FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v 24 x 7 Direct Pty Ltd [2012] FCA 156 Citation: Deputy Commissioner of Taxation v 24 x 7 Direct Pty Ltd [2012] FCA 156 Parties: DEPUTY COMMISSIONER OF TAXATION v 24 X 7 DIRECT PTY LTD (ACN 117 975 185) File number: VID 956 of 2011 Judge: GORDON J Date of judgment: 28 February 2012 Date of hearing: 28 February 2012 Date of last submissions: 28 February 2012 Place: Melbourne Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 9 Counsel for the Applicant: Mr J Sinisgalli Solicitor for the Applicant: Hunt & Hunt Counsel for Mr Devang Parikh: Mr W Alstergren Solicitor for Mr Devang Parikh: Vernon Da Gama & Associates Counsel for the Liquidator: Mr M Costello Solicitor for the Liquidator: Mills & Oakley IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 956 of 2011 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: 24 X 7 DIRECT PTY LTD (ACN 117 975 185) Respondent JUDGE: GORDON J DATE OF ORDER: 28 February 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application for an adjournment is dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 956 of 2011 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: 24 X 7 DIRECT PTY LTD (ACN 117 975 185) Respondent JUDGE: GORDON J DATE: 28 February 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 16 February 2012, Registrar Luxton ordered, inter alia, that 24 x 7 Direct Pty Ltd (in Liquidation) (ACN 117 975 185) (the Company) be wound up (the Orders). By an interlocutory process dated 22 February 2012, Devang Parikh, a director of the Company, applied to the Court for review of the Orders. That application came on for hearing before Gray J on 20 February 2012. 2 Gray J granted Mr Devang Parikh leave pursuant to ss 482(1) and (1A) of the Corporations Act 2001 (Cth) (the Corporations Act) to apply to the Court for review of the Orders. That approval was granted on the giving of certain undertakings and subject to certain conditions. The undertakings and conditions were as follows: Peter Vince, the liquidator of 24 x 7 Direct Pty Ltd ACN 117 975 185 ("the company"), by his counsel undertakes to the Court that he will, until 4.15 pm on 28 February 2012 or further order: a. continue to conduct the business of the company as if the orders made on 16 February 2012 had not been made; b. for that purpose, permit Devang Parikh to have access to the company's premises during normal business hours; c. save as required by law, refrain from informing the company's creditors, customers and employees that the orders made on 16 February 2012 have been made, or that the company has been placed in liquidation; and d. to the extent that he does inform any person that the orders made on 16 February 2012 have been made, or that the company has been placed in liquidation, also inform each such person that there is pending an application to review the orders made on 16 February 2012, returnable on 28 February 2012. Devang Parikh undertakes to the Court that he will not make any payment, or incur any liability, on behalf of the company without the consent in writing of the liquidator. … 3. The approval in paragraph 2 is conditional on Devang Parikh being personally responsible for the costs of the application that would otherwise be borne or ordered to be paid by 24 x 7 Direct Pty Ltd ACN 117 975 185. 4. The application for review be filed and served on or before 22 February 2012 and be made returnable on 28 February 2012. 5. The application for a stay of the orders made on 16 February be dismissed. 6. On or before 24 February 2012, Devang Parikh provide to the liquidator a statement of the affairs of 24 x 7 Direct Pty Ltd ACN 117 975 185 in accordance with s 475 of the Corporations Act 2011 (Cth). 3 The application for review was listed for hearing this morning. Counsel for Mr Parikh applied for an adjournment of the substantive hearing. The adjournment arose as a result of discussions between Counsel and the bench concerning the inadequacy of the material filed by the Company. 4 Mr Alstergren, for the Company, submitted that there would be no prejudice to any party by the granting of the adjournment, having regard to the nature and substance of the orders made by Gray J on 20 February 2012 (see [2] above), which included an order that Mr Parikh himself is personally responsible for the costs that would otherwise be borne or ordered to be paid by the Company in relation to the application. 5 Both the liquidator and the Deputy Commissioner of Taxation opposed the adjournment on three bases. The first was that the affidavits as to solvency sought to be relied upon in earlier hearings before Registrar Luxton were concerned with matters which were not relevant at those hearings. 6 Second, if the Company was, in truth, viable, notwithstanding its presumed insolvency by reason of its failure to respond to the statutory demand (s 459C of the Corporations Act), then it was within the power of the liquidator to adopt a number of courses to ensure the ongoing commercial life of the Company, including the appointment of an administrator under s 436B of the Corporations Act. The company directors could then propose a Deed of Company Arrangement with all the creditors having a say in the future of the Company. 7 The third basis for opposing the adjournment was the apparent failure of the Company to provide proper material in order to establish solvency at the hearing of this application. The last argument requires further development. The originating process filed by the Deputy Commissioner of Taxation seeking orders for the winding-up of the Company was filed on 1 September 2011. The hearing of that application was adjourned on a number of occasions in order to permit the Company to file material relevant to the issues then in dispute. The Company's solvency was the only issue in dispute. The tax debt was not in dispute. On 16 February 2012, Registrar Luxton ordered that the Company be wound up. 8 On 20 February 2012, Mr Parikh sought an urgent hearing seeking a review of the orders of Registrar Luxton. The matter was heard by Gray J. That hearing took place over a week ago and some 12 days since the hearing before Registrar Luxton. Despite the time which has elapsed, the material before the Court is still incomplete. For example, the Company has failed to provide audited financial accounts. The accounts in evidence are at best unaudited and qualified. Next, the assets of the Company set out in the unaudited and qualified accounts are, in my view, incomplete. They are incomplete because, for example, a number of items listed as "assets" require further explanation. No explanation has been provided. 9 As is apparent, the Court is being asked to consider granting an adjournment in order to permit the Company to rectify that which it should have rectified months ago – evidence as to its solvency. The Company has been granted indulgences in the past to enable it to put its house in order and has failed to do so. Counsel for the Company submitted that the adjournment was necessary to enable it to file Business Activity Statements, income tax returns for 2010-2011 income year and audited accounts. I accept that material would be of assistance. But that material should have been filed and prepared long before today. There is nothing in my view that justifies granting the Company additional time now for that to occur. In those circumstances, the application for adjournment is refused. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 28 February 2012