Ok I got this working. Under Active Directory Integration I specify a Users OU. So based on the code, it goes looking into the specified Users OU instead of the local server.

There was a WDeployAdmin account already created and I am not sure why the account couldnt be removed via "SecurityUtils.DeleteUser(appHostConfigWriter, ServerSettings, UsersOU);" but, renaming the existing WDeployAdmin account allowed it to re-create the account.

For anyone who is encountering the same problem do look at the Users OU specified in the Web Server settings.

Thanks heaps Trevor.