Source: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2020/2020fca0542
Timestamp: 2020-07-07 17:17:34
Document Index: 386566123

Matched Legal Cases: ['art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5']

NSD 439 of 2020
CORPORATIONS – application to modify requirements of Part 5.3A of the Corporations Act 2001 (Cth), the Insolvency Practice Schedule (Corporations) and the Insolvency Practice Rules Corporations 2016 (Cth) to permit administrators to give notice of creditors’ meetings and other notifications to or communications by creditors with the administrators to be given by electronic means and to permit creditors’ meetings and any future meetings of committees of inspection to be conducted exclusively by audio-visual or telephone conference – where state and federal governments imposed limits on gatherings of people to supress the spread of the COVID-19 virus – where orders for notice of meeting and notifications between administrators and creditors promotes quick and cheap communications, conserving the limited assets of the companies for the benefit of creditors – where provision made for affected persons to apply to the Court for variation of the orders – application granted.
CORPORATIONS – application to extend the period for administrators to give notice under s 443B of the Corporations Act 2001 (Cth) where time during which notices may be given has expired – where extension is in the best interests of creditors generally – where administrators delayed by government-imposed physical distancing requirements designed to stop the spread of the COVID-19 virus – where provision made for affected persons to apply to the Court for variation of the orders – application granted.
COSTS – application for costs by asset lessor granted leave under r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) – where no reason to depart from usual rule – application refused.
Corporations Act 2001 (Cth) ss 435A, 443A, 443B, 447A, 1322
Corporations Act 2001 (Cth) Sch 2, Insolvency Practice Schedule (Corporations) ss 90-15, 90-20
Corporations Regulations 2001 (Cth) Pt 5.3A
Federal Court (Corporations) Rules 2000 (Cth) r 2.13
Insolvency Practice Rules (Corporations) 2016 (Cth) rr 75-15, 75-30, 75-35, 75-40, 75-75, 75-225, 80-5
Australasian Memory Pty Limited v Brien [2000] HCA 30; (2000) 200 CLR 270
Bumbak (Administrator), in the matter of Duro Felguera Australia Pty Ltd (Administrators Appointed) [2020] FCA 422
In the matter of BBY Ltd [2015] NSWSC 974
Silvia v FEA Carbon Pty Ltd [2010] FCA 515; (2010) 185 FCR 301
Mr D Krochmalik
IN THE MATTER OF TECHFRONT AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 157 983 303 & ORS
RYAN REGINALD EAGLE AND GAYLE DICKERSON, IN THEIR CAPACITY AS JOINT AND SEVERAL VOLUNTARY ADMINISTRATORS OF EACH OF TECHFRONT AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 157 983 303 SCREENCORP PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 069 599 300 AND TECHFRONT INFRASTRUCTURE SOLUTIONS PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 623 442 820
TECHFRONT AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 157 983 303
SCREENCORP PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 069 599 300
TECHFRONT INFRASTRUCTURE SOLUTIONS PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 623 442 820
1. The Originating Process filed on 17 April 2020 be made returnable before Farrell J at 2.15pm on 17 April 2020.
2. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Corporations Act), Part 5.3A of the Corporations Act is to operate in relation to each of the second plaintiff, third plaintiff and fourth plaintiff as if any notice (Notice) required to be given pursuant to rr 75-225(1) and 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) will be validly given to creditors of the second plaintiff, third plaintiff or fourth plaintiff by reason of the following steps having been taken at least five business days prior to the date of the proposed meeting:
(a) where the first plaintiffs:
(i) have an email address for a creditor, by sending the Notice by email to each such creditor;
(ii) where the first plaintiffs do not have an email address for a creditor but have a postal address for the creditor (or have received notification of non-delivery of a notice sent by email in accordance with (a)(i) above), by sending the Notice by posting a copy of it to the postal address for each such creditor;
(b) by causing the Notice to be published on the Australian Securities and Investments Commission (ASIC) published notices website at https://insolvencynotices.asic.gov.au/; and
(c) by publishing the Notice on the website maintained by the first plaintiffs at https://home.kpmg/au/en/home/services/advisory/deal-advisory/services/restructuring/creditors-shareholders/techfront-australia.html.
