Soil and Contracting Pty Ltd v Boban Pty Ltd (Administrators Appointed) [No 3] - [2015] WASC 59

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SOIL AND CONTRACTING PTY LTD -v- BOBAN PTY LTD (ADMINISTRATORS APPOINTED) [No 3] [2015] WASC 59

CORAM: MASTER SANDERSON

HEARD: 3 FEBRUARY 2015

DELIVERED : 3 FEBRUARY 2015

PUBLISHED : 12 FEBRUARY 2015

FILE NO/S: COR 23 of 2014

BETWEEN: SOIL AND CONTRACTING PTY LTD
Plaintiff
AND
BOBAN PTY LTD (ADMINISTRATORS APPOINTED)
Defendant

Catchwords:

Corporations Law - Application for extension of time to hear winding up application - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 459R

Result:

Time extended

Category: B

Representation:

Counsel:

Plaintiff:     Mr J E Scovell
Defendant:     Not applicable
Interested Party             :     Mr N Dillon (for Allen Caratti)

Solicitors:

Plaintiff:     Mills Oakley Lawyers (Vic)
Defendant:     Not applicable
Interested Party             :     Roe Legal Services

Case(s) referred to in judgment(s):

Soil and Contracting Pty Ltd v Boban Pty Ltd [2014] WASC 402
Soil and Contracting Pty Ltd v Boban Pty Ltd [No 2] [2014] WASC 418

