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[2017] VSC 376
plaintiff. Convening period for the second meetings of creditors extended to 19 September 2017 for each company; s 439A(1) ordered to operate as though meetings may be held at any time during the extended...
The joint administrators of three related companies sought more time to prepare reports and investigate the group's affairs before convening the statutory 'second meetings' of creditors. The Supreme Court of Victoria granted an extension to 19 September 2017 because the group was large and complex, investigations (including of intercompany loans, asset values and effects of a recent Federal Court judgment) were incomplete, and the likely prejudice to stakeholders from the extension was minimal. The Court also ordered flexibility on meeting dates (a 'Daisytek' order) to avoid forced adjournment and extra costs.
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1,810 words · generated 14/06/2026
Three related companies within a group, Acquire Learning & Careers Pty Ltd, Acquire Learning Pty Ltd and Acquire Retail Pty Ltd, went into voluntary administration on 12 May 2017. The joint administrators (Sam Kaso, Bruno Secatore and Barry Wight) applied to the Supreme Court of Victoria on 1 June 2017 for an extension of the statutory convening period for the second meetings of creditors under s 439A(6) of the Corporations Act 2001 (Cth). They sought to extend the convening period to 19 September 2017 and to obtain ancillary relief permitting the meetings to be held at any time during the extended period or within five business days thereafter (a 'Daisytek' order). The administrators' affidavit (Barry Wight, sworn 1 June 2017) explained that investigations were incomplete: there were large intercompany and shareholder loans to examine, recent Federal Court findings against Acquire Learning & Careers required assessment, asset values (including a 90 per cent shareholding in CareerOne) needed valuation, and a draft DOCA required negotiation (see [2], [17]–[21], [34]–[55]). Gardiner AsJ granted the extension and ancillary orders on 1 June 2017 and delivered reasons on 28 June 2017, finding that the balance of considerations favoured an extension to enable the administrators properly to form the opinions required under s 439A(4)(b) and thereby to maximise creditor returns ([53]–[56]).
2 cited instruments linked from this judgment.
The Court's reasoning rests on a straightforward application of the statutory framework and established authorities. Two statutory provisions are central:
Authorities emphasise the balancing exercise the Court must conduct: administrations are expected to be relatively speedy, but strict adherence to tight timeframes should not be allowed to prejudice sensible measures that materially assist the maximisation of returns for creditors. The judgment reproduces and relies upon earlier statements of this balance in Re Diamond Press, Silvia (FEA Plantations), Algeri; Re Colorado Group Ltd, Parbery v Newsat Ltd, and Re Riviera Group, authorities the Court regarded as supportive of granting extensions in large or complex matters where extra time will likely improve outcomes for creditors (see [26]–[33]).
Applying these principles to the facts, Gardiner AsJ accepted the administrators' evidence that this corporate group was large and structurally complex, that relevant investigations (intercompany and shareholder loan recoverability, valuation of limited-market assets such as CareerOne shares and intellectual property, and assessment of potential claims arising from a recent Federal Court ruling concerning contraventions of the Australian Consumer Law) were incomplete, and that a DOCA proposal was only at draft stage and required negotiation. The administrators had begun an expressions-of-interest campaign and received approaches, but more time was needed for due diligence and to achieve meaningful engagement by potential purchasers or DOCA proponents (see [20]–[21], [34]–[55]). The Court concluded that the likely prejudice to stakeholders from the extension was minimal, there were no major secured creditors, landlords had been engaged, employees were not operating the business, and the ACCC did not oppose the application, so the balance favoured granting the extension ([36]–[46], [53]–[56]). The Court therefore extended the convening period to 19 September 2017 and made the Daisytek order to prevent inefficient adjournments and extra costs (orders (1)–(2); see [3], [51]).
Before this decision, the governing statutory framework and the relevant jurisprudence were well established. Section 439A contains the procedural timetable for voluntary administrations and gives courts power to extend the convening period; s 447A confers broad powers to regulate how Part 5.3A operates in relation to a company.
Case law had developed a set of practical factors and an overarching balancing approach for extension applications: courts should consider matters such as the size and complexity of the business or group, access to records, co-operation of officers, intercompany loan structures, potential for sale as a going concern, and whether extra time is likely to enhance the return for creditors (see Parbery v Newsat Ltd [2015] FCA 435, Re Riviera, Re Diamond, Silvia). 'Daisytek' orders (following Re Daisytek Australia Pty Ltd) were already an accepted mechanism for giving practical flexibility to the timing of second meetings to avoid forced adjournments.
After Gardiner AsJ's reasons in Re Acquire Learning, the state of the law is unchanged in principle but reaffirmed in practice: where administrators establish a concrete need to complete investigations and demonstrate that extra time is likely to promote creditor recovery, and where prejudice from an extension is not material, courts will grant extensions of convening periods and will routinely employ s 447A powers to permit flexible scheduling of second meetings. The judgment adds another factual instance applying the familiar multi-factorial test and confirms the Court’s practical approach to 'Daisytek' orders (see [53]–[56], orders).
