FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation, in the matter of Sanditon Pty Ltd v Sanditon Pty Ltd [2009] FCA 1534

IN THE MATTER OF SANDITON PTY LTD ACN OR ARBN 106 062 051, DEPUTY COMMISSIONER OF TAXATION v SANDITON PTY LTD ACN 106 062 051

QUD 206 of 2009

DOWSETT J

16 OCTOBER 2009

BRISBANE

IN THE MATTER OF SANDITON PTY LTD ACN OR ARBN 106 062 051

THE COURT ORDERS THAT:

1.                  Sanditon Pty Ltd ACN 106 062 051 be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth).

2.                  Jonathan Paul McLeod, an official liquidator, be appointed the liquidator of the company.

3.                  The plaintiff’s costs be fixed in the sum of $1,137.31 and reimbursed in accordance with s 466(2) of the Corporations Act 2001 (Cth).

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE MATTER OF SANDITON PTY LTD ACN OR ARBN 106 062 051

REASONS FOR JUDGMENT

1                                             This is an application by the Deputy Commissioner of Taxation (the “Commissioner”) for the winding up of the defendant (the “company”).  The company is presently in administration.  The administrator has filed a report in which he recommends that the company be wound up for the following reasons: 

(1)        That it is insolvent;

(2)        That if the administration ends, control of its affairs will return to the directors;

(3)       That he does not have sufficient information from his investigations to confirm that a deed of arrangement which is proposed is a better option for creditors than liquidation;

(4)       That it is anticipated that any return to creditors under a deed of company arrangement may be over a longer timeframe than in liquidation; and

(5)       That the proposed deed is conditional upon creditors, including the plaintiff, who hold personal claims against a director for company debts, executing deeds of forbearance. 

2                                             It is clear that the Commissioner, who has such a claim under statute, does not intend so to do.  Mr Jones appears for Mr and Mrs Pfabe who are creditors and may be secured creditors.  He has sought an adjournment pursuant to s 440A of the Corporations Act 2001 (Cth) (the “Act’).  He submitted that the administrator had not had access to the full books of account of the company and that his opinion, therefore, was uninformed.  That he did not have access to the books is, itself, a matter of some concern.  It is said that they have now been supplied to him, but there is as yet no indication as to whether he is likely to change his view that the company should be wound up. 

3                                             Mr and Mrs Pfabe have a fixed and floating charge over the assets and undertaking of the company.  The charge was registered within the six month period.  It is, therefore, probable that it will be set aside.  It is difficult to know how to deal with them in those circumstances, particularly given that no clear indication has been given as to whether or not they will attend and vote as unsecured creditors at any meeting called to consider the proposed scheme of arrangement.  The matter is of some importance because, if they were to give up their security and participate as unsecured creditors, they would be the major creditor.  As things presently stand, the Commissioner occupies that position. 

4                                             The second meeting of creditors in the administration is due on Tuesday of next week.  It is suggested that, in view of the relatively short period of time involved, it would be appropriate to grant an adjournment pursuant to s 440A.  It is said that Gyles J took that course in Deputy Commissioner of Taxation, in the matter of Management Pty Ltd (Administrators Appointed) (ACN 103 667 241) v Management Pty Ltd (Administrators Appointed) (ACN 103 667 241) [2005] FCA 1903.  However, in that case, it seems that the proposal involved the upfront payment of a substantial amount of money to the company, a proposal which is not part of the present proposal. 

5                                             The proposed deed involves an undertaking by persons enjoying personal guarantees from Mr Cook, the company director, not to enforce those guarantees.  I am told that this includes the Commissioner undertaking not to proceed against Mr Cook pursuant to his statutory claim against him.  As I have said, the plaintiff will not agree to that course.  However Mr Jones submits that he may be persuaded to adopt some slightly different position which would permit the deed to be acceptable to all parties.  That may be the case, but I must deal with the case on the facts as they are, not as they may be in the future. 

6                                             In the event that the creditors having the benefit of such guarantees, including the Commissioner, agree to defer claims against Mr Cook, the business of the company will probably be transferred to another entity.  That business is, in effect, the rent roll of the company which is a real estate agent.  It is said that the new business will be managed by Mr Cook, his wife and Mr Schmierer who is, I gather, an accountant.  Mrs Cook is a real estate agent.  It is not entirely clear to me why Mrs Cook is not involved in the business at the moment.  Nor is it clear to me why it is thought that the business conducted under this changed regime will be any more capable of rendering a profit than has been the company.  Indeed, there is no evidence supporting the assertion that Mrs Cook and Mr Schmierer will be involved in the business.  The proposed deed provides only that the director, presumably, Mr Cook, continue to manage it. 

7                                             It is proposed that, if the scheme proceeds, the company or its successor, as holder of the rent rolls, will pay $5,000 a month for 36 months to the administrator of the company for distribution to the creditors on a pro rata basis, according to their respective debts.  However, as I have said, there is really nothing in the material which explains why it is thought that the new entity, even with the new management, will be able to do better than the company has been able to do. 

8                                             It is said that new management and relief from the need to service existing debts may assist, but I have difficulty in seeing how this is expected to occur.  In the circumstances, I find myself unable to form any view concerning the proposal, other than that it is an exercise in wishful thinking which seems, at least at this point, not to have resulted in any proposal which is likely to satisfy the Commissioner.  He is, of course, not the only creditor, but he is a substantial creditor and, until such time as Mr and Mrs Pfabe decide to give up their security, or it is set aside, he controls more than half, by amount, of the voting power to be exercised at any meeting.  In those circumstances, the Commissioner’s position cannot be discounted simply upon the basis that Mr and Mrs Pfabe may give up their position as secured creditors, or may be forced to give it up.  They have said that they will participate as unsecured creditors if other creditors accept the proposal, and if Mr Cook is allowed to continue trading as a real estate agent.  In view of the plaintiff’s position, it seems that such conditions will not be satisfied.  In the circumstances, I am unable to see any firm benefit to be derived by the creditors from delay in the winding up of the company. 

9                                             I accept the force of the submission made by Mr Jones that the adjournment sought is only a short one.  However, given that the administrator has not yet expressed a view based upon the additional documents recently supplied to him, the prospects of a considered view being advanced to the creditors, and being considered by them, at or prior to the meeting on Tuesday, seem to me to be somewhat remote.  My own expectation would be that there will be an attempt to adjourn the meeting on that day, with whatever consequences that may have under the Act.

10                                          In these circumstances, I find myself unpersuaded as to the matters identified in s 440A(2).  In those circumstances, I proceed to hear the application on its merits.  No basis for resisting the application is advanced.  There is no suggestion that I should make any order other than an order as sought by the Commissioner.  There will be orders in terms of the draft.

Associate:

Dated:         23 December 2009