3. Pursuant to s 447A(1) of the Corporations Act, and further or alternatively s 90-15 of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act) (Insolvency Practice Schedule) if pursuant to any provision in any of Part 5.3A of the Corporations Act, Part 5.3A of the Corporations Regulations 2001 (Cth), the Insolvency Practice Schedule or the Insolvency Practice Rules, the first plaintiffs are required to provide any other notification to creditors during the administration of each of the second plaintiff, third plaintiff or fourth plaintiff, the applicable notice requirements will be satisfied by reason of the following steps having been taken:
(i) have an email address for a creditor, by notifying each such creditor of the relevant matter via email;
(ii) do not have an email address for a creditor but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with (a)(i) above), by notifying each such creditor in writing of the relevant matter via post;
(b) by publishing notice of the relevant matter on the website maintained by the first plaintiffs at https://home.kpmg/au/en/home/services/advisory/deal-advisory/services/restructuring/creditors-shareholders/techfront-australia.html; and
(c) to the extent the matter relates to a meeting that is the subject of r 75-40(4) of the Insolvency Practice Rules, by causing notice of the meeting to be published on the ASIC published notices website at https://insolvencynotices.asic.gov.au/.
4. Pursuant to s 447A(1) of the Corporations Act, and further or alternatively s 90-15 of the Insolvency Practice Schedule, to the extent not permitted specifically by rr 75-30, 75-35 and 75-75 of the Insolvency Practice Rules, the first plaintiff be permitted to hold meetings of creditors during the administration of each of the second plaintiff, third plaintiff or fourth plaintiff by telephone or audio-visual conference (only, and in place of a physical meeting) with such details of the arrangements for using the telephone or audio-visual conference facilities to be specified in each of the notices issued to creditors.
5. Pursuant to s 447A(1) of the Corporations Act, and further or alternatively s 90-15 of the Insolvency Practice Schedule, if a committee of inspection is formed for any of the second plaintiff, third plaintiff or fourth plaintiff, then to the extent not permitted specifically by r 80-5(3) of the Insolvency Practice Rules:
(a) a meeting of such committee of inspection may be convened by electronic notice sent to an email address specified by each of the members of the committee of inspection; and
(b) a meeting may be permitted to be held by telephone or audio-visual conference (only, and in place of a physical meeting) with such details of the arrangements for using the telephone or audio-visual conference facilities to be specified in each of the notices issued to, or by, the members of the committee of inspection.
6. Pursuant to s 443B(8) and/or s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to each of the second plaintiff, third plaintiff or fourth plaintiff, with respect only to any leases entered into by any of the second plaintiff, third plaintiff or fourth plaintiff with the lessors specified in Items 1 and 3 to 9 of Schedule 2 of these Orders, as if:
(a) the first plaintiffs’ personal liability under ss 443A(1)(c) and 443B(2) of the Corporations Act begins on 1 May 2020, such that the first plaintiffs are not personally liable for any liability with respect to the property leased, used or occupied by any of the second plaintiff, third plaintiff or fourth plaintiff (including amounts payable pursuant to any leases entered into by any of the second plaintiff, third plaintiff or fourth plaintiff) from the lessors specified in Items 1 and 3 to 9 of Schedule 2 of these Orders, in the period from 17 April 2020 to 1 May 2020 inclusive; and
(b) the words “within five business days after the beginning of the administration” in s 443B(3) of the Corporations Act instead read “by 1 May 2020”.
7. Pursuant to s 443B(8) and/or s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to each of the second plaintiff, third plaintiff or fourth plaintiff, with respect only to any leases entered into by any of the second plaintiff, third plaintiff or fourth plaintiff with the lessor specified in Item 2 of Schedule 2 of these Orders, as if:
(a) the first plaintiffs’ personal liability under ss 443A(1)(c) and 443B(2) of the Corporations Act begins on 24 April 2020, such that the first plaintiffs are not personally liable for any liability with respect to the property leased, used or occupied by any of the second plaintiff, third plaintiff or fourth plaintiff (including amounts payable pursuant to any leases entered into by any of the second plaintiff, third plaintiff or fourth plaintiff) from the lessor specified in Item 2 of Schedule 2 of these Orders, in the period from 17 April 2020 to 24 April 2020 inclusive; and
(b) the words “within five business days after the beginning of the administration” in s 443B(3) of the Corporations Act instead read “by 24 April 2020”.
