Hedge in his capacity as Administrator of Federation Health Ltd (Administrator Appointed)

[2006] FCA 645

FEDERAL COURT OF AUSTRALIA

Hedge in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) [2006] FCA 645

PETER HEDGE IN HIS CAPACITY AS ADMINISTRATOR OF FEDERATION HEALTH LTD (ADMINISTRATOR APPOINTED)

ACD15 OF 2005

EMMETT J
28 APRIL 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIA CAPITAL TERRITORY DISTRICT REGISTRY	ACD15 OF 2005

PETER HEDGE in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) APPLICANT
JUDGE:	EMMETT J
DATE OF ORDER:	28 APRIL 2006
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Order 2 of the orders made by Emmett J on 23 June 2005 be varied by deleting ‘30 April 2006’ and inserting ‘31 October 2006’.

2.The costs of the Notice of Motion be the costs and expenses of the administration of Federation Health Limited (Administrator Appointed) ACN 004 155 622.

3.The applicant have liberty to apply.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIA CAPITAL TERRITORY DISTRICT REGISTRY	ACD15 OF 2005

PETER HEDGE in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) APPLICANT
JUDGE:	EMMETT J
DATE:	28 APRIL 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 23 June 2005, I made orders, pursuant to s 82XZE of the National Health Act 1953 (Cth) (‘the Act’), that a scheme of arrangement concerning the business of Federation Health Limited (‘Federation Health’) be implemented in accordance with the terms of the scheme of arrangement deed between Latrobe Health Services Incorporated (‘La Trobe’), Federation Health and Mr Peter Hedge, in his capacity as Administrator of Federation Health. The scheme was in the form set out in the schedule to the orders.

2. By Order 2 of 23 June 2005, I ordered that the operation of s 82XZJ(3)(e) of the Act be varied and that Part IVA of that Act operates so that, notwithstanding Order 1 of 23 June 2005, the administration of Federation Health was to end on the earlier of the day after the day in which the scheme was implemented in full, and 30 April 2006.

3. My reasons for making Order 2 are explained in reasons I delivered on that day (see [2005] FCA 980). Under s 82XZJ(3)(e) of the Act, the administration of an organisation under administration ends when the Court makes an order or orders under s 82XZE. However, having regard to the nature of the scheme and the administrative obligation imposed upon Mr Hedge as administrator under the scheme, which would require activity on his part after the making of the orders under s 82XZE, I considered it was appropriate to make a further order varying the operation of s 82XZJ(3)(e), such that the administration did not end until the implementation of the scheme in full.

4. At that time Mr Hedge's assessment was that 30 April 2006 would be ample time within which to ensure that the scheme was implemented in full.  However, Mr Hedge’s hope has not been fulfilled.  By an affidavit of 28 April 2006, Mr Hedge has explained some procedural difficulties that have had the result that he will not be able to complete the administration by 30 April 2006.  Accordingly, by a notice of motion filed today, he, in effect, seeks an extension of the time in which the administration should be completed.

5. In essence, the reason for Mr Hedge’s inability to complete the administration is derived from delays in obtaining a health program grant from the Department of Health and Ageing (‘the Department’), which is used to fund medical clinic operations of Federation Health.  The grant was terminated by the Department on 31 March 2006.  However, it is a requirement of the Department that Federation Health submit an acquittal request for the Department to review, prior to payment under the grant being provided by the Department.

6. The payment of the grant for the period 1 January 2006 to 31 March 2006 will be made after that information is provided to the Department.  Those acquittal requirements involve preparation of financial statements of receipts and payments relating to the grant, certified by a qualified public accountant, a copy of the Annual Report of Federation Health, details of the number of services provided and relevant Medicare benefits schedule item number for each service in respect of diagnostic and therapeutic procedures provided by general practitioners and specialists, and details of the number and type of clinical services performed.

7. Those requirements are detailed in nature and often relate to retrospective information that cannot be prepared until after the date on which the period for the grant ends.  It was not until after 31 March 2006, therefore, that it was possible for Mr Hedge to commence compiling the relevant information for the current grant.  The acquittal and audit process required by the Department in relation to the final drawdown under the grant are presently under way.

8. In summary, Mr Hedge is unable to finalise the acquittal requirements in relation to the period 1 January 2006 to 31 March 2006 prior to 30 April 2006.  He summarises the reasons as follows: 

   (a)Various of the acquittal requirements which need to be provided to the Department for the period are retrospective, and Mr Hedge could not begin to collate them until after the termination of the grant period.

   (b)Mr Hedge has not received the precise requirements from the Department as to the grant for the period.  The Department supplies the grant documentation outlining the acquittal requirements following the end of the period to which the drawdown relates.

   (c)Mr Hedge has not received the grant document from the Department relating to the period and therefore cannot ensure that any submissions to the Department addresses the correct acquittal requirements.  Once the acquittal requirements in relation to the period are submitted to the Department, the Department will need time to review and to process the request.

9. Mr Hedge has concluded that, in the interest of receiving the final drawdown under the grant to maximise the value of the assets transferred by Federation Health to La Trobe under the scheme, it is inappropriate for the administration to end until the final drawdown is received.  The final drawdown is in the vicinity of $400,000.

10. A number of tasks still needed to be completed, including the following.

    (a)completion of the financial accounts;

    (b)statistical reports in respect of the health services provided by medical clinics;

    (c)an independent review report on the financial accounts of the medical clinics by Federation Health’s auditor;

    (d)a submission to the Department in accordance with the acquittal requirements;

    (e)response to any questions posed by the Department in relation to the submission by Federation Health.

11. Mr Hedge considers that six months would be an appropriate extension of the administration of Federation Health to ensure that all of those tasks will be completed and that the administration of Federation Health end on a date prior to 31 October 2006.

12. Clause 19.7 of the scheme deed provided that, in the event that the administrator had not completed the realisation of the balance assets, as defined, and the satisfaction of the liabilities of Federation Health, in accordance with clause 19, within one month prior to the expiration of the administration, the administrator might apply to extend the administration for a further period consented to by La Trobe and the Private Health Insurance Council (‘the Council’).

13. While the application has not been made until today and the period expires on 30 April 2006, both La Trobe and the Council have consented to the extension now requested by Mr Hedge.  In addition, the Department has also indicated that it has no objection to the proposed extension and will not oppose this application.

14. In the circumstances it appears to me to be appropriate to grant the extension. The power to do so is either inherent or arises under s 447A of the Corporations Act 1989 (Cth) which is applied to this scheme by the operation of the Act. Accordingly, it is appropriate to accede to Mr Hedge’s application.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             26 May 2006

Counsel for the Applicant:	Mr P.M. Wood
Solicitor for the Applicant:	Blake Dawson Waldron
Date of Hearing:	28 April 2006
Date of Judgment:	28 April 2006

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