Cathro Partners Andrew Blundell and Simon Cathro must have thought that they had a good chance of retaining their appointments as voluntary administrators (VAs) of failed chartered accounting firm Talbots Pty Ltd when proceedings commenced yesterday morning.
Those proceedings constituted the hearing of an application brought by the Deputy Commissioner of Taxation (DCoT) for the immediate winding up of Talbots and related entity Talbots Investments Services Pty Ltd (The Companies).
Since being appointed VAs Blundell and Cathro have been trading the business while negotiating to sell it as a going concern.
Their solicitor Alex Winston of Bridges Lawyers told Registrar Geoff Segal that a purchaser had been identified and a non-refundable $59,000 deposited.
All that was required was to finalise the sale agreement and conclude negotiations with the secured creditors to ensure they would agree to release their security interests.
To this end, Winston told Segal that his clients sought an adjournment of the hearing of the winding up application to November 7. He said they would also agree to adjourn this Friday’s scheduled second meeting of creditors to ensure no vote takes place before the matter returned to court.
Segal seemed receptive to the idea of an adjournment, but that was before Craddock Murray Nuemann’s Dennis Olthoff, on behalf of the DCoT, got in his ear about the primary question the registrar had to consider. And it wasn’t whether or not the VAs should be granted time to make the sale.
No. It was about what was in the best interests of all creditors and, because the proposed sale would deliver not a cent to unsecureds and could be concluded in a liquidation scenario anyway, Olthoff argued that the Registrar had no reason to delay a winding up.
Unfortunately for Blundell and Cathro, the DCoT had someone else in mind to be appointed liquidator and Segal, on hearing that the proceeds of the mooted sale would only be applied to the secured creditors’ claims and the VAs’ fees, quickly embraced the notion that the Companies were better off being wound up now and by someone other than the incumbent exads.
He declined Winston’s submission about Blundell and Cathro being best placed to take over as liquidators because as the VAs records showed, they had naturally enough only incurred very limited expenses in terms of investigations so there would be little duplication of costs if the DCoT’s preferred nominee – RSM’s Richard Stone – was installed instead.
Olthoff hammered home the point that the only chance that unsecured creditors might extract a dividend was through recovery actions commenced by a liquidator and that the court should favour the successful applicant’s nominee. And ultimately the Registrar was happy to agree.