In the matter of Usman Dental Pty Ltd (admins apptd)

[2025] NSWSC 591

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Usman Dental Pty Ltd (admins apptd) [2025] NSWSC 591

Hearing dates:

27 May 2025

Date of orders:

27 May 2025

Decision date:

27 May 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Application for adjournment of winding up application dismissed. Defendant company to be wound up in insolvency. Liquidators nominated by Plaintiff appointed as liquidators of the company.

Catchwords:

CORPORATIONS – Insolvency – Winding up – Application for adjournment of winding up application - Where voluntary administrators of company sought adjournment of winding up application to allow a proposed deed of company arrangement to be considered at second creditors’ meeting – Whether it is in the interests of the company’s creditors that the company continue under administration rather than be wound up.

CORPORATIONS – Insolvency – Winding up – Presumption of insolvency – Where company failed to comply with creditor’s statutory demand – Where presumption of insolvency arises – Whether voluntary administrators should be appointed as company’s liquidators instead of liquidators nominated by the Plaintiff.

Legislation Cited:

Corporations Act 2001 (Cth) ss 180, 440A(2), 588G

Cases Cited:

- Deputy Commissioner of Taxation v Bradley Keeling Management Pty Ltd (2003) 44 ACSR 377; [2003] NSWSC 47

- Re Denham Constructions Pty Ltd [2016] NSWSC 1425 and [2016] NSWSC 1426

- Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296

- Re Trinity Constructions (Aust) Pty Ltd (admin apptd) [2021] NSWSC 1277

Category:

Principal judgment

Parties:

Workfast Infrastructure Australia Pty Ltd (Plaintiff)
Usman Dental Pty Ltd (admins apptd) (Defendant)

Representation:

Counsel:
D Neggo (Plaintiff)
B Ng (Interested Party – Administrators of Usman Dental Pty Ltd)

Solicitors:
Macpherson Kelley (Plaintiff)
Mills Oakley (Interested Party)

File Number(s):

2025/134277

JUDGMENT

Application to adjourn winding up

1. By Interlocutory Application filed today, by leave, Messrs Calabretta, Lawrence and Tribut (“Voluntary Administrators”) applied for an order that winding up proceedings brought by the Plaintiff, Workfast Infrastructure Australia Pty Ltd (“Workfast”) be adjourned under s 440A(2) of the Corporations Act 2001 (Cth) (“Act”) to a date after 3 June 2025. That application is directed to the fact that there is a proposed second meeting of creditors of the Defendant in that application, Usman Dental Pty Ltd (“Usman Dental”) to take place shortly.

2. Section 440A(2) of the Act relevantly 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 voluntary 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 applicable principles are well established and have been consistently applied since the decision in Deputy Commissioner of Taxation v Bradley Keeling Management Pty Ltd (2003) 44 ACSR 377; [2003] NSWSC 47 at [18]. The ultimate question is whether the Court is persuaded that the winding up application should be adjourned, and the amount of proof that is necessary to establish that matter may vary, depending upon whether an application is brought shortly after the voluntary administrator is appointed or at a later date. Here, the application is brought several weeks after the administrator is appointed, and only just before a proposed second meeting of creditors to consider a deed of company arrangement (“DOCA”) put forward by persons associated with the company, which would be an alternative to a winding up. In Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296 at [6], as to which leave to appeal was refused by the Court of Appeal, Brereton J observed that the section required that the Court be satisfied "that it is in the interest of the company's creditors for the company to continue under administration, rather than be wound up, as distinction from satisfaction that it may be so". His Honour also noted at [6] that "a substantial degree of persuasion that administration rather than liquidation is in the interests of a company's creditors is required to invoke the section". I have also addressed the relevant authorities in cases including Re Denham Constructions Pty Ltd [2016] NSWSC 1425 and [2016] NSWSC 1426, and Re Trinity Constructions (Aust) Pty Ltd (admin apptd) [2021] NSWSC 1277.

Affidavit evidence

3. The Voluntary Administrators lead substantial evidence in support of the adjournment application, but the application can ultimately be determined on a relatively straightforward basis. The Voluntary Administrators read a first affidavit dated 26 May 2025 of Mr Tribut, who is a joint and several administrator of Usman Dental and associated companies and refers to a proposal for a "pooled deed of company arrangement" in respect of Usman Dental.

4. I proceed on the basis that that concept is available, as a contractual matter, within a DOCA, but s 440A(2) of the Act is directed to a comparison of the position of the particular company in a winding up and in its continuance in voluntary administration. Mr Tribut there expresses the view that an adjournment of the winding up application is in the interests of Usman Dental’s creditors, for several reasons, although the position put in that affidavit has since been updated for subsequent developments. He also refers to the history of the Voluntary Administrators' appointment and documents that have been issued in the course of that appointment, including his second report of creditors. He addresses the creditors of Usman Dental, and it appears that those creditors have claims, broadly, in the order of $1 million. He refers to attempts which have been made, initially successfully but now unsuccessfully, to adjourn the winding up application by consent.