Each of these passages encapsulates the statutory test and the factual application the Court made in granting the extension.
This decision will be most instructive where administrators can demonstrate one or more of the following features:
Where these factors exist and the administrators can provide evidentiary detail demonstrating the specific tasks that require more time and how extra time will likely enhance creditor returns, courts will be receptive to extensions.
This judgment follows and applies established authority rather than breaking new doctrinal ground. It confirms the approach taken in Parbery v Newsat Ltd and related authorities: courts will grant extensions when the administrators show that additional time is necessary to produce informed recommendations and that prejudice from the extension is not material (see [26]–[33], [53]–[56]). The 'Daisytek' mechanism was applied in the ordinary way to avoid inefficient adjournments. Practitioners should treat Re Acquire Learning as an example of a successful evidentiary template: a structured affidavit identifying incomplete investigatory tasks, quantifying the complexity and likely creditor benefit from an extension, and showing that stakeholders will not be unduly prejudiced. The decision does not purport to alter the legal test; later courts will treat it as a reinforcing example of the balancing exercise and of the routine use of s 447A to provide scheduling flexibility.
Practical takeaways for practitioners: prepare a focussed affidavit that identifies specific unfinished investigatory tasks, explains why extra time is likely to enhance creditor returns, quantifies potential prejudice to stakeholders, and canvasses realistic timelines. Where a DOCA is on foot or a market for specialised assets is limited, emphasise the need for a longer expressions-of-interest period. Seek a 'Daisytek' order when there is a real risk that convening meetings only at the statutory end of the period will produce costly adjournments and duplication of meeting costs.
CORPORATIONS - Voluntary administration - Application by administrators of a group of companies for extensions of convening periods of second meetings of creditors required by s 439A(6) of the Corporations Act 2001 (Cth) - Order made for extensions of convening periods and other ancillary orders.
1 On 12 May 2017, Sam Kaso, Bruno Secatore and Barry Wight ('the administrators') were appointed joint and several administrators of Acquire Learning and Careers Pty Ltd ('Acquire Learning & Careers'), Acquire Learning Pty Ltd ('Acquire') and Acquire Retail Pty Ltd ('Acquire Retail') ('the companies') pursuant to s 436A of the Corporations Act 2001 (Cth) ('the Act').
2 On 1 June 2017, the administrators filed an originating process seeking orders extending the convening period for the second meeting of creditors in the voluntary administrations by approximately three and a half months to 19 September 2017. The administrators rely on an affidavit of Barry Wight, one of the administrators, sworn 1 June 2017.
3 On 1 June 2017, I made orders extending the convening period for the second meetings of creditors in the voluntary administrations to the date sought together with certain other ancillary orders, including a 'Daisytek' order to allow the meetings to be held at any time during or within five business days after the end of the convening periods.[1] These are my reasons for making those orders.
4 Acquire Learning & Careers is the holding company of four subsidiaries within a corporate group, Acquire, Acquire Retail, Compare Courses Pty Ltd and Recruit Easy Pty Ltd (collectively, 'the Group'). Acquire Learning & Careers also holds a 90 per cent interest in CareerOne Pty Ltd ('CareerOne').
5 Jesse Karam Sahely is a director of each of the companies. In addition, John Hamilton Wall is a director of Acquire and Acquire Learning & Careers.
6 The Group formerly included other companies as well. Their involvement will be described below.
(i) Acquire Learning & Careers was incorporated in July 2012 and up until around 30 June 2014 ran an education broking and recruitment service that marketed programs on behalf of several Registered Training Organisations ('RTOs') who were responsible for accepting and finalising enrolments in a Federally funded training scheme known as VET FEE-HELP.
(ii) on or around 1 July 2014, Acquire took over those operations and Acquire Learning & Careers became the 'head company' of the Group.
(iii) at the date of the appointment of the administrators, Acquire Learning & Careers' main function was to hold the shares in the subsidiary entities and manage the finances of the Group and related parties.
(iv) Acquire Learning & Careers purchased a 90 per cent shareholding in CareerOne between March 2015 and July 2016. CareerOne's key business activities included the marketing and selling of education and training services and the provision of an online career resource for employers, recruitment firms and employees. This role included compiling job listings, job searching tips, maintaining the candidate database, online advertising, career information and courses which are operated via the website at www.careerone.com.au.
(v) Acquire Learning & Careers formerly owned all of the shares in two (2) RTOs being:
(A) Asia Pacific Training Institute Pty Ltd ('APTI') - purchased in or around December 2014; and
(B) Franklyn Scholar Pty Ltd ('FS') - purchased in or around September 2015.