8. The first plaintiffs must take all reasonable steps to cause notice of these orders to be given, within two (2) business days of the making of these orders, to:
(a) the creditors (including persons or entities claiming to be creditors) of each of the second plaintiff, third plaintiff and fourth plaintiff, in the following manner:
(i) Where the first plaintiffs have an email address for a creditor, by notifying each such creditor, via email, of the making of the orders and providing a link to a website where the creditor may download the orders and the Originating Process;
(ii) where the first plaintiffs do not have an email address for a creditor but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with (a)(i) above), by notifying each such creditor, via post, of the making of the orders and providing a link to a website where the creditor may download the orders and the Originating Process; and
(iii) by placing scanned, sealed copies of the Originating Process and the orders on the website maintained by the first plaintiffs at https://home.kpmg/au/en/home/services/advisory/deal-advisory/services/restructuring/creditors-shareholders/techfront-australia.html; and
9. Any person who can demonstrate a sufficient interest has liberty to apply to vary or discharge Orders 2 to 8 above, on 3 business days’ written notice being given to the plaintiffs and to the Court.
10. The plaintiffs have liberty to apply on 3 business days’ written notice to the Court in relation to any variation of these orders or any other matter generally arising in the administrations of any or all of the second plaintiff, third plaintiff and fourth plaintiff.
11. The plaintiffs’ costs of the application are to be treated as costs in the administrations of each of the second plaintiff, third plaintiff and the fourth plaintiff, jointly and severally.
12. These orders be entered forthwith.
1 The first plaintiffs, Ryan Reginald Eagle and Gayle Dickerson of KPMG, were appointed as joint and several voluntary administrators of the other plaintiffs, Techfront Australia Pty Ltd (administrators appointed) (Tf Australia), Screencorp Pty Ltd (administrators appointed) and Techfront Infrastructure Solutions Pty Ltd (administrators appointed) (Tf Infrastructure Solutions) (together Companies), pursuant to s 436A of the Corporations Act 2001 (Cth) by resolution of the directors of each of the Companies on 7 April 2020.
2 Each of the Companies is a proprietary company, incorporated and operating in Australia. They are part of a corporate group comprised of other companies incorporated and operating in Australia, New Zealand, Singapore and the United Arab Emirates known as the Global Sports Commerce group of companies (Group).
3 The only entities in the Group to enter external administration are the Companies. Screencorp is a wholly owned subsidiary of Tf Australia. Tf Infrastructure Solutions is also a subsidiary of Tf Australia, but it is not a wholly owned subsidiary; the other shares in Tf Infrastructure Solutions are held by Strategic Communications Management Pty Ltd. The shareholders of Tf Australia are Techfront International FZE (incorporated in the United Arab Emirates), Clive Potter and Clive Potter Marketing Pty Ltd ACN 002 558 296. Tf Australia’s ultimate holding company is Technology Frontiers (India) Pvt. Ltd (incorporated in India).
4 By an originating process filed on 17 April 2020, the administrators and each of the Companies sought orders pursuant to s 447A(1) of the Corporations Act and s 90-15 of the Insolvency Practice Schedule (Corporations) being Sch 2 to the Corporations Act, directed to enabling them to carry out the administration of the Companies having regard to the exigencies in the administration caused by measures taken by State and Federal Governments to suppress the COVID-19 virus. For instance, on 24 March 2020, the Prime Minister announced the shutdown of non-essential services, including indoor entertainment, sporting events and religious venues. On 29 March 2020, the National Cabinet agreed to limit indoor and outdoor gatherings to two persons only (with limited exceptions). It is not yet clear for what period those restrictions will remain in place.
5 By the originating process, the plaintiffs sought orders of an administrative kind:
(1) Permitting meetings of the Companies’ creditors, including the first meeting of creditors scheduled for 21 April 2020, to be conducted exclusively by audio-visual or telephone conference (and not in person);
(2) Permitting notices to be sent by email to those creditors for whom the administrators have email addresses; and
(3) With respect to any committee of inspection formed for any of the Companies, permitting meetings to be held exclusively by audio-visual or telephone conference (and not in person) and also permitting members of any such committee to send and receive notices by email.
6 The plaintiffs also sought a two week extension of the time during which the administrators may give notice under s 443B of the Corporations Act to lessors of certain equipment and motor vehicle leases about whether they would retain or give up possession of that property, having regard to the administrators’ personal liability for repayment obligations in the absence of an extension of time.
7 These are the reasons for making the orders sought by the plaintiffs.
8 The hearing of the application was conducted electronically and with regard to the Special Measures in Response to COVID-19 information note (SMIN-1) issued by Allsop CJ as at 31 March 2020.
