Loi (Administrator) v Homeland Furniture Wollongong Pty Limited

FOSTER J: 1 The plaintiff is the administrator of Homeland Furniture Wollongong Pty Limited (ACN 166 085 696) (Administrator Appointed) (the company). He was appointed administrator of the company on 16 August 2016 pursuant to s 436A of the Corporations Act 2001 (Cth) (the Act). 2 In circumstances to which I shall refer below, the plaintiff seeks orders that the first meeting of the creditors of the company fixed for tomorrow (26 August 2016) is not invalid by reason of the late notification of that meeting to some of the company's creditors. The plaintiff's application has been made ex parte. The relief which he seeks is required urgently. The plaintiff relies upon s 447A of the Act. In the alternative, he invokes s 1322(4) of the Act. I propose to grant the relief sought pursuant to s 447A of the Act. In those circumstances, it is not necessary to consider s 1322(4). 3 The sole director and shareholder of the company is a gentleman named Guanjiao Wang (Mr Wang). 4 The company traded as a retailer of home furniture from leased premises located at Shop 1, 139 King Street, Warrawong, NSW (the premises). The company was part of a group of companies known as the Homeland Furniture Group (the group). 5 The company would purchase furniture from Homeland Furniture Pty Limited (HFPL), another company in the group. That furniture would then be supplied by HFPL to the company's customers in accordance with orders placed upon the company by those customers. Deposits were taken by the company in respect of most orders. 6 HFPL is not under administration. 7 The company has a substantial deficit of assets over liabilities. 8 Australian Securities and Investments Commission (ASIC) and Personal Property Securities Register searches have been conducted. Those searches have not revealed any security interests over the company's assets and stock. 9 The plaintiff has done his best to obtain all of the books and records of the company from Mr Wang. He has not been entirely successful in this endeavour. The plaintiff has also had difficulty gaining access to the premises in order to secure the property of the company remaining at the premises. 10 On 18 August 2016, the plaintiff issued his First Report to Creditors incorporating a Notice of First Meeting of Creditors for the company (the report). The report was sent to all creditors known to the plaintiff at that time. The creditors to whom the report was sent were those individuals and entities which were listed in the Statement about the Company's Business, Property, Affairs and Financial Circumstances provided to the plaintiff by Mr Wang on 16 August 2016. In addition to sending the report to the known creditors, the plaintiff also caused Notice of the First Meeting of Creditors to be published on ASIC's website. 11 The first meeting of creditors is fixed for 9.30 am tomorrow (26 August 2016) at the premises of Chartered Accountants of Australia and New Zealand, Level 9, Lawson Room, 33 Erskine Street, Sydney, NSW. 12 Last Friday (19 August 2016), the plaintiff received an email from Mr Wang to which was attached a schedule of stock that Mr Wang believed was located at the premises, together with details of the identity of customers who had purchased that stock. At the same time, Mr Wang also furnished the plaintiff with a second schedule of stock that was on order from HFPL and the names and contact details of the customers for whom that stock was on order. 13 The plaintiff immediately appreciated that the documents provided to him by Mr Wang on 19 August 2016 included a list of persons who might be contingent creditors of the company viz those persons who had placed orders with either HFPL or the company. The report had not been sent to any of those persons. The plaintiff was given the names and email addresses of the customers but did not have the postal addresses of any customers. The plaintiff requested Mr Wang to provide him with contact details for each of the persons identified in the list of customers. These contact details were provided yesterday (24 August 2016). 14 In light of the information thus provided, the plaintiff took the following steps: (a) For those customers where he was provided with an email address, he emailed to each customer a copy of the report; (b) For those customers where he was provided with a postal address, he separately posted by direct mail a copy of the report to the address provided to him by Mr Wang; and (c) For those customers where he was provided with a contact number, he attempted to contact them by telephone and either advised them of his appointment and the meeting of creditors on Friday or left a message for them to return his call as soon as possible. 15 The plaintiff also stated in his affidavit affirmed today (25 August 2016) that Mr Wang has informed him that HFPL will satisfy all orders that have been placed with it by the company on behalf of the company's customers and in respect of which deposits or payments have been made to the company. 