In the matter of Pan Pharmaceuticals Limited [2003] FCA 598
CORPORATIONS – application by administrators of companies in voluntary administration for 75-day extension of time under s 439A of Corporations Act 2001 (Cth) for convening of meeting of creditors required by that section – director/contributory, pursuant to leave to appear, makes submissions in opposition to the grant of extension – exercise of discretion – whether it should be left to creditors at meeting held in accordance with timetable laid down in s 439A whether to give administrators more time and to adjourn meeting accordingly.
Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 cited Re Echuca Insured Housing Loans Pty Ltd (Administrator Appointed) v Lumsden, unreported, Supreme Court of Victoria, Harper J, 4 February 1994 cited Re Tracker Software (Australia) Pty Ltd (Administrator Appointed) (1997) 24 ACSR 92 cited
IN THE MATTER OF PAN PHARMACEUTICALS LIMITED
N 3033 OF 2003
LINDGREN J 6 JUNE 2003 SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 3033 OF 2003
IN THE MATTER OF PAN PHARMACEUTICALS LIMITED (ADMINISTRATORS APPOINTED) (ACN 091 032 914)
AND PAN PHARMACEUTICALS EXPORT PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 100 897 514) AND PAN LABORATORIES (AUSTRALIA) PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 003 763 308) AND PAN PHARMACEUTICALS SERVICES PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 095 628 943) AND PAN PHARMACEUTICALS TECHNOLOGIES PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 104 129 188)
ANTHONY GREGORY McGRATH AND CHRISTOPHER JOHN HONEY IN THEIR CAPACITY AS THE JOINT ADMINISTRATORS OF PAN PHARMACEUTICALS LIMITED (ADMINISTRATORS APPOINTED) (ACN 091 032 914) AND PAN PHARMACEUTICALS EXPORT PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 100 897 514) AND PAN LABORATORIES (AUSTRALIA) PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 003 763 308) AND PAN PHARMACEUTICALS SERVICES PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 095 628 943) AND PAN PHARMACEUTICALS TECHNOLOGIES PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 104 129 188) PLAINTIFFS
JUDGE:
LINDGREN J
DATE OF ORDER:
6 JUNE 2003
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.An order extending the convening periods for the meetings of creditors required to be held under s 439A of the Corporations Act 2001 (Cth) of:
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 3033 OF 2003
IN THE MATTER OF PAN PHARMACEUTICALS LIMITED (ADMINISTRATORS APPOINTED) (ACN 091 032 914)
AND PAN PHARMACEUTICALS EXPORT PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 100 897 514) AND PAN LABORATORIES (AUSTRALIA) PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 003 763 308) AND PAN PHARMACEUTICALS SERVICES PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 095 628 943) AND PAN…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Re Pan Pharmaceuticals Ltd [2003] FCA 598
Case
[2003] FCA 598
Decision Date
CaseChat Overview and Summary
The case of Re Pan Pharmaceuticals Ltd involved the administrators of Pan Pharmaceuticals Limited and its subsidiaries who sought a 75-day extension for convening a creditors' meeting under section 439A of the Corporations Act 2001 (Cth). The primary issue before the court was whether the administrators should be granted an extension to the convening period for the meeting of creditors, and if so, whether the decision should rest with the creditors at the meeting. James Selim, a director and contributory of Pan, opposed the extension and made submissions pursuant to leave granted by the court.
The court considered the discretion to grant an extension under section 439A(2) of the Corporations Act, which allows for a meeting to be convened within a five-business-day period after the appointment of administrators. The court also evaluated the arguments presented by Mr. Selim, who contended that the decision on whether to extend the convening period should be left to the creditors at the meeting. The court noted that the administrators had already taken significant steps to manage the administration process, including meeting with creditors, overseeing the product recall, and engaging with the Therapeutic Goods Administration. Given the complexity of the situation and the extensive work required, the court found that an extension was warranted to allow the administrators to complete their tasks effectively.
In granting the extension, the court emphasized that the decision to convene the meeting earlier should depend on the outcome of discussions with the Therapeutic Goods Administration regarding the reinstatement of Pan's manufacturing licence. The court also noted that if the administrators were in a position to convene the meeting earlier, they would apply for an order under section 447A of the Act to advance the meeting. The court concluded that, given the circumstances, the 75-day extension sought by the administrators should be granted. The final orders extended the convening periods for the meetings of creditors of Pan Pharmaceuticals Limited and its subsidiaries for a period of 75 days.
