Bernsteen Pty Ltd v Newmore Pty Ltd

[1995] FCA 801

CATCHWORDS

CORPORATIONS - Part 5.3A of Corporations Law - application to extend convening period of company under administration - application made outside twenty one days of commencement of administration - whether s439A(6) allows more than one extension of convening period - function of committee of creditors - requirement of prompt investigation of affairs of the company by the administrator

Corporations Law ss 436E(4), 436F, 439A(5) and (6)

Federal Court Rules O 35 r 7

No. SG 3178 of 1995

IN THE MATTER of BERNSTEEN PTY LTD (ADMINISTRATOR APPOINTED) (ACN 008 178 163) and NEWMORE PTY LTD (ADMINISTRATOR APPOINTED) (ACN 056 650 929)

PETER IVAN MACKS  Applicant

Branson J
Sydney (Video link-up to Adelaide)
29 September 1995

IN THE FEDERAL COURT OF AUSTRALIA )
  )
SOUTH AUSTRALIA DISTRICT REGISTRY )    No. SG 3178 of 1995
  )
GENERAL DIVISION                 )

IN THE MATTER of
  BERNSTEEN PTY LTD
  (ADMINISTRATOR APPOINTED)
  (ACN 008 178 163)

- and -

NEWMORE PTY LTD
  (ADMINISTRATOR APPOINTED)
  (ACN 056 650 929)

PETER IVAN MACKS

Applicant

EX TEMPORE REASONS FOR DECISION

CORAM:    Branson J
PLACE:    Sydney (Video link-up to Adelaide)
DATE:     29 September 1995

This application has been brought on as a matter of urgency.

By notice of motion of today's date, the applicant seeks to vary orders made by me on 15 September 1995 by which I extended to Monday next the convening period provided by s439A(5) of the Corporations Law in respect of two companies in administration pursuant to Part 5.3A of the Corporations Law. In the alternative, the applicant seeks a further extension of time within which the administrator of each of the companies may convene a meeting under s439A of the Corporations Law.

The power of the Court to extend the convening period is found

in s439A(6) of the Corporations Law. That sub-section is in the following terms:-

"The Court may extend the convening period on an application made within the period referred to in paragraph 5(a) or (b), as the case requires."

So far as this case is concerned, it is par(b) that is required.  It refers to:-

"... the period of 21 days beginning on the day when the administration begins."

The orders made on 15 September 1995 were made on an application made within the period of twenty one days beginning on the day when the administrations of the two companies concerned began. The present application is made outside of that time. I have not been referred to any authorities on the interpretation of s439A(6). Unaided by authority, I am not persuaded that s439A(6) should be read as though it includes a reference to any extension of the convening period. If it had been intended that the convening period could be extended on an application made within the convening period, it would have been simple for the drafter to have so provided. He or she has instead referred to the periods prescribed by s439A(5).

Presumably it was concerned about the power of the Court to extend the convening period other than on an application made, in the circumstances of this case, within twenty one days from the commencement of the administration, that motivated the
drafter of the notice of motion to make application in the first instance for orders varying my earlier orders. I do not consider that the provisions of s439A(6) of the Corporations Law can be circumvented in this way. It is not suggested that there has been any accidental slip or omission in the earlier orders or that they fail to reflect the intention of both the Court and the applicant as at 15 September 1995. I do not consider that I have power in the circumstances, whether pursuant to O35 r7 of the Federal Court Rules or otherwise, to vary my orders of 15 September 1995 in the ways sought by the applicant.

The present application not having been made within the period of twenty one days beginning on the day when the respective administrations commenced, I am of the view that the alternative orders sought by the applicant are also beyond the power of the Court.

I consider it appropriate to record that, even if I were of the view that the Court was entitled to make the orders sought by the application, I would have been disinclined, in the exercise of my discretion, to have made them.

Part 5.3A of the Corporations Law is intended to ensure a prompt investigation of the affairs of a company in administration by the administrator to the intent that in appropriate cases a deed of company arrangement may be entered into. If the creditors lack confidence in the administrator appointed by the company they are empowered to remove him or her and appoint somebody else as administrator (s436E(4) of the Corporations Law). Where a committee of creditors is appointed, as it has been in this case, its functions are as specified in s436F of the Corporations Law. That section provides as follows:-

"(1)The functions of a committee of creditors of a company under administration are:

(a)to consult with the administrator about matters relating to the administration; and

(b)to receive and consider reports by the administrator.

(2)A committee cannot give directions to the administrator, except as provided in subsection (3).

(3)As and when a committee reasonably requires, the administrator must report to the committee about matters relating to the administration."

The administrator has sworn an affidavit in which he deposes to having acted on "the directions" of the committee of creditors in applying for the orders previously made by me.  I do not consider that I should read that assertion wholly literally.  However, later in his affidavit the administrator deposes to the committee of creditors having required certain financial information to be provided to the administrator and to the creditors by the directors of the companies in order that it "... could be properly assessed and made the subject of detailed comment" by the administrator in his report to the creditors.  The administrator goes on to depose to the committee of creditors requesting him to obtain additional financial information from the company and to forward the whole of the financial information supplied to him by the companies to a consulting firm, Perks & Associates, to enable an independent review of such information and the provision of a report to creditors by Perks & Associates.  The administrator states in his affidavit that on Thursday 28 September 1995 he was provided by Perks & Associates with draft reports in relation to each of the companies.  He goes on:-

"I now have to examine those reports in order that I might comment on them in the course of expressing my opinion regarding the proposal for a Deed of Company Arrangement in my report to the creditors."

The above course of events would appear from the administrator's affidavit to be the main, although not the only reason, why, as he asserts, he will be unable to complete his report to creditors by 3 October 1995.  Monday, 2 October 1995 is a public holiday.

I do not consider that the course of events outlined above is one appropriate to be followed in respect of a Part 5.3A administration - particularly where to do so may result not only in the statutory convening period being required to be extended but in an extended convening period proving to be inadequate.

Part 5.3A of the Corporations Law requires the administrator to prepare a report about the company's business, property, affairs and financial circumstances. It requires the administrator to state his or her opinion about certain specified matters. The committee of creditors has the function of consulting with the administrator about matters relating to the administration and of receiving and of considering reports of the administrator. Further, the committee of creditors may reasonably require the administrator to report to the committee about matters relating to the administration.

In my view this latter power is one intended to ensure disclosure by the administrator to the committee of creditors of matters relevant to the administration.  It is not a power to control the administrator's investigations with respect to the company, or a power to require the administrator to seek the opinion of third parties on matters respecting which he or she has a duty to form an opinion.

In my view, the history of these administrations as set out in the administrator's affidavit is not a history consistent with the intention reflected in Part 5.3A of the Corporations Law.

The applications made by the notice of motion of today's date will be dismissed.

I certify that this and the preceding     pages are a true copy of the Ex Tempore Reasons for Decision of Justice Branson.

Associate:

Dated:

Counsel for the Applicant            :    Mr R Mansueto
Solicitors for the Applicant         :    Piper Alderman

Counsel for the Secured Creditor,     :    Mr J Marsden
     National Australia Bank Ltd
Solicitors for the Secured Creditor,  :    Finlaysons
     National Australia Bank Ltd

Hearing Date  :    29 September 1995