Sydney Ringtread [2001] NSWSC 424

Reported Decision : (2001) 38 ACSR 221 (2001) 19 ACLC 1215

New South Wales Supreme Court

CITATION : Sydney Ringtread [2001] NSWSC 424 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2659/01 HEARING DATE(S) : 16/05/01 JUDGMENT DATE : 16 May 2001

PARTIES : Sydney Ringtread Tyres Pty Limited (Administrator Appointed) - Plaintiff JUDGMENT OF : Barrett J

COUNSEL : Mr D. Blessington (Solicitor) - Plaintiff SOLICITORS : Coudert Brothers - Plaintiff CATCHWORDS : CORPORATIONS - Voluntary administration - Extension of time for execution of deed of company arrangement - Principles to be applied LEGISLATION CITED : Corporations Law s.444B(2) DECISION : Order for extension of time

THE SUPREME COURT REVISED OF NEW SOUTH WALES EQUITY DIVISION BARRETT J

WEDNESDAY 16 MAY 2001 2659/2001 - IN THE APPLICATION OF SYDNEY RINGTREAD TYRES PTY LTD JUDGMENT

HIS HONOUR: 1 Application is made under s.444B(2)(b) of the Corporations Law for an extension of time within which a deed of company arrangement is to be executed by Sydney Ringtread Tyres Pty Ltd of which Mr G D McDonald became the administrator under Pt 5.3A of the Corporations Law on 22 March 2001. 2 The second meeting of creditors required by Pt 5.3A in consequence of the appointment of the administrator was held on 26 April 2001. It was resolved at that meeting, with one creditor abstaining and all others present voting in favour, that the company execute a deed of company arrangement to give effect to a proposal which had been outlined at the meeting both by way of a report by the administrator and in discussion. The proposal involves an arrangement between the company and RTS (Australasia) Pty Ltd under which RTS will provide funds to enable indebtedness outstanding in respect of the company's plant and equipment to be satisfied and to ensure that employees who are creditors with priority will be paid in full, with other unsecured creditors receiving payment of the order of 6 cents in the dollar. The proposal further envisages that the company will continue to trade under an arrangement with RTS. 3 While the bare bones of the transaction with RTS to be embodied in the deed of company arrangement were known at the time of the creditors' meeting and were disclosed to creditors, it was envisaged, as the minutes of the meeting show, that there would be further discussion and settling of details between the company and RTS. In the events which have happened, that process is taking somewhat longer than might have been expected, although it is not as if the administrator has been idle. Rather, the discussions with RTS have been ongoing and the administrator deposes that it is likely that, if the additional time sought becomes available, agreement can be reached. He asks for an extension of 21 days from tomorrow, 17 May 2001, when the period applicable under s.444B(2) in the absence of extension will expire. 4 I am not aware of any authority on the approach to be taken upon an application for extension of time under s.444B(2)(b). Nor was I referred to any. On general principles, however, the function of the Court, as I see it, is to balance the benefits and detriments to be obtained from pursuing the deed of company arrangement possibility against those which will flow if the period prescribed by s.444B(2) is allowed to expire without extension so that the company passes automatically into liquidation. 5 On the material before me it is clear that the general body of unsecured creditors will be better off to some extent under the proposed deed than they will be in case of liquidation and that employees with priority will certainly be better off, as will the creditor in respect of the plant and equipment. In those respects, the proposal which it is now sought to facilitate by the extension has merits and benefits which would not be reflected in winding up. 6 Against that I was concerned that an extension for 21 days might be undesirable because of the continuation of the statutory moratorium that Pt 5.3A entails. However, Mr Blessington who appeared for the administrator has pointed out to me that the company is not at present trading and has no employees, since the services of all of them have been terminated. That being so, the deleterious effect, if any, of the continuation of the statutory moratorium can in this case safely be regarded as so insignificant as not to matter. 7 In all of the circumstances, therefore, I consider it appropriate to make the order for extension of time under s.444B(2)(b) requested in the administrator's application and I now do so. I also make an order for costs, as sought in the application. ******