Convergency Services Pty Ltd & Anor [2007] VSC 403 (5 October 2007)

1 I have before me an application by Convergency Services Pty Ltd and nine other companies known as the Convergency Group, under ss 447A(1), or alternatively ss 1322(4) of the Corporations Act 2001 (the Act) to amongst other things extend the convening period for calling the second meeting of creditors. The application concerns a group of companies called the Convergency Group. Mr Galvin of counsel appears for the Plaintiff.

2 On 17 August 2007, administrators were appointed to each member of the group under Part 5.3A of the Act. The administrators held the first meetings as required by ss 439A(1). The administrators convened the second meeting of creditors on Monday 10 September 2007 and held the meetings on Monday 17 September 2007. At each of the meetings the creditors resolved that each of the companies be wound up save for Convergency Group Pty Ltd the tenth plaintiff. No creditors were identified for it and it has been handed back to the control of its directors.

3 For the reasons set out below, the second meetings of creditors were held after the administration of each of the plaintiffs had ended and were of no effect. The plaintiff companies seek to regularise the position.

4 Under ss 439A(1):

"The administrator of a company under administration must convene a meeting of the company's creditors within the convening period as fixed by subsection (5) or extended under subsection (6)."

5 In this case, subsection (5) fixed a period of 21 days beginning on the day when the administration begins. In other words the convening period ended on 6 September 2007.

6 Section 435C provides when an administration begins and ends. Paragraph 435C(3)(b) provides:

"However the administration of a company may also end because:

(b) the convening period, as fixed by subsection 439A(5), for a meeting of the company's creditors ends:

(i) without the meeting being convened in accordance with section 439A; and

(ii) without an application being made for the Court to extend under subsection 439A(6) the convening period for the meeting;"

7 In this case the administration of each of the companies came to an end before the second meeting of creditors was convened, as the meeting had not been convened in accordance with section 439A by 6 September.

8 The affidavit of Mr Nicol, one of the two joint and several administrators of the plaintiff companies, discloses that he and his other administrator were very busy completing the sale of the business of the companies by Friday 7 September and when they sent out the notices convening the second creditors' meetings on Monday 10 September 2007, they did not appreciate that the effect of the notice (and thus the resolutions to wind up the companies) being late was such that the administration of each of the companies would end and the companies would return to the control of their directors.

9 Mr Nicol deposes that all creditors voted in favour of liquidation of the plaintiffs. In his view each of the plaintiffs is insolvent. The businesses of the companies have been sold.

10 I have been informed that the creditors and ASIC have not been informed of this application. It has been pressed on me that in view of the fact that all the creditors voted in favour of the companies going in to liquidation that this technical oversight is not a material matter which ought to be draw to their attention.

11 Section 447A(1) provides;

12 "The Court may make such orders as it thinks appropriate about how this Part is to operate in relation to a particular company."

13 Examples of circumstances where the court may make an order under ss (1) are set out in ss 447A(2).

14 Subsection 1322(4) provides in part that the court may extend the period for doing any act, matter or thing under this Act in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made).

15 Mr Galvin referred me to several authorities on the power of the court under s 447A, and under ss 1322(4) of the Corporations Act. In particular he has referred me to the decision in Re Ricon Constructions Proprietary Limited (in liquidation)[1] where Santow J made an order under ss 447A(1) extending the convening period where a meeting had been convened after the convening period had expired and the meeting went on to resolve the company execute a deed of company arrangement.

16 In Australasian Memory Proprietary Limited v. Brien[2] the High Court of Australia held that the express power to extend the convening period as provided in subsection 439A(6) did not exclude the operation of subsection 447A(1) to extend the convening period if otherwise subsection 439A(6) did not apply. The court also defined the extent of the power under 447A(1).

17 Mr Galvin rightly drew my attention to an issue about whether an order could in effect operate nunc pro tunc and drew my attention to the observations of Young C.J. Shirlaw v. Graham.[3] His Honour held that the court can make an order under section 447A which has some effect in the past in the same way as the court can make an order nunc pro tunc.[4] I also note the High Court appeared to endorse such an approach where there is no inconsistency between the varied operation of Part 3.5A (i.e. the winding up of the companies) and the rights that have accrued in the intervening period. (In this case I have not been informed of any such rights).[5]

18 Mr Galvin also drew my attention to the decision of Merkel J. in Panasystems Pty Ltd v. Voodoo Tech Proprietary Limited[6], and in particular to the form of order there made by his Honour as to how Part 5.3A should operate in relation to particular companies.

19 In my view it is appropriate, in the view of the evidence of Mr Nicol for me to make an order in this case validating the second creditors' meetings by extending the convening time to when they were in fact convened. I understand that this will have the effect of validating the resolutions properly passed at the meetings.

20 As I have pointed out in discussion, at this stage I would not want my order to go beyond merely validating the holding of the meetings to expressly validate any resolutions which were passed.

21 I will hear submissions on the exact form of the order from Mr Galvin but at the moment I am minded to order that pursuant to ss 447A(1) of the Corporations Act 2001 that Part 5.3A of that Act operate in relation to the plaintiff companies as if the convening period is fixed by ss 439A(5) for a meeting of the companies' creditors ended at the end of Monday 10 September 2007.

22 I am further minded to order under ss 1322(4) of the Corporations Act 2001 that in respect of each plaintiff the convening period prescribed under ss 439A(5) of the Corporations Act be extended to 10 September 2007.

23 I note that no issue was raised as to the standing of the plaintiffs to bring the application where the administration of each had ended.

[1] (1997) 43 NSWLR 74.

[2] (2000) 172 ALR 28.

[3] (2001) NSWSC 612.

[5] (2000) 172 ALR 28, [29]-[32].

[6] (2003) FCA 428.