(vi) During the period in which Acquire Learning & Careers owned APTI and FS it controlled several interrelated companies whereby it arranged for the brokerage staff employed by Acquire to recruit prospective students, used the data obtained from Acquire's staff to contact prospective students (via CareerOne), and for APTI and FS to provide Commonwealth Government funded VET FEE-HELP courses.
(vii) in or around February 2017, Acquire Learning & Careers sold all of its shares in both APTI and FS. The sale appears to have been made to third parties, but Acquire Learning & Careers provided some ongoing indemnities and appears to have continued to have some ongoing relationship with these companies. The management of Acquire Learning & Careers and Acquire have advised the administrators that both of these RTOs had to be sold largely as a result of a change in legislation regarding the VET FEE-HELP scheme, the introduction of the VET STUDENT-LOAN scheme and the prohibition on the use of third party brokers to recruit students to such Government funded courses. Mr Wight considers that further time is required to review and form an opinion about the sale agreements, the circumstances giving rise to the entry into them and the value of any consideration received.
(viii) Acquire Learning & Careers was also largely responsible for the transfer of monies between different entities within the Group. In this regard, Mr Wight deposes that further time is required to review and form an opinion about several related party loan accounts.
(ix) on 30 May 2017, following a trial conducted on 26 July 2016 and based largely on admissions made by Acquire Learning & Careers, Murphy J of the Federal Court of Australia imposed pecuniary penalties totalling $4.5M on Acquire Learning & Careers and ordered that it contribute $100,000 toward the costs of the Australian Consumer and Competition Commission ('ACCC') incurred in that proceeding.[2] The penalties were imposed because of contraventions of the Australian Consumer Law by Acquire Learning & Careers in marketing VET FEE-HELP assisted courses to job seekers. The contraventions relate to telemarketers employed by Acquire Learning & Careers engaging in misleading or deceptive conduct, making false or misleading representations about VET FEE-HELP courses and engaging in conduct trade or commerce which was likely to mislead. The Court found that the motive of Acquire Learning & Careers was to maximise its profits by so doing. Its conduct was heavily criticised by Murphy J. As the judgment was only delivered on 30 May 2017, the administrators are still assessing the assertions made by the ACCC in the relevant proceedings and considering the impact of the findings by Murphy J in relation to claims which might be made in a liquidation against those involved.
(i) Acquire was incorporated in March 2014 and from 1 July 2014 operated as a sales arm of vocational educational courses funded via the VET FEE-HELP scheme. Acquire's business model included:
(A) Entering into agreements with online job advertisers ('advertisers') by which the advertisers agreed to provide Acquire with the personal information of job seekers who responded to online job advertisements. After Acquire Learning & Careers purchased its 90 per cent shareholding in CareerOne, Acquire was also given direct access to personal information and contact details of CareerOne job seekers to use in marketing vocational education courses.
(B) Entering into agreements with certain approved providers of vocational education and training ('VET') courses ('clients') to market and promote their courses. Each client appointed Acquire as its agent and agreed to pay Acquire a fee, sometimes a percentage of the course fee, for each student enrolled in a VET FEE-HELP assisted course. Acquire's services included assisting prospective students in completing client enrolment and VET FEE-HELP documentation.
(C) Employing or contracting people who were termed career advisors ('career advisors') but who made telemarketing calls to job seekers to market VET FEE-HELP assisted courses offered by its clients and engage with students who were not making progress in the VET FEE-HELP funded courses.
(D) Employing or contracting people who were termed mobile mentors ('mobile mentors') to assist students enrolled in VET FEE-HELP funded courses offered by its clients when such students were not making progress in the courses.
(E) Procuring prospective students for the RTOs including those owned by Acquire Learning & Careers, being APTI and FS.
(ii) In or around late August 2016 both APTI and FS were each issued with a Notice of Deferral of Payment under subclause 60(3) of Schedule 1A to the Higher Education Support Act 2003 (Cth). As a result, Commonwealth Government funding to APTI and FS ceased and this had a flow on effect to Acquire. The administrators are still investigating the events that led to the notices.
(iii) Between September 2016 and March 2017 the Group's revenue was largely derived from a number of agreements entered into between Acquire, Acquire Learning & Careers and Careers Australia Group Limited (Administrators Appointed) ('Careers Australia'). Careers Australia also had a separate agreement with CareerOne at this time to purchase prospective job seeker data and used the resources of Acquire (including IT infrastructure, office and call centre space) to contact prospective students to enrol in VET FEE-HELP and VET FEE-STUDENT funded courses. The administrators are still in the process of reviewing those arrangements. Because of the change in third party brokerage laws, many of Acquire's staff were formally transferred to Careers Australia.
(iv) The Management of Acquire Learning & Careers and Acquire have advised the administrators that Careers Australia stopped meeting its payment obligations to Acquire in or around March 2017. At the date of the appointment of the administrators, the records of Acquire stated that it was owed around $3.2 million by Careers Australia.
