By Originating Process filed on 27 October 2015 by leave, Mr Timothy Heesh and Ms Amanda Lott in their capacity as joint and several administrators of Ice TV Pty Ltd (Administrators Appointed) ("Company") seek orders, in effect, permitting notice of a meeting of creditors of the Company to be convened, and documents required to be sent to creditors for the purpose of that meeting to be sent to them, by sending an email in a specified form to those creditors of the Company who are either subscribers to the Company's subscription television service or are persons who have paid for but not yet received set top boxes.
The application is brought under s 447A of the Corporations Act 2001 (Cth) which provides that the Court may make such order as it thinks appropriate as to how Pt 5.3A of the Corporations Act is to operate in relation to a particular company. In making an order under s 447A of the Act, the Court has regard, of course, to the purposes of Pt 5.3A of the Corporations Act including, importantly, the object of Pt 5.3A as set out in s 435A of the Corporations Act, namely to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence or, if it is not possible for the company or the business to continue in existence, results in a better return for the company's creditors and members than would result from an immediate winding up of the company.
The application is supported by an affidavit of Mr Heesh, who is one of the appointed administrators of the Company. Mr Heesh and Ms Lott were together appointed as joint and several administrators of the Company on 6 October 2015 and a second meeting of creditors is scheduled to occur on 10 November 2015. Mr Heesh's evidence is that the Company provided a service to allow its customers to record free to air content broadcasts from Australian commercial television, which could be purchased through an online subscription process, and customers were required to, and the majority did, provide an email address as part of the subscription application. Subscription fees were paid in advance of services being provided and customers would also purchase a set top box from the Company or from another manufacturer.
Mr Heesh identifies that the Company has four classes of creditors, namely employees, general creditors, subscribers and set top box purchasers. Employees and general creditors are not affected by this application, since Mr Heesh, sensibly, proposes that they should be given notice of the meeting and associated documents by sending them by prepaid ordinary mail in the ordinary way. However, Mr Heesh's evidence is that subscribers are very numerous, being in excess of 16,800 at the date of his appointment, and there are also approximately 780 customers who had purchased set top boxes which the Company had not dispatched at the time of his appointment. Mr Heesh indicates that he proposes to treat those persons ("Customers") as unsecured creditors of the Company.
Mr Heesh's evidence is that he anticipates that the notice of the second meeting of creditors will be approximately seventy-five pages in length, and that significant costs and time would be involved in dispatching that notice to approximately 17,601 Customers within the relevant categories. Mr Heesh notes that a significant number of Customers, namely 5,571 of them, have already agreed to receive a copy of the notice by email, but a significant number have not yet responded to a request for such agreement. Mr Heesh's evidence is that the estimated number of pages to be printed, to send a notice of that estimated length to the Customers who have not yet expressly agreed to receive it by email, would be in the order of 900,000 pages, or 450,000 pages if printed double-sided, and the estimated cost of delivery and printing of the notices would amount to in excess of $300,000, with additional administration costs to be incurred if that were undertaken by his staff, and with a significant time involved to print notices of that volume. It appears that, if an external printing company were engaged to undertake the exercise, the cost would be cheaper but still in the order of nearly $100,000, and significant costs would again be incurred in the administration of that process.
Mr Heesh indicates that he has formed the view that it would be preferable that an email be sent to Customers, falling within the relevant categories, providing a link to the administrators' web site where the relevant information would proceed. Mr Heesh points out that that course is consistent with the manner in which Customers have already dealt with the Company, so far as they provided an email address at the point of subscription, and it is also consistent with maximising the likelihood that those creditors will receive prompt notice of the meeting, since it will allow such notice to be dispatched more promptly than if printing in that volume was required to be undertaken. Mr Heesh has confirmed that if a customer indicates a preference for a hard copy of the report, he would comply with that request and provide such a hard copy of the report to that customer.
Mr Lim, who appears for the administrators in this application, draws attention to case law which has dealt with very similar issues. In Re Mothercare Australia Ltd (Admins Apptd) [2013] NSWSC 263 at [8], I referred to several previous decisions where orders had been made permitting notice to be given by electronic means to those for whom email addresses were available and otherwise by notice on the administrators' web site and by newspaper advertisement. I there noted that Courts had become increasingly willing to modify the manner in which such notices have been given, no doubt as electronic means of communication were more widely accepted in the wider community than had previously been the case. In Re BBY Ltd [2015] NSWSC 974 at [9], Brereton J similarly ordered electronic notification in respect of creditors of a broking firm, who had been accustomed to deal with that firm by electronic means, noting that that course was calculated to bring notice of the meeting to the attention of the maximum number of creditors at the earliest possible time and more economically than would be achieved by postal distribution of notices to all of them.
Mr Lim draws attention to several relevant matters, to which I referred in Re Mothercare Australia above at [9], namely the number of creditors, the size of the creditors' claims, and the magnitude of costs involved in giving notice to the relevant creditors, and Mr Lim also draws attention to the need, to which I also referred in Re Mothercare Australia above, to balance "the need to take appropriate steps to give notice to creditors but, on the other hand, the need to avoid costs of compliance that would otherwise operate to the detriment of the creditors generally". As Mr Lim points out, the number of creditors involved here is substantial. A matter supporting the approach proposed by Mr Heesh is that creditors have previously dealt with the Company by providing email addresses to it, so there is little risk that the persons to whom such notice will be given either do not have email addresses or are not accustomed to using those email addresses for communicating with third parties. The cost of printing hard copies of the notice would here be substantial, and the time involved in printing and delivery would involve a significant delay. Importantly, as in Re Mothercare Australia above, if costs were to be incurred in printing the notices and dispatching them to shareholders in printed form, then the monies expended in that way would not be available to creditors generally, and the waste of costs in that way is likely to be disadvantageous to creditors generally. In this case, it seems to me, as Mr Lim submits, that the course of sending notice by email is one that will in fact bring the notice of the meeting to the maximum number of creditors within the relevant class at the earliest possible time, and will do so in a much more economical and efficient manner than would occur by sending printed notices to those persons.
For these reasons, I am satisfied that orders should be made in the form proposed by the administrator, with a modification which was proposed in the course of submissions and accepted by the administrators, to make clear that the modification extends only to those creditors who are either subscribers or set top box purchasers of the Company, and not to those who are either employees or general creditors. That modification, is, of course, consistent with the position for which the administrators contend.
Accordingly I make orders in accordance with the short minutes of order initialled by me and placed in the file. These orders provide that the costs of this application are to be costs and expenses of the administration of the Company. Such an order is properly made where this application was sensibly brought by the administrators and will promote the objects of the administration.
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Decision last updated: 12 February 2016