Deputy Commissioner of Taxation, in the matter of Managenet Pty Ltd (Administrators Appointed) (ACN 103 667 241) v Managenet Pty Ltd (Administrators Appointed) (ACN 103 667 241) [2005] FCA 1903

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation, in the matter of Managenet Pty Ltd (Administrators Appointed) (ACN 103 667 241) v Managenet Pty Ltd (Administrators Appointed) (ACN 103 667 241) [2005] FCA 1903

CORPORATIONS – insolvency – application for adjournment of a proceeding for winding up a company in administration in order to hold second meeting of creditors – adjournment granted Corporations Act 2001 (Cth), s 440A(2)

IN THE MATTER OF MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

DEPUTY COMMISSIONER OF TAXATION v MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

NSD 1962 OF 2005

GYLES J

16 DECEMBER 2005

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1962 OF 2005

IN THE MATTER OF MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

BETWEEN: DEPUTY COMMISSIONER OF TAXATION

PLAINTIFF

AND: MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

DEFENDANT

JUDGE: GYLES J

DATE OF ORDER: 16 DECEMBER 2005

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The matter be adjourned to the Registrar's List on 10 February 2006. 2. Liberty to apply on two days' notice in the meantime.

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 1962 OF 2005

IN THE MATTER OF MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

BETWEEN: DEPUTY COMMISSIONER OF TAXATION

PLAINTIFF

AND: MANAGENET PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 667 241)

DEFENDANT

JUDGE: GYLES J

DATE: 16 DECEMBER 2005

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application to adjourn an application to wind up the company which is under administration, Managenet Pty Ltd (Administrators Appointed) (ACN 103 667 241), because of the impending second meeting of creditors under the administration, which is scheduled to be held next Wednesday, 21 December 2005. 2 In order to adjourn the matter I should be satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up (s 440A(2) of the Corporations Act 2001 (Cth) (the Act)). That in the present circumstances requires that I be satisfied that it is in the interests of the creditors for the second creditors meeting to be held which carries with it the possibility that a deed of company arrangement will be entered into along the lines of that which has been put before me. 3 The case is a relatively straightforward one. The company is a failed start up company with what appears at least on the face of the evidence to have virtually no assets. There are priority creditors in the form of employees. There are also trade creditors and other creditors who have a closer interest in the company. The plaintiff, the Deputy Commissioner of Taxation, is another such creditor who is owed a substantial amount of tax arising out of the failure of the company to file tax returns. 4 The argument in favour of granting the adjournment and allowing a deed of company arrangement to be put to the creditors depends upon two factors. First of all, there is a promised cash contribution which would enable payment out of priority creditors and would enable a modest amount to be paid to other creditors. Secondly, a deferral of some of the creditors is proposed, so as to improve the position of creditors who are not deferred. The net result is that the priority creditors would be advantaged very greatly and other creditors would receive some advantage. 5 The administrator, who is an official liquidator, supports the entry into the deed of company arrangement. It is suggested for the plaintiff that this opinion has been expressed without adequate investigation. It is put that one cannot be certain about the existence, or otherwise, of assets, voidable transactions or claims against those involved in the company. It is also suggested that the terms of the deed are inadequate because they merely defer and do not cancel some of the so-called deferred debts. It is argued that there are public interest reasons for not permitting the company to continue to trade, if that were contemplated, because it would be an insolvent company. 6 The latter point seems to me to be misconceived in a case where we are considering only either a deed of company arrangement being entered into or an inevitable liquidation if the vote is lost. It seems to me that creditors, as a whole, are advantaged by being able to consider the benefits offered here, which are not otherwise available, and to compare those benefits with the potential result of a liquidation. In my opinion, that is a matter for creditors to consider and they should be permitted to exercise the power given to them by the Act to vote at the second creditors meeting. 7 I propose to adjourn the matter on the undertaking given to the Court today by Mr Vaz Hovanessian, Company Director of Managenet Pty Ltd (Administrators Appointed) and Portitech Pty Ltd.