(v) At the date of the administrators' appointment, Acquire had 41 employees including two directors. Those employees were largely working on developing educational training content, which was a minor aspect of Acquire's business operations.
(i) Acquire Retail is the lease holding entity within the Group. At the date of the appointment of the administrators, Acquire Retail held the following leases:
(A) Lot 1 & 2, 600 Glenferrie Road Hawthorn VIC 3122 ('Hawthorn');
(B) Suites C1 and B7 1 Bellvue Drive Varsity Lakes QLD 4227 ('Varsity Lakes'); and
(C) 17 Hardware Lane Melbourne VIC 3000 ('Hardware Lane').
(ii) Acquire Retail currently occupies Lot 1 of the Hawthorn premises which houses the Group's IT infrastructure and management accounts. The Hawthorn premises was previously the main trading location of the Group. The call centre which brokered students to enrol in vocational funded courses via the VET FEE-HELP scheme was located on Level 2 of the Hawthorn premises.
(iii) Prior to the appointment of the administrators, Acquire Retail had sub-leased Lot 2 at the Hawthorn premises to an unrelated entity, Vision Australia. Acquire Retail also had informal verbal agreements in place with former related entities including FS, EON Sports Radio Pty Ltd and G1X Holdings Pty Ltd ('G1X'). G1X is a subsidiary of Acquire Learning & Careers.
(iv) The Varsity Lakes lease was entered into in or around August 2016. At the date of the appointment of the administrators, CareerOne and People For Property Pty Ltd, a subsidiary entity of Compare Courses Pty Ltd, were utilising the Varsity Lakes premises on an ad hoc basis. The administrators have provided formal notice to the landlord that the Varsity Lakes premises would be vacated by close of business on 1 June 2017.
(v) The Hardware Lane premises is occupied by CareerOne and this location is referred to as the 'CareerOne Hub'. There is no formal sub-lease agreement in place between Acquire Retail and CareerOne in relation to this tenancy. At the date of the appointment of the administrators, rental obligations had been paid in advance until 31 May 2017. CareerOne has since confirmed that it will provide the administrators with funding to continue to meet rental obligations in full so that CareerOne can continue to occupy the premises during the administration period.
(vi) The management of Acquire have told the administrators' staff that Acquire or Acquire Learning & Careers (or both of them) contributed approximately $2,000,000 - $2,500,000 to the refurbishment of the CareerOne Hub. The administrators are still investigating whether this is correct and, if so, what action may be taken in respect of the recovery of any assets located within the CareerOne Hub.
7 Based on information known to the administrators at 1 June 2017, the date of their appointment, the Group had debts of over $88,454,057.72 (inclusive of inter-company debts between entities within the Group) calculated as follows:
(a) Employee creditors in the vicinity of $911,303.19;
(b) Unsecured creditors in the vicinity of $39,324,714.91; and
(c) Related party creditors in the vicinity of $48,218,039.62.
8 The acquisitions of FS, APTI and CareerOne were funded by loan facilities taken out with the Commonwealth Bank of Australia ('CBA') for in excess of $40 million. From a review of the books and records, Mr Wight understands that the secured debt to the CBA was repaid in full by 30 June 2016. Acquire Learning & Careers and Acquire also had combined credit card facilities of approximately $750,000. These facilities appear to have been reduced to nil by the date of the administrators' appointment. Accordingly, as far as the administrators' investigations have revealed to date, there are no major secured creditors in the administrations.
9 A break-down of creditors of each of the companies is as follows:
10 Mr Wight states that given the early stage of the administrations, the numbers identified at paragraphs 7 and 8 above are only estimates and are likely to change. The administrators have not yet called for, or adjudicated on, proofs of debts for dividend purposes. At the first meetings of creditors, some proofs of debt for voting purposes were lodged.
11 Excluding intercompany loans to entities within the Group, the most significant debts are:
(a) a debt in the vicinity of $7.27 million owing to News Limited for amounts outstanding in respect of the Group's acquisition of CareerOne;
(b) a debt in the vicinity of $6.435 million owing to CareerOne in respect of a former service agreement involving Careers Australia Group, CareerOne and Acquire Learning & Careers; and
(c) a debt of $4.6 million owing to the Commonwealth in respect of the penalties and costs orders imposed in the recent Federal Court of Australia judgment of Murphy J.
12 A debt of $48,197,525.64 is noted in the records of Acquire Learning & Careers as being owed to Acquire in respect of intercompany transactions. Mr Wight has not yet been able to establish the source of those funds or what became of them after they were provided, and has not been able to form a view about the commerciality of the transactions.
13 The main collective assets of the Group are as follows:
(b) the 100 per cent shareholding in Compare Courses Pty Ltd (noting that this entity is a 95 per cent shareholder in People For Property Pty Ltd);
(c) the 100 per cent shareholding in Recruit Easy Pty Ltd;
(d) debtors with a book value of $3,794,218.56;
(e) amounts owing pursuant to a loan agreement known as the G1X loan being $10,853,078.62;
(f) amounts owing pursuant to various loans to shareholders being $14,540,287.04;
(h) intellectual property such as trademarks, domain names and educational content.
