FEDERAL COURT OF AUSTRALIA
Wily (Administrator), in the matter of APH 480 Queen St Pty Ltd (Administrator Appointed) [2012] FCA 1493
IN THE FEDERAL COURT OF AUSTRALIA
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
1. The convening period within which the applicant must convene a meeting of the creditors of APH 480 Queen Street Pty Ltd (administrator appointed) (receivers and managers appointed) ACN 119 445 724 (the Company) as fixed by s 439A(5) of the Corporations Act 2001 (Cth) (Corporations Act), be extended under s 439A(6) of the Corporations Act, to midnight 13 December 2012.
2. Pursuant to s 447A(1) of the Corporations Act, that Part 5.3A of the Corporations Act operate in relation to the Company so that the second meeting of creditors of the Company required by s 439A of the Corporations Act may be held at any time during, or within 5 business days after the end of, the convening period as extended, provided that the applicant gives notice of the meeting in accordance with s 439A(3) of the Corporations Act.
3. Any person having a sufficient interest may apply to the court to vary orders 1 or 2 above providing 5 days’ notice in writing to the applicant’s solicitor.
4. As soon as practicable, the applicant give notice to the creditors of the Company of the terms of these orders by email if the applicant has an email address for the creditors, or by way of correspondence sent to their last known address.
5. The costs of this application are to be paid out of the assets of the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
QUEENSLAND DISTRICT REGISTRY
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GENERAL DIVISION
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QUD 659 of 2012
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IN THE MATTER OF APH 480 QUEEN ST PTY LTD (ADMINISTRATOR APPOINTED) ACN 119 445 724
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BETWEEN:
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ANDREW HUGH JENNER WILY IN HIS CAPACITY AS ADMINISTRATOR OF APH 480 QUEEN ST PTY LTD (ADMINISTRATOR APPOINTED) ACN 119 445 724
Applicant
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JUDGE:
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LOGAN J
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DATE:
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28 NOVEMBER 2012
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PLACE:
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BRISBANE
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REASONS FOR JUDGMENT
1 Mr AHJ Wily is the administrator appointed voluntarily in respect of APH 480 Queen St Pty Ltd (APH 480). Receivers and managers have also been appointed to that company. The receivers and managers have been notified of today’s application but have chosen not to appear. In his capacity as administrator Mr Wily applies for the extension of the convening period of the company’s second meeting of creditors. The application is made pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Corporations Act).
2 The following emerges from the affidavits read today on behalf of the administrator.
3 APH 480 formerly conducted a business of property development. It had ceased trading in that business prior to the administrator’s appointment. Its major asset is real property situated at 391 Adelaide Street, Brisbane. Mr Wily’s appointment as administrator occurred on 18 October 2012. Having regard to s 439A(1) and s 439A(5), the second meeting of creditors should have been convened on or prior to 15 November 2012. That date is the last day of the convening period unless the Court extends that period, pursuant to s 439A(6) of the Corporations Act.
4 The extension sought is for a convening period which would end on 13 December 2012. Mr Wily in his evidence puts forward the following as bases upon which he seeks an extension of the convening period:
(a) a need to conduct further investigations of the proofs of debt;
(b) a need to consider a deed of company arrangement which is being proposed by one creditor, AET SPV but not yet received by him; and
(c) a need to complete a report on the financial affairs of APH 480 which will include, as the Corporations Act requires, a comparison of the likely return to creditors if:
(i) the company is placed in liquidation;
(ii) the company is released from administration; or
(iii) a deed of company arrangement is received by the applicant and accepted by creditors.
5 The evidence is that the accounts of the company, as originally encountered by the administrator and then assessed by him, had not been updated for some two years and were not accurate. Mr Wily has made a number of unsuccessful attempts since his appointment to obtain accurate accounts of APH 480. He has likewise sought substantiation of the proofs of debt lodged by the major creditors of APH 480. This information has not yet been received. He has sought that information because of a complexity attending the asserted basis of indebtedness.
6 A meeting as between those acting for the administrator and representatives of AET SPV was held on 29 November 2012. It was at that stage that the administrator was appraised of a proposal to submit a deed of company arrangement. The receipt of that deed is imminently expected.
7 The material also discloses that APH 480 has but one employee. That employee does not make any claim for employment benefits. Prior to this morning’s application coming on I had made directions in respect of the notification of the application to the body of creditors of APH 480 and to the Australian Securities and Investments Commission (ASIC). As was the case with the receivers and managers, there has been no appearance by or on behalf of any creditor or the ASIC.
