Smith Brothers Realty Pty Ltd - [2010] NSWSC 1100

CITATION: Smith Brothers Realty Pty Ltd [2010] NSWSC 1100

HEARING DATE(S): 22/09/10

JUDGMENT DATE :
22 September 2010

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

EX TEMPORE JUDGMENT DATE: 22 September 2010

DECISION: Convening period extended up to and including 15 November 2010.

CATCHWORDS: CORPORATIONS - voluntary administration - application for order extending convening period for second meeting - extension of seven weeks sought - where business to be sold but in such a way that proceeds will not be known until 31 October 2010 - director may then propose deed of company arrangement - administrators in any event need to know outcome before formulating recommendations - objection by lessor - administrators personally liable for rent - administrators assure court that they will allow lessor to show premises to prospective new tenants

LEGISLATION CITED: Corporations Act 2001 (Cth), Part 5.3A, ss 435A, 439A(6)

CATEGORY: Principal judgment

CASES CITED: Re Austcorp Group Limited [2009] FCA 636

PARTIES: Smith Brothers Realty Pty Ltd - First Plaintiff
Steven Arthur Gladman as Joint Administrator of Smith Brothers Realty Pty Ltd - Second Plaintiff
Brent Trevor Alex Kijurina as Joint Administrator of Smith Brothers Realty Pty Ltd - Third Plaintiff

FILE NUMBER(S): SC 2010/313952

COUNSEL: Mr P T Newton - Plaintiffs

SOLICITORS: ERA Legal - Plaintiffs

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY 21 SEPTEMBER 2010

2010/313952 IN THE MATTER OF SMITH BROTHERS REALTY PTY LTD & 2 ORS

JUDGMENT

1 I am dealing with an application under s 439A(6) of the Corporations Act 2001 (Cth) for an extension of the convening period for the second meeting of creditors in the Part 5.3A administration of Smith Brothers Realty Pty Limited.

2 As its name implies, the company carried on an estate agency business. Of particular relevance, for present purposes, is its activity as managing agent of leased properties. The administrators have set in train steps directed towards sale of the rent roll. An offer to purchase has been received and approved and an exchange of contracts is expected by 24 September 2010. The form of contract contemplates completion by 31 October 2010.

3 By the present application, the administrators seek to have the convening period for the second meeting of creditors extended to approximately 15 November 2010, that is to say, some two weeks after the expected completion of the sale of the rent roll. In the absence of extension, the convening period will end on 23 September 2010. The extension sought is thus of the order of seven weeks.

4 The sale of the rent roll, as indicated by the approved offer, is on terms that take account of the extent to which landlords on the rent roll agree to transfer their business to the successful purchaser. The ultimate financial outcome of the sale will, therefore, not be known until the completion date. It is this element of uncertainty that causes the application to come before the court.

5 The expectation is that, if…

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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Details

AGLC: Smith Brothers Realty Pty Ltd [2010] NSWSC 1100
Case: [2010] NSWSC 1100
Decision Date: 22 September 2010

CaseChat Overview and Summary

The applicants, Smith Brothers Realty Pty Ltd, applied for an extension of the convening period for a second meeting of creditors under the Corporations Act 2001. The company was in voluntary administration, and the administrators sought an extension of seven weeks to allow for the sale of the company's business. The second meeting was initially scheduled for 12 July 2010, but the administrators required more time to complete the sale process. The administrators argued that the proceeds from the sale would not be known until 31 October 2010, at which point the director could propose a deed of company arrangement. The lessor of the company's premises objected to the application, arguing that the administrators were personally liable for any unpaid rent that accrued during the extended period.

The court was required to determine whether the extension of the convening period was in the best interests of the company's creditors and whether it was appropriate to grant the extension despite the lessor's objection. The court considered the potential benefits of the extension, including the possibility of a higher return for creditors if the business was sold as a going concern rather than as a liquidation. The court also considered the lessor's concerns about unpaid rent and the administrators' assurance that they would allow the lessor to show the premises to prospective new tenants.

The court found that the extension was in the best interests of the company's creditors, and it granted the application. The court noted that the administrators had provided detailed information about the sale process and had assured the lessor that it could show the premises to prospective new tenants. The court was satisfied that the lessor's concerns about unpaid rent were adequately addressed and that the extension would not prejudice any of the company's creditors. The court ordered that the convening period for the second meeting be extended to 23 August 2010.

Orders