FEDERAL COURT OF AUSTRALIA In the matter of Daisytek Australia Pty Limited [2003] FCA 575 CORPORATIONS – application by administrators of two companies in voluntary administration for extension of time fixed by s 439A of the Corporations Act 2001 (Cth) for convening meetings of creditors – application by administrators also under s 447A of the Act for an order permitting the two meetings to be held earlier than the period of five business days following expiry of the extended convening period – whether s 447A empowers court to make latter order – discretionary considerations relating to both kinds of order. Corporations Act 2001 (Cth) ss 439A, 447A Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 cited IN THE MATTER OF DAISYTEK AUSTRALIA PTY LTD AND DAISYTEK AUSTRALIA (QUEENSLAND) PTY LTD N 3031 OF 2003 LINDGREN J 4 JUNE 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3031 OF 2003 IN THE MATTER OF DAISYTEK AUSTRALIA PTY LIMITED (ACN 075 675 795) (ADMINISTRATORS APPOINTED) AND DAISYTEK AUSTRALIA (QUEENSLAND) PTY LIMITED (ACN 097 222 163) (ADMINISTRATORS APPOINTED) MARTIN RUSSELL BROWN AND GREGORY WINFIELD HALL IN THEIR CAPACITY AS THE JOINT ADMINISTRATORS OF DAISYTEK AUSTRALIA PTY LIMITED (ACN 075 675 795) (ADMINISTRATORS APPOINTED) AND DAISYTEK AUSTRALIA (QUEENSLAND) PTY LIMITED (ACN 097 222 163) (ADMINISTRATORS APPOINTED) PLAINTIFFS JUDGE: LINDGREN J DATE OF ORDER: 4 JUNE 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth), the convening period for the meetings of creditors of Daisytek Australia Pty Limited and Daisytek Australia (Queensland) Pty Limited be extended up to and including Friday 4 July 2003. 2. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth), the meetings of creditors of Daisytek Australia Pty Limited (Administrators Appointed) and of Daisytek Australia (Queensland) Pty Limited (Administrators Appointed) required by s 439A of that Act may be held at any time during the period composed of the convening period as extended by Order 1 above and the period of five business days thereafter, notwithstanding the provisions of s 439A(2) of the Corporations Act. 3. The costs and expenses of this application be costs and expenses of the administrators of Daisytek Australia Pty Limited (Administrators Appointed) and of Daisytek Australia (Queensland) Pty Limited (Administrators Appointed). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3031 OF 2003 IN THE MATTER OF DAISYTEK AUSTRALIA PTY LIMITED (ACN 075 675 795) (ADMINISTRATORS APPOINTED) AND DAISYTEK AUSTRALIA (QUEENSLAND) PTY LIMITED (ACN 097 222 163) (ADMINISTRATORS APPOINTED) MARTIN RUSSELL BROWN AND GREGORY WINFIELD HALL IN THEIR CAPACITY AS THE JOINT ADMINISTRATORS OF DAISYTEK AUSTRALIA PTY LIMITED (ACN 075 675 795) (ADMINISTRATORS APPOINTED) AND DAISYTEK AUSTRALIA (QUEENSLAND) PTY LIMITED (ACN 097 222 163) (ADMINISTRATORS APPOINTED) PLAINTIFFS JUDGE: LINDGREN J DATE: 4 JUNE 2003 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 The plaintiffs ("the Administrators") are joint administrators of Daisytek Australia Pty Limited ("Daisytek Australia") and Daisytek Australia (Queensland) Pty Limited ("Daisytek Queensland"). They were appointed as administrators of the companies by the directors of the companies on 16 May 2003. 2 Subsection 439A(1) of the Corporations Act 2001 (Cth) ("the Act") requires the administrators of a company under administration to convene a meeting of the company's creditors within the convening period as fixed by subs (5) or extended under subs (6) of s 439A. Subsection 439A(6) of the Act provides that the Court may extend the convening period on an application made within that period. Under s 439A(5)(b) the convening period in the present case is the period of 21 days beginning on the day when the administration began. The present administrations began on 16 May 2003 and the convening periods will expire at midnight tomorrow 5 June 2003. 3 The Administrators apply ex parte for an extension of the convening periods until 4 July 2003. facts and reasoning Application under subs 439A(6) 4 The Administrators rely on three grounds in support of their application for the extension. The first ground relates to a fixed and floating charge executed by each company on or about 21 November 2002 in favour of GE Capital Finance Pty Ltd ("GE"). The debt owed to GE is owed by Daisytek Australia and is guaranteed by Daisytek Queensland. Notice of the charge given by Daisytek Queensland was lodged with the Australian and Securities Investments Commission ("ASIC") on 12 December 2002, but notice of the charge given Daisytek Australia was not lodged with ASIC until 14 March 2003. Accordingly, the charge given by Daisytek Australia is prima facie void as security as against the Administrators by reason the operation of subs 266(1) of the Act. 5 GE has applied to this Court under subs 266(4) of the Act seeking an order extending the time for lodgement of notice of the charge given by it to Daisytek Australia. That application is to be heard by Gyles J this coming Friday 6 June 2003. Obviously, it will be important that the Administrators be in a position to report to the meetings of creditors the result of that application. The more so, since, as between the two companies, virtually all assets are the property of Daisytek Australia rather than Daisytek Queensland. 