Orders
Orders of the court
1. An order extending the convening periods for the meetings of creditors required to be held under s 439A of the Corporations Act 2001 (Cth) of:
(a) Pan Pharmaceuticals Limited (Administrators Appointed) ACN 091 032 914;
Pursuant to r 2.13 of the Corporation Rules 2000, I gave leave to James Selim, a director of all five VA companies and a contributory of Pan, to be heard in the proceeding without becoming a party to the proceeding. FACTS Pan is a publicly listed company. It has been manufacturing pharmaceutical products for various “sponsors” for approximately 29 years. Generally, the products were manufactured by Pan pursuant to written contracts with the sponsors, which supplied the products to distributors or retailers who offered them for sale to the public. Pan is the primary trading vehicle of the group. The fate of each of the four subsidiaries is inextricably linked to the fate of Pan. On 30—31 January 2003 the Therapeutic Goods Administration (“TGA”) conducted an unannounced Good Manufacturing Practices (“GMP”) audit on Pan to investigate possible causes of recalls of “Travacalm”, a travel sickness product manufactured by Pan, due to allegations of a series of adverse consumer reactions to the product. The purpose of the audit was to assess Pan’s compliance with manufacturing standards and with the conditions set out in its manufacturing licence. Further audits were carried out by the TGA in February and April 2003, and an audit report was issued on 27 April 2003. The TGA concluded that the issues identified during the January audit were not restricted to the one product; that corrective actions taken by Pan in response to previous TGA audits had been unsatisfactory; and that there were “critical GMP deficiencies” and instances of non-compliance with the conditions of Pan’s licence to manufacture therapeutic goods. By letters dated 28 April 2003 from the TGA, Pan was informed that the products listed in schedules to the letters would be removed from the Australian Register of Therapeutic Goods and that Pan was required to take immediate steps to recover all such products manufactured and supplied since 1 May 2002. This product recall was to be conducted to consumer level and extended to all products manufactured by Pan. By a further letter from the TGA dated 28 April 2003 Pan was advised that its licence to manufacturer therapeutic goods had been suspended for six months. Mr McGrath, one of the Administrators, states that he understands the product recall to be the largest product recall ever to be conducted in Australia. Pan has received over 30 letters to date from or on behalf of sponsors for which Pan has manufactured products, stating that they will be seeking compensation from Pan in relation to losses incurred as a result of the actions of the TGA. Pan has also received more than 20 letters from members of the public or their legal representatives claiming compensation for losses alleged to have been suffered as a result of the ill effects of Pan products (principally Travacalm). According to Mr McGrath’s affidavit, since their appointment on 22 and 23 May 2003, the Administrators have: “(a)convened meetings of creditors of each of the VA companies under section 436A of the Corporations Act which were held on 29 May 2003;(b)convened a meeting of the committee of creditors which is to be held on Thursday 12 June 2003; (c)requested the directors of each of the VA companies to provide a report as to affairs pursuant to section 438A of the Corporations Act, and allowed the directors an extension to provide that report until 13 June 2003; (d)met with various major creditors to discuss the nature and implications of the appointment of the Administrators; (e)managed the product recall; (f)reviewed the contingent claims made or threatened to be made against the company with a view to forming an opinion about the value of those claims, and developed a protocol for dealing with them;(g)met with representatives of the Therapeutic Goods Administration to discuss the reinstatement of Pan’s manufacturing licence; (h)overseen a major review of the company processes and in particular its computer systems to address deficiencies identified; (i)gathered various documents and information in relation to the businesses; (j)reviewed financial reports prepared by the management of the VA companies as at 30 December 2002; (k)reviewed financial forecasts and estimates prepared by management with the assistance of Deloitte Touche Tohmatsu during May 2003 relating to the solvency issues of the VA companies; (l)held discussions and issued instructions to legal advisors relating to various matters relevant to the administration of each of the VA companies including proceedings recently issued against the VA companies; (m)liaised with the Australian Workers Union who represent a proportion of the workforce concerning the efforts to obtain reinstatement of the manufacturing licence, offering the business for sale and securing employee entitlements; (n)reviewed financial models prepared by the company management detailing the costs associated with the recall, the necessary work required to satisfy the TGA to reinstate the licence and ascertained the costs involved with maintaining an appropriate level of workforce to enable manufacture to begin if the licence suspension is lifted; (o)dealt with numerous retention of title claims; (p)dealt with forensic accountants (Deloitte Touche Tohmatsu) and lawyers to establish guidelines for the assessment of claims by sponsors for reimbursement of legal costs and for loss of profits; and (q)dealt with numerous telephone queries from creditors.”
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
LINDGREN J
In the course of the hearing I raised with senior counsel for the Administrators the possibility that his clients may find that they are in a position to convene the meeting earlier than the five business day period referred to in subs 439A(2) of the Act. Whether this will transpire will depend principally on the result of the discussions with the TGA about renewal of Pan’s manufacturing licence. Senior counsel for the Administrators took instructions and informed the Court that if his clients are in a position to convene the meeting of creditors earlier, they will apply to the Court for an order under s 447A of the Act allowing the meeting to be advanced.CONCLUSION All the evidence being one way, the 75 day extension sought should be granted.