Deputy Commissioner of Taxation v Vensys Australia Pty Limited (No 2)

[2008] FCA 1404

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Vensys Australia Pty Limited (No 2)

[2008] FCA 1404

DEPUTY COMMISSIONER OF TAXATION v VENSYS AUSTRALIA PTY LIMITED

NSD 581 OF 2008

EMMETT J

29 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:	29 AUGUST 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The costs orders made on the following dates and fixed in the following amounts be rescinded:

(a)20 June 2008 fixed in the amount of $3,000.00;

(b)27 June 2008 fixed in the amount of $2,000.00;

(c)1 August 2008 fixed in the amount of $2,711.75;

(d)18 August 2008 fixed in the amount of $4,719.00; and

(e)25 August 2008 fixed in the amount of $2,975.67.

2.The Defendant pay the Plaintiff’s costs fixed in the amount of $13,852.70, being costs in the amount of $12,924.06 plus the costs of today, 29 August 2008, fixed in the amount of $928.64.

3.The balance of the costs previously paid by the Defendant to the Plaintiff, in the amount of $14,606.72, less the costs awarded in paragraph 2 of this order be applied to the Defendant’s taxation debts ($754.02).

4.The proceedings be adjourned to 10 October 2008 for further hearing.

5.Liberty be reserved to the Plaintiff to restore the matter for hearing before the Corporations Duty Judge on 2 days notice to the Defendant.

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:	29 AUGUST 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This winding-up application has been before the court on many occasions previously.  The plaintiff, the Deputy Commissioner of Taxation, has, on a number of occasions, but not all occasions in the past, indicated that she neither consents to nor opposes the adjournment of the hearing.  The basis upon which the adjournments have been sought and granted is that the defendant has been in the throes of negotiating the sale of its business in circumstances that I outlined briefly in earlier reasons that I have given concerning an adjournment (see Deputy Commissioner of Taxation v Vensys Australia Pty Limited [2008] FCA 1170). At that stage it was unclear precisely what would be the nature of the transaction that would be entered into in order to generate funds to discharge the debt owing to the Commissioner of Taxation.

2. This afternoon, a formal agreement was entered into between the defendant and HTC Global Services Australia Pty Limited, whereby the defendant agrees to sell its business assets, as defined in the agreement, for a consideration in cash consisting of an amount of the lesser of the sum of $618,661.14 and the total amount outstanding, at completion of the agreement, of all debts and liabilities of the defendant at that time, including, in particular, the indebtedness of the defendant to the Deputy Commissioner of Taxation.  Completion is to take place on 30 September 2008 or within five business days after satisfaction or waiver of certain conditions precedent set out in the agreement.  The amount of $618,661.14 is to be paid into the defendant’s solicitors trust account within five days, to be held on behalf of the Deputy Commissioner of Taxation until completion. 

3. The defendant has furnished evidence as to its present financial position, apart from the indebtedness of the defendant to the Deputy Commissioner of Taxation.  The defendant has current debtors of $170,616.87 and projected debtors as at 30 September 2008 of $205,709.50.  The current debtors are for the period July and August 2008.  On the basis of the historical performance of the business of the defendant, current debtors will pay by mid-September 2008.  Debtors invoiced before 22 September 2008 will pay within two weeks prior to 30 September 2008.

4. The evidence indicates that the defendant will, as at 30 September 2008, have unsecured creditors in the sum of $1,061,480.44, but that its current assets will constitute sufficient funds to pay out all unsecured creditors on that day, assuming that the agreement is completed as contemplated.  The evidence indicates that, on the basis of past performance, the cash flow of the defendant will be positive during September. 

5. In the course of the various adjournment applications, Mr Venkatesh Paditham, the principal of the defendant, has given a number of undertakings to the Court.  They are repeated in paragraph 8 of his latest affidavit, sworn on 29 August 2008.  In that affidavit, Mr Paditham has expressly confirmed that he repeats the undertakings that have been given hitherto, with the exception of those undertakings that involve payments and past events.  The undertakings generally are concerned with the conduct of the affairs of the defendant and the regular furnishing of information to the Deputy Commissioner of Taxation. 

6. On the basis of the agreement that is now in evidence, the Deputy Commissioner of Taxation has indicated that she consents to the further adjournment of the hearing of the winding-up application to 10 October 2008.  That consent is given in the expectation that, by that time, the agreement will have been completed.  The Deputy Commissioner has foreshadowed that, provided the funds expected to be available to the defendant at that time are applied in full satisfaction of all unsecured liabilities of the defendant, including all liabilities to the Deputy Commissioner, she will consent to the dismissal of the proceeding.  That would leave only the question of costs. 

7. On successive applications for adjournments, one of the terms of adjournment has been that the defendant pay the plaintiff’s costs of the day.  Due to some miscalculation, the defendant has in fact paid more costs than the plaintiff intended to receive.  As a consequence, the parties have asked the court to make orders, by consent, rescinding all previous costs orders and to make a fresh order that the defendant pay the plaintiff’s costs in a fixed amount, including the costs of today.  The balance previously paid by the defendant to the plaintiff exceeds that amount.  The parties have agreed that the excess will be applied by the plaintiff in reduction of the liability of the defendant to the plaintiff.

8. In all of the circumstances, there is no reason why the Court should not accede to the request of the parties that the hearing of the winding-up application be adjourned to 10 October 2008.  I am satisfied from the material before me that there should be no prejudice to the community generally by the defendant’s continuing to carry on its business in the way that it has hitherto.  Its debts, apart from the debt due to the plaintiff, are being met as and when they fall due, and there is every reason to expect that the agreement will be completed and that, on completion, the defendant will be in a position to discharge all of its unsecured debts. 

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:        29 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:	29 August 2008
Date of Judgment:	29 August 2008