Re Disability Dr. Pty Ltd (Administrator Appointed)
[2025] WASC 38
•10 FEBRUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE DISABILITY DR. PTY LTD (ADMINISTRATOR APPOINTED); EX PARTE MERVYN JONATHAN KITAY as administrator of DISABILITY DR. PTY LTD (ADMINISTRATOR APPOINTED) [2025] WASC 38
CORAM: HILL J
HEARD: 6 FEBRUARY 2025
DELIVERED : 6 FEBRUARY 2025
PUBLISHED : 10 FEBRUARY 2025
FILE NO/S: COR 19 of 2025
MATTER: IN THE MATTER OF DISABILITY DR. PTY LTD (ADMINISTRATOR APPOINTED)
EX PARTE
MERVYN JONATHAN KITAY as administrator of DISABILITY DR. PTY LTD (ADMINISTRATOR APPOINTED)
First Plaintiff
DISABILITY DR. PTY LIMITED (ADMINISTRATOR APPOINTED)
Second Plaintiff
Catchwords:
Corporations - External administration - Application for extension of convening period for second creditors' meeting - Whether modification in the interests of creditors as a whole - Whether interests of any persons prejudiced by modification are protected by terms of orders - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 435A, s 439A, s 447A
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | C James |
| Second Plaintiff | : | C James |
Solicitors:
| First Plaintiff | : | Edwards Mac Scovell Legal |
| Second Plaintiff | : | Edwards Mac Scovell Legal |
Cases referred to in decision:
Diamond Press Australia Limited [2001] NSWSC 313
Mighty River International Limited v Hughes [2018] HCA 38
Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274
Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings and to correct matters of grammar and expression.)
By originating process dated 3 February 2025, the plaintiffs seek orders pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) for an extension of the convening period of the second creditors' meeting of the second plaintiff, Disability Dr. Pty Ltd (the Company), until 7 May 2025. The plaintiffs also seek an order pursuant to s 447A(1) of the Act that the second creditors' meeting may be held at any time during the extended period and the period of five business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.
The originating process was listed before me today on an urgent basis. In support of the application, the plaintiffs have read two affidavits: an affidavit of Mervyn Jonathan Kitay, the first plaintiff, filed 3 February 2025; and an affidavit of Charmaine James, the solicitor for the plaintiffs, filed 5 February 2025. I have also had the benefit of an outline of written submissions.
Factual background
The factual background to the application is set out in the affidavit of Mr Kitay and can be briefly summarised as follows.
On 9 January 2025, Mr Kitay was appointed as voluntary administrator of the Company, pursuant to s 436A of the Act.[1]
[1] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [10] - [11], 'MJK-1' p 21 - 22.
The Company, which was incorporated on 24 July 2020, is a registered provider under the National Disability Insurance Scheme (NDIS) and provides specialist nursing and support services to clients with disabilities, including the provision of 'live in' residences for its clients for both supported independent living as well as respite care.[2]
[2] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [14], [16].
The first creditors' meeting for the Company was held on 21 January 2025.[3] At this meeting, creditors were not informed of the plaintiffs' intention to bring this application. Since then, Mr Kitay has sought and obtained the views of the Australian Tax Office (ATO) (who he believes is the largest creditor of the Company)[4] and given notice of the application to the other creditors of the Company.[5] The evidence before me is that the ATO has filed a winding up application in relation to the company in the Federal Court which is listed for hearing on 11 February 2025. The ATO has indicated that it does not have a position on the plaintiffs' application and that if it is successful, it will consent to an adjournment of the winding up application.[6] The ATO did not seek to be heard on the application and neither it, nor any other creditor, has raised an objection to the orders that are sought or appeared today at the hearing.[7]
[3] Affidavit of Jonathan Mervyn Kitay filed 3 February 2025 [30].
[4] Affidavit of Jonathan Mervyn Kitay filed 3 February 2025 [47], 'MJK-7'.
[5] Affidavit of Charmaine Ruth James filed 5 February 2025.
[6] Affidavit of Jonathan Mervyn Kitay filed 3 February 2025 [46], 'MJK-7'.
[7] Affidavit of Charmaine Ruth James filed 5 February 2025 'CRJ-1'.
Since his appointment, Mr Kitay has encountered some difficulty in accessing the information, books, and records of the Company, and believes that the Company did not maintain fulsome financial records. This has had an impact on his ability to accurately ascertain the financial status and value of the Company.[8] While the information provided to date has enabled him to form a preliminary understanding of the Company's assets and liabilities, his opinion is that substantial work is required in order to obtain a more accurate picture of the Company's true financial position and value.
[8] Affidavit of Jonathan Mervyn Kitay filed 3 February 2025 [42].
