In the matter of Parker Logan Property Pty Ltd [2021] NSWSC 792

Background

1. By way of background, the company operated as a building contractor on projects throughout New South Wales. The company ceased trading on 10 May 2021 and the plaintiffs were appointed joint and several administrators of the company pursuant to a resolution passed by Mr Redelman on 11 May 2021 (Mr Sprowles' affidavit sworn 17 June 2021 at [5]).
2. On 21 May 2021, the first meeting of creditors of the company was held pursuant to s 436E(2) of the Corporations Act, which requires the first meeting of creditors of a company under administration to be held within eight business days after the commencement of the administration (Ex A at 11; Mr Sprowles' affidavit sworn 17 June 2021 at [6]).
3. On 11 June 2021, the administrators issued a report to creditors (the Administrator's Report, Ex A at 33-107), which included a notice that the second meeting of creditors would be held on 22 June 2021 at 10.00am. The Administrator's Report was purportedly issued pursuant to 439A of the Corporations Act and r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules). The Administrator's Report notes that a deed of company arrangement has been received from the director of the company but that, notwithstanding this, the administrators have recommended that the creditors should resolve to place the company in liquidation at the second meeting of creditors.
4. Section 439A of the Corporations Act requires the administrator of a company under administration to convene a meeting of the company's creditors within the convening period as fixed by subs 5 or as extended under subs 6. The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period (subs 2).
5. Relevantly, the applicable convening period in the present case was the period of 20 business days beginning on the day after the administration began (subs 5) (i.e., 20 business days after 11 May 2021).
6. Rule 75-225 of the Insolvency Practice Rules sets out, inter alia, the requirements for written notice in respect of meetings to be convened under s 439A of the Corporations Act:
7. Mr Sprowles has explained the circumstances in which, by oversight, the Administrator's Report was not issued within the convening period (Mr Sprowles' affidavit sworn 17 June 2021 at [10]-[13]). That period expired on 8 June 2021. However, the Administrator's Report and notice convening the second meeting of creditors was not issued until 11 June 2021.
8. Because of that oversight, the date scheduled for the second creditor's meeting (22 June 2021) is more than five business days after the end of the convening period (8 June 2021). Mr Sprowles explained that he had relied upon calculations of his staff as to the date on which the convening period ended and that he had understood that, by issuing the Administrator's Report on 11 June 2021, he was issuing it within time. He reconsidered the calculations after the Report was issued and realised that the convening period had ended on 8 June (see his affidavit at [10]-[11]) and brought this application urgently in order to attempt to cure the irregularity and so that the second creditors' meeting can proceed as scheduled on 22 June 2021.
9. There is evidence as to compliance with the requirement that written notice of the second meeting given to as many of the company's creditors as possible.
10. The application is brought on three bases to extend, in effect, the convening period to 15 June 2021 which would enable the meeting on 22 June 2021 to proceed as scheduled. The first is pursuant to s 439A(6) of the Corporations Act, which empowers the Court to extend a convening period on an application made during or after the period referred to in s 439A(5) of the Corporations Act.
11. Pursuant to s 439A(6) of the Corporations Act, the Court may extend the convening period on an application made either during or after the period referred to in subs 50(a) or (b), as the case requires.
12. If an application is made under subs 6, after the convening period then the Court may only extend the convening period if the Court is satisfied that it would be in the best interests of the creditors if the convening period were extended in accordance with the application.
13. Sub-section 8 provides that: (8) If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, then, in making an order about the costs of the application, the Court must have regard to: (a) the fact that the application was made after that period; and (b) any other conduct engaged in by the administrator; and (c) any other relevant matters.
14. In considering an application of this kind, the Court must allow for the need for the administration of a company to be carried out as efficiently and as expeditiously as possible, against the need to maximise the return to creditors by presenting meaningful choices to them (see Re Riviera Group Pty Ltd (admin apptd) (recrs and mgrs appt) (2009) 72 ACSR 352; [2009] NSWSC 585 at [15]-[16] per Austin J). In the present case, the plaintiffs submit that the grant of the extension will satisfy both of those objects as it will ensure that the meeting can proceed and that creditors can vote on the proposals made before them without delay.
15. The plaintiffs submit that the requirement of subs 7 is satisfied, in that the application seeks to rectify an unfortunate oversight in the issue of the Administrator's Report after the expiry of the convening period, and, from a practical perspective, it is said that the grant of the extension will not unduly delay the administration of the company and that there is no reason why the meeting should not proceed as scheduled, in circumstances where creditors have been given more than five business days' notice of the meeting, and in circumstances where the company's sole director and secretary (and the proponent of the Deed of Company Arrangement, which arises for consideration at the second meeting of creditors) also consents to the extension being granted.
16. Mr Mulvenna, in his affidavit, has deposed to the notification to known creditors of the company of the making of this application and that no creditors have informed the plaintiff of any opposition to the extension being granted.
17. It is submitted that, in circumstances where it is an application to extend the convening period only for a short period of some four days to 15 June 2021, in order to rectify the oversight, this will allow the meeting to proceed in accordance with the notice given to the creditors.
18. The plaintiffs made clear that they are not seeking an order for costs and will bear the costs of this application; and, therefore, those costs will not form part of the costs of the administration.
19. It is submitted that, in circumstances where prompt steps have been taken to rectify the oversight, in a way that the plaintiffs consider avoids any inconvenience to creditors, the requirements of ss 439A(7) and (8) are satisfied. On that basis, an extension of the convening period to 15 June 2021 is sought.
20. The second basis on which the application is put is pursuant to s 447A of the Corporations Act, which provides that the Court may make such orders as it thinks appropriate as to how Pt 5.3A is to operate in relation to a particular company.
21. It is noted that the section confers wide discretionary powers on the Court, including to do what it thinks just in all of the circumstances, having regard to the rights of those affected by the administration, and including making orders that would alter what would otherwise be the operation of Pt 5.3A of the Corporations Act. Reference is made by the plaintiff to the decision of Black J in the matter of Re Foodora Australia Pty Ltd (admin apptd) [2018] NSWSC 1426 at [7], and to the cases there cited by his Honour.