14 As at the date of the appointment of the administrators, the Group employed around 41 employees.
(a) 35 employees were made redundant upon the appointment of the administrators (given that the Group had ceased to trade); and
(b) six finance staff were initially retained upon the request of CareerOne, who agreed to meet the ongoing employment costs. Four of these employees were not required from 29 May 2017, which has resulted in four further redundancies.
16 As at 1 June 2017, two employees have been retained by the administrators to assist with their ongoing investigations.
17 Pursuant to s 439A of the Act, the administrators are required to investigate the companies' property, business, affairs and financial circumstances. In addition, the administrators are also required to prepare and provide a report to creditors of each of the companies.
18 The administrators' strategy to date has been to take control of the assets of the companies, commence an expressions of interest campaign in respect of the assets and businesses of the Group and commence investigations into the affairs of the companies.
19 The tasks undertaken by the administrators to date include the following:
(a) Taking control of the Group's business and assets.
(b) Notifying key stakeholders of the administrators' appointments including all known creditors, employees, landlords and utility providers.
(c) Notifying entities such as the Australian Taxation Office and the State Revenue Office of the administrators' appointment and ensuring the administrators are registered for GST, PAYG and payroll tax purposes.
(d) Liaising and meeting with management for each of the companies, together with their advisors, to understand the companies' businesses, key assets, operations and financial position.
(e) Commencing communications and negotiations with landlords, sub-lessors and sub-tenants in respect of the three leased premises.
(f) Negotiating and entering into a funding agreement with CareerOne.
(g) Issuing demands on shareholder loans made by Acquire Learning & Careers and G1X in respect of outstanding loans.
(i) Contacting each secured party identified as having a security interest registered against any of the companies on the Personal Property Securities Register.
(j) Reviewing numerous proofs of debt and proxies submitted by creditors for the purposes of the first meetings of creditors of the companies.
(k) Preparing the first circular to all known creditors of the companies and convening the first meeting of the companies' creditors.
(l) Establishing new bank accounts for the administrations.
(n) Attending to statutory notifications with ASIC.
(o) Advertising for expressions of interest for parties looking to either recapitalise the Group via a Deed of Company Arrangement ('DOCA') proposal or purchase the Group's assets.
(p) Liaising with 21 different interested parties.
(q) Preparing a data room to allow parties to conduct due diligence.
(r) Receiving a draft DOCA proposal and holding discussions with the DOCA proponents.
(s) Receiving and considering various offers for the purchase of specific assets.
(t) The administrators are required to consider a number of key issues in order to determine the likely outcomes under the DOCA and liquidation scenarios. On 30 May 2017, the administrators received a draft proposal for a DOCA which is not in a form currently suitable for presentation to creditors. The level of contribution is likely to be subject of further negotiation. An assessment of the proposal needs to be made against potential recoveries and the administrators will be in a more informed position to undertake such negotiations after their investigations have been completed.
(u) Since the date of the appointment of the administrators, the administrators have commenced investigations into the companies' affairs. Much of the investigations remain incomplete, but they include:
(i) Reviewing potential unfair preference payments.
(ii) Reviewing potential allegations of insolvent trading.
(iii) Reviewing shareholder loans and issuing demands for payment.
(iv) Reviewing the acquisition and disposal of various assets and businesses of the Group.
(v) Reviewing the Commonwealth Government investigation of the Group and the action taken by the ACCC and the findings of the Federal Court of Australia.
(vi) Reviewing of loans advanced to parties including G1X.
(vii) Reviewing and quantifying employee entitlements.
(ix) Reviewing potential breaches of directors' duties.
20 Mr Wight deposes that in order to be able to provide an opinion under s 439A(4) of the Act about the best outcome for creditors, the administrators still need to complete a number of tasks including:
(a) assessing the recoverability of the shareholder loans and the G1X loan which are of the order of $14m and $10m respectively;
(b) assessing the acquisition and disposal of various assets and businesses and movements of intercompany loans between entities within the Group;
(c) assessing the Commonwealth Government audit, ACCC investigation and Federal Court of Australia findings to determine impact on the Group and whether any breaches of directors' duties are evident and capable of successful prosecution;
(d) assessing the value of the key assets within the Group, including the shares held in CareerOne and Compare Courses Pty Ltd;
(e) enquiring into and investigating the events leading to the companies' failures;
(f) quantifying the potential preference payments identified; and
(g) regularly assessing the ongoing realisation strategy for the Group to ensure the administrators deliver the best outcome for creditors.
