- Mann v Abruzzi Sports Club Ltd - [2019] NSWSC 478 - NSWSC 2019 case summary — Zoe

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- Mann v Abruzzi Sports Club Ltd

[2019] NSWSC 478

Supreme Court of NSW|2019-04-24|Before: Black J, Austin J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2019-04-24

Before

Black J, Austin J

Source

Original judgment source is linked above.

Judgment (10 paragraphs)

[1]

Solicitors: William James Lawyers (Applicants) V L Macri Lawyers (Interested Parties) File Number(s): 2018/91831 (008)

[2]

Judgment - ex tempore (revised 26 april 2019)

By Interlocutory Process filed on 15 April 2018, Mr Timothy Cook as administrator of the Third Plaintiff, Fearndale Holdings Pty Ltd (admin apptd) ("Fearndale"), and Fearndale apply, under s 439A(6) and 447A of the Corporations Act 2001 (Cth) and, to the extent necessary, s 90-15 of the Insolvency Practice Schedule (Corporations) ("IPSC") for an extension of the period in which he must convene a meeting of creditors of Fearndale under s 439A of the Act up to and including 30 September 2019.
Mr Cook and Fearndale also seek an order, in common form, that the meeting of creditors may be held at any time during, or within five business days after the end of the convening period, and granting liberty to any person affected by the orders to apply to modify or discharge them. Mr Golledge, who appeared for Mr Cook, noted that this order is sought to preserve the possibility that Mr Cook might convene the second meeting of creditors at an earlier date than the extended date of 30 September 2019 which is sought, if circumstances develop in a manner that permits him to do so.
Two parties claiming to be creditors, Equivest Pty Ltd ("Equivest") and Torpoint Investments Pty Ltd ("Torpoint") were granted leave to be heard, under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). They made no substantive submissions, but indicated their intent to make submissions as to costs which I will address separately. I will return to the potential implications of that matter for another application foreshadowed by Equivest and Torpoint, or other action foreshadowed by Equivest and Torpoint, below.

[4]

The evidence in support of the application

As will emerge below, Fearndale's operations are very simple, but its affairs are extraordinarily complex; the approach adopted by creditors has caused considerable difficulties, and is likely to continue to cause considerable difficulties, for the orderly management of the administration; and the process of an orderly disposal of assets has been complex and time consuming, and is likely to continue to be so, given litigation which is presently under way in respect of Fearndale's principal asset. I will return to the evidence of those matters below.
Mr Cook relies, in support of the application, on his affidavit dated 24 October 2018, which set out the circumstances of his appointment as administrator of Fearndale, pursuant to orders made by Leeming JA in May 2018, in place of an administrator previously appointed by a secured creditor of Fearndale. The circumstances of Mr Cook's appointment at that time were unusual, so far as they involved complex orders made in contested proceedings, with a view to seeking to restore order to the realisation of Fearndale's assets. It appears that aspiration has not been wholly successful. Mr Cook also there referred to Fearndale and the persons interested in it and to its primary asset, namely land situated at Luddenham in New South Wales, and to matters which might give rise to potential value for that land, and issues arising in respect of quarrying activities on that land. Mr Cook also there referred to incomplete books and records of Fearndale, a matter which has been addressed, in part, by subsequent examinations conducted by Mr Cook, and to uncertainties arising out of the suggested existence of a trust associated with Fearndale, the Fearndale Trust, and as to loan arrangements in respect of Fearndale and competing claims to the land.
By Mr Cook's further affidavit dated 26 November 2018, paragraphs 1-10 of which were read today, Mr Cook provided further information as to known creditors of Fearndale and as to the position of unitholders in the Fearndale Trust.
I referred to aspects of these affidavits in my earlier judgment in respect of an earlier application determined on 4 December 2018, when I modified the orders previously made by Leeming JA extending the convening period for the second meeting of creditors to a date seven days after the completion of the sale of Fearndale's land, on Mr Cook's application, so that the convening period of the second meeting of creditors was extended to a specified date, expressly reserving his opportunity to apply for a further extension of the convening period. Although that application was not, strictly, an application for an extension of the convening period, but rather an application to replace a date specified by reference to an event with a calendar date, I had regard to the principles which would apply to an extension of the convening period, in determining that that order should then be made.
Mr Cook also relies on further affidavit evidence, dealing with subsequent events, in support of this application. He relies on an affidavit dated 11 April 2019 of Mr Lincoln Blackledge, a real estate agent, who refers to his view that the land owned by Fearndale has "unique" features; that a sale by public auction would not be an appropriate method for sale; and that an expressions of interest campaign was likely to be the preferable method for sale. Mr Blackledge also there referred to the impact on any sale process of a lease held by Drama Unit Pty Ltd ("Drama Unit"), which was the subject of earlier proceedings and is now the subject of further proceedings which have been tentatively listed for hearing on 17 May 2019.
Mr Cook also relies on his further affidavit dated 12 April 2019, which referred to the position in respect of Drama Unit; to the position in respect of public examinations to obtain further information in respect of Fearndale's affairs; and to the uncertainties as to a return to creditors, which largely depended upon the value that was capable of being realised in respect of Fearndale's land, and also on the extent of any claim to Fearndale by a secured creditor of Fearndale, Consolidated Capital and Funding Pty Ltd ("CCF"), which is presently the subject of a reference and is expected to be determined shortly.
Finally, Mr Cook relies on the affidavit of Ms Doyle dated 24 April 2019, which indicates that notice of this application has been given to creditors of the company. CCF, the secured creditor, has indicated that it neither consents to nor opposes the application, and I referred above to the position adopted by Equivest and Torpoint at this hearing.