22. It is noted that the overriding requirement for an order under s 447A is that it be designed to achieve the objective of Pt 5.3A, as expressed in s 435A of the Corporations Act, which provides that: 435A. The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its 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. Note: Schedule 2 contains additional rules about companies under external administration.
23. Reference is made in the plaintiff's submissions to Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 (Australasian Memory v Brien), as to the power of the Court to make orders under, inter alia, s 447A; and to Re Strawbridge (in their capacity as joint and several administrators of CBCH Group Pty Ltd) (No 2) [2020] FCA 472 at [39] per Markovic J.
24. It is noted that in Australasian Memory v Brien, the High Court held (at [23]-[24]) that the power to extend the convening period, as provided in s 439A(6) of the Corporations Act, does not exclude the operation of s 447A(1) to extend the convening period even if otherwise s 439A(6) did not apply. The plaintiffs also refer to Re Convergency Services Pty Ltd [2007] VSC 403 per Robson J.
25. An issue raised by the plaintiffs (which was considered by Black J in the matter of Byron Group Holdings Pty Ltd (admin apptd) [2016] NSWSC 1947 (Byron Group Holdings), albeit which his Honour suggested (at [9]) "might be regarded by some as unduly technical"), is as to whether the plaintiffs currently have standing to apply for an order under s 447A, by reference to the operation of s 435C(3)(b) of the Corporations Act; i.e., that where the company is no longer in administration, the administrator of the company may not have to bring the application.
26. However, it is submitted that the plaintiffs have standing, in any event, as a creditor of the company, (having an entitlement to unpaid remuneration - see Mr Sprowles' affidavit at [21]; or as an "other interested person", that expression being one which is to be interpreted broadly, and including a person whose material legal rights or pecuniary or other economic interests are substantially affected by the making of the order under s 447A - see BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton (2011) 82 NSWLR 336; [2011] NSWCA 414 at [168] per Campbell JA (with whom McColl JA agreed); Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd subject to Deed of Company Arrangement (2020) 149 ACSR 1; [2020] FCA 1395 at [401] per Beach J).
27. The plaintiffs here submit that the objects of Pt 5.3A will be promoted by making an order that Pt 5.3 of the Act is to operate in relation to the company as if the convening period had ended at the end of 15 June 2021 in order to enable the second creditors' meeting to proceed as scheduled and in conformity with the Corporations Act, so that the creditors may vote as to the future of the company as they would otherwise have been entitled to do.
28. It is noted that in the matter of Byron Group Holdings Pty Ltd, Black J considered that the making of an order under s 439A(6) or s 447A of the Corporations Act in the terms the plaintiff here proposes, extending the convening period after it has ended, may operate in a self-contained way without the need for any further order addressing the consequences of s 435C(3), but that, in the Byron Group Holdings case, it was suggested that such an order might not be effective without more, in circumstances where, pursuant to s 435C(3), the administration has come to an end. In that case, his Honour made an order under s 447A (out of an abundance of caution) to reinstate the administration, in effect, in circumstances where it had otherwise ended by operation of s 435C(3). Relevantly, Black J said the following at [9]: [9] One issue of the form of orders arises, to which Mr Oakes, who appears for the Applicants, has drawn attention. Section 435C(3) of the Act relevantly provides that the administration of a company may end if the convening period ends, without the relevant second meeting having been convened in accordance with s 439A of the Act, and without an application having been made to the Court to extend the time under s 439A(6) of the Act. That was plainly the case here since the application was not made until today, when the convening period would end last Friday. In Re FEA Plantations Ltd (admins apptd) [2010] FCA 468, to which Mr Oakes refers, Dodds-Streeton J contemplated that, if the convening period expired without an extension first being made, the administration would end under s 435C(3)(b) of the Corporations Act. Her Honour was not there specifically directing her attention to the position in respect of an application made after the end of the convening period. I dealt with an application made after the end of the convening period in Re Tendiris Pty Ltd (admin apptd) (recs and mgrs apptd) [2013] NSWSC 739, where my attention was not, so far as I can recall, specifically drawn to s 435C(3)(b) of the Act or to her Honour's decision in Re FEA Plantations Ltd (admins apptd) above. I proceeded on the basis that an order made under s 439A(6) of the Act, after the convening period, would operate in a self-contained way to extend the convening period. That, of course, would be a logical and desirable result, but it seems to me that it could be argued that an order under s 439A(6), although it extends the convening period, is not effective without more, in circumstances that s 435C(3) had come into effect. That argument might be regarded, by some, as unduly technical and, if it were advanced, it would almost inevitably be met by a further order, nunc pro tunc, under s 447A of the Corporations Act to avert that undesirable result.
29. That is the basis on which the plaintiffs here seek a further order in the proposed orders, albeit one that was not specified in the originating process, so as to make clear that Pt 5.3A of the Corporations Act operates in relation to the company in such a way that the administration of the company did not come to an end on 8 June 2021, notwithstanding that the convening period fixed by s 439A(5) ended without a meeting having been convened in accordance s 439A, and without an application being made to the Court to extend the convening period under s 439A(6).
30. Finally, the last of the bases under which the application is made is pursuant to s 1322(4)(d) of the Corporations Act, which provides that: (4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit.
31. The plaintiffs note that orders extending time pursuant to s 1322(4)(d) have been made in analogous circumstances involving a counting error on the part of the administrators, referring to Re Telminex No Liability (2005) 54 ACSR 42; [2005] FCA 705 at [12], where Emmett J (then sitting in the Federal Court) extended the time for the holding of the second creditors' meeting.
32. The Court must not make an order under s 1322(4) unless it is satisfied that no substantial injustice has been or is likely to be caused to any persons (see s 1322(6)(c) of the Corporations Act). The plaintiffs here submit that no substantial injustice has been or will be caused to any person if the convening period is extended for the short period proposed (and that injustice is likely to rise, on the other hand, if the convening period is not extended). Accordingly, it is submitted that an order extending the convening period should be made on this additional ground.