5. An initial report to creditors dated 21 May 2025 which was exhibited to that affidavit in turn outlines the process for a pooled DOCA with two other companies. The Voluntary Administrators there expressed their opinion that it was not in the creditors' interest for the voluntary administration to end. They there summarised potential claims, in respect of Usman Dental, noting an insolvent trading claim in excess of $1 million. They also referred to potential breaches of ss 180 and 588G of the Act, involving, respectively, a director's failure to exercise due care and diligence and a failure to prevent insolvent trading. They pointed to the option of a DOCA available to creditors, and other options, and recommended the entry into a DOCA, which has since been somewhat improved by the amended DOCA (“Amended DOCA”). They there expressed the view that the estimated return in a separate liquidation of Usman was between 26 and 33 cents, although it is not apparent how they derived that figure, given the information that is available as to the insolvent trading claim that an amount that is approximately the same as the amount of Usman Dental’s creditors, and potential other claims, including shareholder debts owed to Usman Dental.

6. An annexure to that document in turn referred, inter alia, to a shareholder debt in the amount of approximately in excess of $2.65 million as of 14 April 2025 owed to Usman Dental, and referred to other amounts that were owed, in figures that differed somewhat, and to amounts owed by way of intercompany loan accounts. Mr Neggo, who appears for Workfast, rightly points out that it is impossible to reconcile those figures, in any precise way. That is not a matter that assists the Voluntary Administrators, where it is they who seek to establish that it is in the interests of Usman Dental’s creditors to continue the voluntary administration, with a view to the recommended entry into the Amended DOCA, or at least creditors making a decision as to that matter, where they would be doing so by reference to figures that are difficult to reconcile. That report also addresses the Voluntary Administrators' view that Usman Dental became clearly insolvent by 30 June 2024 although there are arguments for an earlier date of insolvency, and again refers to a possible insolvent trading claim in the vicinity of $1 million, based on the later insolvency date of 30 June 2024, and also refers to unquantified payments to related entities which may constitute unreasonable director related transactions. The Voluntary Administrators recognised, and I recognise, that there may be issues as to recoverability as to those claims, but that question is not addressed in any systematic way in that report.

7. By a further affidavit dated 26 May 2025, Mr Tribut refers to the Amended DOCA which was provided to him on that date and which he had not had a full opportunity to assess. At that point, without any criticism of Mr Tribut, he appears to have been comparing the Amended DOCA proposal which had not been fully analysed with a liquidation scenario that had also not been fully analysed and, perhaps unsurprisingly, the limits to that comparison limited any useful information that could emerge from it.

8. By an affidavit dated 27 May 2025, Ms Paisal, who is a solicitor acting for the Voluntary Administrators, in turn annexes a proposed supplementary report to creditors dated 27 May 2025. That document refers to the receipt of the Amended DOCA proposal and describes what are set out as advantages of the Amended DOCA and refers to a comparison between the return on the Amended DOCA, estimated as between 18 to 49 cents on a pooled basis, and the return on a liquidation to unsecured creditors estimated as between 17 and 29 cents. It is difficult to follow, by reference to that report, how either of those ranges is calculated. The former appears to make assumptions, which are not clear, as to what will arise on the sale of a property which is contemplated to fund the large part of the DOCA contributions, and possibly also as to the enforceability of a guarantee to be given by the very persons who the Voluntary Administrators doubt could meet an insolvent trading claim, and the return to creditors in a liquidation makes uncertain assumptions as to the amount of recoveries.

9. In particular, Ms Ng, who appears for the Voluntary Administrators, draws attention to Schedule B, recording the estimated outcomes in a liquidation, which may or may not have been intended to be provided to creditors, but records the amount of recoveries in respect of debtors, related party debtors, plant and equipment, goodwill on a sale of business as commercially sensitive, disclosing no relevant information about them, allows a recovery of between $30,000 and $60,000 for insolvent trading, notwithstanding the reference to a claim of $1 million to which I referred above, and does not record any recoveries for voidable transactions. It will immediately be apparent that a creditor provided with that information could not undertake any meaningful assessment of the likelihood of recoveries in a liquidation, that compares with the asserted recoveries with the Amended DOCA.

Determination of the adjournment application

10. In these circumstances, the uncertainties in the information to be put before creditors and now put before the Court are such that it is not possible to undertake any rational comparison of the benefit to Usman Dental of remaining in voluntary administration, with a view to entering into the Amended DOCA, and liquidation, because the Voluntary Administrators have not provided sufficient information as to the outcome in either position to allow their reasoning to be assessed. Where that is the case, creditors would have difficulty voting on the relevant resolution, in any informed way, and, more importantly for present purposes, it is not possible for the Court to be satisfied that it is in the interests of Usman Dental’s creditors for it to continue in voluntary administration rather than be wound up, preserving the opportunities of any insolvent trading claim and any of the other claims to which the Voluntary Administrators refer. In an application of this kind, the Voluntary Administrators bear the onus of establishing that manner; as Brereton J had pointed out, they bear the onus of establishing not merely the possibility of a better result in a voluntary administration, but the fact that it is in the interests of the company's creditors for Usman Dental to continue under administration, on the balance of probabilities, and the evidence before me is incapable of establishing that matter.

