Sims, in the matter of Huon Corporation Pty Ltd (Administrators appointed)

[2006] FCA 958

FEDERAL COURT OF AUSTRALIA

Sims, in the matter of Huon Corporation Pty Ltd (Administrators appointed) [2006] FCA 958

CORPORATIONS – voluntary administration – application for extension of time for convening and holding of second meeting of creditors – application for order permitting committee of creditors to fix remuneration of voluntary administrators – proper plaintiffs – large and complex administration – Held: the administrators proper plaintiffs in both respects – discretion exercised to make both orders sought.

Corporations Act 2001 (Cth) ss 439A, 447A, 449E

Re Daisytek Australia Pty Ltd (administrators appointed) (2003) 45 ACSR 446 cited

IN THE MATTER OF HUON CORPORATION PTY LIMITED
(ADMINISTRATORS APPOINTED) ACN 115 243 206

ANTHONY MILTON SIMS, SCOTT DARREN PASCOE AND
KENNETH STEWART SELLERS (Administrators)

NSD 1376 OF 2006

LINDGREN J
20 JULY 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1376 OF 2006

IN THE MATTER OF HUON CORPORATION PTY LIMITED
(ADMINISTRATORS APPOINTED) ACN 115 243 206

ANTHONY MILTON SIMS SCOTT DARREN PASCOE KENNETH STEWART SELLERS Plaintiffs
JUDGE:	LINDGREN J
DATE OF ORDER:	20 JULY 2006
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The plaintiffs have leave to file in Court the originating process dated 19 July 2006 (“the Originating Process”) and the affidavit of Scott Darren Pascoe sworn 19 July 2006.

2.The Originating Process be returnable instanter.

3.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (“the Act”), the convening period defined in s 439A(5)(b) of the Act in respect of Huon Corporation Pty Limited (Administrators Appointed) ACN 115 243 206 (“the Company”) be extended by 90 days, and if the 90^th day should be a Saturday, Sunday or Public Holiday, to the next business day after the 90^th day.

4.Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate in relation to the Company as if:

(a)there were added to para (a) of s 449E(1) immediately following the word “be”, the following words:

“or by a resolution of a committee of creditors appointed pursuant to subsection 436E(1) of the Act, passed after not less than seven days’ written notice has been given to the members of that committee of the amount of remuneration claimed by the administrators of the company under administration, and details of how that amount has been arrived at and calculated, including:”

(i)details of the staff classification, hourly rate and hours charged by each staff member,

(ii)a description of the tasks completed by each staff member; and

(iii)details of the skills relevant to each staff classification; and ...”

(b) there were added to subsection 436F(1) of the Act, the following:

“  ;  and

(c)to fix by resolution the remuneration of the administrator of a company under administration, by resolution passed after not less than seven days’ written notice has been given to the members of the committee of the amount of remuneration claimed by the administrator, and details of how that amount has been arrived at and calculated, including:

(i)details of the staff classification, hourly rate and hours charged by each staff member,

(ii)a description of the tasks completed by each staff member; and

(iii)details of the skills relevant to each staff classification; and ...”

(c)       Subsection 439A(2) provided, in lieu of its present provision:

“The meeting must be held at any time during the period that commences on the day when the administration begins and ends on the day on which the fifth business day following the expiry of the convening period occurs.”

5.Any person having a sufficient interest may apply to the Court for an order discharging or varying either or both of Orders 3 and 4 above.

6.The costs of this proceeding be payable out of the assets of the Company.

7.These orders be entered forthwith.

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	NSD 1376 OF 2006

IN THE MATTER OF HUON CORPORATION PTY LIMITED
(ADMINISTRATORS APPOINTED) ACN 115 243 206

ANTHONY MILTON SIMS
SCOTT DARREN PASCOE
KENNETH STEWART SELLERS
Plaintiffs

JUDGE:	LINDGREN
DATE:	20 JULY 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1. The plaintiffs are voluntary administrators of Huon Corporation Pty Ltd (administrators appointed) (“the Company”), having been appointed by resolution of the Company’s director on 30 June 2006.

2. The plaintiffs apply, first, for an order under s 439A(6) of the Corporations Act 2001 (Cth) (“the Act”) extending the convening period for the second meeting of creditors of the Company, and, secondly, for an order under s 447A of the Act permitting the committee of creditors to determine the plaintiffs’ remuneration as administrators.

3. I think that the plaintiffs are proper plaintiffs in both respects. As to s 447A, subs (4) of that section provides expressly that an order under the section may be made on the application of various persons, including, in the case of a company under administration, the administrator of the company.

