this article came out about 1.5 hours ago
http://www.couriermail.com.au/sport...-facie-insolvent/story-e6frep5x-1226308221024
THE Titans have been dealt another blow with the club's property arm facing bankruptcy proceedings after its legal team admitted there was a prima facie case that the Gold Coast property group is insolvent.
As it emerged debts on the Titans group of companies has blown out to $35 million, the club suffered a further setback when a Federal Court judge today supported Reed Constructions' claim to replace the Australian Tax Office in wind-up proceedings against the Gold Coast Titans (Property) Pty Ltd.
The property arm of the Titans rugby league club will now face a bankruptcy application next month after a judge ruled one its creditors, Reed, to be a new plaintiff.
Reed Constructions' can now move to liquidate the Titans' property arm at the next court hearing on April 20 - effectively giving the Titans property group less than 30 days to prove their solvency and avert collapse.
The legal bodyblow means the building firm will now seek $1.046m from the Titans' property arm, placing further strain on the Gold Coast empire, which has bled more than $35m and is currently being audited by external accountants on the behalf of the Australian Rugby League Commission.
The Australian Tax Office had applied to wind up the Gold Coast Titans (Property) Pty Ltd earlier this month but asked for leave to withdraw after coming to an arrangement with the company to pay outstanding tax.
However, Reed Constructions Australia which claims it is owned more than $1million for work done on the Centre of Excellence and interest, then asked to be substituted as the plaintiff in the winding up application.
The matter was listed before Federal Court Registrar Heather Baldwin today, but was then sent to Justice John Reeves for determination in a hearing.
The court heard in a deed signed by the parties last August it was agreed Reed was owed $943,858 for work done.
It also claimed to be owed in excess of $100,000 in interest.
Solicitor Brent Turnbull, for Reed, said the argument was on a narrow issue of whether his client was a creditor of Titans Property under the relevant section of Corporations Act.
He said it was also argued on behalf of Reed that because Titans Property had not paid the Tax Office it was on the face of it insolvent and as a creditor Reed had a right to being wind up proceedings.
Solicitor Ashley Tiplady, for Titans Property, said his clients admitted there was a prima face case they were insolvent but Reed had no right to be subsituted as a plaintiff in bankruptcy proceedings because it was not a creditor but rather a prospective creditor.
He said in the deed signed last August there was no mention of the amount of money to be repaid in monthly instalments.
Therefore a "vacuum" existed on what the debt was and how much was owing.
Justice Reeves ruled in Reed's favour and ordered they be substituted as plaintiff in the bankruptcy action.
He found Reed was a creditor and there was a prima face case that Titans property was insolvent.
Justice Reeves set the matter down for hearing before a registrar on April 20.
He also gave the ATO the right to withdraw and ordered Titans Property pay its costs.
A further order was made that advertisment for the winding up application be taken out.
Legal representatives for the Titans argued that Reed Constructions should not be permitted to commence wind-up proceedings as they were only a prospective creditor.
But Judge Reeves ruled in favour of Reed Constructions, paving the way for the construction giant to seek $943,858 for money owed on the Centre of Excellence project.
In a worrying sign for the Titans' property arm, their legal representatives did not dispute that money was owing, but rather the precise amount and the specified period in which the debts must be settled.
The collapse of the property arm would be a massive blow to the Titans, who are in danger of being stripped of their NRL licence as external auditors discovered millions of dollars in hidden debt in the football club.
The auditing team, which has been putting the Titans' fiscal health under the microscope, also discovered that the debts incurred on various arms of the group's business operations are "intertwined".
The explosive discoveries are at odds with the sentiments of Titans boss Michael Searle, who has assured Gold Coast fans that the issues confronting the club's property arm have no repercussions for the NRL outfit.
It is understood the external accountants discovered the football club was in millions of dollars of debt to suppliers, including those that provide merchandise, catering and ground hiring.
The level of debt is unprecedented in NRL history _ and now the blowout threatens to get worse following the Federal Court ruling.
NRL boss David Gallop said he is determined to keep the Titans afloat but conceded there are serious financial concerns engulfing the club's entire operations.
"We received reports from our external accountants (yesterday) that confirm the whole structure at the Titans is under considerable financial stress," he said.
"We are working through the options around that but there needs to be an acceptance that the various arms of the group's business are intertwined in terms of the level of debt and that will have ramifications as future options are explored.
"The game's clear goal is to maintain a viable football club at the Titans.
"The issues around the building are creating an alarming diversion from what would otherwise be a successful expansion of our game into an important area."
