accepts that it has the onus of establishing that it is in the interests of the Company’s creditors to continue the administration. To discharge that onus, there must be some persuasive evidence to demonstrate that the assets that would be realised under administration will produce a larger dividend than that which would be produced on a winding-up. That is to say, the question is whether the Court is satisfied that there is some prospect, being a realistic prospect, that the creditors would get more by way of payment of their debts under administration than from winding-up.
Mr William Hamilton, the administrator, who is very experienced in matters of insolvency, has expressed the opinion that it is in the interests of the creditors for the winding-up to be adjourned for 28 days to allow creditors to consider a deed of company arrangement along the lines that I have briefly described. His reasons are as follows:
·The potential for continuity of the Company’s business would be preserved and Oracle would have more time to consider whether to continue its current arrangements with the Company.
·The potential claims on the Company from the present director would be diminished.
·Retrenchment payments to employees, including the former director, would be at least deferred.
·The debtors would be more easily realised under administration than in a winding-up.
·A number of employees of the Company are sponsored under the Migration Act1958 (Cth). It may well be necessary for them to be returned to their countries of origin if their visas were terminated by reason of the winding-up of the Company and the loss of their employment.
At this stage, the administrator has not made a comprehensive investigation of the financial position of the director for the purpose of determining whether potential claims under the Act are available by reason of the Company’s having traded while insolvent. On the other hand, there is some evidence that the director would not be in a position to meet any substantial claim. That evidence consists of proceedings brought against him in the Local Court of New South Wales by the Deputy Commissioner for payment of tax.
The administrator also points to the fact that there may be some suggestion that the Deputy Commissioner has received a preference, which may be voidable in the event of a winding‑up. The possibility of recovering the preference, which may amount to more than $100,000, would be lost if the administration were to continue. The administrator points out that he would have some obligation to investigate the Company’s affairs and to report to creditors, although his powers would not be as extensive as those of a liquidator.
One matter that caused me some concern was the fact that, in June 2008, Mr Paditham, the director and one of the shareholders, caused the incorporation of a company called Vensys Consulting Pty Limited. However, in early October he resigned and the shares in that company were transferred to a third party. The Deputy Commissioner, understandably, expressed some concern as to that course of events. However, Mr Paditham, who gave evidence today, has satisfied me that there was no impropriety involved in the formation of that company. No doubt it would be a matter for the administrator to pursue any valuable name that may be associated with the Company’s business. Vensys Consulting Pty Limited was formed in order to protect an identical registered business name owned by the Company, that name being registered in Queensland, Western Australia and Victoria, as well as in New South Wales.
I am persuaded on balance that it is in the best interests of the unsecured creditors for the hearing of the winding‑up application to be adjourned for 28 days, to enable the creditors to have the opportunity of considering the proposed deed of company arrangement that has been suggested by Mr Hamilton. Whether there is any real prospect for the creditors to be paid something out of such an arrangement will very much depend upon the attitude of Oracle. As I have said, Oracle has not rejected out of hand the possibility of continuing to deal with the prospective purchasers. Although the number of the Company’s employees has reduced significantly in the last few months, the fact that there is still some continuity with respect to the employees may indicate that there is some reasonable prospect that Oracle may continue to deal with the existing director and the present employees.
In the circumstances I propose to adjourn the hearing of the winding‑up application to 28 November 2008.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 28 November 2008
Counsel for the Plaintiff: Mr P Rodionoff Solicitor for the Plaintiff: Australian Taxation Office Legal Services Branch Counsel for the Defendant: Mr P Stern Solicitor for the Defendant: Addisons Date of Hearing: 31 October 2008 Date of Judgment: 31 October 2008
0
1
0