Determination

1. I am satisfied that the requirements of ss 439A(7) and (8) are met on the present application. I am satisfied that the evidence establishes that the fact that the Report was issued outside the convening period (and therefore that the notice of the second creditors' meeting was outside the convening period) was an oversight on the part of those in the administrators' office. I am satisfied that there will be no prejudice occasioned by an extension of the period of time for the convening period and that it is in the best interests of the creditors that the second meeting of creditors proceed in order for creditors to be able to consider the Deed of Company Arrangement put forward by the director (Mr Redelman) and the administrators' recommendation as to the placement of the company in liquidation.
2. I am also satisfied, for the reasons that have been put forward by Counsel for the plaintiff, that, in the circumstances, it is appropriate to make the further order (sought under s 447A(1) of the Corporations Act) and, in particular, for an order, for the avoidance of doubt, as to the effect of the operation of Pt 5.3A of the Corporations Act in circumstances where the convening period is here to be extended.
3. While I consider it is not strictly necessary for there also to be an order pursuant to s 1322(4) of the Corporations Act, extending the convening period, as I am satisfied that it is an alternative basis, I will make the order in alternative terms to include that.
4. Accordingly, for the above reasons I make the following orders: 1. Order pursuant to s 439A(6) of the Corporations Act, that in respect of the defendant company, the convening period prescribed under s 439A(5) be extended to 15 June 2021. 2. Order pursuant to s 447A(1) of the Corporations Act that part 5.3A of the Act will operate in relation to the company as if the convening period fixed by s 439A(5) of the Act, for a meeting of the company's creditors ended at the end of 15 June 2021. 3. To the extent it may be necessary, order pursuant to s 1322(4) of the Corporations Act, that in respect of the company the convening period prescribed under s 439A(5) of the Act be extended to 15 June 2021. 4. Order pursuant to section 447A of the Corporations Act, that 5.3A of the Act operates in relation to the company in such a way that the administration of the company did not come to an end on 8 June 2021, notwithstanding that the convening period fixed by s 439A(5) ended without a meeting being convened in accordance with s 439A and without an application being made to the Court to extend the convening period under s 439A(6). 5. Note that the costs of bringing this application will be borne by the plaintiffs and will not form part of the costs of the administration of the company. 6. Order that these orders be entered forthwith.

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