Farnsworth in his capacity as voluntary administrator, in the matter of Vivo International Corporation Pty Limited (administrator appointed)
[2013] FCA 1386
•12 December 2013
FEDERAL COURT OF AUSTRALIA
Farnsworth in his capacity as voluntary administrator, in the matter of Vivo International Corporation Pty Limited (administrator appointed) [2013] FCA 1386
Citation: Farnsworth in his capacity as voluntary administrator, in the matter of Vivo International Corporation Pty Limited (administrator appointed) [2013] FCA 1386 Parties: ADAM EDWARD PATRICK FARNSWORTH IN HIS CAPACITY AS VOLUNTARY ADMINISTRATOR OF VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171 and VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171 File number: NSD 2507 of 2013 Judge: YATES J Date of judgment: 12 December 2013 Catchwords: CORPORATIONS – administration under Part 5.3A of the Corporations Act 2001 (Cth) – application for extension of convening period Legislation: Corporations Act 2001 (Cth) ss 436A, 436E, 439A, 447A Date of hearing: 12 December 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 19 Counsel for the Plaintiffs: Mr JM White Solicitor for the Plaintiffs: Bridges Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2507 of 2013
IN THE MATTER OF VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
ADAM EDWARD PATRICK FARNSWORTH IN HIS CAPACITY AS VOLUNTARY ADMINISTRATOR OF VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
First PlaintiffVIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
Second Plaintiff
JUDGE:
YATES J
DATE OF ORDER:
12 DECEMBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the period within which the first plaintiff must convene the second meeting of creditors of the second plaintiff pursuant to s 439A of the Act be extended up to and including 7 February 2014.
2.Pursuant to s 447A(1) of the Act, Part 5.3A of the Act have effect in relation to the second plaintiff such that the meeting of creditors required by s 439A of the Act may be held at any time during the period up to, or within five business days after, 7 February 2014 notwithstanding the provisions of s 439A(2) of the Act.
3.The costs of and incidental to this application be costs and expenses in the administration of, and be paid out of the assets of, the second plaintiff.
4.Liberty be granted to the first plaintiff to apply to the Court for any further extension of the convening period referred to in the orders above at any time prior to 7 February 2014.
5.Liberty to apply be granted to any person who can demonstrate sufficient interest to make such application as he, she or it may be advised, to vary or discharge these orders on three business days’ notice being given to the plaintiffs and to the Court.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2507 of 2013
IN THE MATTER OF VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
ADAM EDWARD PATRICK FARNSWORTH IN HIS CAPACITY AS VOLUNTARY ADMINISTRATOR OF VIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
First PlaintiffVIVO INTERNATIONAL CORPORATION PTY LIMITED (ADMINISTRATOR APPOINTED) ACN 087 480 171
Second Plaintiff
JUDGE:
YATES J
DATE:
18 DECEMBER 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This is an application under s 439A(6) of the Corporations Act 2001 (Cth) (the Act) to extend the convening period for the second meeting of creditors of the second plaintiff (Vivo) to 7 February 2014, and for ancillary relief. If not extended, the convening period will end on 20 December 2013. The first plaintiff, Mr Farnsworth, is the current administrator of Vivo.
On 22 November 2013, Adam Shepard was appointed voluntary administrator of Vivo by resolution under s 436A(1) of the Act. On 4 December 2013, Mr Shepard held the first meeting of Vivo’s creditors convened under s 436E of the Act. At that meeting, Vivo’s creditors unanimously resolved to appoint Mr Farnsworth as voluntary administrator in place of Mr Shepard (see s 436E(4) of the Act). Mr Farnsworth and Mr Shepard are partners in the firm of Farnsworth Shepard. The creditors also unanimously authorised Mr Farnsworth, as administrator, to make the present application.
Vivo was incorporated (under a different corporate name) on 7 May 1999. From 11 May 1999 to 27 June 2013, Fabio Grassia was the company’s sole director and secretary. On 27 June 2013, Mr Grassia resigned as a director and David Dai was appointed as the company’s sole director. At the date of Mr Shepard’s appointment as administrator, the sole shareholder of Vivo was a company called Vivo International Pty Limited (Vivo International).
From 7 May 1999 to a date in 2004, Vivo was used by Mr Grassia as the vehicle by which he operated an IT business. Thereafter to about May 2006, Vivo was used by Mr Grassia as the vehicle by which he operated a luxury boat business. This business ceased in May 2006, when Vivo established a business importing audiovisual products which were sold under the names of the manufacturers of those products. In about late 2006, Mr Grassia began to oversee the manufacture of audiovisual products, including televisions, in Asia. From about June 2007, Vivo began to import and supply in Australia a range of electronic products, including televisions, under the name VIVO. In August 2008, the Dick Smith chain of retail stores began selling VIVO branded products. In the 2010/2011 financial year, sales of these products totalled 120,000 units, with a sales value of over $37 million. From 2006 to about late 2011, approximately 260,000 units of VIVO branded products were sold, with a sales value of over $87 million.
On 14 January 2011, TiVo Inc. and TiVo Brands, LLC. (collectively, Tivo) commenced a proceeding in the Court against Vivo and Mr Grassia relating to infringement of the TIVO registered trade mark. Vivo was subsequently restrained from infringing that trade mark. An appeal to the Full Court was unsuccessful.
On 31 December 2012, Vivo entered into a Business Sale Agreement (the sale agreement) with Vivo Australia Pty Limited, now known as Viano Corporation Pty Limited (Viano). Viano was incorporated on 20 November 2012. Mr Grassia has been its sole director since that time. The sole shareholder of Viano is Capital 65 Pty Ltd. The sale agreement was executed by Mr Grassia in his capacity as the sole director of Vivo and the sole director of Viano.
