Supreme Court New South Wales Medium Neutral Citation: In the matter of Creative Memories Australia Pty Limited (administrators appointed) [2013] NSWSC 732 Hearing dates: 6 May 2013 Decision date: 06 May 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made allowing for notice by email for convening meeting of creditors. Catchwords: CORPORATIONS - management and administration - meetings - applications for amendment to notice requirements in convening a meeting of company creditors - whether service by email as opposed to post will expand the number of creditors to receive notification. Legislation Cited: Corporations Act 2001 (Cth) ss 436E, 436E(1), 436E(3), 436(3)(a), 447A, 600G Cases Cited: - ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd) v Honey [2010] FCA 353 - Carson Re Hastie Group Ltd (No 2) [2012] FCA 717 - Re Carson (as admins of Hastie Group Ltd (admin apptd)) [2012] FCA 626 - Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 - Re Silvia (as admins of FEA Plantations Ltd (admins apptd)) [2010] FCA 468 Category: Interlocutory applications Parties: Atle Crowe-Maxwell and James Michael White in their capacity as joint and several administrators of Creative Memories Australia Pty Limited (administrators appointed) (Plaintiffs) Representation: Counsel: Tean Kerr (solicitor) (Plaintiffs) Solicitors: Swaab Attorneys (Plaintiffs) File Number(s): 2013/139963 Judgment - EX TEMPORE 1The plaintiffs in this application are Mr Atle Crowe-Maxwell and Mr James White who are the joint and several administrators of Creative Memories Australia Pty Limited (admins apptd) ("Company"). They were appointed to that role only recently, on 2 May 2013. Under s 436E(1) of the Corporations Act 2001 (Cth), they are required to convene a meeting of the company's creditors by 14 May 2013. Under s 436E(3)(a) of the Corporations Act, they are required to convene that meeting by giving written notice of the meeting to as many of the company's creditors as reasonably practicable at least five business days before the meeting. 2By this application, the administrators seek an order under s 447A of the Corporations Act modifying the requirement under s 436E(3) of the Act, to which I have referred, so that notice of the first meeting of creditors of the company will be validly given to any creditor by giving notice electronically by email, where the email address of the creditor is known to the plaintiffs, and to trade creditors by post where a mailing address is held, and by causing notice of the meeting to be published in The Australian newspaper. 3The application is prompted by a particular characteristic of the Company's creditors. Mr Crowe-Maxwell's affidavit dated 6 May 2013 indicates that the Company has a loyalty program for customers who pay an annual subscription fee and are entitled to a discount on purchases, who may purchase stock directly from the Company's website and who communicate with the Company by email. Mr Crowe-Maxwell notes that some or all of those customers may be creditors of the Company for a portion of their annual subscription fee and for loyalty points, and the Company has about 12,000 customers falling within that category. 4Mr Crowe-Maxwell also notes that the Company has about 2,000 consultants responsible for direct sales to clients and remunerated by commission, and some or all of those consultants may be contingent creditors of the Company for commission on sales and commission for referrals. Mr Crowe-Maxwell's affidavit indicates that the Company has other creditors, including trade creditors, and that there are, in his estimate, approximately 70-80 such creditors. I noted above that the form of orders sought contemplates that such creditors would be given not only email notification but postal notification of the meeting where an address is held. 5Mr Crowe-Maxwell's evidence is that the Company has postal addresses for its consultants and trade creditors, but he has not been able to locate postal addresses for the approximately 12,000 customers who are participants in the loyalty program. The Company holds email addresses for those customers. Mr Crowe-Maxwell notes the existence of section 600G of the Corporations Act which permits the use of electronic means of sending notices, if the recipient nominates an electronic address by which the recipient may be notified of notices. Mr Crowe-Maxwell rightly recognises that the email addresses of the customers provided to the Company were not provided for the purposes of receiving notices in respect of an administration, and are therefore unlikely to fall within the scope of s 600G of the Corporations Act. 6Mr Crowe-Maxwell expresses the view, which seems to be obviously correct given the circumstances which he has outlined, that it would be lengthy, time-consuming and expensive not only to search for the addresses of the relevant customers, but then to send in excess of 14,000 letters by post to those customers. Mr Crowe-Maxwell expresses the view, also likely to be correct, that he does not believe it will be possible for this to occur within the time limits provided for in the Act. He expresses the view that emailing notices will result in as many of the Company's creditors as is practically possible receiving notification, and that notification by post would not be likely to reach the majority of creditors within the time required by the Act. 7Pausing here, it is important to note that the modification sought by the administrators does not constrict the number of persons who will be given notification of the first meeting of creditors. Indeed, it very likely expands the number of creditors who will receive such notification. Section 436E of the Corporations Act requires such notifications to be given within a very short timeframe, and the shortness of that timeframe is recognised by the language of s 436E(3)(a) which requires that notice be given to as many of the company's creditors "as reasonably practicable". In the present case, the number of creditors to whom it would be reasonably practicable to give notice by post within the relevant time period may ultimately be relatively small. The number of creditors for whom it would be reasonably practicable to give notice by email within that timeframe is likely to be significantly larger. In these circumstances, the modification sought by the administrator serves the purposes of Part 5.4A of the Act, in expanding the number of persons who will receive notice of and have the opportunity to participate in the first creditors' meeting if they wish to do so. This, in my view, is a very strong factor in support of the application. 8Australian courts have, in any event, been increasingly willing to modify the manner in which notices may be given in respect of companies in administration to address issues of costs and practicality, including by authorising the giving of the such notices by electronic means, no doubt reflecting the fact that such means are now more widely accepted in the wider community. There are several decisions in which the courts have made orders, in respect of first or second meetings of creditors of companies in administration, permitting notice to be given by electronic means to those for whom email addresses are available and otherwise by notice, for example, on an administrator's website or by newspaper advertisement: for example, ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd) v Honey [2010] FCA 353; Re Silvia (as admins of FEA Plantations Ltd (admins apptd)) [2010] FCA 468; Re Carson (as admins of Hastie Group Ltd (admin apptd)) [2012] FCA 626; Carson Re Hastie Group Ltd (No 2) [2012] FCA 717; Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 at [8]. 9In this case, as I have noted, the modification sought by the administrator seems to me to be one which will facilitate the purposes of the Act and expand the number of creditors who will be made aware of the first meeting. For these reasons, I would make orders in the form sought by the administrator. I note that these orders include an order that the costs of the proceedings be costs in the administration of the company, which is plainly appropriate where this is a reasonable and proper application made in the administration. 10I therefore make orders in the form of the short minute of order initialled by me and placed in the file. I add an additional order 6 that these orders be entered forthwith. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 June 2013