Scott, in the matter of Tzukuri Pty Ltd (Administrators Appointed) ACN 168 417 721
[2018] FCA 16
•23 January 2018
FEDERAL COURT OF AUSTRALIA
Scott, in the matter of Tzukuri Pty Ltd (Administrators Appointed) ACN 168 417 721 [2018] FCA 16
File number: NSD 43 of 2018 Judge: RANGIAH J Date of judgment: 23 January 2018 Catchwords: CORPORATIONS – application by administrators for extension of time to convene creditors’ meeting under s 439A(6) Corporations Act 2001 (Cth) – balance of considerations – application for non-publication order pursuant to s 37AF Federal Court of Australia Act 1976 (Cth) – application granted Legislation: Corporations Act 2001 (Cth) s 439A, 447A(1), Pt 5.3A
Federal Court of Australia Act 1976 (Cth) s 37AF(1) and 37AG(1)(a)
Cases cited: Diamond Press Australia Pty Ltd [2001] NSWSC 313
In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777
In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 316
Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) [2010] FCA 30
Park (Administrator), in the matter of Surfstitch Group Limited [2017] FCA 1221
Pleash, in the matter of Consolidated Tin Mines Limited (Administrators Appointed) [2016] FCA 931
Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636
Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683
Date of hearing: 23 January 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 15 Counsel for the Plaintiffs: Mr J Hynes Solicitor for the Plaintiffs: Johnson Winter & Slattery ORDERS
NSD 43 of 2018 IN THE MATTER OF TZUKURI PTY LTD (ADMINISTRATORS APPOINTED) ACN 168 417 721
ANDREW JOHN SCOTT (AS A JOINT AND SEVERAL ADMINISTRATOR OF TZUKURI PTY LTD (ADMINISTRATORS APPOINTED) ACN 168 417 721)
First Plaintiff
CHRISTOPHER CLARKE HILL (AS A JOINT AND SEVERAL ADMINISTRATOR OF TZUKURI PTY LTD (ADMINISTRATORS APPOINTED) ACN 168 417 721)
Second Plaintiff
TZUKURI PTY LTD (ADMINISTRATORS APPOINTED) ACN 168 417 721
Third Plaintiff
JUDGE:
RANGIAH J
DATE OF ORDER:
23 JANUARY 2018
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period, as defined by s 439A(5) of the Act, for the meeting of creditors of the Tzukuri Pty Ltd (Administrators Appointed) ACN 168 417 721 (the Company), be extended up to and including Monday 30 April 2018.
2.Pursuant to s 447A of the Act, Pt 5.3A of the Act is to operate in relation to the Company as if the meeting of creditors of the Company required by s 439A of the Act may be convened and held at any time during the period as extended under Order 1, and the period of five (5) business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.
3.Any person who can demonstrate sufficient interest, including any creditor of the Company or the Australian Securities and Investments Commission, may apply to vary these orders on the giving of reasonable notice to the first and second plaintiffs.
4.The plaintiffs have leave to apply for any further extension of the convening period, or any matter arising in the administration of the Company generally.
5.The first and second plaintiffs provide a copy of these orders to the creditors of the Company by:
(a)email to all creditors of the Company who have provided the plaintiffs with an email address; and
(b)mail to all creditors of the Company who have not provided the plaintiffs with an email address.
6.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth):
(a)Exhibit 2 is not to be published or accessed except pursuant to an order of the Court;
(b)any reference in the transcript of the proceedings on 23 January 2018 by Counsel for the Plaintiffs to the value of property or assets contained in Exhibit 2 be suppressed and not published except pursuant to an order of the Court.
7.The costs and expenses of and incidental to these proceedings be costs and expenses in the administration of the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
RANGIAH J:
The first and second plaintiffs (the Administrators) were appointed as administrators of Tzukuri Pty Ltd (the Company) on 20 December 2017.
The Administrators seek an order pursuant s 439A(6) of the Corporations Act 2001 (Cth) that the convening period for a meeting of the Company’s creditors be extended for three months. Unless extended, the convening period will, pursuant to s 439A(5) of the Corporations Act, expire on 30 January 2018, which would require the Administrators to hold the meeting no later than 6 February 2018.
