Deputy Commissioner of Taxation v Grand Platinum Pty Ltd

YATES J: 1 There is an application before the Court to wind up the defendant, Grand Platinum Pty Limited, in insolvency. The application was before a Registrar for hearing today. 2 The defendant is currently in administration. Its administrators, Liam Bailey and Christopher Palmer, were appointed on 18 April 2024. They seek to have the winding up application adjourned under s 440A(2), of the Corporations Act 2001 (Cth) (the Corporations Act) to enable a deed of company arrangement (DOCA) proposal to be considered at the second meeting of creditors of the defendant, which is to be held on 27 May 2024. 3 Section 440A(2) provides that: 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. 4 The plaintiff, the Deputy Commissioner of Taxation, opposes the application for an adjournment. 5 The last day for determining the winding up application is 22 May 2024, unless the period under s 459R(1) of the Corporations Act is extended under s 459R(2) thereof. 6 The defendant ceased trading in or about December 2021. It operated a project management and property development business in New South Wales. It provided project management and labour services directed to demolition, excavation and engineered access solutions. It operated across residential, commercial, retail and industrial properties, as well as public roads and service infrastructure throughout the Greater Sydney region. It also bought and sold real property and undertook development projects. 7 The defendant's major assets are five units in a strata complex situated at 7 Hunter Street, Heathcote, New South Wales, more particularly described as Lots 1, 2, 3, 4 and 5 in Strata Plan 106556. The estimated cumulative value of these properties is $4 million. According to the Report on Company Activities and Property, the defendant also owns scaffolding equipment with an estimated value of $10,000 and a 2012 Ford Ranger motor vehicle with an estimated value of $12,000. 8 The property of the defendant is subject to freezing orders made in the Supreme Court of New South Wales on 21 December 2021. These orders were made in proceedings commenced by the New South Wales Crimes Commission pursuant to the Criminal Assets Recovery Act 1990 (NSW). On one view of the orders, they operate to prevent, amongst other things, the defendant from disposing of, or otherwise dealing with, any interest in property which includes the real property to which I have referred. The administrators have not taken any steps to realise or deal with the defendant's property because of these orders. 9 The defendant has unsecured creditors of approximately $5,691,975. Approximately $3,657,308 are owed to related parties. 10 On 16 May 2024, the administrators received a DOCA proposal signed by Dennis Pallos and Ashurina Pulis. The proposal provides for the creation of a unit trust into which a fund of $500,000 will be paid, and from which participating creditors of the defendant, who are not related parties of the defendant, will receive a distribution of approximately 16 cents in the dollar. 11 If a resolution in favour of the proposal is passed, Mr Bailey would be appointed as the deed administrator of the DOCA and trustee of the creditors' trust. The $500,000 fund will be paid by Mr Pallos in his capacity as trustee of the Oceanus Investment Trust in three instalments. The first instalment of $100,000 has already been paid in anticipation of the proposal being agreed to. Following payment of the costs of the voluntary administration, the DOCA and the creditors' trust, the fund will be paid to participating creditors by way of a single distribution. The DOCA will effectuate upon the distribution being made. Participating creditors will retain their rights under Pt 5.3A of the Corporations Act until the distribution is made. 12 The DOCA will not extinguish or effect any claims that the New South Wales Crimes Commission, the State of New South Wales, or the Commonwealth of Australia might have against any of the property that is currently the subject of the freezing order. 13 Ms Pulis will grant a mortgage over her property at 21 Eremaea Road, Craigieburn, Victoria as security for the payment of the contributions. The property has an estimated unencumbered value of between $460,000 and $518,000. 14 The evidence is that the Oceanus Investment Trust currently holds $130,000.01 in cash in its bank account. 15 The present application is supported by an affidavit made by Mr Bailey on 17 May 2024, and by Mr Pallos made on 17 May 2024. The information in relation to the company, its affairs, its creditors, and the DOCA proposal, to which I have referred, is taken from Mr Bailey's affidavit. 16 The administrators have decided to recommend to creditors that they vote in favour of the DOCA proposal. The reasons for that recommendation are set out in Mr Bailey's affidavit. The principal reasons are, firstly, the creditors' trust will provide a mechanism for unrelated creditors of the defendant to receive a distribution in a timely manner which would not otherwise be possible if the defendant were wound up because its assets are subject to the freezing order. 17 Secondly, whilst the best case scenario for the creditors in a winding up is substantially better than the position they would be in under the DOCA, the best case scenario is dependent on the freezing order being lifted. The administrators have very little information about when that could occur, or if it will occur. They have assumed that it is more likely than not that, if the freezing order were to be lifted, it would take considerably longer for creditors to receive payment than the programmed time for payment of funds under the DOCA. 18 Thirdly, payment of the contributions to the creditors' trust will be secured by way of a first registered mortgage over Ms Pulis's property at Craigieburn in Victoria. 19 Fourthly, absent the creditors resolving or the Court ordering to the contrary, the DOCA will not be terminated until the distribution from the trust funds has been made to participating creditors. This reserves to the creditors the ability to protect their interests by taking steps to terminate the DOCA and thereby the creditors' trust if they are dissatisfied with the regime. 20 Mr Bailey has expressed the view that, in his experience, a return of 16 cents in the dollar is not an immodest return to unsecured creditors of an insolvent company. This return should be contrasted with the worst case scenario in a liquidation of the defendant in which the creditors would receive nothing. 21 I am satisfied that it is in the interests of the defendant's creditors for the administration to continue at the present time. I am satisfied that it is particularly in the interests of the unrelated creditors that they be given the opportunity to exercise their own commercial judgment as to whether the DOCA proposal should be accepted. In coming to that view, they will have the assistance of the expert views of the administrators. The proposal will provide them with the opportunity to consider whether they should accept a payment of approximately 16 cents in the dollar in a relatively timely fashion, compared to the prospect of receiving no payment, or receiving a more significant payment depending on the contingency of whether the freezing order will be lifted and whether any funds will be available to them. 22 I also take into account the fact that, although the winding up application has been on foot for some time, the period of the adjournment that is sought is modest, being to 29 May 2024. 23 As I have noted, the period for determining the winding up application is presently 22 May 2024. It will therefore be necessary for that period to be extended. I am satisfied that special circumstances justify an extension of the period, being the particular circumstances to which I have referred in relation to the DOCA proposal. 24 I will order that the winding up application be adjourned for hearing on 29 May 2024 and that, pursuant to s 459R(2), the period for determining the winding up application be extended to 31 May 2024. There will be no order as to costs of the adjournment application. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.