It was bound to happen. A new-ish law, aimed at distressed small businesses and intended to give their embattled owners a shot at survival, inevitably grants them potential scope to diminish the consequences of their actions, just like voluntary administration only cheaper.
In the Federal Court yesterday, an example of the Small Business Restructuring Regime’s capacity to be creatively utilised came before Nicola Colbran, and the National Judicial Registrar didn’t pull her punches.
“The court is somewhat skeptical of such restructures this close to a listing date being sought,” the Registrar said after learning that the director of Dalmau Network Group Pty Ltd (Dalmau) had appointed Worrells’ Jason Bettles as Restructuring Practitioner on November 21, a week before the hearing of the Deputy Commissioner of Taxation’s (DCoT) application for a wind up order.
Nor was the Registrar happy that despite the appointment, nobody appeared on behalf of the defendant company to make a formal application for adjournment.
“It’s very unsatisfactory for a last minute appointment and then there’s no appearance and no explanation as to why it’s in the best interests of creditors,” she said before standing the matter down in her list to give the defendant time to appear.
After the lunch break someone did appear for the defendant but it wasn’t the director. It was accountant Gareth Croy, whose company Your Future Strategy is listed in Bettles’ DIRRI as referrer, along with a reference to $25,000 in indemnity funds the ailing director deposited in Worrells’ trust account.
Connected to the court’s audio-visual facility with face time Croy, who was sitting in the driver’s seat of his car, told the Registrar that Dalmau’s director had not appeared before her because he was seriously ill in hospital.
Given the DIRRI records a conversation Worrells’ principal James Robba had with the director on November 21 to confirm the SBR appointment, the onset of the director’s illness was sudden.
The Registrar granted Croy leave to appear on behalf of the company on the basis that he was an accountant and had been engaged by the director to facilitate the appointment of an SBR practitioner.
After explaining that on his view of the company’s financial records a proposal via an SBR could potentially deliver creditors a better outcome than liquidation, the Registrar ordered that an affidavit in support of an adjournment be filed with the court by tomorrow and that the parties appear again on Friday. Only then will we have a chance of knowing whether the Registrar’s skepticism was justified.
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