[5]

Mr Cook's submissions

In submissions, Mr Golledge sets out the history of the appointment of Mr Cook and summarises the position in respect of Fearndale's land holding, and the uncertainties as to the value which will be realised from the land, including the position in respect of the lease with Drama Unit, which is the subject of the proceedings to which I have referred. Mr Golledge refers to the well-established principles in respect of the extension of a convening period to which I have referred above, but points out that, unusually, Mr Cook was here appointed by the orders made by Leeming JA which contemplated that the administration would continue until the land was sold. The orders which I subsequently made in December 2018 to indicate a fixed date were made on the same basis, at a time that it was hoped the land would be sold earlier than has been achieved.
Mr Golledge submits, persuasively in my view, that the continuation of the administration, and the extension of the period for the second meeting of creditors, will give effect to the orders which were initially made by the Court, and that they should not be disturbed, particularly on an application by persons who were involved in the making of those orders by consent. Mr Golledge also refers to the steps which have been taken by Mr Cook to seek to be in a position to sell the land, in a manner that would maximise its value for creditors, albeit that will likely require a determination of the issues in respect of Drama Unit's lease. Mr Golledge also refers to the fact that the extent to which creditors' claims will be met is not yet known, and cannot be known until the likely or actual sale proceeds of the land are known, which will depend on the position in respect of Drama Unit's lease, and will likely also depend upon the amount to which CCF has a proper claim, which is the subject of the ongoing reference.
Mr Golledge points out that there is no prejudice to creditors in a continuation of the administration, where CCF does not oppose that position; there are no employees of Fearndale and it has no leased property which is presently subject to a moratorium arising by way of the administration; and any distribution to creditors, including in a liquidation, could only be made after the land was realised.
It seems to me that, in the present circumstances, there are three reasons to extend the administration, in the manner proposed by Mr Cook, although I will refer further to the period of that extension below. The first is that, as matters stand, Mr Cook is unlikely to be able to provide meaningful information to creditors, at a second meeting of creditors, to assist them in a determination whether Fearndale should be placed in liquidation; or a deed of company arrangement should be implemented, if one was proposed; or Fearndale should be returned to the control of its directors. The range of options available to Fearndale is likely to be narrower, at a second meeting of creditors held now, than it would be in circumstances where there was greater clarity as to the value of its land.
The second reason for such an extension is that it would, as I have noted above, be consistent with the orders originally made by Leeming JA, by the consent of affected parties, which contemplated that the administration would provide a means of realising the relevant land, where there was a significant level of dispute between creditors, and uncertainty in respect of Fearndale's position. The third reason to extend the convening period is that it will maximise the opportunity for Fearndale to realise the value of the land and, consistent with the observations I have made above, potentially increase the range of options which may be available to creditors at the second meeting of creditors.
While I am conscious that the administration will have continued for a substantial period, and much longer than would ordinarily be the case, that appears to be the consequence, not of any lack of activity or diligence on Mr Cook's part, but of the difficulty of the circumstances in which Fearndale finds itself, and the range of disputes that have emerged in respect of its land and its creditors' claims. I also have regard to the authorities which emphasise that, in applications of this kind, considerable weight should be given to the administrator's view.
I note, for completeness, that Mr Golledge drew attention to a question whether an order under s 439A(6) of the Act could be made in the present circumstances, if this application is properly treated as a second extension of the convening period. That depends, in part, upon the history of earlier events, including the position in respect of an earlier application by the previous administrator appointed by CCF, and whether the orders previously made by Leeming JA, to which I have referred above, could be characterised as an extension of the convening period. It is not necessary to resolve those questions since it is plain the Court has a broad plenary power under s 447A of the Act to make an order, varying the operation of Part 5.3A of the Act to extend the convening period so as to promote the purposes of that Part. Such an order would, in my view, promote the purposes of Part 5.3A of the Act, and I would, to the extent the power is not available under s 439A(6) in the relevant circumstances, make that order under s 447A of the Act.

- Mann v Abruzzi Sports Club Ltd

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Judgment (10 paragraphs)

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