IMO Australian Money Exchange Pty Ltd (Administrator Appointed) (ACN 090 388 257)
[2013] VSC 659
•29 November 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2013 05911
IN THE MATTER of AUSTRALIAN MONEY EXCHANGE PTY LTD (Administrator Appointed) (ACN 090 388 257)
| GIDEON ISAAC RATHNER (in his capacity as Voluntary Administrator of AUSTRALIAN MONEY EXCHANGE PTY LTD (ADMINISTRATOR APPOINTED) (ACN 090 388 257) and the Companies Listed in Schedule 1 | Plaintiffs |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 November 2013 | |
DATE OF RULING: | 29 November 2013 | |
CASE MAY BE CITED AS: | IMO Australian Money Exchange Pty Ltd (Administrator Appointed) (ACN 090 388 257) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 659 | |
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CORPORATIONS – External administration under Part 5.3A of the Corporations Act2001 (Cth) – Application for extension of convening periods pursuant to section 439A(6) of the Act and certain ancillary orders in relation to application – Application granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Harris | M + K Lawyers |
HIS HONOUR:
The first plaintiff (“Mr Rathner”) makes application pursuant to s 439A(6) of the Corporations Act2001 (Cth) (“the Act”) to extend the convening periods of the second meetings of creditors of several companies of which he is administrator pursuant to s 439A(5)(b) of the Act. He seeks an extension of six months. Mr Rathner also seeks an order under s 447A that Part 5.3A of the Act operate in relation to the administration such that the meetings may be held at any time before, or within 5 business days after 19 May 2014, notwithstanding the provision of s 439A(2) of the Act.
On 19 November 2013, I made orders extending the convening periods and other orders. I indicated that I would publish my reasons for doing so at a later date and these are my reasons.
On 21 October 2013, Mr Rathner was appointed administrator of the nine companies identified in the schedule to the originating process (“the AMX Group”). The majority of the companies in the AMX Group are involved in short term lending and motor vehicle finance. They operate franchises under the trading name of “AMX Money”. Mr Rathner was appointed pursuant to s 436C(1) of the Act by MB Finance Pty Ltd (“MB Finance”), which is a secured creditor of each of the companies pursuant to a deed of charge dated 29 June 2007.
Under the terms of that charge, MB Finance holds cross-collateral interests over each of the companies. MB Finance is a wholly owned subsidiary of Keybridge Capital Limited (“Keybridge”) and Keybridge is the sole shareholder of one of the companies, PR Finance Group Limited (“PR Finance”).
On 31 March 2013, Keybridge entered into a scheme of arrangement to acquire all the shares in the companies. During the performance of the terms of the scheme, the directors of PR Finance entered into a share sale agreement to sell the motor vehicle finance business it operated to MAHA Finance Pty Ltd (“MAHA Finance”). The performance of the scheme was completed on 16 August 2013 and on that date all of the then directors of each of the companies, with the exception of Mr Peter Llewellyn, resigned and were replaced by Mr Nicholas Bolton and Mr Antony Sormann. Mr Llewellyn resigned as director on 23 September 2013 after settlement of the sale of the motor vehicle finance business. On 25 September Mr William Brown was appointed a director of PR Finance.
Messrs Bolton and Sormann sought advice from lawyers and accountants after they received a letter from ASIC that expressed concern that one of the group, Australian Money Exchange Pty Ltd (“AMX”) was trading in such a way that its exemption under the National Consumer Credit Code was not tenable. ASIC stated that AMX should immediately desist in carrying on business as a credit provider until such time as it obtained an Australian Credit Licence (“ACL”). ASIC was concerned that AMX might otherwise become insolvent. MB Finance engaged BDO Accountants to undertake an investigation of the business of the AMX Group.
Based on the advices received, Messrs Bolton and Sormann decided that they would resign as directors and did so on 20 October 2013. Mr Brown also resigned as a director of PR Finance on the same day. Mr Rathner was appointed as administrator of the companies the following day. He deposes that his appointment as administrator was caused by the issue of the above letter by ASIC.
The first meetings of creditors of the companies in administration were held concurrently on 30 October 2013 at Mr Rathner’s offices and at those first meetings committees of creditors were appointed to AMX and AMX No 1 Pty Ltd. Resolutions were put at the first meetings to appoint different administrators to AMX, PR Finance Group Limited, AMX No 1 and AMX Club Limited but those resolutions were not passed and Mr Rathner’s appointment was confirmed. At the first meetings, the creditors who were present were informed that this application would be made.