9 Shortly before the hearing was due to start, Mr J Burke of Lark Lawyers indicated that he sought to appear on behalf of Bigstone Lending Pty Ltd, a lessor of certain equipment to Tf Australia. Mr Burke appeared at the hearing electronically and leave to be heard was granted to Bigstone under r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth). Mr Burke initially opposed the Court making orders extending time for the administrators to issue notices under s 443B. After Mr Burke had been provided with a copy of the plaintiffs’ written submissions and there had been an opportunity to confer, Mr Burke indicated that his client would not oppose an order being made in relation to his client, providing the extension was for seven days. No other creditors sought to be heard at the hearing.
10 Factual matters relating to the Companies and the administration referred to in these reasons rely on:
(1) Mr Eagle’s affidavit dated 17 April 2020 and exhibit RRE-1;
(2) The affidavit of Kassandra Suzann Adams, a solicitor employed by Clayton Utz (the solicitors to the plaintiffs), dated 17 April 2020. Ms Adams affidavit relates to letters sent by Mr Eagle to the holders of security interests in equipment and motor vehicle leases of which Tf Australia and Screencorp are lessees (Asset Leases), the response received from Bigstone (but no other lessor) and service of notice of these proceedings by emails sent to those creditors shortly after 11.00 am on 17 April 2020.
The Court notes that neither affidavit has been executed having regard to procedures adopted by the Court in accordance with SMIN-1. Mr Krochmalik, counsel for the plaintiffs, undertook that the affidavits would be sworn and filed as soon as circumstances permitted.
11 The plaintiffs filed written submissions on the morning of the hearing.
12 From the initial investigations of the administrators it appears that:
(1) The Group is an international media technology provider.
(2) Tf Australia is the main operating and employing entity within the Group in Australia.
(3) Tf Australia specialises in providing technology for sporting arenas including digital display systems, interactive spectator management solutions, customised sports programming solutions and augmented reality solutions for sports codes such as Soccer, Cricket, Rugby, Tennis, Golf and Motor Racing. Tf Australia also produces and supplies digital display systems to various other industries such as road transport, building facades, outdoor and indoor signage, outdoor and indoor events, entertainment and media (collectively, the Business). It has 172 creditors (including 41 employees).
(4) Screencorp operated indoor and outdoor light-emitting diode (LED) screens, digital signage and production services. These operations have been transferred to Tf Australia. It has two creditors of which one is an employee.
(5) Tf Infrastructure Solutions is not a trading entity and it has no creditors or employees. It was intended that Tf Infrastructure Solutions provide shared service operations between another company in the group, Cellular Asset Management Limited ACN 154 756 439, and Tf Australia, but this did not occur.
(6) As at 7 April 2020, landlords of the Companies were owed approximately $149,864.87 and suppliers and other creditors (including employees) were owed approximately $3,707,115.48.
(7) The administrators have email addresses for 159 of the 172 known creditors of Tf Australia, and postal addresses for the remaining 13 creditors. They have email addresses for Screencorp’s two creditors.
13 Since their appointment, the administrators have sought to continue to trade the Business on a “business as usual” basis, subject to the restrictions resulting from COVID-19, while assessing viable options to continue to keep the Business operating.
14 The COVID-19 pandemic and the steps taken by the State and Federal Governments to respond to it have delayed the administrators’ conduct of the administration. The administrators’ staff at KPMG have been required to operate remotely with limitations on persons being able to work in close proximity to each other with the consequential impact that:
(1) All discussions and liaison with team members must be done by phone or email, which delays information becoming available.
(2) All discussions and liaison with officers and employees of the Companies must be done by phone or email, which has caused delays and incomplete information being obtained regarding the Business.
(3) Limited numbers of KPMG staff are able to access the Companies’ head office in Gladesville, New South Wales. At present, only two staff members are able to attend the office, with the result that review and assessment of the Companies’ books and records is taking substantially longer than would usually be the case.
(4) There are logistical difficulties arising from the inability to access secretarial support and office equipment (for instance printing), preventing the issuance of physical mail in a timely manner.
15 As at 7 April 2020:
(1) The Companies had entered into 16 real property leases (RP Leases).
(2) Tf Australia had entered into Asset Leases in relation to (among other things) equipment and motor vehicles with Australian Telecommunications Pty Ltd, Bigstone, Canon Finance Australia Pty Ltd, De Lage Landen Pty Ltd, Ingram Micro Pty Ltd, Strategic Communications Management and World’s Best Technology Distributors Pty Ltd. Screencorp had entered into similar asset leases with Westpac Banking Corporation and Capital Finance Australia Ltd. The lessors of the Asset Leases will together be referred to as the Asset Lessors.