21 The administrators' longer term plan for the Group during the period of any extension of the convening period includes:
(a) completing the above investigation process including, in particular, with respect to the intercompany loans and considering whether there are any potential proceedings that can be brought against the directors;
(i) whether the draft DOCA is in the best interests of creditors;
(ii) whether the draft DOCA can be negotiated or otherwise improved;
(iii) whether any other parties will submit DOCA proposals;
(iv) which of the companies should be included in the DOCA proposal;
(v) whether the assets of the Group can be split and sold separately;
(vi) whether offers for certain assets should be completed;
(vii) whether there is any prospect of selling the business of those subsidiaries who are not in administration as a going concern;
(viii) which assets of the Group are excluded from the DOCA; and
(ix) whether placing the Group into liquidation is in the best interests of creditors.
Legal principles in an application to extend the convening period under s 439A(6)
22 Sections 439A and 447A appear in Part 5.3A of the Act.
23 Section 439A(1) requires the administrator of a company to convene the second meeting of the company's creditors within a convening period as fixed by subs (5) or extended under subs(6). Sub-section (3) provides that in the ordinary course the convening period ends 25 business days after the date that the administration began. Sub-section (6) allows the Court to extend the convening period.
24 Section 439A(2) requires the second meeting of creditors to be held within a period beginning five days before and ending five days after the end of the convening period.
25 Section 447A(1) of the Act states that '[t]he Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.'
26 In Re Diamond Press Australia Pty Ltd,[3] Barrett J stated:
The function of the Court on an application such as this is, as I see it, to strike an appropriate balance between, on the one hand, the expectation that administration will be relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders.
27 In Silvia, in the matter of FEA Plantations Ltd,[4] DoddsStreeton J stated:
Relevant authorities recognise that strict compliance with the tight timeframes for convening the second meeting (statutorily imposed to avoid the prolongation of the voluntary administration procedure and its concomitant moratorium and impact on rights) may not be feasible in large and complex administrations, if the administrators are to produce informed recommendations based on adequate investigations, and a sufficiently comprehensive and detailed report capable of providing meaningful assistance to the creditors in deciding the fate of the company.
28 In Algeri; Re Colorado Group Ltd,[5] Judd J stated:
Where the relevant business group is large and complex, or there is a prospect of successful realisation of assets through negotiations with third parties, as in the present case, the administration process is often given more time. There is no place for a predisposition against granting an extension.
29 In Parbery v Newsat Ltd,[6] Beach J stated:
The power to extend the time for convening the second meeting of creditors should be not exercised lightly or as of course. But this is not to suggest that juridical parsimony is paramount. Rather, Pt 5.3A should be given a commercial construction and application which reflects the reality of the setting in which both the company under administration and the administrator find themselves. The court must balance the expectation that administration will be a relatively speedy and summary matter against the consideration that undue speed should not be allowed to prejudice constructive commercial actions directed to maximising the return for creditors and potential return to shareholders. The lens to be used to assess that balance should not be so narrow that it focuses merely on some scholastic analysis of the text applied from the usually pessimistic perspective of an insolvency practitioner. After all, a potential outcome of Pt 5.3A may be a restructuring or a trade out which enables the company under administration and its activities to continue to the benefit of creditors and all stake-holders. The court must be commercially astute to facilitating such a potentially positive outcome where it is feasible. The first step in that process is usually the consideration of an application of the present type.
30 In the circumstances of this case, pursuant to s 439A(5) of the Act, the administrators are required to convene the second meeting of creditors for each of the companies by no later than 9 June 2017 and hold those meetings by 19 June 2017.
31 Section 439A(4)(b) of the Act requires the administrators to prepare and provide a report and statements and to express an opinion about whether it would be in the creditors' interests for:
(a) the administration of some or all of the companies to end and control to be returned to the directors; or
(b) some or all of the companies to execute a DOCA; or
(c) some or all of the companies to be wound up.
32 In Parbery v Newsat Ltd,[7] Beach J stated that the factors justifying an extension of the convening period include:
(a) whether there is a lack of any or timely access to financial or other business records;
(b) the level of co-operation of the company's officers or employees in providing useful and timely information to the administrator to facilitate his investigations;
(c) the size and scope of the business of the company or the group (as the case may be);
(d) whether there are substantial international activities;
(e) whether there are a large number of employees with complex statutory and other entitlements relating to rights of redundancy payments, annual leave, long service leave and the like;
(f) whether one is dealing with a complex group structure including significant inter-company loans;
(g) whether there have been complex transactions entered into by the company or the group;
(h) the time needed to effect an orderly process for the disposal of assets in a manner sufficient to maximise the return to creditors;
(i) the time needed for a thorough assessment of a proposal for a deed of company arrangement to enable the company to trade out or to restructure its affairs;
(j) whether any extension would maximise the chances of the sale of the relevant business as a going concern;
(k) the number in quantity, value and type (secured and unsecured) of the creditors and the level of complexity in any securitisation or sub-ordination arrangements;
(l) if receivers have been or may be appointed, any additional complexity involved in the timing and relationship of such receivers' activities as it affects the administration and the options available to the company under administration;
(m) if a group is involved, the investigation of the desirability or appropriateness of 'pooling' assets and creditors' claims;
(n) if a group is involved, the investigation of the desirability or appropriateness of one or more deeds of company arrangement;
(o) whether there are any unusual substantial transactions that warrant further investigation in order for the administrator to properly advise creditors concerning potential recovery or other action; and
(p) more generally, whether additional time is likely to enhance the return for creditors.