16 The plaintiff applies to the Court for relief pursuant to s 447A(1) of the Act in respect of tomorrow's first meeting of creditors in order to ensure that that meeting, when held, is not invalidated by reason of his failure to notify all creditors of the company within the stipulated timeframes of the date, time and place of that meeting. 17 Section 436E of the Act is in the following terms: 436E Purpose and timing of first meeting of creditors (1) The administrator of a company under administration must convene a meeting of the company's creditors in order to determine: (a) whether to appoint a committee of creditors; and (b) if so, who are to be the committee's members. (2) The meeting must be held within 8 business days after the administration begins. (3) The administrator must convene the meeting by: (a) giving written notice of the meeting to as many of the company's creditors as reasonably practicable; and (b) causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner; at least 5 business days before the meeting. Note: For electronic notification under paragraph (a), see section 600G. (3A) A notice under paragraph (3)(b) that relates to a company may be combined with a notice under paragraph 450A(1)(b) that relates to the company. (4) At the meeting, the company's creditors may also pass a resolution: (a) removing the administrator from office; and (b) appointing someone else as administrator of the company. 18 Section 447A provides that the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. 19 Section 447A(1) of the Act bestows upon the Court a general power to make such order as it thinks appropriate about how Pt 5.3A of the Act is to operate in relation to a particular company. 20 As Young J said in Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 at 611D-E: … the Court is to have plenary powers to do whatever it thinks is just in all the circumstances, but the Court is to bear in mind when exercising those powers the rights of the various groups of people that are affected by voluntary administration, and that there is a very great public interest in not permitting such voluntary administration to go on for a long period of time. Provided that those principles are borne in mind, the court is to ensure that the object of the exercise, that is to consider whether in everybody's interest it is better to have some form of administration short of winding up, is fulfilled. 21 His Honour explained his reasons for that conclusion at 608D-611C/D. 22 In Cawthorn, his Honour ordered that a meeting of creditors of the company in question had not terminated but was to be treated as having been adjourned to a time and place to be notified by the administrator of that company provided that eligible creditors were given at least seven days' notice of the adjourned meeting. His Honour made that order notwithstanding the fact that s 439B(2) of the Act provided that such a meeting could not be adjourned to a day that was more than 60 days after the first day upon which the meeting was held and notwithstanding that that 60 day period had expired by the time that his Honour made the order. 23 I agree with Young J that the operation of s 447A(1) of the Act is not limited to filling a gap in the legislative scheme of Pt 5.3A or adding to the provisions of that Part and that the section empowers the Court to make orders altering what would otherwise be the operation of that Part. 24 An order may be made under s 447A(1) of the Act varying the time by which a second meeting of creditors under s 439A(2) must be held (Re Henry Walker Eltin Group Ltd (Administrators Appointed) (2005) 54 ACSR 383) or modifying the manner in which notice of a meeting of creditors is to be given in order to permit notice to be given by email (Re Carson [2012] FCA 626. See also ABC Learning Centres Ltd (No 1) [2008] FCA 1943). 25 The authorities to which I have referred at [20]-[24] above provide ample support for the making of the orders sought in the present case. 26 I am satisfied that the Court has the power to make the orders sought. The orders sought go no further than that which is necessary to ameliorate the difficulties caused by the late receipt of creditor information by the plaintiff. 27 It is clear that the current problem confronting the plaintiff is not of his making but rather is the result of the company's sole director failing to fully inform the plaintiff of the existence and details of all potential creditors of the company. In the circumstances, and bearing in mind that the claimed relief is confined to ameliorating the position in respect of the first meeting of creditors where the business to be conducted is fairly limited, I propose to make the orders sought. 28 Accordingly, I make the orders sought in the draft form of order provided to me by Counsel for the plaintiff. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.