16 There were complexities attached to eight of the RP Leases because, while they were leased by Screencorp, the premises were occupied by Visibilis Pty Ltd which is not in voluntary administration and still requires the leases.
17 Mr Eagle subsequently determined that only four of the RP Leases are integral to operating the Business. Accordingly, on 15 April 2020, Mr Eagle issued letters to each of the landlords of the remaining twelve RP Leases stating that those leases were “disclaimed”, effective on that day, in accordance with s 443B of the Corporations Act. In the case of the eight premises occupied by Visibilis, Mr Eagle stated that the landlord should negotiate a new lease with Visibilis.
18 Due to the complexities associated with the occupation of eight premises by Visibilis, the quantum and liabilities associated with the RP Leases and practical issues faced as a result of the COVID-19 pandemic, reaching a determination as to the utility of each of the RP Leases was one of the most pressing requirements in the early part of the administrations.
19 The administrators sought to investigate the particular goods that are the subject of the Asset Leases and, in particular, ascertain whether these goods are an essential part of the Business (such that they need to be retained as part of the continued operation of the Business). It is not clear to the administrators on the information currently available to them to what all of the Asset Leases relate. Some of the leased goods appear to include office fit-out, handsets and printers.
20 The administrators issued letters to each of the Asset Lessors on 8 April 2020. Attached to each of the letters was a “Security Interest Questionnaire”. The letters included the following:
In respect of each security interest, would you please complete the attached questionnaire and return it to this office with the required supporting documentation.
We draw your attention to the Personal Property Securities Act 2009 (PPSA), specifically Section 277 of the PPSA, which requires you to provide a response within ten business days.
If no response is received within ten business days we will submit an Amendment Statement to the PPSR Registrar for a determination that, pursuant to Section 178 of the PPSA, the registration is to be amended to end the effective registration (including an amendment to remove the registration) on the basis that no details have been provided to indicate the registration secures any obligation (including a payment) owed by the Company to you as the secured party.
21 Ten business days had not elapsed at the date of the hearing. Only Bigstone had provided a response by that time and the administrators are still considering its response which was provided on 15 April 2020.
22 It is Mr Eagle’s evidence that:
(1) As the administrators have not received a response from the majority of the counterparties to the Asset Leases, they are unable to make a determination at this stage about whether the property the subject of the Asset Leases is required to be used for the continuation of the Business.
(2) The administrators’ inability to make that determination has also resulted from delays in their investigations caused by the practical and logistical difficulties arising from the measures taken to suppress the COVID-19 virus which are described above.
(3) The administrators wish to retain all essential goods or other equipment used by the Business in an effort to preserve the value of the Business and thereby maximise any possible sale price of the Business in the interests of the Companies’ creditors. At the same time, they do not want to burden the Companies or take on personal liability with respect to obligations to make lease repayments to Asset Lessors if they are not necessary for the Business to be carried on successfully or if they are not otherwise an integral part of the Business.
(4) While the final amount owing in respect of the Asset Leases is yet to be determined because of the administrators’ ongoing enquiries, they are able to confirm that outstanding rental payments total approximately $710,000.
(5) As at 16 April 2019, the Companies together had approximately $969,000 cash at bank in administration bank accounts. As restrictions relating to COVID-19 have made a significant impact on the Companies’ revenue, and those restrictions will be in place for an indeterminate time, the administrators are conscious of preserving as much cash as possible in the administration of the Companies.
(6) Unless an extension is granted, pursuant to s 443B, the administrators will be personally liable for rent and other amounts payable under the Asset Leases after 16 April 2020. The extension of time is required for the administrators to ascertain the exact subject of the Asset Leases in order to reach a commercial decision about whether those leases are required in the ongoing trading of the Business and to determine costs under those leases so that the administrators may determine for what they may ultimately be liable. Based on his experience, and given the additional impact of COVID-19 suppression measures, Mr Eagle estimates that a further two weeks are required.
(7) The administrators wish to be in a position to inform creditors of any orders made as a result of these proceedings at the first meeting of creditors to be held on 21 April 2020. It is likely to promote ongoing interest in the Business from creditors, related parties of the Companies or other potential purchasers if the administrators have sufficient time to consider the Asset Leases properly and determine what property is subject to those Leases.
