White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) [2018] FCA 21

RANGIAH J: 1 The plaintiffs were appointed as administrators (the Administrators) of Mossgreen Pty Ltd (the Company) on 21 December 2017. 2 The Administrators seek an order, pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), that the convening period for a meeting of the Company's creditors be extended for three months, and ancillary orders. Unless extended, the convening period will, pursuant to s 439A(5) of the Act, expire on 31 January 2018, which would require the Administrators to hold the meeting no later than 7 February 2018. 3 One of the Administrators, James White, deposes as follows. The Company operated an auction house and gallery, as well as tearooms for hosting functions, at locations in Melbourne and Sydney. A significant category of creditors of the Company consists of people who provided goods to the Company on consignment for sale by auction. In some cases, goods were sold, but the proceeds have not yet been received, or not yet paid, by the Company to the consignors. Resolution of the consignors' claims will affect the outcome of the administration. In particular, determining whether the cash in bank and funds received through the collection of receivables, which, according to the books and records of the Company may be as much as $2.8 million, is available to the general body of creditors or held on trust for particular consignors, will be a fundamental issue in the administration. The Administrators are currently investigating and taking advice in respect of these issues. 4 The position is complicated by the fact that the Company's record management and archive systems were not integrated or properly maintained. Records are in many cases incomplete or no longer current. The Company holds in excess of 12,000 items, provided by in excess of 1000 consignors. The Administrators are conducting a full stocktake of all consigned goods in the possession of the Company in order to properly identify them and determine their ownership. 5 The Administrators have called for expressions of interest by 29 January 2018 to purchase the Company's business, or part of the business. The Administrators are in discussions with a number of potentially interested parties. 6 Mr White deposes that he is not presently able to provide an accurate statement to the creditors setting out the Company's business and property affairs and financial circumstances for the purpose of s 439A(1) of the Act. He believes that if the convening period is extended for three months, no creditor would suffer any material prejudice, and that it is in the interests of the creditors to extend the convening period. 7 The creditors were notified that an application for extension of the convening period might be brought, and none of them indicated any opposition to such an application. A committee of inspection, comprising three creditors, has been formed, and the committee has been notified of the filing of this application. Members of the committee have not objected to the application. Further, two other major creditors have been notified of the application, and they have not expressed any objection to the application. 8 Section 439A of the Act provides, relevantly: 439A Administrator to convene meeting and inform creditors (1) The administrator of a company under administration must convene a meeting of the company's creditors within the convening period as fixed by subsection (5) or extended under subsection (6). … (2) The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period. (5) The convening period is: (a) if the day after the administration begins is in December, or is less than 25 business days before Good Friday - the period of 25 business days beginning on: (i) that day; or (ii) if that day is not a business day - the next business day; or … 9 By s 447A(1) of the Act, the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. 10 The application has been brought within 25 business days of 21 December 2017, when the administration began. 11 It is well established that the Court is to have regard to and balance the interests of the creditors in a reasonably speedy administration with the need to ensure that the speed with which it is dealt does not prejudice sensible and constructive actions directed towards maximising the return for creditors and shareholders: Diamond Press Australia Pty Limited [2001] NSWSC 313 (Barrett J) at [10]; Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 (Lindgren J) at [18]; Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) [2010] FCA 30 at [15]-[16]; Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683 (Jacobson J) at [22]; In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777 (Black J) at [12]; Park (Administrator), in the matter of Surfstitch Group Limited [2017] FCA 1221 (Gleeson J) at [29]-[30]. 12 In Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (ACN 102 298 279) (2009) 72 ACSR 352; [2009] NSWSC 585, Austin J identified at [13] various factors that had led to extensions being granted, including: the size and scope of the business; lack of access to corporate financial records; the time needed to execute an orderly process of disposal of assets; whether the extension would allow sale of the business as a going concern; and, more generally, that additional time is likely to enhance the return for unsecured creditors. His Honour said at [14]: 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. 13 It is also relevant to take into account that no objection to an extension of the convening period has been raised by creditors when notice of a proposed extension was given: see In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 316 (Hely J) at [2]. 14 The proposed extension will afford to the Administrators the time they need to complete investigations into the extent, value and saleability of the Company's assets, and to complete any sales process in an orderly way. It is in the best interests of the creditors for this to occur. In these circumstances, there are sound reasons to grant an extension of the convening period. An order will be made granting an extension for three months. 15 An order should be made, pursuant to s 447A of the Act, that Pt 5.3A of the Act is to operate in relation to the Company as if the meeting of creditors required by s 439A of the Act may be convened and held at any time during the period as extended and the period of five business days thereafter, notwithstanding the provisions of s 439A(2) of the Act: see Re Daisytek Australia Pty Ltd (admin apptd) (2003) 45 ACSR 446; [2003] FCA 575 (Lindgren J) at [10]-[18]. 16 A further order should be made, pursuant to s 447A of the Act, which will allow the Administrators to give notice by email to any creditors for whom they hold email addresses: see Carter, in the matter of AMT Group Pty Ltd (Administrators Appointed) [2017] FCA 303 (Yates J) at [18]-[19]; In the matter of Creative Memories Australia Pty Limited (administrators appointed) [2013] NSWSC 732 (Black J) at [8]). 17 An order should be made that any person who can demonstrate a sufficient interest, including any creditor of the Company or the Australian Securities and Investments Commission, may apply to vary these orders on the giving of reasonable notice to the plaintiffs. I will make orders requiring the plaintiffs to provide copies of these orders and reasons to the creditors of the company. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.