ywoament No. L227 12. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3503 of 1995 GENERAL DIVISION ) Re: MARTIN RUSSELL BROWN First Applicant And: BARRY RAYMOND COOK Second Applicant And: F.F.C. REALISATIONS PTY LTD {formerly __ Favelle__Fayco Cranes Pty Ltd) (receiver and manager appointed) (subject to Deed ° Compan Arrangement) ACN 003 689 478 Third Applicant REASONS FOR JUDGMENT EINFELD J SYDNEY 24 OCTOBER 1995 The joint administrators of FFC Realisations Pty Limited apply this afternoon at short notice for an order directing that a meeting of creditors of the company fixed for tomorrow morning at 9.30am be postponed to a later date. The grounds upon which they move are that since the notice of meeting which was settled by or received the approval of the Court some weeks ago, one of the creditors, Southern Steel Group Pty Limited, has circulated creditors with misleading and deceptive information and has sought and received proxies to vote in accordance with the positions it proposes to advocate at the meeting. The adoption of these proxies by the meeting would result in maintaining as the status quo a deed of company arrangement both in relation to -2- the proposed dividend to be paid to creditors and the administration of the company for that purpose, amongst others. Only one creditor has attended this hearing today because the proceedings were brought on at short notice on the basis that the allegedly misleading circular only came to the notice of the administrators today. That creditor was Southern Steel, the author of the allegedly offending document. Southern Steel does not oppose, and in fact supports, the application for an adjournment of the meeting whilst denying that the circular is misleading in any respect. This rather odd position was not explained by the company's counsel except to say that the present dispute ought to be resolved by the Court before the meeting takes place. The purposes of the meeting included the view or request of Justice Foster, who had settled or approved the explanation to creditors, that a meeting be held to obtain the view of the creditors on the confirmation of the first applicant as a joint administrator. Obviously if the meeting is postponed that opinion cannot be obtained. As it seems to me, the effect of either agreeing to or refusing the postponement will be to involve this company, the third applicant, and its creditors in litigation of a not inconsiderable kind. This is because sooner or later in this process, the question of whether the circular was or was not misleading and deceptive, whether it induced the votes of some of the creditors, and whether as a consequence an unjust result was obtained, will have to be dealt with. The problem would have -~3- been able to be solved by relevant persons placing before the meeting tomorrow morning their viewpoints on the circular, perhaps castigating its alleged inaccuracies or deceptive nature. However, the Court has been informed that a considerable number of proxies have been obtained in favour of Southern Steel's position, presumably based upon the contents of the circular, at least in part. Obviously the meeting could not be a place where creditors voting by proxy could be addressed at all as they would not be present. On the side of the administrators and those who will support them if the meeting takes place, there would obviously be a motion for an adjournment. The proxies received by reason of the Southern Steel circular do not state whether the creditors concerned wish to vote in favour of or against an adjournment. That would put those to whom the proxies were given in the difficult position of not being instructed as to how to vote on the resolution for an adjournment. For their part, the administrators as chairpersons of the meeting would be in the even more difficult position of having to decide whether to accept the proxies if they purported to be used to vote against an adjournment and on with the business of the meeting. This in itself would almost certainly result in litigation whichever way the result went. For those reasons the matter presents to the Court with a most invidious and difficult dilemma but I have come to the conclusion that the meeting should be postponed on the grounds that it is probably better to have these matters resolved by sensible - 4- discussion and negotiation between the relevant creditors rather than by permitting facts to be established by the power of numbers so as to give one side the advantage of having one or more resolutions in its favour which would then have to be upset in Court. I take this step with considerable reluctance because no doubt some considerable cost will already have been incurred in the calling of the meeting and in the presence of some creditors. In addition, there is always a danger, when creditors are frustrated by inefficiencies or inconveniences, that some will lose interest in the whole operation and drop out, while others with greater staying power and perhaps a greater interest stay to have their will imposed. However, I have balanced against that possibility the serious risk that creditors would be occasioned even greater cost if the meeting takes place and, by the use of numbers possibly obtained by misleading or deceptive conduct, a result is achieved which then challenges those who were defeated to move for its setting aside, again resulting in a contentious piece of litigation. It is at least possible that by postponing the meeting, the creditors can by their own actions correct what has taken place and then proceed to a-'meeting in the near future which deals with the matter on a more or less even and correct basis. That possibility is virtually excluded if the meeting takes place. Moreover, if the meeting does not take place, its postponement might give time for a little cooling down, some reassessment of _ 5 ~- positions, and more discussion which could bring about a state of affairs that holds paramount the interests of all the creditors and of the public. I therefore order that the meeting of creditors of the company fixed for 25 October 1995 at 9.30 am be postponed to a later date to be fixed by the Court or with the Court's approval by the parties. Costs will be reserved. The balance of the motion will be stood over to the Registrar's Corporations list on Friday morning 27 October 1995,