(8) The administrators accept that Asset Lessors and other interested parties should have the right to make an application to vary or set aside any orders that are made that affect them.
Section 447A of the Corporations Act and s 95-15 of the Insolvency Practice Schedule
23 Section 447A of the Corporations Act and s 90-15 of the Insolvency Practice Schedule contain general powers with respect to the modification of provisions of Part 5.3A of the Corporations Act. The courts have interpreted these provisions as having broad application where to make orders would serve the object of Part 5.3A as set out in s 435A of the Corporations Act. Section 435A of the Corporations Act provides as follows:
24 Section 447A of the Corporations Act provides as follows:
(c) in the case of a company under administration—the administrator of the company; …
25 Section 90-15 of the Insolvency Practice Schedule provides as follows:
Section does not limit Court’s powers
(7) This section does not limit the Court’s powers under any other provision of this Act, or under any other law.
26 Section 90-20 of the Insolvency Practice Schedule sets out those persons who may apply for orders under s 90-15 as follows:
27 Section 5-30(a)(iii) of the Insolvency Practice Schedule defines persons with a “financial interest” in the external administration of a company to include an external administrator of the company. Section 5-20(a) of the Insolvency Practice Schedule defines an “external administrator” of a company as the administrator of the company. Section 5-25 of the Insolvency Practice Schedule states that a reference in the Schedule to the external administrator of a company is to be read as a reference to all external administrators. Section 9 of the Corporations Act defines an officer of a company to include an administrator.
Orders relating to electronic communications with creditors and holding meetings by electronic means
28 As noted in the submissions, most of the orders sought are of an administrative kind designed to facilitate communications with and meetings of creditors of the Companies. This is against the background of public health orders restricting public gatherings designed to reduce the spread of the COVID-19 virus. The duration of such public health orders is uncertain. Nothing has been drawn to the Court’s attention which would suggest that the making of such orders is not authorised by either s 447A of the Corporations Act or s 90-15 of the Insolvency Practice Schedule and it is clearly desirable that such orders be made to facilitate the voluntary administration of the Companies. As Perram J said in Capic v Ford Motor Company of Australia Limited (Adjournment) [2020] FCA 486 at [5], it is apparent that public institutions such as the Court must do all they can to facilitate the continuation of the economy.
29 The first meetings of creditors of the Companies are to be held concurrently on Tuesday, 21 April 2020. The administrators seek orders enabling this meeting and any subsequent meetings of creditors (including meetings of the committee of inspection if one is formed) to be convened by email and conducted solely by audio-visual or telephone conference rather than in person.
30 The Insolvency Practice Rules (Corporations) 2016 (Cth) provides for the manner in which meetings of creditors are to be convened and held, and consequential notifications given to ASIC, as follows.
(1) Section 75-15:
Division 75 Meetings
Subdivision B Convening meetings
75-15 How notice of meetings to be given
(c) state the effect of section 75-85 (entitlement to vote as creditor at meetings of creditors); and
(8) Section 75-30:
75-30 Time and place of meetings
(9) Section 75-35:
75-35 Notice of electronic facilities for meetings
(a) set out the arrangements for using the facilities
(10) Section 75-40:
75-40 Notification of meetings on ASIC website
(11) Section 75-75:
Subdivision C Procedures at meetings
75 75 Participating in meetings by electronic means
(b) a person, or a person’s proxy or attorney, has given the convenor of the meeting a statement in accordance with paragraph 75-35(2)(b).
(12) Section 75-225:
75-225 Companies under administration—how certain meetings are convened
Note: Notice of the meeting must be lodged with ASIC—see section 75-40.
(13) Section 80-5:
Division 80 Committees of inspection etc.
80-5 Eligibility and procedures
(4) If a committee of inspection is appointed as a result of a determination of the creditors of the company under section 80-10 of the Insolvency Practice Schedule (Corporations), the external administrator or a member of the committee may convene a meeting of the committee.
31 There are many decisions in which the courts have made orders permitting notice of creditors’ meetings to be given by electronic means to those for whom e-mail addresses are available and otherwise by notice, for example on an administrator’s website or by newspaper advertisement. This saves costs and time and so conserves limited assets for the benefit of creditors: see In the matter of BBY Ltd [2015] NSWSC 974 at [7] (Brereton J) and the cases there cited; see also Quinlan, in the matter of Halifax Investment Services Pty Ltd (Administrators Appointed) [2018] FCA 1891 at [12]-[14] (Yates J) and Jahani, in the matter of The Ralan Group Pty Ltd (administrators appointed) [2019] FCA 1446 at [23] (Gleeson J).