Under the sale agreement, Vivo agreed to sell to Viano its business of importing televisions, rebranding televisions with the VIANO and NUOVO brands, and supplying the rebranded televisions to retailers. The sale included intangible assets and goodwill, as well as plant and stock. Viano agreed to pay Vivo a purchase price of $251,897.80 of which $201,897.80 was attributed to stock and $50,000 was attributed to plant. Viano agreed to pay the purchase price on or before 31 December 2013. Viano paid the purchase price on 22 November 2013.
Mr Grassia’s accountant has now provided Mr Farnsworth with a valuation of Vivo’s identifiable intangible assets and goodwill, which was prepared by Expedite Strategy, apparently in November 2013 (the Expedite valuation). Mr Grassia’s accountant has also provided Mr Farnsworth with a valuation of office furniture and warehouse equipment prepared by O’Maras and dated 4 July 2013 (the O’Maras valuation), and a summary of stock held by Vivo as at 31 December 2012.
The Expedite valuation concludes that the value of Vivo’s goodwill as at 31 December 2012 was nil. It also concludes that the value of Vivo’s intangible assets (comprising the VIVO trade marks and brand name, customer relationships, an informal manufacturing agreement, and employee agreements) was nil.
The O’Maras valuation valued Vivo’s office furniture and warehouse equipment as at 1 July 2013 as within a range of $20,730 to $36,930.
Mr Farnsworth has sought to investigate the sale transaction. On 10 December 2013, he engaged McMahon Worth Valuations to prepare a valuation of the assets the subject of the Expedite valuation. McMahon Worth Valuations has indicated that it will not be in a position to provide a valuation, and comments on the Expedite valuation, before mid-January 2014.
On 11 December 2013, Mr Farnsworth engaged Pickles Valuations to prepare a valuation of the assets the subject of the O’Maras valuation, and the stock sold under the sale agreement. It is expected that this valuation will be provided by 24 December 2013.
Mr Farnsworth has given evidence that, since his appointment, he has undertaken, and continues to undertake, investigations into Vivo’s financial position. He has been provided with a Report as to Affairs dated 2 December 2013, which has been signed by Mr Grassia. It discloses, as at 22 November 2013, that Vivo:
·had assets totalling $248,368.95 including cash at bank of $216,871.95;
·had unsecured creditors totalling $4,668,805.02, which includes a claimed debt of $1,932,271 to a related entity, Vivo International;
·did not have any secured creditors; and
·did not have any claims by employees.
Mr Farnsworth has also given evidence that, during the course of his appointment as administrator, he has been provided with financial documents prepared by Vivo’s external accountants. These financial documents indicate that:
·during the financial year ended 30 June 2011, Vivo paid dividends totalling $1,900,000 to Vivo International;
·during the financial year ended 30 June 2012, Vivo paid dividends totalling $980,000 to Vivo International;
·as at 30 June 2010, Vivo was indebted to Mr Grassia for the sum of $3,191,676; and
·as at 30 June 2013, Vivo was indebted to Vivo International for the sum of $1,897,192 with Vivo International apparently having received an assignment of Vivo’s debt to Mr Grassia in or about 2011.
Further, Mr Farnsworth has been provided with a copy of an extract from a term deposit account in Vivo’s name with HSBC Bank Australia Limited. It is Mr Farnsworth’s understanding that this extract was provided to Tivo in the course of the appeal proceeding to which I have referred, in response to a proposed security for costs application. The extract shows that the deposit was a monthly one, with a maturity date of 16 May 2012. The whereabouts of the funds representing this deposit is not known.
Mr Farnsworth said that, since Mr Shepard’s and then Mr Farnsworth’s respective appointments as administrator, a number of steps have been taken to progress the administration. Mr Farnsworth has detailed these steps in his affidavit of 12 December 2013. It is not necessary for me to repeat those matters. I have referred to some of the steps taken to date.
Mr Grassia has indicated that, prior to the second meeting of creditors, he will put forward a proposal for a deed of company arrangement. Mr Farnsworth has said that, given that he has yet to finalise his investigations into Vivo (in particular, to form an opinion on the consideration paid under the sale agreement), he considers that he would be unable to advise Vivo’s creditors as to whether any proposed deed of company arrangement would be likely to result in a better return to them than a liquidation of the company. For one thing, he would need to review the two valuations that he has commissioned. He also wishes to investigate the dividends paid to Vivo International and the position concerning the term deposit to which I have referred.
Mr Farnsworth says that he seeks an extension of the convening period because:
·it will enable him to receive the reports and valuations he has commissioned and, thereafter, to form a view as to whether the transaction the subject of the sale agreement is liable to be set aside;
·it will enable him to complete his investigations into Vivo’s affairs including in respect of uncommercial transactions and/or unfair preferences (other than arising from the sale agreement);
·it will enable him to make further inquiries and conduct further investigations in respect of the term deposit;
·it will facilitate a deed of company arrangement proposal being put forward; and
·it will enable him to make an informed recommendation to creditors as to whether any deed of company arrangement proposal or liquidation of the company will be likely to lead to a better return.
I am satisfied that it is appropriate to extend the convening period. The extension sought is a relatively modest one, being some 49 days. I take into account that the impending Christmas period is likely to delay the time within which Mr Farnsworth can carry out the further inquiries I have indicated. I also take into account that, in any event, the valuation of Vivo’s intangible assets and goodwill cannot be provided, on present indications, before mid‑January 2014. Significantly, Vivo’s creditors have unanimously agreed to the present application for extension being made. I am satisfied, therefore, that orders substantially as sought should be made.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 18 December 2013
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