The business of the Company involved research, design and manufacture of Bluetooth-enabled reading glasses and sunglasses and a related mobile tracking application, as well as retail sales. The Company ceased its research and trading activities and terminated the employment of its employees at some point prior to the appointment of the Administrators.
The first plaintiff, Mr Scott, deposes that the Company’s books and records reveal that the Company has a negative net asset position of $837,522. However, the sole director of the Company believes that the Company’s intellectual property has a very substantial value. The intellectual property relates to particular processes which are not completely documented or readily identifiable from the records of the company.
Mr Scott deposes that in order to properly assess the nature of the intellectual property, the Administrators require access to the knowledge and expertise of the Company’s director and a particular former employee of the Company. The Administrators wish to properly document the intellectual property, make an assessment of the value and saleability of the property, undertake a market sounding process and, if appropriate, undertake a more formal sale campaign. Mr Scott says that if there is no market appetite for acquiring the intellectual property, the Administrators would convene a meeting of creditors and recommend that the Company be wound up.
Mr Scott considers that there will be minimal risks to the creditors of the Company in extending the convening period for three months. He indicates that “in a liquidation scenario” the return to creditors will be in the range of one to two cents in the dollar, but that if the extension is granted, there is likely to be an improved return for the creditors.
At the first creditors’ meeting, Mr Scott raised the prospect of seeking an extension of the convening period and, on 17 January 2018, issued letters to all known creditors advising of the application. No creditors have raised any objection to the proposed extension. The Australian Securities and Investments Commission (ASIC) has also been advised of the application and has raised no objection.
Section 439A of the Corporations Act provides, relevantly:
439A Administrator to convene meeting and inform creditors
(1)The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6).
…
(2)The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.
(5) The convening period is:
(a)if the day after the administration begins is in December, or is less than 25 business days before Good Friday—the period of 25 business days beginning on:
(i) that day; or
(ii) if that day is not a business day—the next business day; or
…
(6)The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.
…
The application has been brought within 25 business days of 20 December 2017, when the administration began.
By s 447A(1) of the Corporations Act, the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company.
It is well established that the Court is to have regard to and balance the interests of creditors in a speedy administration with the need to allow sufficient time for administrators to carry out their function properly and maximise the benefit to creditors through a proper administration: Diamond Press Australia Pty Ltd [2001] NSWSC 313 (Barrett J) at [10]; Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 (Lindgren J) at [18]; Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) [2010] FCA 30 at [15]-[16]; Park (Administrator), in the matter of Surfstitch Group Limited [2017] FCA 1221 at [29]-[30] (Gleeson J); Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683 at [22] (Jacobson J); In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777 at [12] (Black J).
It is also relevant to take into account that no objection to an extension of the convening period was raised at a first meeting of creditors where notice of a proposed extension was given: see In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 316 (Hely J) at [2].
The proposed extension will afford to the administrators the time they need to complete investigations into the value and saleability of the Company’s intellectual property and to complete any sale process. It appears in the best interests of the creditors for this to occur as it is likely to maximise the return for creditors. No objection has been raised to this course by the creditors or ASIC. In these circumstances, there are sound reasons to grant an extension of the convening period for three months.
An order should also be made granting leave to any party with a sufficient interest, including creditors and ASIC, to apply for a variation of the orders.
A document which is Exhibit 2 in this proceeding contains a figure given by the Company’s director as his estimate of the value of the Company’s intellectual property. It is appropriate to maintain confidentiality in respect of that information to ensure the integrity of the Administrators’ sales process and to prevent prejudice to the proper administration of justice: see s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth); Pleash, in the matter of Consolidated Tin Mines Limited (Administrators Appointed) [2016] FCA 931 (Edelman J) at [21]. A non-publication order should be made pursuant to s 37AF(1) of the Federal Court of Australia Act.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah. Associate:
Dated: 23 January 2018
2
8
2