In the matter of Canberra RSL Memorial & Citizens Club Limited (Administrators appointed) and Senatore and Hundy [2008] ACTSC 43 (22 April 2008)

Last Updated: 28 July 2008

IN THE MATTER OF CANBERRA RSL MEMORIAL & CITIZENS CLUB LIMITED (ADMINISTRATORS APPOINTED) AND EZIO MARCO SENATORE AND STEPHEN JOHN HUNDY

[2008] ACTSC 43 (22 April 2008)

CORPORATIONS - Voluntary administration - extension of convening period - form of order for extension - Corporations Act 2001 (Cth) CS 439A, 447A

Corporations Act 2001 (Cth), ss 439A, 439C, 447A

Gaming Machine Act 2004 (ACT)

Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253

Re Pan Pharmaceuticals Limited [2003] FCA 598

Re South Burnett Wines Ltd (Administrator Appointed) (2004) 52 ACSR

Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611

Re Daisytek Australia Pty Ltd (Administrator Appointed) & Anor (Bowen and Hall as joint administrators) [2003] FCA 575; (2003) 45 ACSR 446

Re TPE Kintech Pty Ltd (Administrator Appointed); ex parte Carter (as administrator) and Anor [2004] NSWSC 250; (2004) 49 ACSR 106

Fincorp Group Holdings Pty Ltd and Others [2007] NSWSC 363; (2007) 62 ACSR 192

EX TEMPORE JUDGMENT

No. SC 323 of 2008

Judge: Refshauge J

Supreme Court of the ACT

Date: 22 April 2008

IN THE SUPREME COURT OF THE )

) No. SC 323 of 2008

AUSTRALIAN CAPITAL TERRITORY )

CANBERRA RSL MEMORIAL AND CITIZENS CLUB LIMITED (ADMINISTRATORS APPOINTED)

First Plaintiff

EZIO MARCO SENATORE

Second Plaintiff

STEPHEN JOHN HUNDY

Third Plaintiff

ORDER

Judge: Refshauge J

Date: 22 April 2008

Place: Canberra

THE COURT ORDERS THAT:

1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) the convening period for the second meeting of creditors of the first plaintiff, Canberra RSL Memorial & Citizens Club Limited (Administrators appointed) ACN 008392103 be extended to 31 July 2008.

2. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth), the meeting of creditors required by s 439A of that Act may be held at any time during or within five business days after the end of the convening period as extended by order 1, notwithstanding the provisions of s 439A(2) of the Act.

3. That the costs of these proceedings be costs in the voluntary administration of the company.

1. The second and the third plaintiffs were appointed administrators of the first plaintiff on 26 March 2008 under the provisions of Pt 5.3A of the Corporations Act 2001 (Cth) (the Corporations Act). The first plaintiff conducted a social club on premises which are partly owned and partly leased by the first plaintiff. I am not informed about the size and nature of the business, nor of the number of employees of the first plaintiff, but was informed by Mr J Hill, who appeared for the plaintiffs, that the administrators had restructured the operation of the company, which he confirmed was still trading; though that could perhaps be inferred from the affidavit of the second plaintiff, it was not stated expressly in it.

2. The administrators convened the first meeting of creditors. I am not told on which date that was held, but assume that it complied with s 436E of the Corporations Act. I assume, although again it is not stated, that the administrators were not removed at the meeting. I am not informed, however, whether a committee of creditors was appointed. Under Pt 5.3A of the Corporations Act, the administrators are required to convene a second meeting of creditors within a relatively short period of time set out in s 439A(5), "the convening period", and it must be held within five days before or after the end of the convening period, s 439A(2).

3. The administrators, who are insolvency practitioners of substantial experience, have requested an extension of time under s 439A(6) of the Corporations Act within which this meeting is to be held. When convening this meeting, the administrators must circulate a report and statement, which addresses the following issues, and I quote from s 439A(4):

(a) A report by the administrator about the company's business, property, affairs and financial circumstances; and

(b) a statement setting out the administrator's opinion about each of the following matters:

(i) whether it would be in the creditors' interests for the company to execute a deed of company arrangement;

(ii) whether it would be in the creditors' interests for the administration to end;

(iii) whether it would be in the creditors' interests for the company to be wound up;

and also setting out

(iv) his or her reasons for those opinions; and

(v) such other information known to the administrator as will enable the creditors to make an informed decision about each of the matters covered by subparagraph (i), (ii) or (iii); and

(c) if a deed of company arrangement is proposed - a statement setting out details of the proposed deed.

4. Section 439C sets out what the creditors may decide at the meeting and that is substantially the matters to which the report of the administrators is addressed, namely whether:

(a) that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or

(b) that the administration should end; or

(c) that the company be wound up.

5. It can be seen that the creditors have to make significant decisions about the future of the company, being the first plaintiff, and that these will affect them substantially as the decisions that they take may determine what, if any, return they will recover on their debts. They will, therefore, be very dependant upon the administrators and their report, which must, of course, be based upon the investigations they carry out into the affairs of the company and the options available for continuation of trading or the realisation of assets.