32 Mr Eagle’s evidence demonstrates that he has an email address for a substantial majority of creditors presently identified (159 of 172 known creditors of Tf Australia and both Screencorp creditors). In the context of restrictions on gatherings imposed in relation to limiting the spread of the COVID-19 virus, Mr Eagle has said that his staff will face practical difficulties arranging notices to be printed and posted.
33 Making the order with respect to issuing notices of creditors’ meetings by email and publishing the notice on KPMG’s website and the website for notices operated by the Australian Securities & Investments Commission (ASIC) will fulfil the objective of notifying as many creditors of the Companies as quickly and cheaply as possible thereby allowing the administration to be effected in a way which is more straightforward and cheaper for the administrators, a benefit which will ultimately accrue to creditors of the Companies. Further, in this case, it facilitates the efficient continuation of the administration of the Companies at a time when limits have been imposed on gatherings of people designed to suppress the spread of the COVID-19 virus to protect the health and welfare of the Australian community.
34 Accordingly, it is appropriate to make the orders sought with respect to notices convening the creditors’ meetings which must be convened under rr 75-15 and 75-225 of the Insolvency Practice Rules and any other notification which the administrators are required to give creditors during the administration of the Companies under any provision in Part 5.3A of the Corporations Act, Part 5.3A of the Corporations Regulations 2001 (Cth), the Insolvency Practice Schedule or the Insolvency Practice Rules.
35 The Court accepts the administrators’ submission that, while r 75-75 of the Insolvency Practice Rules clearly authorises participation in meetings of creditors by electronic means, the requirements of rr 75-15(1)(a), 75-30 and 75-35 suggest that meetings will be conducted at a “place”, such that it is not clear that meetings may be held only by electronic means. It might be said that these requirements are met because the “place” of the meeting is where the administrator is located (even if participants are unable to attend there), however that may be a strained construction of the provisions. The administrator (and the creditors) should not be left in doubt as to whether a meeting has been validly convened and held. To allow doubt opens up avenues of dispute about the validity of resolutions and may necessitate further applications for validation under s 1322(4) of the Corporations Act.
36 The Court also accepts Mr Eagle’s evidence that he has previously conducted meetings of creditors that have provided a telephone conference service for creditors and, in his experience, the use of telephone conference facilities works well. The administrators have suitable technology in place to conduct a meeting in this manner. Mr Eagle does not consider that there is any practical impediment to conducting meetings only by means of telephone.
37 Accordingly, it is appropriate that the Court make orders that, to the extent that it is not specifically permitted by rr 75-30, 75-35 and 75-75 of the Insolvency Practice Rules, the administrators be permitted to hold meetings of creditors during the administration of each of the Companies by telephone or audio-visual conference facilities only and in place of physical meetings, with details of such arrangements to be included in the notices issued to creditors.
38 The administrators sought similar orders with respect to notices to members of a committee of inspection, should one be formed for the Companies, and for the manner in which those meetings might be held.
39 The administrators concede that such orders may not be necessary given the terms of r 80-5(3) of the Insolvency Practice Rules. However, there is nothing in that rule which specifically permits meetings to be held only by audio-visual or telephone conference facilities, nor does it specifically permit notice to be given to, or by, members of the committee solely by email. The administrators submit, and the Court accepts, that the administrators and members of any committee should not be left in any doubt as to the validity of any resolution passed at meetings convened and held in that manner. The Court is also of the view that it is appropriate to make the order even though no such committee currently exists, since it would involve further time and cost to approach the Court for such an order if the committee is constituted, and that time and cost can sensibly be avoided by making the order now.
Extension of the period for the administrators to give notice under s 443B to Asset Lessors
40 Sections 443A and 443B of the Corporations Act appear in Part 5.3A of the Corporations Act and they provide as follows:
41 Although the originating process sought relief in relation to the operation of s 443B, during the course of the hearing counsel for the administrators also sought relief under s 443A(1)(c), along the lines of orders made by Markovic J in Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 (Strawbridge, CBCH Group).