6 The second ground relied on relates to the fact that a number of creditors of Daisytek Australia are suppliers which claim to have the benefit of "reservation of title" clauses, but the Administrators are not yet in a position to express a view as to the validity of those claims. The Administrators have attempted to negotiate continued supply from the major supplier to Daisytek Australia, Hewlett-Packard Limited ("H-P"). H-P has claimed to have the benefit of a retention of title clause. It will be important that the Administrators be able to report to the meetings of creditors as to the results of their negotiations with H-P, as well as, more generally, as to the validity of the asserted clauses. 7 The third ground relied upon concerns the possible sale of the business of Daisytek Australia. There is evidence that in the past two weeks some 14 parties have expressed interest in purchasing or investing in that business. The Administrators are advertising the business for sale in the Australian Financial Review this week and intend to do so again in the week commencing 9 June 2003. In their opinion it will or may take a further four weeks to finalise any negotiations regarding the possible sale of, or investment in, the business. They say they need until 4 July in which to resolve the position. 8 There is evidence that both GE and H-P either consent, or do not object, to the extension of time sought. 9 In my opinion a case is made out for the extension of time. Application under subs 447A(1) 10 On the basis that the extension is granted, subs 439A(2) of the Act has the effect, relevantly, that the meetings of the creditors of the two companies must be "held" (as distinct from "convened") within five business days after the end of the extended convening period – within five business days after 4 July 2003. The meetings may not be held prior to the end of the extended convening period, even if the Administrators are in a position early in the extended convening period to convene the meetings and if it would be convenient and desirable that they be held without waiting until after 4 July 2003. The Administrators believe that the three matters referred to earlier as the grounds for the extension may be resolved sooner rather than later. They do not know, and ask that I make an order under s 447A of the Act having the effect of enabling the meetings to be held during the period embracing the extended convening period and the period of five business days thereafter. 11 Subsections 447A(1) and (2) of the Act provide as follows: "(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end." 12 No doubt s 1322(4)(d) of the Act, which empowers the Court, relevantly, to abridge the time for doing an act under the Act or in relation to a corporation would make it possible for the Court, upon a future application being made by the Administrators, to abridge the extended convening period, but it would be unfortunate if the possible desirability of meetings being held on or before 4 July 2003 could not be accommodated in the orders now to be made. 13 Section 447A was considered by the High Court in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. The Court held that the section enabled an order to be made altering times fixed by Pt 5.3A of the Act (in which s 439A occurs). 14 In my opinion subs 447A(1) gives power to make the further order sought by the Administrators. Although I have not heard argument on the matter on this ex parte application, I am inclined to the view that subss 439A(1) and (6) do not contemplate anything other than an extension for a fixed period: subs 439A(1) speaks of "the convening period as fixed by subsection (5) or extended under subsection (6)", and subs (5) specifies fixed periods. On this basis, if it becomes desirable for the meetings of creditors to be held prior to the expiry of the extended convening period, Pt 5.3A will "operate in relation to" (in terms of subs 447A(1)) the two companies by requiring the Administrators to "sit on their hands" until 4 July 2003 to no good end. 15 I note in passing that the original 21-day convening period will expire tomorrow, 5 June 2003, and as a practical matter, the meetings of creditors cannot be held tomorrow. Accordingly, that no question arises in this case of my making it possible for the meetings to be held during that original 21-day convening period fixed by subss 439A(1) and (5). The further order sought under s 447A relates only to the 29-day period of the extension. 16 No legislative policy underlying Part 5.3A would be frustrated if the meetings of creditors were permitted to be held at any time during the period which combines the 29-day extension period down to 4 July 2003 and the period of five business days thereafter. 17 For the above reasons, in my opinion, the Court has power under subs 447A(1) of the Act to make the further order sought. 18 As a matter of discretion, I think it appropriate that the Administrators be enabled to convene the meetings to be held on a date prior to expiry of the extended convening period if this is thought desirable, rather than being compelled to await the arrival, following that expiry, of the period of five business days referred to in subs 439A(2). CONCLUSION 19 For the above reasons, I make orders under subs 439A(6) and subs 447A(1) of the Act. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 16 June 2003 Counsel for the Plaintiffs: Mr M Darke Solicitor for the Plaintiffs: Kemp Strang Date of Hearing: 4 June 2003 Date of Judgment: 4 June 2003