In the matter of Bobos Engineering Australia Pty Limited

[2015] NSWSC 2050

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Bobos Engineering Australia Pty Limited [2015] NSWSC 2050
Hearing dates:	22 April 2015
Date of orders:	22 April 2015
Decision date:	22 April 2015
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Application for further adjournment dismissed; Winding up order made and liquidators appointed.
Catchwords:	CORPORATIONS – winding up – application to adjourn winding up proceedings – where further adjournment sought to permit consideration of deed of company arrangement – where unlikely that deed would be approved by creditors – where viability of deed unconfirmed – where result of deed not clearly superior to liquidation – where further costs will be incurred if proceedings adjourned – held, application for adjournment dismissed; CORPORATIONS – winding up – winding up in insolvency – failure to comply with creditor’s statutory demand – presumption of insolvency – suitability of appointing administrators as liquidators.
Legislation Cited:	(Cth) Corporations Act 2001, s 439A, s 440A
Category:	Principal judgment
Parties:	Workers Compensation Nominal Insurer ACN 564 379 108 (plaintiff) Bobos Engineering Australia Pty Ltd ACN 083 002 411 (defendant)
Representation:	Counsel: Mr K Metlej (solicitor) (plaintiff) (mentioning Office of State Revenue) Mr J Hynes (administrator) Mr N Bobos (director) (defendant) Mr Vrong (supporting creditor)   Solicitors: Craddock Murray Neumann Lawyers Pty Ltd (plaintiff) Fisher Jeffries (defendant)
File Number(s):	2014/361767

Judgment (ex tempore)

Application for adjournment of winding up proceedings

1. HIS HONOUR: These proceedings for the winding up of the defendant company Bobos Engineering Australia Pty Ltd were commenced by the plaintiff Workers Compensation Nominal Insurer by originating process filed on 9 December 2014. It was first returnable before the court on 2 February 2015. On that date, the proceedings were adjourned to 23 February and a direction made that the defendant support any further request for an adjournment with an affidavit setting out the facts and circumstances to be relied upon.

2. On 23 February, the proceedings were adjourned by consent to 2 March 2015. On 2 March, the defendant applied for a further adjournment, which was declined by the registrar and referred to the Corporations Judge for allocation of a hearing date, but with a view that directions would be made for the service of the defendant's evidence in the meantime. I fixed the proceedings for hearing on 25 March with a half day estimate and provided for the defendant to serve evidence by 20 March, it being contemplated that evidence of solvency would be adduced. Shortly before 25 March, the defendant appointed voluntary administrators and, on 25 March, over the opposition of the plaintiff, I adjourned the proceedings, pursuant to (Cth) Corporations Act 2001, s 440A, to 7 April. On 7 April, again over the plaintiff's opposition, I further adjourned the proceedings to today.

3. The two adjournments to date under s 440A were supported primarily on the basis of preserving the business of the company in the interim, so as to enable the administrators to investigate further and to negotiate proposed sales of the company’s business. Today, the Court was informed that those proposals had not proceeded any further. The plaintiff seeks to proceed on the winding up application. The administrators make no application for a further adjournment, but Mr Bobos, the principal of the company, appears and seeks a further adjournment, effectively pursuant to 440A, in order to enable the second creditors meeting to consider a proposal for a deed of company arrangement which he has propounded.

4. As well as the plaintiff, there are before the Court as supporting creditors two other statutory creditors – the Deputy Commissioner of Taxation and the Commissioner of State Revenue – each of whom supports the plaintiff's position. Together with the plaintiff, they represent about 52% in value of the currently established creditors of the company.

5. The administrator has provided a preliminary analysis of the DOCA proposal, which is in DX03 and which indicates that the DOCA may generate a dividend of 15 cents in the dollar for unsecured creditors, whereas liquidation, on a pessimistic scenario, might generate one cent in the dollar, but, on an optimistic scenario, 19 cents in the dollar.

