FEDERAL COURT OF AUSTRALIA Vince, in the matter of GF & GM BALSILLIE PTY LTD (Administrator Appointed) v GF & GM BALSILLIE PTY LTD (Administrator Appointed) [2001] FCA 1872 COMPANIES – administration – meeting of creditors irregularly convened – meeting of creditors irregularly adjourned – termination of administration – order made to regularise Corporations Act 2001 (Cth) ss 435C, 436E, 437A, 439A, 443A, 443D, 443F, 447A, 471B Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 - applied IN THE MATTER OF GF & GM BALSILLIE PTY LTD (Administrator Appointed), PETER ROBERT VINCE in his capacity as former administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) v GF & GM BALSILLIE PTY LTD (Administrator Appointed) and ROBERT COLE in his capacity as administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) V 3080 of 2001 JUDGE: FINKELSTEIN J PLACE: MELBOURNE DATE: 14 DECEMBER 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 3080 of 2001 IN THE MATTER OF GF & GM BALSILLIE PTY LTD (Administrator Appointed) BETWEEN: PETER ROBERT VINCE in his capacity as former administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) Plaintiff AND: GF & GM BALSILLIE PTY LTD (Administrator Appointed) and ROBERT COLE in his capacity as administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) Defendants JUDGE: FINKELSTEIN J DATE OF ORDER: 14 DECEMBER 2001 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Pursuant to s 471B of the Corporations Act 2001 (Cth), the plaintiff has leave to proceed with this application against the first defendant. 2. Pursuant to s 447A of the Corporations Act, Pt 5.3A is to operate in relation to the first defendant during its administration with the plaintiff as administrator as if:- (a) the administration of the first defendant with the plaintiff as administrator ended on 15 November 2001 and at a time immediately before the appointment of the second defendant as administrator of the first defendant; (b) section 439A operates in relation to the first defendant such that the second meeting of creditors convened by the plaintiff and held on 17 September 2001 (and subsequently adjourned) was duly convened by:- (i) the publication of the appropriate notice in "The Age" newspaper on 11 September 2001; (ii) the posting of the appropriate notice to creditors on 10 September 2001. (c) the adjourned second meeting of creditors of the company was duly adjourned to the time referred to in sub-par (a). 3. A declaration that any lien of the plaintiff in relation to the period of his administration of the first defendant as provided for in s 443F of the Act, or any equitable lien he may have, has priority over any lien of the second defendant in relation to the period of his administration of the first defendant as provided for in s 443F. 4. The defendants' costs of and incidental to this application be costs in the winding up of the first defendant. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 3080 of 2001 IN THE MATTER OF GF & GM BALSILLIE PTY LTD (Administrator Appointed) BETWEEN: PETER ROBERT VINCE in his capacity as former administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) Plaintiff AND: GF & GM BALSILLIE PTY LTD (Administrator Appointed) and ROBERT COLE in his capacity as administrator of GF & GM BALSILLIE PTY LTD (Administrator Appointed) Defendants JUDGE: FINKELSTEIN J DATE: 14 DECEMBER 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The plaintiff, Mr Vince, was appointed administrator of GF & GM Balsillie Pty Ltd (in liq) on 2 August 2001. The first meeting of creditors, which was convened pursuant to s 436E, was held on 27 August, and adjourned to 3 September. At the adjourned meeting the creditors confirmed Mr Vince's appointment, and also appointed a committee of creditors. 2 Mr Vince was required to convene a second meeting of creditors to decide the company's future: see generally s 439A. The second meeting was convened (by the giving of notice and by placing an advertisement), but not within the required time. The meeting should have been convened on or before 10 September, but it was not convened until 11 September to be held on 17 September. No application was made to extend the convening period. According to s 435C(3)(b) the administration of a company will end if the second meeting is not convened within time. 3 Not realising the problem, the creditors held the second meeting, which by then had been adjourned to 12 November. Mr Vince was in the chair. On his own motion and without the concurrence of the creditors who were present, the meeting was further adjourned for four days. So, on 12 November the creditors did not pass any resolution regarding what should become of the company. In fact, Mr Vince did not have power to adjourn the meeting. That was a matter for the creditors to decide, and they made no decision in that regard. Thus the meeting came to an end when the creditors broke up. According to s 435C(3)(e), if the second meeting ends without a resolution to decide the company's future, the administration of the company comes to an end. 4 Shortly after the adjournment, namely on 15 November, the company was placed into administration a second time, and ultimately was placed in liquidation at the second meeting of creditors in the second administration. 5 Between the beginning of the first administration and the appointment of the second administrator, Mr Vince and the creditors of the company were of the belief that the first administration was continuing. They did not appreciate that the second meeting had been irregularly convened. Nor did they think that there was anything wrong about the manner in which the second meeting had been adjourned. More to the point, at the time no-one realised that the administration had come to an end on 10 September or, if not on that day, then on 12 November. 6 Mr Vince now applies for orders to "regularise" the position. He wishes to ensure that his dealings with the company's property are within power (as to an administrator's powers see generally s 437A) and that he has the benefit of the indemnity provided for in s 443D (which is secured by the lien provided by s 443F) in relation to the debts that he has incurred, and for which he may be personally liable under s 443A. It is not necessary to decide whether the acts of a person who ceased to be an administrator in the manner in which Mr Vince ceased to be an administrator, are nevertheless binding. Nor is it necessary to decide whether an administrator would lose his right of indemnity and supporting lien in the events that have occurred. The only question is whether orders should be made to ensure that Mr Vince is not at risk. 7 Before considering whether any relief should be granted, I should mention the following two matters. First, the company and its liquidator are the defendants to this application. They do not oppose the relief Mr Vince seeks. I assume that if any creditor could be adversely affected by the orders I might make, the liquidator, who is after all looking after their interests, would point that out. It is clear that the liquidator has reached the same conclusion as I have, namely that the interests of the creditor will not be adversely affected by any orders I might make. Second, there is a secured creditor who seeks leave to intervene in this application. Mr Denton SC, who appears for the secured creditor, indicated that if he was given the opportunity to be heard (an issue that I did not resolve), it would only be to indicate that his client sees no problem with Mr Vince's application, especially after certain of the relief initially foreshadowed was abandoned. Of course Mr Denton's client has no interest in looking after the affairs of the general body of unsecured creditors, but it is comforting to see that the prevailing view is that neither the secured nor the unsecured creditors of the company will be adversely affected. 8 As regards Mr Vince, he says that the irregularities which have occurred are procedural, (which is true although that says nothing about their importance) and that he may be substantially prejudiced if the orders are not made (which is also true). 9 Turning to the court's power, Mr Vince seeks an order pursuant to s 447A to the effect that, in substance, part 5.3A is to operate in relation to the company as if the administration ended on 15 November 2001. The only relevance of that date is that it occurs immediately before the appointment of the second administrator. It is proposed that any order I make should not interfere with the second administration. The authorities, which are all well known and include Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, are to the effect that s 447A gives the power to make the orders sought. I can see no reason why they should not be made. This is just the type of case for which s 447A was enacted. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein . Associate: Dated: 20 December 2001 Counsel for the Plaintiff: Mr J Beach QC Ms L Hannon Solicitor for the Plaintiff: Holding Redlich Counsel for the Defendants: Mr S P Gardiner Solicitor for the Defendants: Lewis Walker Counsel for the Intervener: Mr D. Denton SC Mr D. Bailey Solicitor for the Intervener: Herbert Geer & Rundle Date of Hearing: 14 December 2001 Date of Judgment: 14 December 2001