FEDERAL COURT OF AUSTRALIA
Iannuzzi, in the matter of Josa Constructions Pty Ltd (Administrators Appointed) [2017] FCA 822
File number(s): NSD 1163 of 2017 Judge(s): FARRELL J Date of judgment: 21 July 2017 Catchwords: CORPORATIONS – application by administrators of companies for an extension of convening period of second meeting of creditors of companies pursuant to s 439A(6) of the Corporations Act 2001 (Cth) – application that second meeting of creditors may be held at any time during the extended convening period or up to five days after – where companies expected to gain benefits of a contract – where creditors do not oppose application – application granted Legislation: Corporations Act 2001 (Cth) ss 286, 435A, 439A, 440D, 447A, Pt 5.3A Cases cited: Collective Olive Groves Limited, in the matter of Collective Olive Groves Limited; application by Reidy [2009] FCA 177
Diamond Press Australia Pty Limited [2001] NSWSC 313
Portfolio Projects Pty Ltd v Oakes Building Co Pty Ltd (1987) 5 ACLC 911
Re Riviera Group Pty Ltd (administrators appointed) (receivers and managers appointed) (ACN 102 298 279) (2009) 72 ACSR 352; NSWSC 585
Weston, in the matter of Flush Fitness Pty Ltd (Administrators Appointed) [2017] FCA 172
Date of hearing: 17 July 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 37 Solicitor for the Plaintiff: Mr J Scarcella of Johnson Winter & Slattery ORDERS
NSD 1163 of 2017
IN THE MATTER OF JOSA CONSTRUCTIONS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 002 512 290) AND EQUIPMENT HIRE PTY LTD (ADMINISTRATORS APPOINTED) (ACN 143 507 091)
DAVID NICHOLAS IANNUZZI AND STEVEN NAIDENOV IN THEIR CAPACITY AS ADMINISTRATORS OF JOSA CONSTRUCTIONS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 002 512 290) AND EQUIPMENT HIRE PTY LTD (ADMINISTRATORS APPOINTED) (ACN 143 507 091) Plaintiff
JUDGE:
FARRELL J
DATE OF ORDER:
17 JULY 2017
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period prescribed in s 439A(5) of the Act with respect to each of Josa Constructions Pty Ltd (Administrators Appointed) ACN 002 512 290 and Equipment Hire Pty Ltd (Administrators Appointed) ACN 143 507 091 (together, the Companies), be extended to 3 November 2017.
2.Pursuant to s 447A(1) of the Act, that Part 5.3A of the Act operates in relation to the Companies such that the meetings of the creditors of each or any of the Companies required by s 439A of the Act may be held at any time during, or within 5 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.The costs of this application be paid out of the assets of the Companies.
4.Liberty to apply on at least three business days’ written notice to the Plaintiffs be granted to any person, including any creditor of any one or both of the Companies or the Australian Securities and Investments…
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- AGLC
- Iannuzzi, in the matter of Josa Constructions Pty Ltd (Administrators Appointed) [2017] FCA 822
- Case
- [2017] FCA 822
- Decision Date
CaseChat Overview and Summary
The court found that extending the convening period until 3 November 2017 would enable the companies to complete the contract, thereby maximising the return to creditors. The administrators argued that completing the contract would result in a return to unsecured creditors of between 40 and 50 cents in the dollar, compared to immediate liquidation, which would likely result in no return for ordinary unsecured creditors. Additionally, the court noted that related parties would continue to support the companies in completing the contract, but this support would be withdrawn if the companies were placed into liquidation. The court concluded that the extension of the convening period was in the best interests of the creditors, as it would allow the companies to complete the contract, potentially leading to a higher return for creditors and preventing the termination or inability to complete the contract due to premature liquidation.
Consequently, the court granted the application and extended the convening period to 3 November 2017. The court also ordered that the meetings of the creditors of the companies could be held at any time during, or within five business days after the end of, the convening period as extended. The costs of the application were to be paid out of the assets of the companies, and liberty to apply to modify or discharge these orders was granted to any person with a sufficient interest.
Orders
Orders of the court
1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period prescribed in s 439A(5) of the Act with respect to each of Josa Constructions Pty Ltd (Administrators Appointed) ACN 002 512 290 and Equipment Hire Pty Ltd (Administrators Appointed) ACN 143 507 091 (together, the Companies), be extended to 3 November 2017.
2. Pursuant to s 447A(1) of the Act, that Part 5.3A of the Act operates in relation to the Companies such that the meetings of the creditors of each or any of the Companies required by s 439A of the Act may be held at any time during, or within 5 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. The costs of this application be paid out of the assets of the Companies.