11. For these reasons, the Interlocutory Application filed by the Voluntary Administrators seeking an adjournment of the hearing of the winding up application should be dismissed. As matters developed, Workfast did not seek an order that the Voluntary Administrators pay the costs of that application.

Winding up application

12. Turning now to the winding up application, Workfast relies on an unsatisfied creditor's statutory demand (“Demand”) issued to Usman Dental and the affidavit accompanying the Demand. It points to evidence of delivery of the Demand, although Mr Neggo rightly draws attention to an error in the relevant postcode, which appears to have caused no difficulty since there is a tracking document which indicates delivery to the relevant address, notwithstanding the error in the postcode.

13. Workfast reads the affidavit dated 7 April 2025 of Mr Nieuwenhuis in support of the Originating Process, which is directed to the debt claimed in the Demand and also draws attention to a consent of liquidator. Workfast reads the affidavit dated 28 April 2025 of Mr Gamsby, which proves service of the winding up application. It reads an affidavit dated 16 May 2025 of Ms Stratford which proves lodgement of Form 519 with ASIC and publication of the notice of the winding up application. A further affidavit dated 26 May 2025 of Ms Stratford addresses correspondence in respect of the application, and an affidavit dated 26 May 2025 of Mr Hussain refers to a small additional payment received, and the balance of the debt that remains unpaid.

14. Here, the winding up application is based on the presumption of insolvency that arises from the unsatisfied Demand. That presumption has not been displaced by proof of solvency and that is sufficient basis to make the winding up order.

15. Workfast seeks an order for a lump sum costs order and has significantly discounted the amount of professional fees claimed, including the costs of this application, to total $13,120, which is relatively high for a winding up application but reflects the complexities arising in this application. It also claims the usual third party disbursements, including the filing fee and fees due to the Australian Securities and Investments Commission, and has also discounted the amount of Counsel's fees. It accepts that, in circumstances that I make that order, which will avoid the costs of an assessment in respect of a potentially insolvent company, it would not press the order for costs previously sought against the Voluntary Administrators, so that Workfast is not put to the cost of assessing a potentially relatively small claim for costs against the Voluntary Administrators. I will take that course.

16. Accordingly, I will make the winding up order that is sought, and I will order that costs be paid in the amount set out in the bill of costs, as amended.

Identity of liquidator

17. It remains to address the identity of the liquidator to be appointed to Usman Dental, where the Voluntary Administrators have indicated their willingness to be appointed as liquidators, given the work that they have done to date. I recognise that, here, the Voluntary Administrators have been in office for some time and have done some considerable work, and that is a reason to consider appointing them as liquidators.

18. On the other hand, there is a presumption, at least in this State, that the party seeking a winding up order will nominate a liquidator, and that person will ordinarily be appointed unless there is reason to the contrary. Second, it appears that a degree of focus of the Voluntary Administrators has been on the issue of a pooled administration, and the role for the liquidator will be directed to the position of the particular company. Third, there is limited evidence of the work that the Voluntary Administrators have done in respect of the potential for insolvent trading claims and recovery claims, in respect of the company, although I recognise that Ms Ng refers to work done which is not in evidence. Fourth, and importantly, Ms Ng rightly pointed to the fact that the Voluntary Administrators will be the administrators of two other companies within the Usman group of companies. That is not a matter which supports their appointment as liquidator, because here, in circumstances of inter-company loans, and potential claims as against related parties, that may give rise to a conflict of duty and duty rather than advantages of a common appointee. I bear in mind, also, that it appears that, in an advertisement for the national scope of the insolvency practice, the voluntary administration of a company that operates in the Central Coast of New South Wales appears to have been handled by a registered liquidator who is situated in Perth, and it will not necessarily be a disadvantage to appoint Sydney based liquidators to that company.

19. For all of these reasons, I am satisfied that Workfast’s proposed appointees should be appointed as liquidators, and I will make that order.

Orders

20. In this matter, I make the following orders.

1A   The Interlocutory Process filed by Mr Calabretta and others today be dismissed, with no order as to costs against them.

1. Usman Dental Pty Ltd (Administrators Appointed) (ACN 163 993 324), the Defendant, be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).

2. Rahul Goyal and Catherine Margaret Conneely be appointed as joint and several liquidators of the Defendant.

3. The Plaintiff’s costs be fixed in the sum of $20,220.74 and are costs in the winding up of the defendant.

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Decision last updated: 10 June 2025