8 In Australian Securities and Investments Commission v Storm Financial Limited (2009) 71 ACSR 81 at [1] to [3] I made some observations in respect of Pt 5.3A of Ch 5 of the Corporations Act:
[1] Part 5.3A of Ch 5 of the Corporations Act 2001 (Cth) (the Act) makes provision for inter alia, the administration of a company’s affairs with a view to the execution of a deed of company arrangement after its approval at a meeting of creditors. Its origins may be traced to amendments made to the Act’s predecessor, the Corporations Law (repealed) by the Corporate Law Reform Act 1992 (Cth).
[2] In the Explanatory Memorandum circulated by the then Attorney-General when introducing the bill which became the Corporate Law Reform Act, it was noted (paras 14, 15 and 21) that the proposed Pt 5.3A would implement recommendations made in the Law Reform Commission’s Report No 45 in respect of the Commission’s General Insolvency Inquiry, popularly known as “the Harmer Report”.
[3] In the Harmer Report (Vol 1, paras 52 and 53) the following observations are made in relation to the then state of Australia’s corporations law:
Conservative legislation
52. The Commission is also concerned that, apart from conclusions that might be suggested by statistical evidence, the legislative approach to corporate insolvency in Australia is most conservative. There is very little emphasis upon or encouragement of a constructive approach to corporate insolvency by, for example, focussing on the possibility of saving a business (as distinct from the company itself) and preserving employment prospects.
Creative alternatives to insolvency
53. Constructive or creative insolvency is not a myth. However, it requires suitable procedures that encourage and offer a reasonable prospect of achieving that result. A constructive approach to corporate insolvency requires the preservation, if practical and possible, of the property and business of the company in the brief period before creditors are in a position to make an informed decision.
9 As with other judges exercising jurisdiction under the Corporations Act in respect of applications of this kind, (see, for example, Owen, in the matter of Rivercity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) v Madden [2011] FCA 295 at [19]), I have derived assistance from a helpful summary offered by Austin J in Re Riviera Group Pty Ltd (2009) 72 ACSR 352 at 355, [13] to [14] (Re Riviera), of considerations which have proved relevant. That summary was not intended by his Honour to be exhaustive. The following are broad categories, one or more of which has proved persuasive in earlier cases in an extension of the convening period:
(a) the size and scope of the business;
(b) substantial offshore activities;
(c) large number of employees with complex entitlements;
(d) complex corporate group structure and intercompany loans;
(e) complex transactions entered into by the company (for example securities lending or derivatives transactions);
(f) complex prospects of recovery proceedings;
(g) lack of access to corporate financial records;
(h) the time needed to execute an orderly process of disposal of assets;
(i) the time needed for thorough assessment of a proposal for a deed of company arrangement;
(j) where the extension will allow sale of the business as a going concern;
(k) more generally, that additional time is likely to enhance the return for unsecured creditors.
10 In Re Riviera at paragraph 14, Austin J then added:
The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator’s estimate of time has a reasonable basis.
11 In this instance the lack of access to date to corporate financial records, the time needed for a thorough assessment of a proposed deed of company arrangement and the need further to investigate the foundation of major creditors’ proofs of debt are each present and tend to favour the extension of the convening period. Against that background, I have the considered value judgment of the administrator, who is an official liquidator, which is that an extension would be in the interests of creditors, if only to allow time for the receipt and analysis of the proposed deed of company arrangement and the subsequent formulation of his report. There has been no appearance, much less is there any evidence, to gainsay the administrator’s considered value judgment.
12 In matters of this kind, a court exercising jurisdiction under the Corporations Act expects administrators to be candid and, in return, one should not lightly depart from an evidenced value judgment made by an administrator. I am well satisfied on the evidence to hand that each of the matters to which I have made reference as tending to favour an extension, taken in conjunction with the administrator’s value judgment, should lead to a grant of the extension sought. The time beyond the prima facie convening period is not long.
13 Obviously enough, it behoves those who would promote a deed of company arrangement to move with expedition, and the degree of expedition required is prima facie that set out in the Corporations Act as to when the second meeting of creditors must be held. That said, it is, having regard to the explanatory memorandum and the Harmer Report extracts which I have set out, as well as to s 439A, evident that Parliament expects matters arising under Pt 5.3A to be dealt with in ways that recognise the unique situation of each particular company and the interests of that company’s creditors, both secured and unsecured.
14 For these reasons, and also noting an absence of any prejudice to any particular person by the extension, I shall make an order in the terms sought.
Associate:
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