Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253

New South Wales Supreme Court

CITATION : Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 HEARING DATE(S) : 25 March 2004 JUDGMENT DATE : 25 March 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Convening period extended for 60 days

CATCHWORDS : CORPORATIONS - voluntary administration - extension of convening period - intervention of receiver - (no question of general principle) LEGISLATION CITED : Corporations Act 2001 (Cth) s 439A CASES CITED : Mann v Abruzzi Sports Club Limited (1994) 12 ACSR 611 Re Pan Pharmaceuticals Limited [2003] FCA 598 PARTIES : Antony De Vries and Riad Tayeh in their capacity as administrators of New Horizons Corporation Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) and New Horizons Corporation Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) (Ps) FILE NUMBER(S) : SC 2131/04 COUNSEL : S Pateman (Sol) (Ps) SOLICITORS : Purcell Insolvency Lawyers (Ps)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

THURSDAY 25 MARCH 2004

2131/04 RE NEW HORIZONS CORPORATION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED); EX PARTE DE VRIES JUDGMENT (Ex tempore; revised 31 March 2004) 1 HIS HONOUR: This matter began by originating process filed in Court today. 2 The plaintiffs, who are New Horizons Corporation and its administrators Mr De Vries and Mr Tayeh, seek an order under s 439A(6) of the Corporations Act for the extension of the convening period for the second meeting of creditors of the company in administration for a period of sixty days. 3 The extension that is sought is quite a long extension, but I am satisfied that the evidence supports the application. 4 The principles upon which the Court acts in considering such an application are well known. I refer only to Mann v Abruzzi Sports Club Limited (1994) 12 ACSR 611 because the case has some factual similarity with the present case in that there, as here, the administrators' capacity to discharge their work was affected by the appointment of a receiver and manager (in that case the day after the appointment of the administrators and here the day before). 5 The Court's task is to balance the need for the administration of a company to be carried out as efficiently and expeditiously as practicable so as to minimise the effect on those persons who are subject to the moratorium imposed by Part 5.3A, against the need to give the administrators time to present meaningful choices to the creditors at their meeting (see in Re Pan Pharmaceuticals Limited [2003] FCA 598 per Lindgren J). 6 Here the administrators were appointed on 6 March 2004 and have held their first meeting. The company owns and operates a world class golf course at Port Stephens in New South Wales, and in conjunction with the golf course a luxury resort and ancillary functions. It employs over one hundred staff, conducts various national and international golf tournaments and trades with over 150 separate entities mostly in the local community. 7 The sole director of the company is Antonio Geloresi. As I have said, receivers and managers were appointed by the company's secured creditor the day before the appointment of the voluntary administrators. 8 Since their appointment the receivers and managers have assumed control of the company and have taken responsibility for its day-to-day operation. They have required the financial management staff of the company to produce to them records and financial information, and it has not been possible for the administrators and their staff to spend any substantial time with the financial management staff of the company or to request documentation from them, given the time needed to comply with the receivers and managers' demands. 9 The administrators have, however, progressed other aspects of the administration by liaising with the director and with the receivers and managers with respect to ongoing business operations, liaising with creditors and liaising with potential purchasers and interested parties. 10 Before the appointment of the administrators the company was actively engaged in negotiations to secure finance to pay out existing creditors and fund the development of potential development sites at the resort. The possibility of the sale of the business, or the shares in the company, was explored with various parties at that time. Since their appointment the administrators have actively sought a buyer for the company's business, or alternatively someone to pay out the company's secured creditor and then assume control of the undertaking of the company through the provision of further finance. 11 The administrators have continued the employment of a company which had been retained prior to the commencement of the administration to attempt to secure finance or a buyer. Some positive responses to investigations have been received. In the meantime the receivers and managers have not undertaken any advertising for the sale of the business or assets of the company, and they are still to prepare a valuation and formulate a marketing plan. 12 It appears from the evidence before me that the receivers and managers have concentrated significant effort in taking control of the company business and operations and that plans for the sale of the assets have been deferred for a period. 13 The position with respect to creditors is as follows: there are about $8,000,000 in secured creditors and about $6.5 million to $7.5 million in unsecured creditors excluding related party creditors. Mr Geloresi, the director, claims to have contributed through his related company some $8.6 million by way of financial assistance to the company. He has indicated in preliminary discussions with the administrators that he may be prepared to offer to waive part or all of his claim as an unsecured creditor in support of a deed of company arrangement. 14 Mr De Vries has given evidence, based on his substantial experience as an insolvency practitioner, that any bid for the purchase of the business, supported by Mr Geloresi in this way in the context of a deed of company arrangement, may result in a return of significantly greater advantage to creditors than if the company were to proceed to liquidation. 15 The evidence of Mr De Vries is that the administrators need further time so as to obtain access to and review the company's books and records once the receivers and managers make them available, secure a detailed offer from Mr Geloresi regarding any proposed deed of company arrangement, obtain and collate appropriate information for potential purchasers or financiers, more actively market the potential sale of the company's business, and then form a view as to the affairs of the company so as to be able to report to creditors. 16 It appears to me on the evidence that it is appropriate for the Court, doing its best to balance the interests to which I have referred, to grant the sixty day extension that is sought. 17 So far as employees are concerned there is no indication that any employees have endeavoured to initiate any proceedings in respect of dismissal, nor is there any indication there was any other litigant wishing to proceed with litigation but frustrated by the voluntary administration. 18 The single secured creditor is the party who appointed the receivers and managers. The attitude of the receivers and managers indicated in their letter dated 25 March 2004 is that they do not oppose the Court making the extension order that is sought. They say that company is continuing to trade and they have no present intention to terminate the business, although they fully reserve their right to do so. 19 There is no suggestion of any lessor whose right of re-entry is frustrated by the administration. 20 In the circumstances there is a real prospect that unsecured creditors may obtain a better return if the extension is granted and there is no obvious prejudice to any of the interested parties. Therefore, I am prepared to make the order.