Re Collective Olive Groves Ltd v Reidy

REASONS FOR JUDGMENT 1 This is an application under s 447A(1) of the Corporations Act 2001 (Cth) (the Act), which provides for the general power of the court to make orders in these terms: The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. 2 Section 447A(4)(c) relevantly provides that: An order may be made on the application of: … (c) in the case of a company under administration - the administrator of the company; … 3 This is an application by Murray Roderick Godfrey in his capacity as administrator of Drummoyne Sports Club Limited (the company). Mr Godfrey has provided an affidavit in support of the application. The affidavit discloses, insofar as relevant, that he was appointed administrator on 26 July 2012 of the company, which is a registered club under the Registered Clubs Act 1976 (NSW). 4 The first meeting of creditors pursuant to s 436A of the Act was convened on 7 August 2012. In accordance with the length of convening period requirements in s 439A(5) of the Act, Mr Godfrey convened the second meeting of creditors on 29 August 2012. That meeting resolved, amongst other things, to adjourn the second meeting of creditors for a period of not more than 45 business days. The reference to 45 business days is intended to relate to the provisions of s 439B of the Corporations Act, in particular s 439B(2) which provides that: A meeting convened under section 439A may be adjourned from time to time, but the period of the adjournment, or the total of the periods of adjournment, must not exceed 45 business days. 5 The provision in s 439B(2) is supported by reg 5.6.18(2) of the Corporations Regulations 2001 (Cth), which also states as follows: A meeting convened under section 439A of the Act must not be adjourned to a day that is more than 45 business days after the first day on which the meeting was held. 6 The relationship between ss 439A and 439B (including s 439B(2)), the associated regulation and s 447A has been considered in a number of decisions, most recently in the decision of Re Collective Olive Groves Ltd v Reidy [2009] FCA 177 (Re Olive Groves). At [17]-[18] of that decision Jacobson J said: 17. It seems to me that the proper approach to this application is to permit the creditors to adjourn the date of the second meeting. I refer to [15] of Ex parte Vouris [Ex parte Vouris; Re Marrickville Bowling & Recreation Club Ltd (under administration) [2008] FCA 622] and to the observations of Barrett J in Re Porter and Another as joint administrators of Priceright Construction Pty Limited (2006) 57 ACSR 206, in which his Honour observed that it is now well recognised that the Court has power to extend the convening period under section 447A in a way that section 439A does not allow. 18. This is not an application to extend the convening period but to permit a further adjournment of the date of the second meeting of creditors. It seems to me that the principles which should inform the exercise of the discretion are those which have been referred to in earlier authorities. What I need to do is to strike an appropriate balance between the expectation that the administration would be a relatively speedy and summary matter and the requirement that undue speed not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders. 7 What those observations disclose is that there are at least three decisions, those of Barrett J in Re Porter and Another as joint administrators of Priceright Construction Pty Ltd (2006) 57 ACSR 206; [2006] NSWSC 324 (Re Porter) and Jacobson J in Re Olive Groves as well as the decision of Jacobson J in Ex parte Vouris; Re Marrickville Bowling & Recreation Club Ltd (under administration) [2008] FCA 622 (also referred to at [17] of Re Olive Groves), which make clear that the power of the Court to extend the convening period under s 447A is a power to do so in a way that s 439A does not allow. It follows that the order which the administrator seeks in this case, in effect an order amending the operation of s 439B(2) of the Act insofar as it applies to the company, can be made. The effect of the order sought is that the meeting convened under s 439A may be adjourned for a period which must not extend beyond 27 February 2013, despite the operation of reg 5.6.18(2). 8 As Jacobson J indicated in [18] of Re Olive Groves the exercise of the relevant discretion requires weighing up the appropriate balance between the ordinary expectation that it is usually in the best interests of creditors that there be a relatively speedy decision on the future of a company and the requirement that undue speed not prejudice sensible and constructive actions which are directed towards maximising the return for creditors. This is consistent with the terms of s 439A(7) of the Act, which expressly provides that the Court may only extend the convening period for the meeting if satisfied that it would be in the best interests of the creditors if the convening period were extended. 9 Mr Godfrey's affidavit in support of this application explains the reason why the relatively lengthy extension until not beyond 27 February 2013 is sought in this case. It relates to the fact that the company is described as cash poor but asset rich, in that it owns a property which operates a community sports club which, according to the affidavit, has been the subject of considerable commercial interest, including entries into a put and call option deed and a deed of charge supporting various loan agreements. Those legal arrangements have been complicated by the issue of various notices of default arising largely because of the circumstances of the appointment of the administrator to the company and in addition there is commercial interest in the property from a third party. There are a number of issues which the administrator has to resolve, including legal issues about a range of matters which are not straightforward, before the administrator can decide how best to realise the main asset of the company. Based on the administrator's affidavit it is not possible in the current circumstances for anything useful to be done at the adjourned second meeting of creditors which is proposed to take place at midday today. 10 In those circumstances, the application for the extension of time seems, on the evidence, to give the best opportunity for the best interests of the creditors to be achieved and for the maximising of the return to the creditors and the company from any realisation of the company's assets. Accordingly, I am satisfied I should make orders 1 through to 8 in the short minutes of order handed up in Court today. 11 I note in making those orders that they include in order 5 that leave be granted to any person claiming to be interested, including any creditor, to make such application as that person may see fit to the Court. This reflects the observation of Barrett J in Re Porter at [12], in view of the fact that the application in that case, as in this case, was made ex parte by the administrators, that it is a sensible precaution and desirable and appropriate to include an order generally in the terms of proposed order 5 which the administrator has done in this case. Accordingly, I make orders 1 through to 8. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.