Re New Horizons Corporation; Ex Parte De Vries [2004] NSWSC 455

New South Wales Supreme Court

CITATION : Re New Horizons Corporation; Ex Parte De Vries [2004] NSWSC 455 HEARING DATE(S) : 20 May 2004 JUDGMENT DATE : 31 May 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Extension granted

CATCHWORDS : CORPORATIONS - voluntary administration - extension of convening period - administrator handicapped in carrying out duties by receiver being in control of company's business and books and records - more time needed to properly advise creditors and investigate commercial opportunities LEGISLATION CITED : Corporations Act 2001 (Cth) Re Daisytek Australia Pty Ltd (admin appointed) and Another (Bowen and Hall as joint admins) (2003) 45 ACSR 446 CASES CITED : Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 Re Tracker Software (Australia) Pty Ltd (admin appointed) (1997) 24 ACSR 92 PARTIES : Antony De Vries and Riad Tayeh in their capacity as administrators of New Horizons Corporation Pty Limited (Receivers and Managers Appointed) (Administrators Appointed) and New Horizons Corporation Pty Limited (Receivers and Managers Appointed) (Administrators Appointed) - Plaintiffs FILE NUMBER(S) : SC 2131/04 COUNSEL : S Pateman, solicitor - plaintiff SOLICITORS : Purcell Involvency Lawyers - plaintiff

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

31 MAY 2004

2131/04 NEW HORIZONS CORPORATION PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED); EX PARTE DE VRIES JUDGMENT 1 HIS HONOUR: This is an application by a company in administration, and its administrators, for an extension of the convening period under section 439A Corporations Act 2001 (Cth). On Friday 21 May 2004 I made orders on the application, so that the administrator could know where he stood, but deferred giving reasons for those orders. These are the reasons. 2 On 5 March 2004 receivers and managers were appointed to the Company by a secured creditor. On 6 March 2004 the sole director of the Company appointed administrators to it. The receivers have been in occupation of the Company's land, have been operating its business, and have been in possession of its books and records, since then. 3 On 25 March 2004 Austin J approved an extension of the convening period for a period of sixty days, to 25 May 2004, and made a consequential order that the second meeting of creditors be held at any time during the extended convening period and the period of five business days after the expiration of the extended conveying period: Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253. The receivers consented to that extension of the convening period. 4 Now, the Company and its administrator seek a further extension of the convening period for thirty days, to 24 June 2004. They also seek a consequential extension of the time for holding a second meeting of creditors, to five business days after that further extended convening period. 5 The receivers are in the process of trying to sell the Company's land, on which it conducted a resort. They have called for tenders, which will close on 10 June 2004. The receivers have informed the administrators that there have been over one hundred and fifty interested parties. The receivers have prepared an Information Memorandum, relating to the land, which they make available to an interested person upon receipt of a confidentiality undertaking. The receivers have informed the administrators that they have received over seventy such undertakings. The receivers are not prepared to make a copy of that Information Memorandum available to the administrators unless the administrators execute a confidentiality agreement. It appears that the administrators are unwilling to do so. The receivers have also declined to make available to the administrators a valuation of the property which the receivers have apparently obtained. 6 The administrators are themselves negotiating with several potential purchasers who have decided not to negotiate with the receivers, and who appear to be interested in assisting the director of the Company, Mr Antonio Gelonesi, to effect a Deed of Arrangement. One particular prospect which the administrators are investigating concerns a company which has expressed interest in paying out the Company's only secured creditor, taking an assignment of the securities of the secured creditor, and permitting the Company to raise money from another financier on first mortgage of the land – that is, the securities taken on assignment would be postponed to a security given to that financier. That proposal is dependent upon the interested party receiving a valuation of the Resort of more than $12m. Mr Gelonesi and that interested party have commissioned a valuation, which is expected to be completed within one or two weeks from the date of this hearing. 7 The money raised from the second financier is proposed to be made available, under the terms of a Deed of Company Arrangement, for paying the creditors of the Company. 8 The administrators are of the view that if a second finance provider was able to provide money in this fashion, this would be a very significant potential advantage to unsecured creditors. 9 The administrators have been handicapped in their investigation of the Company's affairs by the control of the books and records of the Company remaining with the receivers. Partly for that reason, and partly because the proposal which Mr Gelonesi is trying to put together for a Deed of Company Arrangement has not yet been finalised, the administrators cannot adequately report to the creditors concerning the affairs of the Company, nor make a meaningful recommendation to the creditors about the best course of action. 10 The administrators are not being pressed by creditors for payment. 11 The administrators say they need more time so they can: - obtain access to and review the Company's books and records in full to the administrators' satisfaction - properly elicit a detailed offer from Mr Gelonesi regarding his proposed Deed of Company Arrangement, including the potential for Mr Gelonesi to not participate under any proposed Deed of Company Arrangement (Mr Gelonesi being a significant creditor of the Company) - Finalise each of the present outstanding potential acquisition/finance proposals in relation to the Company as a going concern and maximise the potential returns to unsecured creditors; and - Investigate and form a view in relation to the affairs of the Company, particularly in view of their obligation to provide an opinion of the type referred to in section 439A(4) of the Corporations Act. 12 The administrators are of the view that it is in the best interests of the Company's creditors that the convening period be extended for a further thirty days. While administration ought so far as possible proceed quickly (Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611), the need for speed should give way to the administrators having the opportunity to carry out their statutory tasks properly, where a real need for a slowing down of the legislative timetable is demonstrated (Re Tracker Software (Australia) Pty Ltd (admin appointed) (1997) 24 ACSR 92; Re Daisytek Australia Pty Ltd (admin appointed) and Another (Bowen and hall as joint admins) (2003) 45 ACSR 446). 13 An adequate case for granting the extension sought has, in my view, been made out. ORDERS