In the matter of MF Global Australia Limited (in liquidation)
[2013] NSWSC 779
•27 March 2013
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of MF Global Australia Limited (in liquidation) [2013] NSWSC 779 Hearing dates: 27 March 2013 Decision date: 27 March 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made allowing for notification of creditors by email.
Catchwords: CORPORATIONS - winding up - liquidators - liquidators seek orders under s 447A of the Corporations Act 2001 (Cth) so as to alter the manner in which certain notices may be given to creditors - whether the costs of adhering to usual notification requirements for meetings are proportionate to the benefit that would be obtained. Legislation Cited: Corporations Act 2001 (Cth) ss 446A, 447A, 508, 508(1)(b), 509
Corporations Regulations 2001 (Cth) regs 5.6.11A, 5.6.12, 5.6.48, 5.6.65, 5.6.67(3)Cases Cited: - Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
- Gibbons v LibertyOne Ltd (in liq) [2002] NSWCA 274; (2002) 41A CSR 442
- Re Centaur Mining & Exploration Ltd (in liq) [2003] FCA 1339; (2003) 48 ACSR 1
- Re Love (as liquidator of ACN 077 308 257 Ltd) [2003] NSWSC 58; (2003) 44 ACSR 367
- Re Mothercare Australia Ltd (admin apptd) [2013] NSWSC 263
- Re One.Tel Ltd; Walker & Sherman (as liqs) [2002] NSWSC 1081; (2002) 43 ACSR 305Category: Interlocutory applications Parties: Christopher Robert Campbell, Vaughan Neil Strawbridge and David John Frank Lombe in their capacity as liquidators of the second plaintiff) (First Plaintiffs)
MF Global Australia Limited (in liquidation) (Second Plaintiff)Representation: Counsel:
Mr E Poulos (solicitor) (Plaintiffs)
Solicitors:
Ashurst Australia (Plaintiffs)
File Number(s): 2013/93928
Judgment - ex tempore
By originating process filed by leave, the liquidators of MF Global Australia Limited (in liquidation) ("MFGA") and MFGA seek orders under s 447A of the Corporations Act 2001 (Cth) modifying Part 5.3 of the Act, and specifically s 446A of the Act, so as to alter the manner in which certain notices may be given to creditors of MGFA in respect of certain matters.
In broad terms, the alteration sought would permit such notices to be given, in respect of creditors who are former clients of MFGA, by sending the notice by email containing an internet link to any document accompanying the notice, and in respect of other creditors, by sending the notice by post or facsimile transmission referring to the availability of any accompanying document on a specified website.
The originating process is supported by an affidavit of Mr Christopher Campbell, who is one of the liquidators, sworn 22 March 2013. Mr Campbell's evidence, in summary, is that:
- The liquidators intend to convene a general meeting of MFGA under s 508 of the Corporations Act, since the winding up of MFGA will continue for more than one year, and to prepare a report to be provided to creditors in advance of that meeting.
- There are about 11,500 creditors of MFGA and the cost of sending the notice of meeting and report to those creditors would be approximately $150,000, if the report is about fifty pages in length, and sending other notices, reports or communications in connection with the winding up would involve similar costs.
- About 11,050 of the 11,500 creditors of MFGA are former clients and, prior to its administration, written communications between MFGA and its clients were generally sent by email.
- The liquidators, both in their former capacity as administrators and as liquidators, have also used email addresses contained in MFGA's comprehensive database of such addresses to communicate with clients, and the Court has previously made orders permitting electronic communications in that by email in connection with matters arising in the administration and the liquidation, including the giving of notice of the first and second meetings of creditors in the administration and notices in respect of distribution of moneys held by MFGA under Part 7.8 of the Act.
The Court has jurisdiction to make the orders sought under s 447A of the Corporations Act, so far as they involve the conduct of a creditors voluntary winding up arising under s 446A of the Corporations Act. Section 447A of the Act relevantly provides that the Court may make such order as it thinks appropriate about how Part 5.3A of the Act is to operate in respect of a particular company. Section 446A, which provides for a company in administration to be taken to have passed a special resolution that it be wound up voluntarily in specified circumstances, falls within that part of the Act.
In Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270 at [26], a unanimous High Court accepted that section could be used if the relevant company had been in administration but, by the operation of Part 5.3A, the administration had come to an end, so as to make orders with future effect in respect of matters which had previously arisen. The orders sought by the liquidators have such future operation, albeit in respect of a creditors voluntary winding up which has arisen under s 446A of the Act.
In Gibbons v LibertyOne Ltd (in liq) [2002] NSWSC 274; (2002) 41 ACSR 442, Austin J held that the power under s 447A was available to order that a meeting otherwise required under s 508(1)(b) was not required in a particular case, where the holding of that meeting would deliver little benefit and would incur wasted expense. In Re One.Tel Ltd; Walker & Sherman (as liqs) [2002] NSWSC 1081; (2002) 43 ACSR 305, Barrett J took the view that s 447A was available to modify the future operation of s 446A, so far as it sustained a creditors voluntary winding up arising from an administration, and contemplated that such an order could be made in respect of a class of creditors providing for notice by a single circular, supplemented by information disseminated by newspaper and by means of the internet, where full compliance with notice requirements under the Act would otherwise give rise to unwarranted expense which would be disproportionate to the resulting benefit. His Honour also pointed out that the use of the internet as a form of communication would be more readily justified where particular creditors were likely to be familiar with and have access to the Internet.
In Re Love (as liquidator of ACN 077 308 257 Ltd) [2003] NSWSC 58; (2003) 44 ACSR 367 at [7], Barrett J again observed that the jurisdiction to make an order under s 447A permitted the modification of the requirement for a meeting of members and creditors under s 508, and again identified the relevance of the question whether the cost of the particular step was proportionate to the benefit that would be obtained from it. Finally, in Re Centaur Mining Limited [2003] FCA 1339; (2003) 48 ACSR 1 at [8], Merkel J noted that, as was by then well established:
"In cases where a voluntary winding up occurs by virtue of s 446A (which is within Part 5.3A), the power conferred by s 447A extends to orders in respect of the meetings required to be held under s 508, notwithstanding that the section is not within Part 5.3A."
His Honour also contemplated (at [13]) the possibility that a liquidator could minimise the cost of a meeting by providing information on a website. I interpolate that that is the course which, inter alia, the liquidators seek to adopt in this case.
Mr Poulos, who appears for the liquidators, undertook a comprehensive and helpful review of the provisions requiring notice to be given in written form and by post which would be displaced by the modification of s 446A of the Corporations Act which the liquidator seeks. In the absence of such a modification, the liquidators would be required, inter alia, to give notice of meetings under ss 508 and 509 in accordance with reg 5.6.12 of the Corporations Regulations, inter alia, by sending it by prepaid post to relevant creditors. The liquidators would be required to give notice to submit a formal proof in accordance with reg 5.6.48 and notice of intention to declare a dividend would need to be given under reg 5.6.65 in a specified form. Notice could be given by electronic means under reg 5.6.11A, but only if a creditor had, in accordance with that provision, nominated electronic means to give notice.
The Courts have been prepared to make orders modifying the requirement for communication by mail in the context of ongoing voluntary administrations, particularly in respect of the first and second meeting of creditors. It appears that such orders have previously been made in respect of the voluntary administration of MFGA. I summarised the relevant principles in Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 at [9], where I noted that:
"The Courts have, over time, become increasingly willing to modify the manner in which notices may be given in respect of companies in administration to address issues of costs and practicality, and have been increasingly willing to contemplate electronic means of providing such notices, no doubt as such means are more widely accepted in the wider community. In the early decision of Re Ansett Australia Limited v Mentha [2002] FCA 2; (2002) 115 FCR 395; [2002] 40 ACSR 149, Goldberg J was not prepared to grant orders which would have entirely dispensed with personal communication with creditors, by providing only for publication on the website. However, there are several subsequent decisions in which orders have been made, both in respect of the first and second meeting of creditors, permitting notice to be given by electronic means to those for whom email addresses are available and otherwise by notice on the administrators' website and by newspaper advertisement [citations omitted]."
