Deputy Commissioner of Taxation v VFS Employment Services Pty Ltd, in the matter of VFS Employment Services Pty Ltd

Federal Court of Australia|2016-08-30|Before: Beach J

The Defendant is granted leave nunc pro tunc pursuant to s 490(1) of the Corporations Act 2001 (Cth) for the Defendant to be wound up voluntarily on 17 August 2016 and Richard John Cauchi and Michael Carrafa to be appointed joint and several liquidators of the Defendant on and from that date.
The Plaintiff's costs fixed in the sum of $2,600.05 be costs in the winding up and have priority as if they were costs of the Plaintiff on an application on which the Defendant was wound up.
The Defendant's costs of the interlocutory process be costs in the winding up of the Defendant.
The Plaintiff's originating process filed 11 August 2016 be otherwise dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BEACH J: 1 The plaintiff (DCOT) has applied to wind up the defendant company (VFS) under ss 459A and 459P of the Corporations Act 2001 (Cth) (the Act). In contradistinction, VFS has sought leave nunc pro tunc under s 490(1) of the Act to be wound up voluntarily as a creditors' voluntary winding up under Division 3 of Part 5.5 of the Act. 2 The DCOT does not oppose VFS' application for leave under s 490(1) of the Act. I will grant the leave sought for the following reasons.

Background 3 VFS was formed on 20 September 2013 and conducted a business of labour hire to a related entity. On 2 June 2016, VFS received a statutory demand from DCOT in the amount of $1,446,591. On 14 June 2016, VFS' sole director (Caputo) met with Richard Cauchi and Michael Carrafa, insolvency specialists of SV Partners Insolvency (Vic) Pty Ltd, to obtain information about commercial options available to VFS given its financial position. 4 On 27 July 2016, DCOT issued three Director Penalty Notices to Caputo in relation to the debt owed to DCOT. Such notices required certain action to be taken on or before 17 August 2016 after which time certain legal consequences would follow in terms of Caputo's liability to pay the relevant penalties. 5 On 11 August 2016, DCOT commenced the present proceeding seeking to wind up VFS in insolvency. 6 On or around 16 August 2016, VFS entered into a sale agreement under which the business of VFS was sold to Vision Employment Services Pty Ltd with a completion date of 16 August 2016 (the sale transaction). 7 On 17 August 2016, the sole member of VFS resolved that VFS be wound up voluntarily as, in essence, a creditors' voluntary winding up, and that Messrs Cauchi and Carrafa be appointed joint and several liquidators. Also on 17 August 2016, the Australian Securities and Investments Commission processed the Form 519 filed by DCOT in relation to the DCOT's winding up application. 8 On 18 August 2016, VFS was served with the originating process filed by DCOT. VFS subsequently wrote to DCOT informing DCOT that VFS intended to seek leave under s 490(1) of the Act to enable the voluntary winding up to proceed. As I have said, DCOT does not oppose the application for leave under s 490(1) of the Act. 9 On 25 August 2016, Caputo provided a report as to affairs in relation to VFS. It is proposed that the first meeting of creditors of VFS be held on 2 September 2016 assuming that I grant the leave sought.

Analysis 10 Section 490(1) of the Act provides: (1) Except with the leave of the Court, a company cannot resolve that it be wound up voluntarily if: (a) an application for the company to be wound up in insolvency has been filed; or (b) the Court has ordered that the company be wound up in insolvency, whether or not the order was made on such an application; or (c) the company is a trustee company (within the meaning of Chapter 5D) that is in the course of administering or managing one or more estates. 11 Leave under s 490(1) can be granted retrospectively (see Shaw, in the matter of B & V Lynch Pty Ltd v B & V Lynch Pty Ltd [2015] FCA 908 at [17] per Siopis J). There are various factors to consider in determining whether to grant leave retrospectively including: (a) the views of the petitioning creditor; (b) whether any refusal to grant leave (and any subsequent appointment of a liquidator by the Court) would involve a duplication of work of the pre-existing liquidator; (c) whether granting leave would adversely affect the recovery of any voidable transaction by reason of the effect and consequences of utilising a different relation back day; and (d) any difference in the powers of the pre-existing liquidator if leave were granted as compared with the powers of a court appointed liquidator if leave were refused. 12 First, undoubtedly, whether the petitioning creditor opposes the application for leave under s 490(1) is a significant factor. But as I have said, in the present case DCOT does not oppose such leave. 13 Second, where leave is sought in relation to a creditors' voluntary winding up, which is the present case, the powers of the pre-existing liquidator do not differ markedly from the powers of a court appointed liquidator. 14 Third, it is in the best interests of creditors of VFS to allow the present but putative voluntary liquidation to continue. The relation back day under a court appointed liquidation would be 11 August 2016. The relation back day under the voluntary liquidation is 17 August 2016, a difference of only six days. I have been informed that the liquidators are not aware of any real effect that this difference in the relation back day would have in terms of the consequential periods covering any potential voidable transactions under ss 588FA to 588FJ. I have enquired of counsel as to the potential for any such differences, but none are readily apparent. Such a comment also applies to the potential impact that Division 2 of Part 5.7B of the Act may have on the sale transaction. 15 Fourth, whilst the liquidators were only appointed for a short time before discovering the existence of the winding up application of DCOT, some work has already been carried out by the liquidators. Though little time has elapsed and not a great deal of work has been conducted by the liquidators, at least some measure of work has been done and accordingly duplication of work is likely if I do not grant leave under s 490(1). There is advantage to the creditors in avoiding such duplication of work. 16 Fifth, if leave is not granted, management and control of VFS will be handed back to the sole director pending the hearing of DCOT's winding up application on 16 September 2016. As a consequence, there would be an undesirable discontinuity in the winding up process if I refused leave, although this could be potentially addressed through a provisional liquidation in the interim. 17 Finally, no disadvantage associated with the granting of leave has been identified by either the liquidators or petitioning creditor. 18 I will make orders in the terms sought. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.

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