Dalma administrators always wanted liquidation and now have it

By an expensive and torturous route, the insolvency practitioners in control of Dalma Form Specialist Pty Ltd (DFS) have gotten to where they’ve said they wanted to be all along, which is as Liquidators appointed.

The desired destination was reached on Wednesday when Federal Court judge Justice Brigitte Markovic ordered that the Deed of Company Arrangement (DoCA) endorsed by creditors at the second meeting of DFS on April 12 be terminated and the company’s deed administrators (DAs) Bruce Gleeson and Daniel Soire of Jones Partners be appointed liquidators. (See: Commissioner of State Revenue v Gleeson, in the matter of Dalma Form Specialist Pty Ltd (subject to deed of company arrangement) [2024] FCA 908)

But did it have to go like this? The lawyers, the silks, the hearings, the fees? In hindsight, maybe not.

Within days of their appointments on December 21, 2023 Gleeson and Soire were contacted by the Australian Taxation Office (ATO) which informed them that DFS was part of a group of companies that had acted to allegedly defraud the Commonwealth of more than $150 million over the course more than 15 years.

The pair were also told that the ATO had already had Helm Advisory principal Stephen Hathway appointed liquidator of two other entities in the group and that the ATO was funding Hathway to conduct investigations.

iNO’s mail, which Gleeson and Soire had not contradicted as at time of publication, is that they initially indicated to the tax office that they would make way for Hathway and at the first meeting on January 5, 2024 agreed to adjourn it so Hathway could lodge his consent to act.

When the meeting was reconvened on January 12 the admittance of proofs of debt from related parties however ensured the resolution to replace the incumbents with Hathway failed to pass.

At the start of the second meeting on February 7 Gleeson adjourned for the full 45 days to conduct investigations and to provide time for certain retention payments to be received, a possibility that could alter estimates of potential returns in liquidation and DoCA scenarios being prepared.

Now iNO is only a humble journalist but it is our understanding that investigations are generally considered to be more effective when conducted by a fully funded liquidator empowered by the Act as opposed to a pair of VAs without an external source of funds. And it wasn’t like there wasn’t a fully funded alternative available.

As we’ve said, winding up DFS had been Jones and Soire’s recommendation. They said so in their report to creditors ahead of that second meeting.

They have also indicated that the material to support the ATO’s allegations of widespread fraud wasn’t provided, at least when they needed it, which begs the question of whether the ATO was reluctant to provide sensitive material to anyone other than its preferred practitioner, or whether it was slow off the mark?

Nevertheless, the VAs’ adjudication of a certain proof of debt at the second meeting had the effect of giving those in favour of the deed the numbers.

The proof question came from Revenue NSW and amounted to some $11.3 million in outstanding payroll tax but the documentation Jones and Soire needed to be confident about admitting the claim for its full value failed to materialise by the time the second meeting was reconvened on April 12. They therefore attributed to it a value of $1.00 for voting purposes.

Inevitably the DoCA was accepted and it fell to the Chief Commissioner of State Revenue to apply to the court for orders terminating the deed and winding up DFS.

Now Gleeson and Soire have at last arrived at where they’ve always said they should be, but by a path littered with obstacles that required further fees and expenses to be incurred.

It all might have been avoided if only circumstances had favoured the ATO’s nominee.

Dalma DAs reach winding up the hard way

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