6. The administrators note in pars 18 and 19 of their affidavit and I quote:

18. It will take time to investigate the financial position of the Company properly. For example, we have recently restructured the staffing arrangements within the Business in an attempt to improve profitability. It will take time before we are able to form an opinion regarding whether this restructure has had the desired effect.

19. We are also yet to receive a valuation in respect of the Company's Premises. We have engaged Colliers International to provide a valuation and expect to receive it early during the week commencing 28 April 2008. Without this information, it is difficult to form a view of the Company's true financial position.

7. The administrators also advise their present opinion:

20. It is very difficult for us, at the present time, to form an opinion on what will be in the creditors' interests, and to report meaningfully or in any depth on that opinion and the financial position of the Company when we are unsure of the:

(a) asset value of the Company; and

(b) effectiveness of the recent staffing restructure.

8. As I noted above, the administrators are experienced insolvency practitioners and I should and am entitled to rely upon their opinion. They also advise:

22. If we decide that it is in the best interests of the creditors to sell the Business during the administration, such a sale will in all likelihood involve the transfer of the Company's gaming machine licence. An application to transfer a gaming machine licence under the Gaming Machine Act 2004 (ACT) requires both the transferee and transferors to conduct ballots of their respective members in which those respective members are required to vote for or against the proposed transfer. In my experience, this process takes between eight and ten weeks.

9. The administrators do note that, from the investigations that have been conducted to date, it would appear that the value of the company's assets may exceed the value of its liabilities. This is clear from the relatively small list of major creditors who are owed a total of a little less than $400,000 in all, bearing in mind that the company, the first plaintiff, conducts business from premises which it partly owns in the centre of Canberra City, which must be of substantial value. I am not, however, told how many other creditors there are or what they are owed, either in part or in total.

10. The real question then before me is whether a case has been made out in support of the application that a further extension of time is required in order to have a report prepared and circulated to creditors before the second meeting and which can reasonably be expected to formulate the information required and the opinions and recommendations required as to the future of the company. Austin J put this matter in Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 at par 5:

The Court's task is to balance the need for the administration of a company to be carried out as efficiently and expeditiously as practicable so as to minimise the effect on those persons who are subject to the moratorium imposed by Pt 5.3A, against the need to give the administrators time to present meaningful choices to the creditors at their meeting (see in Re Pan Pharmaceuticals Limited [2003] FCA 598 per Lindgren J).

11. I note that all the major creditors have been advised of and supported the application, a powerful factor in support of the application. See Re South Burnett Wines Ltd (Administrator Appointed) (2004) 52 ACSR 298. There is also a degree of complexity about the issues to be considered by the administrators and that also is a significant and powerful consideration in favour of the application. See Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611. The administrators have, of course, considered the relative merits of winding up versus continuation of the administration and have expressed the view that "... currently liquidation of the Company would not be preferable to continuing the current voluntary administration of the Company ..." and they set out their reasons for that opinion.

12. In my view, the case has been made out for the extension of time proposed and I am prepared to make the order in par 1 of the application. Paragraph 2 of the application, however, seeks an order under s 447A(1) of the Corporations Act that the administrators be in a position to hold the meeting at a time other than the limited 10 day period, five days before and five days after the end of the convening period, which by virtue of the first order I will make, I will extend to 31 July 2008. There has been some consideration of whether such an order can be made and whether it is appropriate.

13. In Re Daisytek Australia Pty Ltd (Administrator Appointed) & Anor (Bowen and Hall as joint administrators) [2003] FCA 575; (2003) 45 ACSR 446 at 448-9 Lindgren J carefully considered the question of whether such an order was authorised and whether it was possible to make such an order. He concluded, for reasons with which I respectfully agree, that it is appropriate that the administrators be enabled to convene the meeting to be held on a date prior to the expiry of the extended convening period if this is thought desirable rather than being compelled to await the arrival, following that expiry, of the period five business days referred to in s 439A(2).

14. That decision has been followed by Austin J of the Supreme Court of New South Wales in Re TPE Kintech Pty Ltd (Administrator Appointed); ex parte Carter (as administrator) and Anor [2004] NSWSC 250; (2004) 49 ACSR 106 and also Barrett J in Fincorp Group Holdings Pty Ltd and Others [2007] NSWSC 363; (2007) 62 ACSR 192. With respect, I note that both their Honours are very experienced judges in the Corporations area. Accordingly, I have formed the view that I have power and it is appropriate in the circumstances to make such an order.

15. It is clearly appropriate for the matters that need to be considered by the administrators and reported on and the matters that the creditors will have to consider to be determined, within reason, as soon as possible. That is, indeed, consistent with

the terms of Pt 5.3A of the Corporations Act requiring as expeditious as possible, a conduct of the administration and a determination of its future.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

Associate:

Date: 13 May 2008

Counsel for the plaintiffs: Mr J Hill

Solicitor for the plaintiffs: Dibbs Abbott Stillman

Date of hearing: 22 April 2008

Date of judgment: 22 April 2008