Deputy Commissioner of Taxation v Dreegan Constructions Pty Ltd [2005] FCA 1935

FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation v Dreegan Constructions Pty Ltd [2005] FCA 1935 DEPUTY COMMISSIONER OF TAXATION v DREEGAN CONSTRUCTIONS PTY LTD NSD1620 OF 2005 EMMETT J 9 DECEMBER 2005 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD1620 OF 2005

BETWEEN: DEPUTY COMMISSIONER OF TAXATION

PLAINTIFF

AND: DREEGAN CONSTRUCTIONS PTY LTD

DEFENDANT

JUDGE: EMMETT J

DATE OF ORDER: 9 DECEMBER 2005

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. By consent, the application be adjourned until 2:15pm on 8 February 2006 to the Registrar's Corporations List. 2. The hearing of the application under section 440A of the Corporations Act on 13 December 2005 be vacated. 3. Costs be reserved. 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 NSD1620 OF 2005

BETWEEN: DEPUTY COMMISSIONER OF TAXATION

PLAINTIFF

AND: DREEGAN CONSTRUCTIONS PTY LTD

RESPONDENT

JUDGE: EMMETT J

DATE: 9 DECEMBER 2005

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 By originating process filed on 8 September 2005, the Deputy Commissioner of Taxation claims an order that the defendant, Dreegan Constructions Pty Limited ('the Company'), be wound-up in insolvency under the provisions of the Corporations Act 2001 (Cth) ('the Act'). 2 That application came before the Court on 14 October 2005, when, by consent, the application was adjourned to 11 November 2005. The Company was directed to file and serve any evidence as to solvency on or before 10 November 2005. On 11 November 2005, the proceeding was adjourned by consent to 2 December 2005. No evidence as to solvency was filed. However, on 10 November 2005, Mr Roderick Mackay Sutherland ('the Administrator') was appointed as administrator of the Company. 3 As required by the Act, the first meeting of creditors took place on 17 November 2005 and a first report to creditors was prepared on 29 November 2005. The second creditors' meeting was scheduled for 7 December 2005. However, because of difficulty with the Company's debtors' ledger, it was not possible to prepare the report required for the convening of a creditors' meeting on 7 December 2005. The Administrator therefore proposes that the second creditors meeting be held on 15 December 2005. 4 On 30 November 2005, the Deputy Commissioner wrote to the Administrator relevantly saying: 'We advise that the Deputy Commissioner of Taxation consents to adjourn the above named proceedings to 9 December 2005 to allow a deed of company arrangement to be proposed. The requirement of any deed of company arrangement includes a provision prioritising the Deputy Commissioner of Taxation's costs of any proceedings as would otherwise be accorded within an official liquidation pursuant to section 556 of the Corporations Act 2001. We note that failure to prioritise a petitioning creditor's costs may form a basis on which to set aside the deed of company administration. The Deputy Commissioner of Taxation reserves the right to seek to proceed with the winding up application on 9 December 2005.' 5 On 2 December 2005, the proceeding was adjourned to today. When the matter came before a Deputy Registrar earlier today, the Administrator again sought an adjournment to enable him to put on evidence to satisfy the requirements of s 44A(2). Under s 44A(2) of the Act, the Court is to adjourn the hearing of an application for an order to wind up a company if the company is under 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. Because the adjournment was opposed, the Deputy Registrar referred the matter to me as corporations duty judge. 6 The question is whether the Administrator should be afforded further time to enable him to file evidence that is capable of satisfying the Court that it is in the interests of the Company's creditors for it to continue under administration rather than be wound up. At present there is no evidence beyond the report to creditors dated 7 December 2005, reconvening the second meeting of creditors for 15 December 2005. 7 An assistant of the Administrator endeavoured to speak with an officer of the Deputy Commissioner on two occasions during this week, on 7 December and on the morning of 8 December, with a view to explaining the proposed deed of company arrangement. It was not until yesterday afternoon that a conversation actually took place. The Deputy Commissioner's officer communicated to the Administrator's assistant that the winding-up application would be pressed when the matter came before the Court on 9 December 2005. 8 The Administrator's assistant says that that was the first time that he understood that the Deputy Commissioner wished to proceed with the winding up prior to the proposed second creditors' meeting, which is now to take place on 15 December 2005. The Administrator's assistant said that he was surprised at the attitude of the Deputy Commissioner because of the adjournments by consent on earlier occasions. 9 In his report to creditors of 7 December 2005, the Administrator recommended that the creditors adopt a deed of company administration. In the report, the Administrator suggests that, on the basis of his estimates, a pessimistic liquidation scenario would result in a deficiency of $1.199 million, whereas a pessimistic view of the outcome under a deed of company arrangement is a deficiency of less than $500,000 and that on an optimistic view, a deficiency of less than $150,000. Even on an optimistic view of a liquidation, the deficiency would be in excess of $900,000. 10 There is no evidence upon which the Court could be satisfied at present that the hearing of the winding up be adjourned. On the other hand, while it is not a strong case, I would be disposed to grant an adjournment for two days to enable the Administrator to endeavour to file such evidence as he is disposed to persuade the Court that it is in the interests of the Company's creditors for the Company to continue under the administration. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.