4. In relation to s 439A, the obligation to convene the second meeting of creditors is imposed on the administrator of a company under administration. The convening period is set out in s 439A(5)(b), and is, in the circumstances of the present case, a period of 21 days commencing on 30 June 2006. Subsection 439A(6) provides:

   “The court may extend the convening period on an application made within the period referred to in paragraph (5)(a) or (b), as the case requires.”

   Since the obligation is imposed on the administrator, the administrator is a proper applicant for an extension of time.

   FACTS

5. The Company conducts business principally as a manufacturer of car parts for the Australian automotive industry.  The business is divided into three business units.  The Company has some 600 employees.

6. The evidence shows that the administration is a large and complex one.  I need not refer to all of the evidence.  It is contained in an affidavit of one of the plaintiffs, Scott Darren Pascoe, made on 19 July 2006, and in the exhibit to that affidavit.

7. The plaintiffs are all experienced administrators. Mr Pascoe states, and I accept, that the plaintiffs need more time in which to complete their report and arrive at the opinion referred to in subs 439A(4) of the Act. They have formed the opinion that it is desirable that they have an opportunity to try to sell the Company’s business as a going concern. There are other matters to which they must attend. Paragraph 36 of Mr Pascoe’s affidavit is as follows:

   “The Administrators are of the opinion that it is in the interests of the creditors of the Company that the convening period for the Second Meeting of Creditors be extended for a period of up to 90 days.  The reason why this particular length of time is sought is because the following key issues are outstanding:

   (a)It is the Administrators’ view that the return to creditors would be maximised if the business of the Company was able to be sold as a going concern.  Since our appointment, the Administrators have spent a considerable amount of time stabilising the business and dealing with the creditors, the employees and the Trade Unions to ensure that the business operations of the Company continue.  We have also commenced the sale process, by inviting expressions of interest to purchase the business and appointing and liaising with an international consulting firm.  The Administrators are currently uncertain whether they will be able to maintain the Company’s business as a going concern.

   (b)The Administrators are also pursuing negotiations with key customers and stakeholders to ensure the stabilisation of the Company’s current operations with a view to effecting a sale as a going concern.

   (c)The Administrators are pursuing a resolution of industrial action in order to maximise the chance of the business continuing as a going concern.  The Administrators have sought funding support from key stakeholders.  All of these matters introduce a high level of uncertainty as to the likely outcome for creditors.

   (d)The Administrators are pursuing litigation against:

   (i)        Nylex in relation to the purchase of the business; and

   (ii)the Director, Huon Property Holdings Pty Limited, Mail Property Pty Limited, Liam Property Pty Ltd and Mr Hunter to recover the Bendigo Property, the Frankston Property and the Dandenong Property.

   (e)In my opinion, the period of extension sought of up to 90 days is in the interests of creditors, given:

   (i)the size and complexity of the separate businesses;

   (ii)the likely timetable for the sale programme for the businesses;

   (iii)the nature of the various litigation proceedings presently being undertaken by the Company.”

8. If the Court were not to extend the convening period, the plaintiffs would recommend at the second meeting of creditors that the meeting be adjourned for 60 days to enable at least some of the above matters to be attended to.  In substance, that course would give rise to the cost of two meetings rather than one.

9. In relation to the fixing of the remuneration of the plaintiffs as administrators, s 449E(1) of the Act provides for the fixing of their remuneration by a resolution of creditors at a meeting convened under s 439A or s 445F, as the case may be. There is evidence as to the cost of convening a meeting of creditors. On the basis that the 90-day extension is granted, the administrators would be required to do a considerable amount of work without any possibility of their being paid until a meeting, possibly nearly 90 days hence.

10. Importantly, there is evidence that the committee of creditors supports the making of both orders sought.  The committee represent 87 percent in value of the unsecured creditors and 75 percent in value of all creditors, secured and unsecured.  There is also evidence that the secured creditor, GE Commercial Corporation (Australia) Pty Ltd, consents to the making of the orders.

    CONCLUSION

11. The evidence establishes a case for the making of both orders and they should be made. An order extending the convening period, without more, would leave s 439A(2) requiring that the meeting be held within the period of five business days following the expiry of the extending convening period, and no earlier: cf Re Daisytek Australia Pty Ltd (administrators appointed) (2003) 45 ACSR 446 at [10] – [14]. An order should be made, or sought, under s 447A permitting the meeting to be held during the extended convening period or within the said period of five business days thereafter.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated:             28 July 2006

Counsel for the Plaintiffs:	Mr P M Wood
Solicitor for the Plaintiffs:	Blake Dawson Waldron
Date of Hearing:	19, 20 July 2006
Date of Judgment:	20 July 2006