4. Liberty to apply on at least three business days’ written notice to the Plaintiffs be granted to any person, including any creditor of any one or both of the Companies or the Australian Securities and Investments Commission, who can demonstrate a sufficient interest to modify or discharge these orders.
5. These orders may be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
These are reasons for orders which I made on 17 July 2017. Unless otherwise indicated, all statutory provisions referred to in these reasons are provisions of the Corporations Act 2001 (Cth). The plaintiffs, Mr Iannuzzi and Mr Naidenov, were appointed as joint and several voluntary administrators of Josa Constructions Pty Ltd (administrators appointed) and Equipment Hire Pty Ltd (administrators appointed) (Companies) on 22 June 2017 by resolution of the Companies’ sole director, Ms Thelma Apokis. The first meetings of creditors of the Companies were held concurrently on 4 July 2017. No resolution was passed to appoint a committee of creditors or to replace the administrators.APPLICATION Section 439A(1) requires the administrators of a company to convene a meeting (often referred to as the “second meeting”) of the company’s creditors within the convening period fixed by s 439A(5) or as extended under s 439A(6). Relevantly to this matter, s 439A(5)(b)(i) defines the convening period to be 20 business days beginning on the day after the administrators’ appointment, that is, 20 July 2017. The Court may extend the convening period on an application made within the convening period: s 439A(6). By an application lodged on 13 July 2017, the administrators sought an extension of the convening period to 3 November 2017, a period of approximately 3.5 months. The administrators also sought an order under s 447A(1) that the meeting of creditors of the Companies may be held at any time during the convening period as extended or within five business days after it. By letter dated 11 July 2017, Mr Iannuzzi advised known creditors of the Companies of the administrators’ intention to make the application and advised in the following terms (as written):Background… At the first meeting of creditors held on 4 July 2017 … amongst other matters, I informed the Creditors present that:Ÿ Josa [Constructions] has one main asset and source of income, that being a contract with Penrith City Council (the Contract);Ÿ Based on my investigations to date, the Contract is profitable and due for completion within approximately three months;Ÿ In addition to the estimated profit and unbilled variations from the Contract (once completed on 3 November 2017), an additional amount of $130,720 in respect of retention payments under the Contract will be released upon practical completion or in the alternative a discounted amount could be paid in advance by a related company in exchange for the full right to receive the retention payments when they become due;Ÿ The Contract requires the support of related parties to the Companies to be completedŸ Current subcontractors servicing the Contract continue to undertake services as contracted;Ÿ Assets subject to finance will be maintained by the Companies and/or related parties. The Companies and related parties will meet the finance payments in respect of the equipment leased by [Equipment Hire] necessary to complete the Contract; andŸ A return to participating creditors for Josa [Constructions] could be in the range of 40 and 50 cents in dollar, subject to the Contract being completed, outstanding debtors being settled and remaining retentions collected.Extension of Convening Period…I have determined that it is in the best interests of the creditors of the Companies to apply to the Court to extend the period in which I must convene the second meeting of creditors of the Companies. In my view, the convening should be extended until 3 November 2017 to allow the Companies to complete the Contract as this will maximise the return to the creditors of the Companies.I have considered whether it is more appropriate and cost effective to convene the second meeting of creditors of the Companies by 19 July 2017 and recommend that creditors, at the second meeting, adjourn those meetings for a maximum of forty-five (45) business days, but that will not provide sufficient time to complete the Contract unless a DOCA is accepted by creditors which allows the Companies to trade to complete the Contract. Thus far no DOCA proposal has been forthcoming and as I understand, will not happen unless the Contract is completed.The other concern I have is that related parties of the Companies continue to support the Companies in completing the Contract but that support will be withdrawn if the Companies are placed into liquidation (which is an option open to creditors). In my view, the premature liquidation of the Companies will result in the termination of the Contract or the inability of the Companies to complete the Contracts and thus not presently be in the interests of creditors.Effect of Extension of the Convening PeriodIf the convening period is extended, the general moratorium on the claims of creditors of the Companies will continue. This will prevent any unsecured creditor enforcing payment and will generally prevent secured creditors (subject to some exceptions) from recovering their security.Administrators’ RecommendationIt is my recommendation to creditors of the Companies that an application to the Court be made to extend the convening period until 3 November 2017 as this will allow completion of the Contract taking into account unforeseen delays (such as bad weather) and will provide an enhanced return to unsecured creditors of Josa [Constructions] of between 40 and 50 cents in the dollar in comparison to immediate liquidation that realistically provides for a nil return to ordinary unsecured creditors. An extension of the convening period will also entice a proposal for DOCA furthering securing a higher return for creditors as compared to a liquidation.