Supreme Court New South Wales Medium Neutral Citation: In the matter of Sirius Corporation Limited (administrators appointed) and others [2013] NSWSC 2003 Hearing dates: 18 September 2013 Decision date: 18 September 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Judgment delivered that orders will be made extending convening period for a second meeting of creditors. Plaintiff to provide short minutes of order consistent with the judgment. Catchwords: CORPORATIONS - management and administration - meetings - creditors' meeting - application for orders to extend the convening period for a second meeting of creditors - whether the proposed extension of time would cause prejudice to creditors. Legislation Cited: Corporations Act 2001 (Cth) ss 439A, 439A(4), 439A(6), 447A, Pt 5.3A Cases Cited: - Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 - Owen Re RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs apptd) v Madden [2011] FCA 295 - Owen Re RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) ACSR 255 - Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 - Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352 - Sylvia Re Austcorp Group Ltd (admin apptd) [2009] FCA 636 Category: Interlocutory applications Parties: Quentin James Olde and Nathan Vance Laundrey in their capacity as joint and several administrators of Sirius Corporation Limited (administrators appointed) and others (Plaintiffs) Representation: Counsel: V. Bedrossian (Plaintiffs) Solicitors: Norton Rose Fulbright (Plaintiffs) File Number(s): 2013/281966 Judgment - ex tempore 1By Originating Process filed on 18 September 2013, by leave, Mr Quentin Olde and Mr Nathan Landrey, in their capacity as joint and several administrators of Sirius Corporation Limited (admins apptd) ("Sirius") and other associated entities seek orders under sections 439A and 447A of the Corporations Act 2001 (Cth) to extend the convening period for a second meeting of creditors of Sirius and its associated entities, and to permit that second meeting of creditors to be held at any time during the extent of convening period or the period of five days thereafter. 2The application is supported by a detailed affidavit of Mr Olde dated 18 September 2013 which indicates the basis on which it is brought. Mr Olde gives evidence of his experience as a registered and official liquidator in the insolvency industry and of his experience in the administration of complex administrations. He and Mr Landrey were appointed as joint and several administrators of Sirius and its associated entities on 30 August 2013. They have convened a first meeting of creditors for each of the companies and the convening period for the second meeting of creditors of those companies would currently expire on 27 September 2013. 3They seek an extension of approximately six weeks for that convening period. Mr Olde's evidence is that Sirius is the ultimate holding company for the companies within the group. Several of those companies are currently trading and others are dormant. The companies conducted business in the information technology industry, providing services predominantly to local council authorities from office locations in Melbourne, Sydney, the Australian Capital Territory and Queensland. 4The companies had, together, some 35 employees at the time of the administrators' appointment. The number of employees has since been reduced as a result of funding constraints affecting the administration, although several employees continue to be employed. Mr Olde's affidavit identifies the material assets available for realisation in the administration which include the businesses operated by the relevant companies, various software packages and intellectual property, and the corporate entity constituting Sirius, which has itself some value as an entity listed on the Australian Securities Exchange, capable of being acquired by a third party who might seek, by that means, to acquire a listing. There is evidence as to the unsecured creditors of the various entities, which include third party creditors and also some intercompany debt. Mr Olde also sets out in considerable detail the work which has been undertaken in the administration to date. 5Mr Olde's evidence indicates that significant progress has been made in seeking to realise the assets of the companies. In particular, he indicates that he has received interest from several parties to provide funding to recapitalise Sirius and acquire its ASX listing and indicates that a written indicative offer has been obtained from one such party and he has been in discussion with other parties. He notes that conclusion of one of those offers, on satisfactory terms, would be of benefit to the creditors of Sirius. 6He indicates that has he has entered into a Heads of Agreement for the sale of one of the businesses operated by Infomaster, which is one of the subsidiaries of Sirius, on certain terms, including that the administrators retain possession of the Sydney premises for that period so that the third party purchaser can access those premises. A draft Sale Agreement to give effect to that Heads of Agreement has been prepared and due diligence is currently taking place. The administrators have also received non-binding offers in respect of other businesses operated by that entity and work is ongoing in respect of that position. Mr Olde's evidence is that he anticipates it would take approximately three weeks to complete negotiations with that third party. 7The administrators have also entered into agreements with third parties for the sale of perpetual licences of certain software owned by Pinnacle Software, another subsidiary of Sirius and Mr Olde's evidence is that, if the sale of further such licences can be negotiated on satisfactory terms, that will improve the prospects of recovery of creditors of Pinnacle Software. 8Mr Olde notes that he needs to conduct an investigation in respect of a claim made by a third party to certain intellectual property which company records indicate is held by the one of the companies within the group. He also expresses the view that the administrators would presently be unable to express a properly informed opinion under section 439A(4) of the Corporations Act, as would be required at a second meeting of creditors, which would require that he complete the process of analysing the offers to recapitalise Sirius and the offers by third party purchasers to purchase various businesses operated by the group. He provides an indication of the time that is likely to be necessary to complete that process, which he indicates is a period of six weeks from 27 September 2013, the date on which the convening period for the second meeting presently expires. 