Hedge, in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) (No 2)

[2006] FCA 1465

FEDERAL COURT OF AUSTRALIA

Hedge, in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) (No 2) [2006] FCA 1465

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

ACD15 OF 2005

EMMETT J
27 OCTOBER 2006
SYDNEY

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

PETER HEDGE in his capacity as Administrator of Federation Health Limited (Administrator Appointed) Applicant
JUDGE:	EMMETT J
DATE OF ORDER:	27 OCTOBER 2006
WHERE MADE:	SYDNEY

THE COURT:

1.Gives leave to the administrator to file a notice of motion in the form initialled by Emmett J and dated with today’s date.

2.Orders that Order 2 of the order made on 23 June 2005 (as varied by orders made on 28 April 2006) be varied by deleting ‘31 October 2006’ and inserting ‘30 April 2007’.

3.Orders that the costs of the Notice of Motion are to be the costs and expenses of administration of Federation Health Limited (Administrator Appointed) ACN 004 155 622.

4.Orders that the applicant is to 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
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD15 OF 2005

BETWEEN:	PETER HEDGE in his capacity as Administrator of Federation Health Limited (Administrator Appointed) Applicant
JUDGE:	EMMETT J
DATE:	27 OCTOBER 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 14 December 2004, the applicant, Mr Peter Hedge (‘the Administrator’), was appointed the administrator of Federation Health Limited (‘Federation’) by the Private Health Insurance Administration Council (‘the Council’). The appointment was made under s 82XD of the National Health Act 1953 (Cth). On 11 May 2005, a scheme of arrangement deed was entered into involving Federation, La Trobe Health Services Incorporated (‘La Trobe’) and the Administrator.

2. On 23 June 2005, the Court made orders for the implementation of the scheme.  Order 2 provided that the administration of Federation was to end on the earlier of the day after the day on which the scheme was implemented in full and 30 April 2006.  On 28 April 2006, the Court made orders that the administration of Federation end on the earlier of the day after the day on which the scheme was implemented and 31 October 2006.  When the latter orders were made, there was evidence before the Court that the Administrator considered that the scheme would be implemented by 31 October 2006.

3. However, the Administrator now applies for further variation to permit the administration to continue until 30 April 2007.  The reason is the difficulty that the Administrator has in dealing with the liability of Federation under a lease of business premises at 30 George Street, Moe.  The Administrator now considers that he will be unable to finalise the implementation of the scheme by 31 October 2006 for the reasons that follow.

4. The premises at Moe are held by Federation under a lease from D & M Disisto Pty Limited (‘the Landlord’).  There are medical clinics at the premises and Federation has sublet part of them. The lease to Federation is for a term expiring in August 2012.  The potential liability for rent of Federation for the unexpired term is approximately $1.2 million.  Since April 2006, the Administrator has been negotiating with La Trobe the possibility of an assignment of the lease to La Trobe.  So far as the Administrator understands, La Trobe is still considering that proposal.  The Administrator has concluded that, if La Trobe is not prepared to accept an assignment, he will have no option but to repudiate the lease.  That would entitle the Landlord to lodge a proof of debt and some time would be required by the Administrator to make a determination on that proof. There is the possibility that the Landlord may wish to have any determination reviewed.  In any event, the Administrator has sufficient funds available to pay the full amount of any liability for future rent. 

5. The Administrator has considered whether Federation should be wound up, pursuant to Division 4 of the National Health Act, so as to enable the potential liability to be dealt with by a liquidator. However, the Administrator has formed the view that the preferable way to deal with all assets and liabilities of Federation is by means of the scheme.

6. Clause 13.7(a) of the scheme deed allows the Administrator to apply to the Court to extend the administration with the consent of La Trobe and the Council.  Both La Trobe and the Council have consented to the extension now sought by the Administrator.  The Administrator is unaware of any party who might be prejudiced by the application.  I have given some consideration to the position of the Landlord.  I am unable to see any basis upon which the extension would prejudice the Landlord and, indeed, the extension may well be in the interests of the Landlord. 

7. In all of the circumstances, I consider that it is appropriate to accede to the Administrator’s application. 

I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:       8 November 2006

Counsel for the Applicant:	A.P. Coleman
Solicitor for the Applicant:	Kemp Strang
Date of Hearing:	27 October 2006
Date of Judgment:	27 October 2006