In that case, I made an order for notices to be given by email, containing references to documents on a company's and its administrators' website, combined with newspaper advertisements. The issues arising from such an order, in the course of a voluntary administration, are not different in kind from those arising in respect of the giving of such notices by similar means in a creditors voluntary liquidation which continues from the voluntary administration.
In the present case, Mr Campbell's evidence indicates that the cost of giving notices by mail, enclosing the relevant documents, would be substantial. It does not seem to me that the benefit of that course would be proportionate to those costs, by comparison with the alternative approaches which the liquidators seek to adopt. So far as client creditors are concerned, there is every reason to think that notification by email with a link to the relevant website will be an effective means of notification, where MFGA adopted that approach in dealing with communications with clients prior to the administration, and the Court has subsequently permitted the administrators, and subsequently the liquidators, to adopt that approach in other aspects of the administration and the liquidation. Indeed, it might be suggested that the continuity of this means of communication is more likely to be effective than a change at this point in the manner of communication so as to send information by post. So far as other creditors are concerned, there is no reason to think that communication by post or facsimile, containing a reference to the availability of the document on the website and the option to request a copy of the document to be sent by post, would be less effective than sending both notice and that document by post at considerable expense.
For these reasons, I am satisfied that the orders sought in Order 1 of the orders sought by the liquidators, with the exclusion of subparagraph (v), should be made.
The order sought in subparagraph (v) of Order 1 raises a somewhat different question, because it is directed to notice of declaration of a dividend under reg 5.6.67(3) of the Corporations Regulations. That regulation deals with the declaration and distribution of a dividend among creditors whose debts or claims are admitted, and requires the liquidator to send a notice of that declaration in accordance with Form 549 to every person entitled to receive payment of the distribution. Form 549 in turn provides for notice to be given that a dividend in a particular amount in the dollar has been declared, and that a cheque calculated at that rate is attached. The regulation and the form operate appropriately together, since the regulation contemplates mailing of the relevant notice and the notice which is mailed can in turn attach a cheque.
The modification sought by the liquidator would permit the sending of notice of the dividend by email to client creditors, and by post or facsimile to other creditors. Plainly, a cheque could not be attached to a communication by email or facsimile, and the liquidators have recognised that by seeking a further modification, pursuant to s 447A of the Act, so that the notice would provide for payment by electronic funds transfer rather than by cheque. It may be that that course would cause no difficulty for all, or nearly all, of MFGA's creditors. In particular, Mr Poulos has foreshadowed that that course is likely to cause no difficulty for client creditors of MFGA, who have already received distributions of client funds in that manner, and who may well have historically dealt with MFGA by providing it with bank details for their ordinary client dealings. It may be that the same position prevails in respect of unsecured creditors who are not client creditors, although the evidence before me presently does not address these matters.
I raised, in the course of submissions, the possibility that the modification sought might, however, cause difficulty where an unsecured creditor had not previously provided bank account details so as to permit electronic funds transfers, and, for whatever reason, was not prepared to provide such details. In particular, the modification sought contemplates the availability for payment by electronic funds transfer, and does not provide for any alternative mechanism if it is not practical to make payment in that matter. Mr Poulos has noted that it is not necessary that an order in respect of that matter be made today, and it is preferable that the liquidators have the opportunity to either consider where an amendment should be made to provide for an alternative, if electronic funds transfer is not feasible, or otherwise have the opportunity to lead further evidence that there is no reason to be concerned as to adopting an approach which limits the manner of payment to electronic funds transfers take place.
In these circumstances, I will make orders in accordance with the short minutes of order initialled by me and placed in the file, which I have modified by striking out sub-paragraph (v) of Order 1 and by striking out Order 2. I note that the liquidators are, of course, free to renew an application for an order under s 447A of the Corporations Act to the effect presently sought in paragraph 1(v) and Order 2, if so advised, on the basis of further submissions as to that matter and such further evidence as they consider appropriate.
I will amend paragraph 3 of the Orders to become paragraph 2, and I will add a new Order 3, that these orders be entered forthwith.
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Decision last updated: 21 June 2013
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