9Mr Olde expresses the view, having regard to the detailed factual background set out in his affidavit, that unsecured creditors would be likely to receive a lesser distribution from an immediate liquidation of the companies than the return which may arise if further steps are taken as he proposes and that other stakeholders, such as remaining employees, may be advantaged by the possibility that their jobs will be preserved if those negotiations progress. 10He notes that several major creditors have been informally notified of the proposed extension of time and have indicated their support for it. He acknowledges that a circular has not been sent to all creditors regarding the extension of the convening period, but the proposed orders would reserve ability for any interested person to apply to vary or amend any orders made to extend the convening period, so that any person who has not had notice of the application and has an interest in opposing it would have the opportunity to do so. 11Mr Olde fairly acknowledges that there are two potential prejudices to creditors arising from the application. The first is that a moratorium would continue to apply affecting the lessor of the Sydney premises. However, Mr Olde notes that prejudice to the lessor would be reduced by the fact that the administrators are personally liable for rent in respect of those premises and are funded to pay that rent. He also notes that the extension of the convening period would delay the lodgement of eligible claims of terminated employees under the Fair Entitlements Guarantee Scheme by the period of the extension. He expresses the view, for which there seems to be me to be a sound basis in the other matters set out in his affidavit, that the prejudice suffered by the lessor and the delay to which those employees are exposed is outweighed by the benefits likely to be conferred by such an extension on remaining employees, the creditors and other stakeholders. 12With this background, I should turn to the relevant authorities. Section 439A(6) and section 447A of the Corporations Act allow the Court to extend the convening period in an application made during that period. This application has been made well within the period. The Court's function in determining such an application, is to reach an appropriate balance between the expectation that the administration will be relatively speedily and summary, and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]. Mr Bedrossian, who appears for the administrators, also draws attention to the useful summary of the relevant factors in Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352, where Austin J summarised the reasons which may support such an extension in a passage that has frequently been cited since, as including the size and scope of the company's business, the time needed to execute an orderly process of disposal of assets, which is a matter plainly relevant in this case, including the opportunity to sell the company's business as a going concern; whether additional time is likely to enhance the return for unsecured creditors; and the impact of any extension on a person whose claim is affected by the statutory moratoriums under Part 5.3A of the Act, which is a matter addressed in Mr Olde's evidence. 13I have referred above to Mr Olde's evidence as to the position of the employees. On the one hand, he notes the possibility that remaining employees may be advantaged, to the extent that some of them may have the opportunity to retain employment if the discussions to which he refers reach a successful resolution. On the other hand, he acknowledges that there will be a delay in terminated employees having the opportunity to claim in respect of the Fair Entitlements Guarantee Scheme. Employees' interests are a matter which may properly be taken into account in an application of this kind: Owen Re RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs appted) v Madden [2011] FCA 295 at [27]. It seems to me that significant weight should be given to the prospect of continuing employment for some employees, although I recognise the disadvantage to other employees who are delayed in making the relevant claims against the Fair Entitlements Guarantee Scheme, although that is mitigated by the relevantly short period of extension which is sought. 14The authorities recognise that the Court can and should give weight to the considered judgment of administrators in applications of this kind: Owen, Re RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs appted) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 at [26]. Mr Olde's affidavit contains a detailed analysis of the relevant advantages and disadvantages, and plainly expresses his view that the advantages of an extension of time for the second meeting outweigh its disadvantages, and I should give weight to that view. 15The determination involved in a matter of this kind plainly involves a weighing process. I am satisfied, by reference the matters to which I have referred, that the case for an extension of the convening period is sufficiently strong to make the orders sought. The period for which that extension is sought is not particularly long, and the advantages which are available from such an extension is apparent. The form of order which is sought will include orders of the kind contemplated by Lindgren J in Sylvia Re Austcorp Group Ltd (admin apptd) [2009] FCA 636 which will permit the meeting to be held at any time during the convening period as extended if events move more quickly than the administrators presently anticipate. The position of creditors who have not received formal notice of this application will be protected, so far as the orders which I will make will reserve to interested persons the ability to restore the matter before the Court in order to seek to set aside the extension granted. 16I grant leave to the plaintiffs to send short minutes of order to my Associate, which I will make in chambers if they are consistent with this judgment. It would be appropriate that those orders provide for notification to creditors of the extension of the extension of the convening period and of their ability to apply the Court, if so advised, in respect of that extension. ********** 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: 23 January 2014