Re GIGA Investments Pty Ltd (admin apptd) (No 2)

[1995] FCA 534

CATCHWORDS

CORPORATIONS - management and administration - external administration - voluntary administration - resolution of creditors that company enter into a deed of company arrangement - dispute as to validity of resolution - whether resolution should be set aside and fresh meeting authorised - discretion conferred on the court by s 447A.

Corporations Law ss 439A and 447A

Brash Holdings Ltd (admin apptd) v Katile Pty Ltd (1994) 13   ACSR 504
Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607
Re Brashs Pty Ltd (1994) 15 ACSR 477
Aloridge Pty Ltd (prov liq apptd) v Christianos (1994)    13 ACSR 99
Milankov Nominees Pty Ltd v Roycol Ltd (1994) 14 ACSR 296
In the Matter of Double V Marketing Pty Limited (In admin)      (an unreported decision delivered 24 March 1995
ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485

No SG 3095 of 1995

IN THE MATTER of GIGA INVESTMENTS PTY LTD (ADMINISTRATOR APPOINTED) ACN 007 924 665

BETWEEN:

I & J FOODS LIMITED  Applicant

IN THE MATTER of an application by I & J FOODS LIMITED

Branson J
Adelaide
30 June 1995

IN THE FEDERAL COURT OF AUSTRALIA )
  )
SOUTH AUSTRALIA DISTRICT REGISTRY )    No. SG 3095 of 1995
  )
GENERAL DIVISION                 )

IN THE MATTER of GIGA INVESTMENTS PTY LTD (ADMINISTRATOR APPOINTED) ACN 007 924 665

BETWEEN:

I & J FOODS LIMITED

Applicant

IN THE MATTER of an application by I & J FOODS LIMITED

REASONS FOR JUDGMENT

CORAM:    Branson J

PLACE:    Adelaide

DATE:     30 June 1995

In this matter the applicant seeks the making of certain orders concerning the administration pursuant to Part 5.3A of the Corporations Law of GIGA Investments Pty Ltd (administrator appointed) ("GIGA"). It seeks to have set aside a resolution of creditors of GIGA that the company execute a deed of company arrangement, and, in effect, have the issue of whether the company should execute a deed of company arrangement recommitted to the creditors for their further consideration. The applicant contends that the source of my power to make such orders is s447A of the Corporations Law.

Section 447A is in the following terms:-

"(1)The Court may make such orders as it thinks appropriate about how this Part [i.e. Part 5.3A] is to operate in relation to a particular company.

(2)For example, if the Court is satisfied that the administration of the company should end:

(a)because the company is solvent; or

(b)because provisions of this Part are being abused; or

(c)for some other reason;

the Court may order under subsection (1) that the administration is to end.

(3)Any order may be made subject to conditions.

(4)An order may be made on the application of:

(a)the company; or

(b)a creditor of the company; or

(c)in the case of a company under administration - the administrator of the company; or

(d)in the case of a company that has executed a deed of company arrangement - the deed's administrator; or

(e)the Commission; or

(f)any other interested person."

The width of the power given to the Court by s447A has been considered on a number of occasions.

The Appeal Division of the Supreme Court of Victoria in Brash Holdings Ltd (admin apptd) v Katile Pty Ltd (1994) 13 ACSR 504 considered whether s447A empowered the court to make declarations about the legislative effect of Pt5.3A of the Corporations Law. It held that it did not on the basis that a declaratory order about how the part does operate in relation
to a particular company is not an order about how the part is to operate in relation to that company. However as to the width of s447A the Court at pp507-508 said as follows:-

"The application to the court was on its face made under s447A, an unusual section, which evidently proceeds on the view that Pt5.3A is inadequate in the provision which it otherwise makes for the new form of administration and that it is therefore necessary to enable gaps in the part to be filled by the exercise by the court of wide powers to make such orders as it thinks appropriate about how the part is to operate in relation to a particular company.  It seems clear enough that s447A(1) is intended to empower the court to make orders which alter what would otherwise be the operation of the part in relation to a particular company."

In Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 at 611 Young J, after reviewing the history of the provision, including the Minister's second reading speech in the House of Representatives, expressed the following view:-

"Although the flavour from this material is that there is to be a short moratorium, and that the interim administration, before the creditors make the appropriate resolution, is not to be indefinite, there is also the flavour that whilst the court is to keep on the sidelines as much as possible, it is to be involved in a supervisory capacity, it is to be involved to ensure that secured creditors are not prejudiced and, indeed, it is to be involved and to use its powers to tailor make a procedure for each company, so that the spirit and objects of the Part will be implemented.

It seems to me that this reinforces the construction that I have placed on s447A, that the Court is to have plenary powers to do whatever it thinks is just in all the circumstances ....".

In Re Brashs Pty Ltd (1994) 15 ACSR 477 the Australian Securities Commission argued before Hayne J in the Supreme Court of Victoria that the only kind of orders which might be made under s447A were ones which filled in what would otherwise be a gap in the legislative scheme or added to the provisions of the Pt5.3A. His Honour at p481 expressed his view on the argument as follows:-

"Although it is clear from the reasons for decision in Katile that the court reserved any general question about the scope of the section for further consideration, I consider that the court did hold that the section does empower the court to make orders altering what otherwise would be the operation of Pt5.3A of the Law. Even if that is not so, and the matter is to be treated as free from authority which binds me, I am clearly of the view that the section does have the operation that has been identified."

In Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99 Burchett J of this Court identified the jurisdiction of the court pursuant to s447A as an important control over the "immense powers" given to administrators under Pt5.3A of the Corporations Law. His Honour expressed the view at p101 that s447A gave the court "broad discretionary powers".  Lee J, also of this Court, in Milankov Nominees Pty Ltd v Roycol Ltd (1994) 14 ACSR 296 at 301 took a similar view of s447A which he described as giving to the court an "unfettered power". His Honour concluded that pursuant to s447A the Court could restrain a company and its administrator from executing a deed, or by order varying the terms of a deed of company arrangement if it appeared to the court to be in the interests of creditors to do so. See also the consideration by Lindgren J of this Court of s447A in the Matter of Double V Marketing Pty Limited (In admin) (an unreported decision delivered 24 March 1995).
This is plainly an area of statutory construction which calls for uniformity in decision making (ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485). I conclude that s447A gives the court wide discretionary powers to make orders such as those here sought. That is, orders which alter what would otherwise be the operation of Division 5 of Pt5.3A of the Corporations Law in relation to GIGA in that they set aside a disputed resolution of creditors and, in effect, require fresh compliance with Division 5 according to a timetable set by the Court.

On the question of whether or not in the exercise of my discretion it would be appropriate in the circumstances of this case to make orders of the type sought, I have concluded that it would be appropriate.

There is a clear dispute on the materials before me as to the circumstances surrounding the holding of a meeting of creditors of GIGA on 9 June 1995. There is also dispute as to precisely what was said and done during the course of the meeting and as to the interpretations to be placed on such events. It is contended that such matters impact on the validity of the resolution of creditors of 9 June 1995. Since 9 June 1995 a new administrator has been appointed to GIGA. The company by its administrator, the previous administrators, who by leave have intervened in these proceedings, and those creditors of GIGA represented before me all seek, or alternatively do not oppose, orders to the effect of those proposed by the applicant. There is nothing to be gained by the creditors of GIGA from a contested hearing on the issue of the validity of the resolution of creditors of 9 June 1995. On the contrary costs would unnecessarily be incurred. In my view it is consistent with the spirit and objects of Pt5.3A of the Corporations Law for the loss of time and costs which would attend such a hearing to be avoided.

I will hear counsel as to the precise terms of the orders to be made.

I certify that this and the preceding     pages are a true copy of the Reasons for Judgment of Justice Branson.

Associate:

Dated:

Counsel for the Applicant        :    Mr P Slattery
Solicitors for the Applicant     :    Wallmans

Counsel for the Administrator        :    Mr M Barrett

Solicitors for the Administrator  :    Kelly & Co.

Hearing Date  :    20 June 1995