In the matter of Advanced Medical Institute Pty Ltd (Administrators appointed) and AMI Australia Holdings Pty Ltd (Administrators appointed) [2011] NSWSC 574

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Advanced Medical Institute Pty Ltd (Administrators appointed) and AMI Australia Holdings Pty Ltd (Administrators appointed) [2011] NSWSC 574 Hearing dates: 10 June 2011 Decision date: 10 June 2011 Jurisdiction: Equity Division - Corporations List Before: Windeyer AJ Decision: See [8] of judgment Catchwords: CORPORATIONS - application by administrators for directions Category: Principal judgment Parties: Geoffrey Trent Hancock & Michael Charles Hird as Voluntary Administrators of Advanced Medical Institute Pty Ltd (Administrators appointed) and AMI Australia Holdings Pty Ltd (first plaintiff)

Advanced Medical Institute Pty Ltd (Administrators appointed) (second plaintiff)

AMI Australia Holdings Pty Ltd (Administrators appointed) (third plaintiff) Representation: M R Aldridge SC (plaintiffs) Colin Biggers & Paisley (plaintiffs) File Number(s): SC 2011/191053

EX TEMPORE Judgment 1This is an application by the administrators of the second and third plaintiffs for directions. 2The question which has arisen in the administration is whether or not the administrators would be justified in selling the businesses of the companies under administration to a related party on terms which would not appear to give any benefit to ordinary creditors of the company other than to employees whose benefits would be preserved or the liability for whose benefits would be taken over by the proposed purchaser related company. The matter has become urgent because it is expected that orders will be made in the Federal Court this afternoon the effect of which, so far as the administrators are concerned, is that they would almost certainly have to cease any trading of the companies under administration, and I accept that to be the position. 3Thus, the position has been reached that either the companies cease to trade, or the businesses of the companies are immediately sold to the only party who has made any offer for the businesses to the administrator apart from one other, which was clearly not an acceptable offer. Unless the businesses are sold, it would seem to be certain that the companies would be put into liquidation at the next meeting of creditors as the administrators have the view that there is no chance of a Deed of Company Arrangement being entered into. 4The benefit to the employees of the sale is that at least if the purchasing company is successful, their employee entitlements for holidays, long service leave and superannuation will be preserved, whereas if the companies go into liquidation then it is likely that the secured creditors will have to sell all the assets of the company to satisfy their charges. In that event the employees will get nothing but will then have to make claims against the General Employee Entitlements Redundancy Scheme so far as termination payments and the like are concerned and if the Australian Taxation Office is successful in recovering unpaid superannuation entitlements presumably from the director of the company then those amounts would be paid to the employees in satisfaction or part satisfaction of their superannuation entitlements. There is no benefit to anybody else. The general creditors of the company on any basis will not receive any dividend on any liquidation. 5The directions which are sought by the administrators are whether they would be justified in ceasing forthwith to trade the business of the companies as one alternative and the other alternative, although they are not put as such, is to sell the business of the companies to a related entity on the terms of a particular offer which, as I have said, give no benefit to anybody except perhaps the secured creditors and the employees, if it turns out to be a benefit, and whether in any event they would be justified in selling without seeking creditor approval. 6As the sale is to a related party apparently controlled by Mr Vaisman, who has been the directing party of the second and third plaintiffs, there would really be no purpose in seeking creditor approval because one would imagine he and his associated parties, as creditors, would obviously vote in favour of it. 7It is not the function of the Court to advise an administrator or a liquidator on what commercial decisions they should take. On the evidence before me, I would have no difficulty in stating that the administrators would be justified in taking whichever action they thought was appropriate. It seems to me that that is a question which they should decide. Obviously, there is some public interest in what happens but that is something which does not really bear upon the decision which they should make. Their decision must take into account the interests of those whose interests they represent and they are justified in coming to whichever decision they wish in respect of the two alternatives which have been put before me and which they consider is the appropriate commercial course to take. Orders 8Order that the first plaintiffs would be justified in either forthwith ceasing to trade the businesses of the second and third plaintiffs or selling the businesses of the said plaintiffs to a related entity on the terms or substantially the terms of the offer set out in the letter from MPB Legal dated 9 June 2011, being tab 15 to Exhibit C in these proceedings, without obtaining creditors' approval to such sale. Note that the decision as to which course to take is a matter for the administrators. 9Order the costs of this application be costs in the administration. 10Orders to be entered forthwith.