Case: Re Hayes; Estate Property Group Ltd (Administrators Appointed) [2007] FCA 935
Outcome: considered
this background, it can be seen that these proceedings raise what Gyles J described in Re Hayes ; Estate Property Group Ltd (Administrators Appointed) [2007] FCA 935 at para 1, hereafter, Hayes' case, as: ...the familiar tension between, on the one hand, the objective of having the first stage of administration dealt with promptly so as not to unduly interfere with the rights of those whom a moratorium affects and, on the other hand, giving worthwhile information to the creditors so that sensible decisions can be made at the meeting. It is well understood that in complex administrations these two objectives can often be in collision. If they are in collision then, in many cases, priority will be given to obtaining sensible information and advice from the administrators to enable the creditors to have the material before them to make an informed decision. In Hayes' case, at para 3, Gyles J voiced a concern arising from the circumstances of that case, where a period of some months by way of extension of the convening period had been proposed. He used the term, prosaically with respect, a "substantial stretch of the statutory provisions" to describe it. His Honour noted that extensions of the order propounded in that case had been granted in other cases. In the result, his Honour reached the view that it was too early to commit to such a lengthy period before the creditors had what he described as "any real say" in the matter. His Honour continued, at para 4: A course which is taken in some of these matters and was, I notice, taken in Fincorp [2007] NSWSC 363 , is to provide for a lengthy period but also, by an order under section 447A , permit foreshortening of the period if events warrant it. Other courses which can be taken are, if a case is made out, to utilise section 447A to extend the period for which the creditors can adjourn the meeting pursuant to section 439B or to utilise section 447A to grant a further extension of the convening period under section 439A. The latter course has been taken in a number of matters. It seems to me that would be the appropriate course to be taken in these matters if necessary. An order of the kind which Gyles J came to make in Hayes' case is one which has been submitted to be appropriate by ASIC. In Re Mentha; Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 , hereafter Mentha , Jacobson J had occasion to reflect upon whether, in the circumstances of the case before him, an order of the kind made in Hayes' case ought to be made. In the result, his Honour came to grant an extension of up to 90 days, as had been sought by the administrators, rather than to adopt a form of order akin to that made in Hayes' case. Regard to his Honour's reasons for judgment at para 27 and para 28 discloses that there were three particular reasons why, in the circumstances of that case, Jacobson J determined to grant an extension of up to 90 days to the administrators rather than to make an order similar to that made in Hayes' case. Those reasons were these: (a) The first was that the cases indicate than an extension of two and a half to three months is not unusual where there is a relatively complex sale process. In this case, by way of contrast, there is no such sale process. (b) The second reason evident in Mentha was that there was a disposition, sworn, it seems on behalf of the administrators, to convene a meeting in a shorter period of time than currently anticipated if the sale process concerned were able to be completed beforehand. Here, the administrators have a disposition likewise to convene a meeting earlier if, in their judgment, there is no advantage in delaying that particular meeting to the maximum permitted by the extension primarily sought. I have no doubt that that particular statement is one seriously made by responsible practitioners. In that sense, there is a similarity as between this case and Mentha , although, again, the occasion for the foreshortening is not, as it was in Mentha , the prospect or contingency of an earlier than anticipated completion of a sale process, but rather that of an earlier than anticipated completion, or at least practical completion, of investigations considered reasonably necessary. (c) The third reason found in Mentha was that the administrators considered that there was sufficient cashflow to enable the post-appointment liabilities to be met. Here, by way of contrast, the administrators have determined not to continue the trading operations of Storm Financial. In that sense, the outgoings, by way of wages and the like, have ceased upon the termination of staff. Nonetheless, the position, it seems to me, is different from Mentha in the sense that one does not have here the cost neutral situation of a business being continued and preserved for the purpose of sale by administrators. The question becomes whether or not the alternative proposal on behalf the administrators achieves a necessary or desirable degree of expedition in that regard or whether it might be better, as ASIC has submitted, to adopt a course similar to that undertaken in Hayes' case, ie, to fix, by way of an extension, a relatively short further period, but to make provision for the further extension of that period? Obviously enough, in the context of any further extension, the receipt by the administrators of a detailed proposal for a deed of company arrangement would be a material consideration. A concern which I have in relation to the alternative proposed by the administrators is that it may admit of some debate as to what constitutes a written proposal for a deed of company arrangement in the order as proposed, and further that it may admit, at the behest of the directors or some other promoter of a deed, of an extension of the administration period to 7 May 2009 in respect of a deed which one might regard as but superficial in its content. Reflecting upon these considerations, the complexity of this particular company's operations, their spread, the need for an adequate report to be made to creditors and the statutory objects involved, it seems to me that the interests of creditors are best served by at least making provision for the prospect of a relatively early decision by them in relation to the choices offered under Pt 5.3A , while at the same time giving the administrators some further weeks to undertake their necessary task of administration.