Bernsteen Pty Ltd v Newmore Pty Ltd

REASONS FOR JUDGMENT 1 On 14 October 2005 I made an order pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act) permitting the adjournment by creditors of the second meeting of creditors required by s 439A to a date no more than 180 days after 8 July 2005 and ancillary orders. I should clarify the circumstances under which those orders were made. 2 The first plaintiffs are the voluntary Administrators of Henry Walker Eltin Group Limited (HWE) and 25 other companies which are members of the Henry Walker Eltin Group (the HWE Group). HWE is a listed public company. The companies in the group conduct mining operations, civil infrastructure projects and various non-core operations. The second plaintiffs conduct the mining operations of the HWE Group. Administrators were appointed to the HWE Group on 31 January 2005. On 1 February 2005 those Administrators resigned and the first plaintiffs were appointed joint voluntary Administrators in their stead. 3 On 16 February 2005, pursuant to s 439A(6) of the Act, Hely J ordered that the period in which the Administrators must convene meetings of creditors under s 439A of the Act be extended until 23 May 2005 (In the matter of Henry Walker Eltin Group Limited (Administrators Appointed) [2005] FCA 316). On 6 May 2005 Hely J ordered, pursuant to s 447A(1) of the Act, that the period within which the Administrators must convene meetings of creditors under s 439A of the Act be further extended up to and including 5 July 2005, together with ancillary orders including the granting of liberty to apply to any person who could demonstrate sufficient interest to modify or discharge the orders upon appropriate notice being given to the plaintiffs (In the matter of Henry Walker Eltin Group Limited (Administrators Appointed) [2005] FCA 984). In making those orders, Hely J held that, notwithstanding the limitations implicit in s 439A (cf Watson v Uniframes Ltd and Trumbull (1994) 55 FCR 556 and Bernsteen Pty Ltd v Newmore Pty Ltd (1995) 13 ACLC 1608), s 447A of the Act conferred the necessary power. 4 The basis for the application before Hely J, put shortly, was that more time was required to reach a position where the mining operations conducted by group entities could be realised and a Deed of Company Arrangement to be proposed once the basis for distribution had become clearer. It was not anticipated that that stage would be reached until beyond the extended date for the meeting. The evidence before Hely J included a good deal of detail about the HWE Group, including creditors and customers of the mining operations and the contractual rights that they had which impinged upon the disposition of the mining operations. It also set out in some detail the steps which had been taken by the Administrators to inform interested parties of what was proposed. Hely J had heard other applications in the Administration and was apparently familiar with the affairs of the Group and the conduct of the Administration. 5 The primary reason advanced for the extension now sought is to permit completion of the sale of the mining operations so that, when creditors come to vote on the proposed Deed of Company Arrangement, they will effectively be dealing with the disposal of the surplus cash proceeds of the realisation of the assets. The sale process is well-advanced but the timetable has had to be extended by several weeks. 6 The preferred position of the plaintiffs was that there should be an order adjourning the meeting to a date appointed by the first plaintiffs no more than 180 days after 8 July 2005. When the matter was called on I indicated to counsel that, because of the shortness of time available to consider the matter, I had not had the opportunity to absorb myself in the detail sufficiently to warrant an order of that kind that would bypass creditors and suggested a short adjournment to enable the application to be advertised and notice given to Australian Securities and Investments Commission (ASIC). Counsel then indicated that the matter needed to be resolved that day otherwise the meeting would need to be convened in any event. The plaintiffs therefore elected to seek the alternative order, which had been proposed in the initiating process, namely, an order that the meeting could be adjourned by creditors to a date appointed by the first plaintiffs not more than 180 days after 8 July 2005. 7 I indicated to counsel that I had some reservations about Administrators appointed pursuant to Pt 5.3A of the Act acting as de facto liquidators and taking steps to dispose of assets in a complex situation prior to the meeting of creditors to decide the company's future, particularly if substantial delay is involved. However, I was prepared to make the alternative order, primarily because to do so was a natural consequence of previous orders made by Hely J, albeit made without any discussion of the point about which I have some reservations. Further, Young CJ in Eq of the Supreme Court of New South Wales granted an order in Re Bosnjak Holdings Pty Ltd & Ors [2005] NSWSC 527 with similar effect to that of Hely J in this case. Although it is not clear from the reasons, I know from my association with other aspects of that administration that the underlying basis for the extension of that meeting period was to further sale of the assets of a substantial group of companies.