Bruce Gleeson.
After reading the Minutes of the reconvened second meeting of creditors of Dalma Form Specialists Pty Ltd (DFS) iNO suspects that a collision between the incumbent voluntary administrators (VAs) and the ATO is inevitable.
The second meeting was initially adjourned on February 7 to allow VAs Bruce Gleeson and Daniel Soire of Jones Partners time to undertake more fulsome investigations into the affairs of DFS
“Ms Andrews noted that Revenue NSW’s claim is based on an estimate and these particulars have
been provided to the Administrators’ office whilst further investigations under anti-avoidance
provisions are taking place. She noted that these anti avoidance provisions are only applied in
exceptionally rare circumstances and only where the Chief Commissioner is likely to be satisfied that it is warranted and necessary.” Minutes of the 2nd Meeting Dalma Form Specialist Pty Ltd.
The unilateral decision to adjourn was made in circumstances where the ATO had written to the VAs shortly after they were appointed advising that the ATO was investigating certain members of the family behind the Dalma group in respect of a fraud of up to $150 million involving more than 30 companies conducted over 15 years.
Further, given the ATO was already funding a liquidator of a related entity – Admin Form Pty Ltd – the ATO wanted Gleeson and Soire to stand aside so as to allow Helm Advisory’s Stephen Hathway to take on the DFS appointment.
Gleeson and Soire however declined to retire and spent the full 45 day adjournment period trying to progress investigations into the matter raised by the ATO.
Success was mixed. At the reconvened second meeting on April 12 Soire admitted that while the VAs had received a considerable amount of material they didn’t believe they had all books and records.
They did however make some critical adjudications in respect of proofs of debt, one of which saw Admin Form’s claim shrunk from $2.179 million to $50,466.00 based on credit notes and supporting emails issued by DFS to Admin Form.
This sparked a robust debate about the validity of the credit notes given Admin Form’s sole director had returned to India one day after being appointed and there was no evidence as to the identity of who from Admin Form had responded to the correspondence from DFS.
ATO representative Craig Morelande asked if the Administrators had taken into account the lack of names and signatures on the emails.
Soire replied that the VAs had taken legal advice. Hathway asked who provided the advice. Steve Polczynski of Polczynski Lawyers advised that he did but that the advice was privileged.
According to the Minutes “Mr Morelande noted that the ATO were very concerned about this aspect. He noted that it is quite clear that someone other than the director was acting in the interests of Admin Form and was of the view that in circumstances where the evidence of one party is being relied on and not to give more credence to the Admin Form Proof of Debt seems odd”.
Polczynski Lawyers’ Dajana Malnersic then responded that it wasn’t the VAs’ job to confirm Admin Form’s proof and that the VAs had sighted documents during interviews with DFS director Jason Ivan Andrijic, 39 of Chatswood which apparently disclosed credits being raised at a particular time and adjustments made.
The adjudication of the Admin Form proof from $2.179 million to $50,466.00 significantly weakened the position of those creditors opposing a DoCA but was as nothing compared to the treatment Revenue NSW’s claim received.
The statutory authority had lodged a proof of debt for $11.374 million in payroll tax which was admitted for $1.00 for voting purposes on the basis that no formal assessment or notice of determination with reasons had been issued.
This prompted Revenue NSW’s Misty Andrews to inform the meeting that “Revenue NSW’s claim is based on an estimate and these particulars have been provided to the Administrators’ office whilst further investigations under anti-avoidance provisions are taking place.
“She noted that these anti avoidance provisions are only applied in exceptionally rare circumstances and only where the Chief Commissioner is likely to be satisfied that it is warranted and necessary. She noted that they are confident that these provisions will be applied and assessments raised in the coming weeks.”
Połczyński replied that while a Proof of Debt was submitted and an estimate provided no reasons had been given by Revenue NSW although they had been sought. The VAs’ hands were tied.
The lack of admissible supporting material had not however stopped the VAs from calculating the impact on returns to creditors in either a DoCA or liquidation scenario if Revenue NSW’s claim was admitted in full.
It wasn’t pretty and when it came to vote on whether or not to accept the DoCA – despite Gleeson and Soire recommending creditors reject it in favour of liquidation – the adjudications of the Admin Form and Revenue NSW proofs were telling, with a majority or creditors – some potentially related parties – by number and value giving the DoCA the nod.
The deadline for the DoCA to be executed is this Friday. iNO asked Soire and Gleeson this morning if execution had already occurred or was still pending but they declined to answer.
If the DoCA isn’t executed in time DFS will automatically lapse into liquidation, which means that at this stage we don’t know if the ATO will be applying to the court to terminate a DoCA or to replace liquidators. Either way, fun times await.
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