Professional Advantage Pty. Ltd. v. Agriculture.Com Pty. Ltd [2001] NSWSC 78

New South Wales Supreme Court

CITATION : Professional Advantage Pty. Ltd. v. Agriculture.Com Pty. Ltd [2001] NSWSC 78 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 4739/00 HEARING DATE(S) : 21 February 2001 JUDGMENT DATE : 21 February 2001

PARTIES : Professional Advantage Pty. Ltd. - plaintiff Agriculture.Com Pty. Ltd. - defendant JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : Ms. H. Morvas, Solicitor, for plaintiff Mr. Castle for defendant SOLICITORS : Morgan Lewis Alter, Sydney for plaintiff Henry Davis York, Sydney for defendant CATCHWORDS : CORPORATIONS - Adjournment of winding up application. LEGISLATION CITED : Corporations Law, s.440A CASES CITED : Waste Recycling v. LGRC (1999) 32 ACSR 194 DCT v. First Netcom (2000) NSWSC 1045 DECISION : See end of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Wednesday 21st February 2001

NO. 4739 OF 2000 PROFESSIONAL ADVANTAGE PTY. LTD. V. AGRICULTURE.COM PTY. LTD.

JUDGMENT

1 I am dealing with an application for an adjournment of this matter, made by the administrator of the defendant who was appointed on 9th February 2001. The application is opposed by the plaintiff. 2 The plaintiff claims to be a creditor in the sum of just under $100,000.00, and served a statutory demand for that amount on 25th October 2000. The statutory demand was not complied with, and these proceedings seeking the winding up of the defendant were commenced on 24th November 2000, with a return date of 5th February 2001. On that day, the defendant sought directions for the filing of affidavits, which would have involved standing the matter over to 19th March 2001. However, the Registrar did not make those orders, but instead stood the matter over to 13th February 2001, ordering the defendant to pay the plaintiff's costs. 3 During that adjournment, that is on 9th February 2001, the administrator was appointed, and on 13th February 2001, an application was made to me under s.440A of the Corporations Law for a further adjournment. I granted that adjournment until today, and the administrator now seeks a further adjournment to some time in the week commencing 12th March 2001, on the basis that the second meeting of creditors is required by 9th March 2001, and also on the basis that such an adjournment would give some time to conclude negotiations which have been under way with a creditor of the defendant, namely Andersen Consulting. 4 The administrator, Mr. Sherman, has put on an affidavit giving some information as to the course of negotiations which had taken place between the directors of the company and Andersen Consulting. That material suggests that a consensus had been reached as to the terms of an agreement whereby Andersen Consulting were to provide financing for the company which would involve, among other things, the injection of funds into the company in a amount of just under $1.2 million. Although that consensus was apparently reached, it did not result in an agreement because Andersen Consulting wished to have a further valuation of the company, and that was resisted by the directors. However, Mr. Sherman expresses the view that he may be able to bring that agreement to finality, in which case he believes that the defendant could continue as a going concerning and all creditors could be paid in full. 5 Mr. Sherman also gives evidence of the calling of the first meeting of creditors. However, it appears that certain creditors, including the plaintiff, were not given notice of that meeting, and although it would seem, on the material before me, that all trading creditors were given notice of the meeting, the meeting itself was not attended by any representative of what appear to be the major trading creditors, in particular Wesfarmers Dalgety, who appear to be owed about $2.3 million, and two other creditors, each owed just under $400,000.00. 6 There is evidence from Mr. Sherman that the company is not trading. I have been informed that the company is not paying any rent and employs no staff, and that if the adjournment of about three weeks is granted, the only additional costs to be incurred would be administration costs estimated to be between $25,000.00 and $35,000.00. 7 There are representatives in Court for Andersen Consulting, claiming to be a creditor in the sum of a little over $500,000.00, and Ebsworth & Ebsworth, Solicitors, claiming to be a creditor in the sum of something over $100,000.00. Those creditors support the adjournment. 8 Mr. Castle for the applicant submits that the Court should be satisfied, in terms of s.440A, that it is in the interests of the company's creditors for the company to continue under administration at least for the next three weeks, rather than to be wound up, in order that the administrator can pursue this possible agreement with Andersen Consulting. The alternative of a winding up would destroy any possibility of the company continuing as a going concern, and would inevitably cause a substantial shortfall in the amount available to pay all the creditors. 9 Ms. Morvas for the plaintiff submits that the defendant company has not been acting in good faith, expressing a dispute as to the debt, claiming to be solvent, and not dealing in a timely fashion with the statutory demand and the application to wind up, and then having an administrator appointed at the last minute. She submitted that, even during the initial adjournment, the defendant had not done what it was required to do, namely give proper notice of a creditors' meeting, and put on satisfactory evidence within a specified time. 10 I should add that Mr. Castle provided a written outline of submissions in support of the application, and in his oral presentation, referred me particularly to two decision of Santow, J. namely Waste Recycling v. LGRC (1999) 32 ACSR 194 and DCT v. First Netcom (2000) NSWSC 1045. 11 I think there is force in the criticisms advanced by Ms. Movsas, but the decision I have to make is essentially whether an adjournment of about three weeks as sought, and the continuation of the administration for that period, would be in the interests of creditors. An experienced liquidator has expressed the view, and supported it with evidence of previous negotiations, to the effect that there is a significant possibility of an agreement being reached which would enable all creditors to be paid. It is no more than a significant possibility, but it seems to me that it is fairly put that high. The essential disadvantage of the adjournment would be the incurring of the additional costs that I have referred to, and possibly a short further reduction of the time in relative to previous transactions could be challenged. 12 On the whole, I think the balance just favours the granting of the adjournment, and I propose to do that. I think it appropriate to grant the adjournment to some time in the middle or second half of the week in question, and to direct that any affidavit in support of any further adjournment be filed and served a couple of days before the adjourned date. I would make it clear that my own view is that, unless at that stage a further adjournment is plainly supported by the majority of creditors who take an interest in the matter, and there is a very strong probability of agreement being finalised with Andersen Consulting, there should be no further adjournment granted at that stage. 13 I stand the matter over to the Corporations List on 19th March 2001. 14 I direct that any material to be relied on by the defendant in support of any further adjournment, or dismissal of the application, be filed and served on or before 14th March 2001. 15 The costs of today are to be costs in the proceedings. *******