In the matter of University Co-operative Bookshop Limited (admins apptd) [2019] NSWSC 1898

In the matter of University Co-operative Bookshop Limited (admins apptd) [2019] NSWSC 1898 - NSWSC 2019 case summary — Zoe

Application of IPS and IPR

I will first address the question as to the application of the IPS and the IPR in the administration of the Co-op entities. Mr Izzo, who appears with Mr McMeniman for the administrators, notes that, by a somewhat complex process, the provisions in Pt 5.3A of the Corporations Act 2001 (Cth) dealing with voluntary administration are applied to co-operatives registered in New South Wales subject to legislation including, relevantly, the Co-operatives (Adoption of National Law) Act 2012 (NSW), applying the Co-operatives National Law ("CNL") as set out in the appendix to the Act, and associated legislation and regulations. That result arises by reasoning which I noted, in reaching that result, in Re Belmont Sportsmans Club Co-Operative Ltd (admins apptd) [2015] NSWSC 543 at [8] and which I do not now repeat.
The administrators recognise, however, in the affidavit of Mr Carter dated 16 December 2019 and in Mr Izzo's submissions, that a difficulty potentially arises because, with effect from 2017, certain provisions of the Corporations Act and the Corporations Regulations 2001 (Cth) which were previously applied to co-operatives by the relevant legislation were repealed, and new provisions were introduced in the IPS and IPR which, at least broadly, correspond with the provisions that have been repealed.
The co-operative legislation does not, however, expressly apply provisions taking the form of the IPS, as a schedule to the Corporations Act, or the IPR, to co-operatives. Mr Izzo notes that, while s 19(1)(a) of the Corporations (Ancillary Provisions) Act 2001 (NSW) preserves the operation of regulations made under the applied law, that does not in turn apply to the IPS or the IPR given their different character. However, Mr Izzo points out that cl 6 in Schedule 4 to the CNL addresses the position where part of the law or an Act has been repealed and re-enacted, with or without modifications, and has the consequence that a reference in the CNL to such a provision then includes the provision as re-enacted since the enactment of the reference. Mr Izzo also points out that, again by a somewhat complex process, those provisions extend to provisions included in the Corporations Regulations, which may now have been enacted in corresponding provisions. Mr Izzo rightly points out that this approach has previously been applied in respect of a corresponding issue and a broadly corresponding saving provision in s 10 of the Acts Interpretation Act 1901 (Cth) in Re Wiggins Island Coal Export Terminal Pty Ltd [2018] NSWSC 1342.
It seems to me that that approach preserves the effect of relevant sections, so far as they were previously contained in the Corporations Act or Corporations Regulations and are now contained in the IPS or IPR, although it would not apply a wholly new provision introduced by the IPS or IPR to a co-operative, and recourse would then need to be made to s 447A of the Act.
In these circumstances, Mr Izzo recognises that there are two ways in which that issue could be addressed. If, as I noted above, the provisions that have been introduced in the IPS and the IPR correspond to former provisions which are carried over by saving provisions, then the Court could give a direction, which must itself be made under the IPS, to the effect that the administrators are justified in proceeding on that basis. Given the complexity of those issues, it seems to me that such a direction would plainly be warranted, to allow the administrators to go forward in the administration, without being placed at risk by reason of the complexity of those issues. Second, to the extent that there is any gap arising from that process, because a previously existing provision has been omitted, or a new provision introduced in the IPS and IPR in a manner that does not trigger the operation of saving provisions, then it would also arguably be open to the Court to make orders under s 447A of the Corporations Act, modifying the operation of the Act, so as to apply that provision to a co-operative where Pt 5.3A generally applies to co-operatives. That of course should not be taken where the Act, or the co-operative legislation, already preserves those provisions.
I am satisfied that the Court can and should make a direction of the kind sought by the administrators, to the extent the new provisions in the IPS and IPR correspond to provisions in the former Corporations Act or Corporations Regulations, and would also have power to vary the Act under s 447A in its operation to the Co-op entities, so far as new provisions have been introduced which needed to apply. Before making such a direction, however, it is appropriate that the relevant provisions and their relationship with former provisions, or new provisions which have no such relationship, be identified. The solicitors acting for the administrators have kindly agreed to undertake that task, so that orders may be made underpinned by such identification. Once that task has been undertaken, I would be prepared to make such an order, and I anticipate that another judge sitting in the Duty List or Corporations List, having regard to this judgment, may well take the same view.

[4]

Extension of convening period

With that background, the question of the extension of a convening period seems altogether more straightforward. Here, it is not necessary to have recourse to any direction or modification of the Act under s 447A of the Act because, as I have noted above, Pt 5.3A of the Act applies in accordance with the terms of the Co-operatives (Adoption of National Law) Act and the CNL to the Co-op entities.
Without disrespect to Mr Carter's detailed affidavit and Mr Izzo's careful submissions, I will deal with this issue relatively briefly, since the conclusion seems to me to be a straightforward one in the circumstances. The principles that are applicable to an extension of a convening period are well established, and I summarised them, inter alia, in Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002. The Court will have regard to the need for expedition in an administration, but will also have regard to the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors. A number of matters have been identified, at least since Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352, as applicable to an extension of a convening period, which include the complexity of the relevant group structures and the time needed to execute an orderly process of disposal of assets.
Mr Carter here gives evidence, and Mr Izzo refers in submissions, to the fact that the business of the Co-op entities is a relatively complex one, involving two subsidiaries, and the operation, within each aspect of the business, of numerous stores situated nationwide and in leased premises. Mr Carter's affidavit evidence refers to the circumstances of the administrators' appointment, the present financial position of the Co-op entities, and the existence of substantial trade creditors and a significant number of employees who depend upon the business for their ongoing employment, both on a permanent and casual basis. He identifies a secured creditor of the Co-op entities, and notes that the administrators have indicated that they will consent to an appointment of a receiver by that secured creditor.
He addresses the actions taken by the administrators since their appointment, including a first meeting of creditors, and investigations which have been directed both to the possibility of sale of the business as a whole or in several parts, and to claims in respect of transactions prior to the administrators' appointment. Mr Carter's evidence is, and it seems to me likely in the circumstances, that a three month period of extension would both be sufficient for, and necessary for, a sale of the business, given its geographical spread and the need for a due diligence process to be undertaken. Mr Carter also points to the fact that such an extension is likely to be necessary, to allow the business to take steps to prepare itself for the next academic year, a matter which is likely to be relevant to preserving its value for the purposes of a potential sale.
Mr Carter expresses the view that, and I accept that, the proposed extension of the convening period is likely to benefit the interests of creditors generally, so far as it preserves the potential of obtaining value for the business by its sale as an ongoing concern, and employees so far as it preserves the opportunity for their ongoing employment. The application for an extension of time has been supported by the committees of inspection, and the secured creditor has indicated that it does not object to the proposed extension. Notice of the application has been given to lessors of property, and none of them have responded to indicate an objection, perhaps not surprisingly, where the administrators are continuing to pay rent for the period since their appointment.
Notice of the application has been given to the Australian Securities and Investments Commission ("ASIC"), albeit likely too late for it to form a view as to the merits of the application. It would, however, be highly unlikely that ASIC would intervene to seek to oppose an application of this character in these circumstances.
I am satisfied, in these circumstances, that the orders sought by the administrators in respect of the extension of the convening period are appropriate, and the time proposed is justified in the circumstances. Orders are also sought to permit communications with creditors by electronic means, which are now readily made in voluntary administrations, because of the cost savings and convenience which they provide, and where creditors and members of the community would no doubt now be much more accustomed to receiving such communications by electronic means than in the past.

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