Mr Kitay's evidence is that the only clients of the Company are NDIS participants. His understanding, based on discussions with a representative of the NDIS, is that the NDIS will permit a company in voluntary administration to continue to provide services as a NDIS provider, but that if the Company goes into liquidation, the Company's registration will be cancelled. Mr Kitay believes it will take approximately 28 business days to arrange for the transition of the Company's clients to an alternative NDIS provider.[9]
[9] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [18] - [19].
Pursuant to s 439A(5)(b) of the Act, the convening period for the second creditors' meeting ends on 7 February 2025, with the second creditors' meeting required to be held by no later than 14 February 2025.[10] The plaintiffs seek an extension of time for the convening of the second creditors' meeting until 7 May 2025.[11]
[10] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [4].
[11] Affidavit of Jonathan Mervyn Kitay filed 3 February 2025 [21] - [25].
If an extension is granted, Mr Kitay believes it is possible that the business of the Company could be sold as a going concern. His opinion is that the business appears to be viable and that it may be able to be marketed and sold. At present, the income generated by the business is sufficient to pay the Company's debts as they are being incurred.[12] However, if the Company is liquidated and it loses its registration as an NDIS provider, the value of the business will be negligible. On this basis, Mr Kitay believes that any sale of the business needs to occur as part of a voluntary administration process.[13] However, before this can occur, more time is required by him to enable the value of the business to be determined.[14]
[12] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [29], [59], [72].
[13] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [38], [58] - [60].
[14] Affidavit of Mervyn Jonathan Kitay filed 3 February 2025 [54] - [57].
Should an extension of time for the convening period be granted?
The legal principles that govern this application are well known.
Pursuant to s 439A(6) of the Act, the court has power to extend the convening period of a second creditors' meeting. In determining the application, the court is required to consider and take into account the objects and scheme of pt 5.3A of the Act. These objects are set out in s 435A of the Act, which are to maximise the chances of the company (or as much as possible of its business) continuing in existence, or, if this is not possible, for the administration to be done in a way so as to result in a better return for the company's creditors and members than would result from an immediate winding up.
In reaching its decision, the court must maintain an appropriate balance between an expectation that the administration will be undertaken in a relatively speedy and summary manner, with the need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising returns for creditors and any possible return for shareholders.[15] The court is also required to take into account the detriment to third parties (if any), including the suspension of rights and remedies of secured creditors, lessors, and others.[16]
[15] Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46 [54] (Banks-Smith J), citing Barrett J in Diamond Press Australia Limited [2001] NSWSC 313 [10].
[16] Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 [18].
The court will generally exercise its discretion to extend the convening period where one or more of the established categories are raised, where there is no evidence of material prejudice to those affected by the extension of time, and the court is satisfied that the administrator's estimate of time required has a reasonable basis.[17]
[17] Mighty River International Limited v Hughes [2018] HCA 38 [73].
In this case, the relevant established categories include:
(a)whether the convening period allows enough time for the administrator to produce a satisfactory report;
(b)where there is a need to extend the administration period to facilitate the sale of the business of the company as a going concern;
(c)whether creditors support the extension; and
(d)the administrator's own opinion as to whether an extension is required.
For the following reasons, I am satisfied that it is appropriate to grant the requested application for an extension of the convening period until 7 May 2025.
First, on the evidence before me, I accept that more time is required to enable Mr Kitay to accurately ascertain the financial status of the Company and the value of its business.
Second, I accept Mr Kitay's evidence that, without an extension, he will not be in a position to make an informed recommendation to creditors at the second creditors' meeting as to the future of the Company.
Third, I accept that an extension is required in order to facilitate the possibility of the sale of the business as a going concern. This is consistent with the purposes of pt 5.3A of the Act.
Fourth, no creditor has raised any opposition to the proposed extension (including the ATO, the majority creditor of the Company), and no one appeared today to oppose the orders sought by the plaintiffs.
Fifth, Mr Kitay's opinion is that an extension is required for a period of approximately 12 weeks. On the basis of the evidence before me, I am satisfied that there is a reasonable basis for this estimate.
Finally, I am satisfied on all the evidence before me that the potential benefit of the extension will outweigh any prejudice to creditors from the delay in holding the second creditors' meeting and that it is in the best interests of the creditors of the Company as a whole to grant the extension. This is particularly because if the convening period is not granted and the Company is placed into liquidation, its registration as an NDIS provider will be cancelled and the value of the business reduced to nil.
I accept Mr Kitay's evidence that this will have a material impact on his ability to sell the business as a going concern and also have an adverse effect on the interests of the Company's creditors.[18]
[18] At the conclusion of the hearing, I made orders in terms of Annexure 'A'.
ANNEXURE 'A'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Hon Justice Hill
10 FEBRUARY 2025
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