FEDERAL COURT OF AUSTRALIA
Pavlakis v Equmen Pty Limited (No 2) [2014] FCA 951
Citation: Pavlakis v Equmen Pty Limited (No 2) [2014] FCA 951 Parties: ANTHONY PAVLAKIS v EQUMEN PTY LIMITED ACN 129 797 315 File number(s): NSD 857 of 2014 Judge(s): YATES J Date of judgment: 29 August 2014 Catchwords: CORPORATIONS – application for leave under s 436B(2) of the Corporations Act 2001 (Cth) for provisional liquidator to be appointed as administrator – relief under s 447A to coordinate second meeting of creditors for all four companies involved in deed of company arrangement proposals Legislation: Corporations Act 2001 (Cth) ss 436B, 436E, 437C, 444A, 446A, 447A, 449(2A) Cases cited: Re Cobar Mines Pty Limited (rec & mgr apptd) (in liq) (1998) 30 ACSR 125
In the matter of Keldane Pty Limited (in liq) (subject to deed of company arrangement) (2011) VSC 385
Parkes Leagues Club Co-op Limited (in liq) [2004] NSWSC 16
Pavlakis v Equmen Pty Limited [2014] FCA 929
Peter Ngan re JKB Constructions Pty Limited (in liq) (2006) NSWSC 1040
Date of hearing: 29 August 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Plaintiff: Mr S Aspinall Solicitor for the Plaintiff: Gillis Delaney Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 857 of 2014
BETWEEN: ANTHONY PAVLAKIS
PlaintiffAND: EQUMEN PTY LIMITED ACN 129 797 315
Defendant
JUDGE:
YATES J
DATE OF ORDER:
29 AUGUST 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Service on the parties of the interlocutory process filed on 27 August 2014 under r 2.7(2) of the Federal Court (Corporations) Rules 2000 (Cth), be dispensed with.
2.Pursuant to s 436B(2)(g) of the Corporations Act 2001 (Cth) (the Act), leave be granted to David Joseph Levi (the applicant) in his capacity as provisional liquidator of the defendant to appoint himself, by writing, as administrator of the defendant.
3.Pursuant to s 447A of the Act, the provisions of Part 5.3A of the Act apply to the defendant as follows:
(a)The need for convening and holding the first meeting of creditors pursuant to s 436E of the Act be dispensed with.
(b)The convening period for the second meeting of creditors pursuant to s 439A of the Act be varied so that the convening period ends on 3 September 2014.
4.The listing of the originating process for hearing for final relief on 3 September 2014 be varied so that the hearing be for directions only, not for final relief.
5.When convening the meeting of creditors to be held under s 439A of the Act, the applicant is to draw to the attention of creditors their ability to appoint, at the meeting, a person other than the applicant as either administrator of any deed of company arrangement or as liquidator of the defendant, should the meeting resolve to do so.
6.Leave be granted to any person demonstrating sufficient interest, to vary or discharge these orders on 2…
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- Case
- [2014] FCA 951
- Decision Date
CaseChat Overview and Summary
The court considered the reasons advanced for Mr Levi's appointment as administrator, including the potential efficiencies and economies of having the same person in both roles, the advanced stage of negotiations, and the absence of any conflict of interest. The court found that while the efficiencies were a neutral consideration, the advanced stage of negotiations and the absence of conflict of interest were compelling reasons in favour of Mr Levi's appointment. The court also considered the need for the second creditors' meetings for all four companies to occur simultaneously to facilitate the proposed deed of company arrangement. The court concluded that the potential benefits to creditors from the proposed deed of company arrangement outweighed the loss of opportunity to appoint a committee of creditors or to replace Mr Levi as administrator.
The court granted Mr Levi leave to appoint himself as the administrator of Equmen and varied the convening period for the second meeting of creditors to align with the other three companies. This decision ensured that the administration of Equmen and the proposed deed of company arrangement could proceed efficiently and effectively.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Thirdly, he submits that, given that Mr Levi has already been involved in negotiations with the plaintiff, in respect of the proposed deeds of company arrangement, it would be wasteful and time-consuming for a third party to take Mr Levi’s place in those negotiations, given that they are at an advanced stage. Consideration It seems to me that, in the present case, the first two reasons advanced are really neutral considerations. I accept that there are obvious efficiencies and economies involved in a provisional liquidator such as Mr Levi being appointed as administrator. However, this is likely to be the case in many applications brought for leave under s 436B(2) and Mr Levi’s appointment as provisional liquidator has only been for a short time. The third reason seems to me to be more compelling. As I have said, the evidence indicates that Mr Levi has been in discussions with the plaintiff and his solicitors for some time and that this has resulted in proposals that appear to be beneficial for the creditors of all the companies and, in particular, the defendant. That success is no doubt due in part to Mr Levi’s involvement. As such, it may not be wise to introduce another party as administrator, particularly at such an advanced stage of the negotiations. The evidence does not reveal any apparent conflict in interest between Mr Levi’s position as provisional liquidator of the defendant and the position of administrator of the defendant, should he occupy that position. Further, the evidence does not reveal any apparent conflict in interest between Mr Levi’s position as administrator of the defendant, should he occupy that position, and his position as administrator of each of the other three companies. Absent any compelling reason against granting leave, it seems to me that leave under s 436B(2) should be granted to Mr Levi to appoint himself administrator of the defendant. The effect of this appointment will be that, while the defendant is in administration, Mr Levi will not perform or exercise his functions or powers as provisional liquidator: see s 437C(1) of the Act. Relief under s 447A to coordinate creditors’ second meetings Mr Levi also seeks relief under s 447A as to how Pt 5.3A of the Act is to operate in relation to the defendant, so far as concerns the convening of creditors’ meetings. Mr Levi seeks dispensation with respect to the requirement under s 436E of the Act for the holding of a first meeting of creditors. He also seeks to have the convening period in relation to the second meeting of creditors with respect to the defendant varied, so that it ends on 3 September 2014. The purpose of these modifications to the operation of Pt 5.3A, in relation to the defendant, is to have the second creditors’ meetings in respect of all four companies involved in the deed of company arrangement proposals, at the same time. The purpose of the first meeting of creditors of a company in administration is to determine whether or not to appoint a committee of creditors. It also gives the creditors an opportunity to remove an existing administrator and appoint an alternative administrator. Counsel submits that, in the present case, the loss of opportunity to appoint a committee of creditors or to replace Mr Levi as administrator is significantly outweighed by the potential benefit to creditors which would flow from the deed of company arrangement that is proposed.