33 Similar factors were identified by Austin J in Re Riviera Group Pty Ltd,[8] where his Honour stated:
The cases show that where a substantial issue in any of these categories is established (and a fortiori where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator's estimate of time has a reasonable basis.
The Administrators' reasons for seeking an extension of the convening period
34 As at the date of swearing his affidavit, Mr Wight was of the opinion that the administrators will not be able to purposely report to creditors and to form the opinions required under s 439A(4)(b) of the Act by the date of the second meetings of creditors, for the following reasons:
(a) Given the size and complexity of the Group, the administrators have not yet been able to complete their preliminary investigations into the affairs and activities of the companies particularly what recoveries could be available if the Companies go into liquidation.
(b) The administrators have not yet received Reports as to the companies' Affairs from the companies' directors.
(c) There are a number of complexities associated with the administration of the companies which are relevant to the administrators' opinions under s 439A and which require further time to investigate. These include:
(i) The Group was previously a very profitable one which generated significant revenue. Given the limited cash in the bank accounts at the date of appointment, further investigations into the location of the companies' distributed profits needs to be undertaken. To date, the administrators have been unable to determine fully the whereabouts of distributed profits and further investigations need to be undertaken about this.
(ii) There have been numerous acquisitions and disposals of business and entities by the Group since its inception. The Group's former and current structure is complicated. The administrators need additional time to assess the circumstances surrounding these transactions.
(iii) Given the interrelationships between the companies, the transfers of assets and intercompany loans involved, it will take some time before the administrators will be able to determine whether any of these transactions may provide avenues for recovery for creditors.
(iv) The ACCC judgment was only delivered several days ago. Based on a preliminary review, including with respect to information related to the issue but considered prior to the judgment, the findings made and facts canvassed by the judgment might give rise to potential claims against the directors of the companies.
(v) The administrators have identified shareholder loans in the sum of approximately $14.5 million which were paid out by Acquire Learning & Careers and Acquire during the course of the 2015 financial year. The loans were made under complex structures and the ultimate beneficiaries are not necessarily clear. Despite demands being issued and preliminary investigations having been made, further investigations will need to be undertaken to enable the administrators to determine the recoverability of the shareholder loans.
(vi) Given the unique nature of the assets of the Group, including, in particular, the shares in CareerOne and the online educational content, there is only a limited market for the assets and therefore creditors would benefit from a longer expressions of interest campaign in this respect.
(vii) There are numerous entities not currently subject to external administration owned by, or associated with, the Group that could be realised for value but the administrators are yet to determine the market value of these assets in circumstances where the market for those assets is small.
(viii) The current DOCA proposal is a draft proposal and the administrators need time to negotiate and work with the DOCA proponents to ensure that, ultimately, best possible proposal is forthcoming for creditors.
35 Mr Wight states in his affidavit that the administrators recognise that if the convening period is extended, the rights of certain parties may be affected. However, the administrators consider that the prejudice to these stakeholders is likely to be minimal, or can be minimised for the following reasons.
36 There are no longer any secured creditors of the companies.
37 Mr Wight has made contact with the landlord of the Hawthorn premises, Bupa Health Services Pty Ltd ('Bupa'). Bupa has advised that it does not have any specific objection to the application.
38 As of the date of the application, Mr Wight had not been able to make contact with the landlord of the Hardware Lane premises.
39 As mentioned earlier, the companies are vacating the Varsity Lakes premises.
40 The administrators do not believe that the lessors are likely to be significantly prejudiced by the extension because the administrators are personally liable for any rent payable by the companies under the leases during the administration period and whilst the companies remain in possession.
41 The administrators are not trading on any part of the business.
42 Members of the administrators' staff have made contact with Mr Brian O'Dwyer (an employee) who purportedly heads up the 'working party' representing the broader employee group. It is not clear what agency Mr O'Dwyer has to represent employees Mr O'Dwyer has informed the administrators that he was very receptive to the present application, understood the need for it, and advised that he has 'total faith' in the administrators and does not have any concerns.
43 The administrators intend to attempt to minimise the delays that may be caused to employees who have been made redundant by:
(a) requesting that the relevant minister make a declaration pursuant to s 49 of the Fair Entitlements Guarantee Act 2012 (Cth). This provision enables the minister in the period of the administration, if they think it is likely that at the second meeting of creditors the companies will go into liquidation, to authorise the release of payments to employees under that Act; and
(b) not unnecessarily delay the second meeting of creditors of a particular company which has employees if it becomes apparent that a suitable DOCA will not be received.