42 In Strawbridge, CBCH Group at [39], Markovic J made the following remarks which the Court respectfully adopts: Section 447A(1) of the Corporations Act gives the Court ample power to alter the operation of s 443B(2) and (3) of the Corporations Act: see In the matter of Mothercare Australia Limited (administrators appointed) [2013] NSWSC 263 (Mothercare Australia) at [6]. Alternatively, s 443B(8) gives the Court an additional power to alter the operation of s 443B(2) and (3): see Silvia v FEA Carbon Pty Ltd [2010] FCA 515; (2010) 185 FCR 301 (Silvia v FEA) at [13]. The usual rationale behind the extension of the five business day period in s 443B(2) and (3) or the exercise of the power in s 443B(8) is because the administrator has had insufficient time to conduct the necessary investigations to decide whether he or she thinks it best to retain or give up possession of leased property: see Silvia v FEA at [12]-[13]. Further it seems that s 443B(8) allows the Court to excuse the administrator from liability to pay rent even after the five business day period has passed (see Silvia v FEA at [13]-[14]) and that s 447A enables a Court to amend the operation of Pt 5.3A of the Act retrospectively: see Australasian Memory Pty Limited v Brien [2000] HCA 30; (2000) 200 CLR 270 at [26].
43 In deciding that the orders sought should be made, the Court took into account the following matters:
(1) The time for notice to be given under s 443B expired on the day before the hearing.
(2) Mr Eagle’s curriculum vitae, which is set out in tab 1 of RRE-1, indicates that he is an experienced administrator and registered liquidator. He has given evidence that the administrators consider that they require further time to consider the ongoing value to the Companies of the goods that are the subject of the Asset Leases and such an extension is in the best interests of creditors generally as it is designed to assist in retaining assets that may be necessary to preserve and enhance the value of the Business.
(3) The administrators acted promptly in communicating with the Asset Lessors to obtain from them information concerning the nature of the equipment and motor vehicles the subject of the Asset Leases. To date, only Bigstone has responded, albeit that the time for response has not yet passed. The administrators have therefore worked diligently to obtain relevant information in relation to the Asset Leases, but they do not presently have all of the information required to determine the importance of the leased equipment with a view to reaching a conclusion on whether the continued use of those chattels in the Business should be sought. An extension of time will permit them to make that assessment and rational decisions in relation to the Asset Leases. That will enhance the prospect of preserving the Business (either in whole or in part) with a view to its sale or restructure as a going concern, which serves the object of Part 5.3A of the Corporations Act and maintains the prospect of obtaining the greatest possible return for creditors of the Companies as a whole.
(4) The administrators have been delayed in the process of ascertaining what property is subject to the Asset Leases and the importance of that property to the continuity of the Business by the physical distancing requirements designed to prevent the spread of the COVID-19 virus. Mr Eagle’s evidence is that there have been difficulties in attending the various premises occupied by the Companies to see the chattels the subject of the Asset Leases and speak to relevant employees of the Companies in order to make an assessment of the continued usefulness in the Business. The administrators note that, in Bumbak (Administrator), in the matter of Duro Felguera Australia Pty Ltd (Administrators Appointed) [2020] FCA 422 at [35(4)], Gleeson J observed that it was reasonable to assume that the current circumstances of the COVID-19 pandemic would affect the timely progress of the administration to some extent.
(5) The length of the extension sought (two weeks) is a shorter period than has been granted in some other cases. For instance, in Mothercare Australia the extension was for one month.
(6) To the extent to which the Asset Lessors may be adversely affected, the orders sought make provision for the Asset Lessors to apply to the Court for them to be varied.
44 The Court concluded that it was appropriate to make the orders sought by the administrators so as to provide, in general, for an extension until 1 May 2020 during which to make a determination whether or not to disclaim any of the Asset Leases and to relieve the administrators of personal liability during the period. In relation to Bigstone, however, the Court accepted that it was appropriate to provide an extension of only seven days until 24 April 2020. The Court accepted that it was appropriate to make the shorter order in relation to Bigstone because it has already provided the information required by the administrators and the administrators accepted that that was sufficient time for them to make the required assessment of the Asset Leases to which Bigstone is a party.
45 The Court did not accept that it was appropriate to make a costs order in Bigstone’s favour on the basis that it had sought and been granted leave to be heard pursuant to r 2.13 of the Federal Court (Corporations) Rules. In such cases, costs orders are not typically made either for or against such a person. The Court saw no reason to depart from the usual rule in this case.
46 The plaintiffs’ application was properly made and the Court accepted that it was appropriate to make the order that the plaintiffs’ costs be treated as costs in the administration of each of the Companies jointly and severally. Bigstone did not seek to oppose that order.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.