Mr Rathner has not yet received the reports as to affairs from the former directors of the companies. The AMX Group operates from 22 sites in New South Wales, Queensland and the Northern Territory, apparently from leased premises. In his affidavit, Mr Rathner details the role that each of the companies performs in the group. PR Finance employs all corporate store employees and the companies’ head office staff and conducts some head office functions. AMX operates the AMX Money business, trading from a number of stores. It manages stores in partnership with other entities and provides assistance and infrastructure to franchisees, and owns plant and equipment located at stores at which it trades in its own right. Several of them are non-trading entities.
Mr Rathner deposes that he has informed ASIC of his intention to apply for an ACL by a letter to ASIC dated 11 November 2013. Other investigations are currently underway by the Australian Transaction Reports and Analysis Centre (Austrack). which commenced an assessment of AMX’s level of compliance with the Anti Money Laundering and Counterterrorism Financing Act 2006 and the Anti Money Laundering and Counterterrorism Financing Rules Instrument 2007 (No 1) on 15 May 2013. On 31 October 2013, Austrack summarised its findings in a report that identified a number of areas of non-compliance by AMX and required certain action to be taken by 30 November 2013. Mr Rathner has given instructions that the matters concerned be addressed. Austrack are aware of Mr Rathner’s appointment.
In his affidavit, Mr Rathner details the tasks he has undertaken as administrator since his appointment. I shall not restate them here but it is obvious that the administrations are complex. In his affidavit he also gives his opinion as to why he considers that it is in the best interests of creditors for extensions of the convening period in s 439A(5)(b) of the Act to be granted. In summary, these are as follows:
(a)Mr Rathner has spent much time thus far in the administrations reviewing and amending the loan documentation used by the business, investigating the costs and requirements of obtaining an ACL, seeking the expressions of interest from prospective purchasers and replacing the cash handling arrangements by implementing a secure delivery service. He says that before he can properly report to creditors, as he is required to do prior to the second meeting, these matters need to be completed so that he will be in a better position to make a recommendation to creditors.
(b)In order to properly report to creditors, he will need to investigate several matters in addition to his standard investigations. These include the review of the sale of the Motor Finance Wizard arm of the business which occurred in August 2013, review of the scheme of arrangement and requirements of the Court order sanctioning that scheme, and investigation of loans of the order of $2 million between PR Finance and related entities of former directors of that company, Mr Llewellyn and Mr James. In addition, he needs to investigate various related party transactions and review the legal advice previously provided to the companies.
(c)The companies are currently operating the businesses without an ACL. Mr Rathner intends to apply for such licences and that process could take up to five months. It will involve preparation of the application, including the obtaining of police checks on 30 persons employed by the companies. Once lodged, the application will take between one and three months to process and will be delayed by the Christmas/New Year period.
(d)Mr Rathner is also investigating whether AMX can become an authorised credit representative of another licensed entity before obtaining its own ACL. Without that interim measure, he considers that the business is not viable and is only able to trade with the support of MB Finance, the secured creditor who appointed the administrator.
(e)The businesses have been advertised for sale via an expression of interest campaign, and it is only through a restructure or otherwise that the sale of the business may result in a dividend to creditors via a Deed of Company Arrangement. Mr Rathner estimates that this could take up to four months. He has already been approached by parties interested in purchasing the business and if this occurs this will produce a better outcome for creditors via a Deed of Company Arrangement. He states that if the second creditors’ meetings were held at this point, the most likely recommendation by him to the meeting would be to place the companies into liquidation as the current business model is not viable. If the companies were liquidated, he states that it is likely that there will be no return to unsecured creditors and indeed that there would be a significant shortfall to the secured creditor, MB Finance.
(f)Mr Rathner states that the matters that have been referred to will take a significant time to complete and that he does not believe it will be possible for him to complete his investigations, form an opinion and prepare the s 439A report within the timeframe provided by s439A(5).
Mr Rathner envisages that a Deed of Company Arrangement will be proposed by MB Finance whether or not the business is successfully sold, but he has not been provided with any terms of such a proposal and cannot presently report to creditors whether or not it is in their interests to execute a Deed of Company Arrangement or whether it would be in the creditors’ interests for the administrations of the group to end.
Mr Rathner states that if no extension is granted and the requisite investigations and compliance measures have not been completed, he would require an adjournment of the meeting pursuant to s 439B(2) of the Act. The total period of any of the adjournments allowed under that provision must not exceed 45 business days and it is his view that it would be of no benefit to adjourn the meeting for such a period as it is likely that he will have to make this application to the Court in February 2014.