6. There is significant doubt as to whether the creditors would approve a DOCA. First and foremost, 52% of the known creditors have indicated that they will oppose the DOCA and desire that the company be wound up. That is a significant and important consideration. In the light of that position, it is only on the administrator's casting vote that a DOCA could be carried at a creditors meeting.

7. It is not inconceivable that the administrator would recommend approval of a DOCA, and it is not inconceivable that an administrator would exercise a casting vote in accordance with such a recommendation, but as things stand, the prospects of the DOCA being approved by creditors, where a majority in value oppose it, seem slim. And if it were approved on a casting vote, there would then very likely be proceedings in the Court for review of the administrator's exercise of that casting vote. Accordingly, the prospects that a DOCA would ultimately survive where the majority in value of the creditors oppose it cannot be considered as high.

8. The DOCA is still in a relatively rudimentary form. The administrators have explained that their position before the Court today is largely informed by the circumstance that they have insufficient information to decide whether the DOCA proposal is a viable one. It is also far from clear that, even if the DOCA were approved, the company would not be continuing to trade while insolvent, a position which the Court could not countenance.

9. The status of the litigation with Crystal appears to me to be neutral, as that litigation, if meritorious, can be pursued by a liquidator, if appointed, with whom the directors would be bound to cooperate. As Mr Metlej has pointed out, it is conceivable that prospective recoveries from preferences and insolvent trading might be significantly more than has been allowed for in the preliminary analysis that indicates a dividend in a liquidation of up to 19 cents in the dollar.

10. Essentially, the present proposal for an adjournment boils down to the Court being asked to accept that there is a chance that the DOCA will prove viable, a chance that the creditors will approve it and a chance that, if approved, it will produce a superior result for creditors than a liquidation. Against that, further costs would be incurred in preparing and distributing a s 439A report and holding a meeting. Additional costs would probably be incurred on an application to review the exercise of a casting vote. At the end of the day, the dividend under the DOCA proposal, though I do not suggest that it is of no significance to creditors, is merely within the range of results that could be produced by a liquidation and not clearly superior to what may be produced in a liquidation.

11. For those reasons, I have come to the conclusion that the proper exercise of the Court's power must be to refuse a further adjournment of the winding up proceedings. The plaintiff is entitled to have its case heard, and the defendant has been afforded repeated opportunities now to put a position before the Court that demonstrates that another course would be more beneficial. Accordingly, I refuse the application for an adjournment.

Winding up application

12. By originating process filed on 9 December 2014, the plaintiff Workers Compensation Nominal Insurer seeks an order that the defendant Bobos Engineering Australia Pty Ltd be wound up and a liquidator appointed. The application relies on presumed insolvency arising from a failure to comply with a creditors' statutory demand which was served on the defendant on 30 October 2014, claiming a debt of $620,491. The evidence establishes that no application was made to set aside the demand, and that the demand has not been complied with. The defendant is presumed, therefore, to be insolvent. If it matters, other evidence tendered in the proceedings, including the appointment of voluntary administrators, also establishes affirmatively the insolvency of the defendant.

13. Service of the originating process is apparent from the appearance of the defendant to oppose the proceedings.

14. The administrators Stephen James Duncan and Nicholas David Gyss have consented to be appointed as liquidators and, having regard to their experience to date in the administration of the company and the knowledge they will have gained, and in the absence of opposition to their appointment by the plaintiff, their appointment appears a sensible course.

15. The evidence establishes that the debt remains unpaid, that no other winding up proceeding is on foot and that the due notices of the application have been published.

16. The Court orders that Bobos Engineering Australia Pty Ltd (Administrators Appointed) be wound up in insolvency and that Stephen James Duncan and Nicholas David Gyss of KordaMentha, Level 4, 70 Pirie Street, Adelaide in the state of South Australia, who are official liquidators, be appointed jointly and severally liquidators of the defendant.

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Decision last updated: 26 February 2016