MASTER SANDERSON: This is the plaintiff's application to extend time within which to deal with a winding up application brought by the plaintiff against the defendant. This is one of four actions running together in what is a bitter and protracted dispute. An application to extend the time within which the application is to be heard has been the subject of two earlier decisions by Acting Master Gething: Soil and Contracting Pty Ltd v Boban Pty Ltd [2014] WASC 402 and Soil and Contracting Pty Ltd v Boban Pty Ltd [No 2] [2014] WASC 418. These reasons, if they are to make any sense at all, need to be read with the two earlier decisions.
On 29 January 2015 I heard argument on the application. I reserved my decision and extended the time for hearing of the application until 3 February 2015. At the resumed hearing, I indicated to the parties I would extend time until further order to allow for resolution of the application. I indicated I would publish my reasons for doing so. These are those reasons.
When dealing with an extension of time, it is important to bear in mind the narrow terms of s 459R(2). It is in the following terms:
The Court may by order extend the period within which an application must be determined, but only if:
(a)the Court is satisfied that special circumstances justify the extension; and
(b)the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.
In both sets of reasons published by Acting Master Gething, he emphasises that in this case there were special circumstances. In particular, the learned acting master placed emphasis on the fact the winding up application was one of four applications which were interlocked and which were to be heard together. The complications involved in running four actions together were sufficient to justify an extension being granted. (That is the thrust of what are detailed and carefully reasoned judgments of the acting master.) The interested party does not take issue with the acting master's decisions. Rather, what is said is that since that decision, further information has come to light which changes the position and makes any further extension of time inappropriate. To understand how the circumstances have changed it is necessary to provide some background facts.
On 1 April 2014 I granted an injunction restraining administrators purportedly appointed to the defendant from taking any further steps in the administration. That injunction was further amended by orders made on 2 September 2014 and 30 October 2014. Those amendments are not material. What is important is that at all material times the administrators were injuncted from taking any further steps in the administration of Boban Pty Ltd (when this action commenced, joint administrators were appointed. One has since retired).
Just prior to trial of this and the other actions, the Australian Taxation Office (ATO) lodged a claim against the company in an amount of $2.3 million. That claim came as a surprise to everyone. Trial of the action could not proceed until the nature of the ATO's claim was clarified.
It is now common ground between the parties the ATO's claim was made after it received information from the administrator. It is also common ground the ATO's claim has now been unconditionally withdrawn. The interested party maintains first, the administrator in passing on any information was in breach of the terms of the injunction restraining him from acting. Second, and following on from that point, it was submitted the delay in resolving the winding up application could now be attributed to the actions of the administrator.
During the course of submissions, I queried with counsel for the interested party whether or not the administrator had a statutory duty to pass on to the ATO any information which came into his possession and which might give rise to a claim by the ATO against the company. Counsel for the parties conferred and produced a joint memorandum. It is in the following terms:
1.At the hearing on 29 January 2015 of the Plaintiff's application for an extension of time pursuant to section 459R for the substantive application to be determined, the Master asked Counsel, Nicholas Dillon, for the interested party Mr Caratti, to provide a memorandum in relation to the following question.
2.Without prejudice to the injunction granted on l April 2014 in relation to the Administrators being restrained from taking any steps in the administration action, what statutory duty or practice were the Administrators appointed to Boban Pty Ltd under in respect of providing to the ATO information brought to their attention which could be relevant to the ATO's prior assessments of Boban's taxable income, liability for tax or the amendment of any assessment thereof.
3.Counsel responds as follows:
3.1The general duty of an Administrator to investigate a company's affairs as required under s438A of the Corporations Act and to report defaults or indiscretions as required by s438D does not include an obligation to specifically investigate the company's fulfilment of its duties to report, disclose or provide materials to the ATO in respect of any defaults or indiscretions in relation to undisclosed taxable income, liability for tax or matters relevant to the assessment thereof.
3.2That is, no provision under the Corporations Act or the Taxation Administration Legislation has been identified which would require an Administrator to undertake a discrete investigation and provide a report, disclosure or information of the type contemplated in paragraph 3.1. The ATO does have the power on written notice issued pursuant to s264 or s264A to require or request a party such as an Administrator to provide information to the ATO - however, there is no evidence presently before this Court to the effect that Administrators of Boban had been served with such a notice or provided the relevant information pursuant to such a notice or that any informal request for information was made by the ATO.
3.3However, in practice, it is usual for an Administrator who has identified a possible or potential creditor to raise with that potential creditor whether the creditor should claim in the administration and to give the creditor the opportunity to advise whether the claim is to be made or not. This practice would, however, not apply if the time for the creditor to legally have made that claim has now passed.
3.4Before giving a notice to a potential creditor as referred to in the preceding paragraph the Administrator must investigate the potential debt and the status of the creditor as a potential creditor of the company.
3.5On the Interested Party's submission, Mr Caratti's, the undertaking of any investigation and giving notice as referred to in the preceding paragraph would be steps in the administration.
4.Counsel advises that the above was compiled following conferral with Mr Darren Weaver, who was previously appointed Provisional Liquidator of Boban pursuant to the Court's orders in these proceedings.
5.Counsel also advises this memorandum has been reviewed by Counsel for the Plaintiff Mr James Scovell. Subject to the following comments, the Plaintiff's Counsel does not challenge the responses in subparagraphs 3.1, 3.3 and 3.4 but does not accept the submission in subparagraph 3.5. In relation to the response in subparagraph 3.2, the issue of whether or not notices or any communications (formal or informal) were issued to Boban's Administrators by the ATO is still open - however this may be answered in due course through the discovery to be given (if so ordered - the Plaintiff maintains its opposition to the making of that order) in Mr Caratti's application for discovery in COR 60 of 2014
Counsel for the plaintiff pointed out it was not yet clear whether a notice of the type referred to in par 3.2 above had been issued. There is presently an issue between the plaintiff and the interested party as to whether or not discovery ought be given. If discovery is ordered, it will disclose whether any notices were issued by the ATO. But even if discovery is not ordered, in the future and certainly by the time this matter goes to trial, it will be clear whether or not notices have issued.
Counsel for the plaintiff also disputed that the giving of any notice by the administrator to the ATO would be a step in the administration. Quite why that should be so did not emerge during the course of submissions. But it may be a detailed analysis of what is actually meant by 'administration' may be necessary to finally determine this issue.
There were a number of reasons why, against this background, I extended time for resolution of the application. First, the administrator had not had the opportunity to put any submissions before the court. Were I to have accepted the submission of the interested party, that would have brought to an end the winding up application and by implication at least, would have done so on the basis the administrator had acted contrary to the injunction restraining him from taking steps in the administration. In my view, it would be inappropriate to have taken any steps which could imply improper conduct on the part of the administrator without the administrator having the opportunity to make submissions.
Second, it was not clear whether the administrator had received any notice from the ATO. The existence or otherwise of that notice was crucial to determining why the administrator had acted as he did.
Finally, to dismiss this application would still leave the three other applications on foot. Furthermore, there is every reason to believe the plaintiff would simply issue a fresh winding up application. It may be it could not rely upon the failure to comply with the statutory demand upon which the present application is based. But it seemed to me preferable the present application should remain on foot and be heard together with the three other applications.
For these reasons, I extended the time within which the application was to be heard and I reserved the costs of the application.