In Re Riviera Group Pty Ltd (Administrators Appointed),[1] Austin J collected examples where extensions of the type presently sought had been granted. In submissions filed on behalf of Mr Rathner, the ones said to be of consideration in these circumstances are:
[1](2009) 72 ACSR 352.
(a)the size and scope of the business;
(b)large number of employees with complex entitlements;
(c)complex corporate group structure and intercompany loans;
(d)complex transactions entered into by the company, for example, securities lending or derivative transactions;
(e)time where needed to execute an orderly process of disposal of assets;
(f)where time is needed for a thorough assessment of a proposal of a Deed of Company Arrangement;
(g)where the extension will allow sale of the business as a going concern;
(h)more generally, additional time is likely to advance the return for unsecured creditors.
Austin J observed at paragraphs 14 and 15 as follows:
The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator's estimate of time has a reasonable basis.
It is difficult to discern, especially in the most recent cases, any substantial remnant of the predisposition against extension. It is true that in Re Diamond Press Australia Pty Ltd [2001] NSWSC 311, Barrett J adverted to "an expectation reflected in the case law that an administration should proceed very quickly and should not be unduly prolonged, particularly in view of the moratorium situation it involves", and he said "it is intended to produce a reasonably speedy fate for the company, one way or another" (at [8]). But his Honour continued (at [10]):
The function of the Court on an application such as this is, as I see it, to strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders.
I consider that the evidence in support of this application establishes that there are substantial reasons for the granting of the extension, which is a long one and at the upper end of the scale in these types of applications. As Barrett J observed however in Lombe Re Australian Discount Retailers Pty Ltd[2] at para 23:
Each case must be approached according to its own circumstances. The balancing of a prompt outcome for creditors against a beneficial outcome for creditors will involve different considerations in every case. In the present case, the considerations to which I have referred indicate that creditors’ interests will be best served by the extension of the convening period as the administrators seek, rather than by forcing on the meeting at an early date. The extension will therefore be granted.
[2][2009] NSWSC 110.
I am concerned to ensure that those persons who may be adversely affected by the making of this order, in particular the owners or lessors of property, are properly notified of the making of these orders and given the opportunity if so advised to bring on any application they consider necessary to protect their position. It is for that reason that I have provided for notice to be provided to them.
I will make orders as follows:
1. Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (“the Act”), the convening period defined in section 439A(5)(b) of the Act in respect of each of the companies listed in Schedule 1 ("the AMX Group") is extended to 19 May 2014.
2. Pursuant to section 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the administration of each member of the AMX Group as if the second meetings of creditors required by section 439A of the Act may be convened and held at any time during the period comprising the convening period as extended under order 1 above and the period of five (5) business days thereafter, notwithstanding the provisions of section 439A(2) of the Act.
3. Liberty is granted to the plaintiffs to apply to the Court for any purpose connected with the administration of the AMX Group, including but not limited to any further extension of the convening period referred to in order 1 above at any time prior to 19 May 2014.
4. The Plaintiffs or their solicitors are to inform the landlords of any premises or property used or occupied by, or in the possession of, the AMX Group of these orders by sending a circular letter to each said landlord within seven days after the making of these orders.
5. The Plaintiffs or their solicitors are to inform all known creditors of the AMX Group of these orders by sending a circular letter or email, as the case may be, to each known creditor within seven days after the making of these orders.
6. Any person having a sufficient interest may apply to the Court to vary any of the principal orders in paragraphs 1 and 2 above on the provision of 7 days’ written notice to the Plaintiffs.
7. The costs and expenses of this application are costs and expenses of the administration of the AMX Group.
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SCHEDULE 1 – The AMX Group
AUSTRALIAN MONEY EXCHANGE PTY LTD (ACN 090 388 257)
PR FINANCE GROUP LIMITED (ACN 109 299 390)
AMX NO 1 PTY LTD (ACN 086 789 531)
AMX CLUB LIMITED (ACN 114 325 290)
AMX MARKETING FUND PTY LTD (ACN 090 254 425)
APPLIANCE FINANCE WIZARD PTY LTD (ACN 118 912 173)
QIKBIZ FINANCE PTY LTD (ACN 093 290 227)
RETAIL FINANCE GROUP PTY LTD (ACN 110 903 083)
56 NERANG STREET PTY LTD (ACN 092 437 548)
(ALL ADMINISTRATOR APPOINTED)
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