44 The administrators have made efforts to contact those creditors they deem to be most impacted by the potential extension.
45 The DOCA proponents have told Mr Wight that they support the application for an extension of the convening period. The administrators contend that given the Group is no longer trading, the creditors of the companies, other than having to await the finalisation of the administrations, suffer no adverse impact.
46 The ACCC has been informed of this application and has advised that it does not oppose the application.
47 A question was asked at the first meeting of creditors regarding an extension of the convening period and Mr Wight responded that he was unsure at that particular time whether an extension would be required.
48 Mr Wight considers that he is not currently in a position to:
(a) prepare a report to creditors which adequately informs them about the options for the future of the companies; and
(b) hold a meeting of creditors to decide on the future of the companies.
49 The administrators believe that the extension is in the best interests of creditors.
50 Any report completed by Mr Wight within the current convening period would be inadequate to fully inform the creditors as to the options for the future of the companies. Additional parties may also be interested in proposing a DOCA for the companies, however they have expressed a reluctance to do so without having a full picture of the asset position of the companies.
51 If the convening period is not extended and the second meeting of creditors is held, the administrators would recommend that the meeting be adjourned. This would mean there were effectively two meetings (rather than one), with the consequence that substantial additional expenditure would be incurred. Based on his past experience, Mr Wight estimates that the costs involved in convening and holding a meeting, only to have it adjourned, would be up to $20,000. Furthermore, the maximum available time that the second creditors meeting can be adjourned by creditors is 45 business days, which is unlikely to be sufficient time for the administrators to conclude all of the required tasks.
52 In all the circumstances, the administrators believe that the extension to the convening period, the subject of this application, is in the best interests of all creditors.
53 I consider that there are substantial reasons why on an application of the relevant legal principles to the circumstances of these administrations that there should be extensions of the time for convening the second meetings of creditors of the companies in administration. The most prominent reasons include the fact that the administrators consider that they are currently unable to prepare and circulate a meaningful report to creditors as they are required to do under s 439A(4) of the Act. The administrations are large and complex and the administrators have not been able within the time period provided for in the Act to complete their preliminary investigations into the affairs and activities of the companies. In particular, what recoveries would be available if the companies go into liquidation.
54 As the evidence filed by the administrators in the application reveals, the companies carried on a very substantial trading concern. During the period that they operated, there have apparently been a number of transactions involving acquisitions and disposal of assets which warrant close investigation by the administrators. This will involve considerable time and work. The administrators will also have to investigate the recoverability of substantial shareholder loans. The assets which are available for sale and for the satisfaction of creditors' claims have a limited market and the administrators indicate that the creditors would benefit from a longer period in the expressions of interest campaign to identity potential purchasers.
55 Finally, the current DOCA proposal which has been tabled is a draft only. The administrators indicate that they need further time to negotiate with the proponents of the DOCA to ensure that the best possible proposal is forthcoming for creditors.
56 As against this, it appears that those parties who might be adversely affected by the extension of the moratorium period which attends the making of orders for the extension of the convening period will not be unduly prejudiced. As the authorities indicate, a balancing exercise is required to be conducted between the expectation that administrations under this part of the Act will be swiftly concluded against the interests in obtaining a maximum return from the creditors of the companies under administration. I consider that on an application of these principles in this instance that an extension of the convening period until 19 September 2017 in respect of each of the administrations is warranted.
57 For the sake of completeness I recite the orders that I made on 1 June 2017.
(a) posting a copy to each creditor known to the plaintiffs at the last known address for that creditor; and
(b) publishing a copy on the plaintiffs' website www.corcordis.com.au
within three business days following the date of this order.
[1] In Re Daisytek Australia Pty Ltd (2003) 4 ACSR 446, Lindgren J held that orders may be made under s 447A with the effect that the second meeting of creditors could be held at any time during an extended convening period or the period of five business days thereafter, notwithstanding the effect of s 439A(2). In Re LED Builders Pty Ltd & Ors [2008] NSWSC 633, [2] Austin J observed that 'Daisytek' orders are "sensible and now almost routine".
[2] The reasons of Murphy J are reported as [2017] FCA 602.
[3] [2001] NSWSC 313, [10].
[4] [2010] FCA 468, [19].
[5] [2011] VSC 260, [24].
[6] [2015] FCA 435, [59].
[7] [2015] FCA 435, [63].
[8] (2009) 72 ACSR 32, [13].
Convening period for the second meetings of creditors extended to 19 September 2017 for each company; s 439A(1) ordered to operate as though meetings may be held at any time during the extended convening period and the following five business days (a 'Daisytek' order); liberty to apply; costs to be costs in the administrations; notice requirements specified (orders 1–6).