FEDERAL COURT OF AUSTRALIA Re Regency South Steyne Investments Pty Ltd [2003] FCA 1546 CORPORATIONS – leave granted to extend term of voluntary administration – liberty to apply additionally granted. Corporations Act 2001 ('Cth') s 447A Re Double V Marketing Pty Ltd (in administration) (1995) 16 ACSR 498 Re Locum Pty Ltd (1997) 15 ACLC 1576 Dean-Willcocks & Anor v Powerline Ges Pty Ltd (2002) 40 ACSR 516 IN THE MATTER OF REGENCY SOUTH STEYNE INVESTMENTS PTY LTD, FLINDERS HOTEL INVESTMENTS PTY LIMITED, SUGARLOAF CRESCENT PROPERTIES PTY LIMITED, RFS DEVELOPMENTS PTY GROUP NO 12 PTY LIMITED AND GEOFFREY DAVID McDONALD AND ROBERT WILLIAM JOSEPH ELLIOTT N 3075 OF 2003 CONTI J 18 DECEMBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3075 OF 2003 REGENCY SOUTH STEYNE INVESTMENTS PTY LIMITED FIRST APPLICANT FLINDERS HOTEL INVESTMENTS PTY LIMITED SECOND APPLICANT SUGARLOAF CRESCENT PROPERTIES PTY LIMITED THIRD APPLICANT RFS DEVELOPMENTS GROUP NO 12 PTY LIMITED FOURTH APPLICANT GEOFFREY DAVID McDONALD AND ROBERT WILLIAM JOSEPH ELLIOTT FIFTH APPLICANTS JUDGE: CONTI J DATE OF ORDER: 18 DECEMBER 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave be granted to file the originating process in Court. 2. The originating process be returnable instanter. 3. Pursuant to s 447A of the Corporations Act that in the administration of the first, second, third and fourth applicants, the time provided for in s 439B(2) for the holding of the adjourned meeting of creditors fixed for 19 December 2003 be extended for 90 days subject to a resolution of the creditors being passed on 19 December 2003. 1. Leave be reserved to any person claiming to be interested, including the Australian Securities & Investments Commission and any creditor of the first, second, third and fourth applicants to make such an application as he, she or it may be advised to vary these orders on 48 hours' notice to the administrators. 5. Costs of this application be an expense of the administration. 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 3075 OF 2003 REGENCY SOUTH STEYNE INVESTMENTS PTY LIMITED FIRST APPLICANT FLINDERS HOTEL INVESTMENTS PTY LIMITED SECOND APPLICANT SUGARLOAF CRESCENT PROPERTIES PTY LIMITED THIRD APPLICANT RFS DEVELOPMENTS GROUP NO 12 PTY LIMITED FOURTH APPLICANT GEOFFREY DAVID McDONALD AND ROBERT WILLIAM JOSEPH ELLIOTT FIFTH APPLICANTS JUDGE: CONTI J DATE: 18 DECEMBER 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application by the abovenamed fifth applicants, being the voluntary administrators of the first, second, third and fourth applicants, for an order that the time provided for in s 439B(2) of the Corporations Act 2001 (Cth) ('the Act') for the holding of the adjourned meeting of creditors fixed for 19 December 2003 be extended for ninety days, subject to an affirming resolution of creditors being passed tomorrow, that is to say, on 19 December 2003. 2 Authority for the order is in my opinion conferred by s 447A of the Act, which provides as follows: 'The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.' Section 447A forms part of Division 13 of Part 5.3A of the Act, which is headed 'Administration of a Company's Affairs with a view to Executing a Deed of Company Arrangement'. 3 The width of the power conferred by the Court for present purposes has been attested by the following authorities: Re Double V Marketing Pty Ltd (in administration) (1995) 16 ACSR 498 (Lindgren J) Re Locum Pty Ltd (1997) 15 ACLC 1576 (Goldberg J) Dean-Willcocks v Powerline Gas Pty Ltd (2002) 40 ACSR 516 (Barrett J) 4 In the light of the precedent set by Lindgren J in Re Double V Marketing, the applicants have offered to submit to an order to the effect that leave be granted to any interested party, including ASIC and any creditor, to make application to vary the orders on forty-eight hours' notice to the administrators. 5 The circumstances giving rise to the application have been set out at some length in the affidavit of Geoffrey David McDonald; in summary, those circumstances relating to the first applicant corporation, in broad outline, may be shortly summarised as follows: (i) the first applicant was incorporated to purchase the Radisson Kestral Hotel at Manly; (ii) pursuant to an option to purchase, which has now expired, option fees of $5,492,103 were paid to the owner; (iii) those option fees were borrowed in various amounts from three companies, in relation to one of which Mr McDonald is administrator; and (iv) there is a prospect that the purchase of the hotel may proceed, and be simultaneously resold, in circumstances productive of a substantial surplus which would reduce the first applicant's indebtedness to two of the three creditors/lenders; the interest of the third creditor/lender is mainly its corporate and/or business relationship with the first applicant. 6 The circumstances relating to the second applicant, in broad outline, may be summarised as follows: (i) the second applicant was incorporated to purchase and develop a hotel in Flinders Street Sydney, and for that purpose, substantial funds were borrowed from four companies, whereof one is also subject to Mr McDonald's administration; (ii) the purchase of the hotel was completed with the secured financial assistance of Suncorp Metway Limited; the hotel has since been resold, and a surplus available for unsecured creditors is anticipated; and (iii) the reason for the financial difficulties attending this particular hotel venture relates to the grant of a development application relating to the site. 7 The circumstances relating to the third applicant may be summarised for present purposes as follows: (i) the third applicant purchased and developed a Castlecrag property with the assistance of a substantial secured borrowing which is not in default; it is intended to sell the property, once a development application has been approved, and the substantial capital profit anticipated will be applied in part payment of creditors; and (ii) the main creditors are persons associated with the third applicant. 8 The circumstances relating to the fourth applicant are to the effect that it has operated the hotel business conducted on the Flinders Hotel site, albeit at a loss. 9 The fifth applicants seek an extension of time for ninety days for the purpose of exploiting financially the option to purchase the Radisson Hotel at Manly. Further time is needed to further and complete negotiations, without which there will be no availability of funds for unsecured creditors. If the extension of time is granted, there is said to be a reasonable prospect that the proposal for exploitation of the relevant assets can be realised, and a reasonable return to creditors being thereafter effected. None of the companies involved are presently trading. 10 I think that counsel for the applicants is correct in his contention that there will be no conceivable prejudice to unsecured creditors, and conversely a real possibility of an advantage to creditors, if the extension sought is granted. In my opinion I should make an order for the extension of time sought, though additionally grant leave to apply for a variation thereof, in each case in the terms sought. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 19 December 2003 Counsel for the Applicant: J Chippindall Solicitor for the Applicant: Clinch Neville Long Date of Hearing: 18 December 2003 Date of Judgment: 18 December 2003