Supreme Court New South Wales Medium Neutral Citation: In the matter of Vical N.S.W. Pty Limited and Arsonello Pty Limited (Administrators Appointed) [2014] NSWSC 1325 Hearing dates: 25 September 2014 Date of orders: 25 September 2014 Decision date: 25 September 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Convening period extended. Leave reserved to interested persons to apply Catchwords: CORPORATIONS - voluntary administration – meeting of creditors – extension of convening period to permit sale of assets as going concern – whether notice should be given to creditors – leave reserved to creditors to apply Legislation Cited: (Cth) Corporations Act 2001, s 439A(6), s 436C, 447A, 449A Category: Procedural and other rulings Parties: Phillip Campbell-Wilson and Simon John Cathro (plaintiffs) Representation: Counsel: R D Marshall (plaintiffs) Solicitors: William James (plaintiffs) File Number(s): 2014/ 281944 Judgment (EX TEMPORE) 1. HIS HONOUR: The plaintiffs Phillip Campbell-Wilson and Simon John Kathrow, who are the administrators appointed pursuant to (Cth) Corporations Act 2001, s 436C, of two companies Vical NSW Pty Limited and Arsenello Pty Limited, having been so appointed by a secured creditor the Commonwealth Bank of Australia trading as Bankwest on 29 August 2014, apply pursuant to the Corporations Act, s 439A(6), for an extension of the period within which they must convene the second meeting of creditors, which period would otherwise expire on 26 September 2014 up to and including 26 March 2015. 2. The companies - or at least one of them, Vical - operates two pharmacy businesses from Westfield Belconnen. Vical also owns three commercial properties in Tuncurry which are leased to tenants. Although the pharmacy businesses are said to be operated by Vical, the lease of one of the shops is held by Arsenello and the other by Vical, and it appears to be Arsenello that engages the employees of the business, it having some 52 employees. 3. Since their appointment, the administrators have attended to relevant statutory lodgements and notifications; informed creditors, employees and the lessor of premises occupied by the company of their appointment; continued to trade the two pharmacies that are operated by the companies from premises in Belconnen leased from Westfield Management Limited; responded to queries from creditors, employees, the lessor and shareholders; liaised with supplier creditors; dealt with proofs of debts and proxy forms for the first meeting of creditors; convened and conducted the first meeting of creditors; commenced investigations into the affairs of the company; and liaised with the director regarding a potential deed of company arrangement. 4. A number of parties have registered PPSA interests in respect of assets of the companies, apparently largely in respect of circulating goods comprising the inventory of stock and also relating to fit out of the premises. 5. The administrators have formed the view that the interests of creditors and of employees are likely to be best served by a sale of the pharmacies as a going concern. That course will maximise the prospects of the employees remaining in employment and likely maximise the sale proceeds and the return to creditors. Were the company to go into immediate liquidation, the tenure of the premises from which the pharmacies trade would be jeopardised, and it seems to me the ability to trade on from the perspective of securing and selling further stock would also be jeopardised, given the PMSI interests recorded on the PPSA register. Essentially for those reasons, the administrators have formed the view that the retention of the employees, the retention of customers, the securing of the ongoing supply of stock and the security of the businesses in the premises is largely dependant upon the administration continuing so that the statutory moratorium precluding secured creditors from enforcing their interests remains on foot. 6. Although reference is made in the administrator's affidavit to a possible deed of company arrangement, nothing I have seen so far, including the letter of 19 September 2014 from the director, offers much hope that a deed of company arrangement will enhance the return to creditors, but what may do so is the enabling of a sale as a going concern rather than an immediate liquidation. 7. It seems to me, therefore, that this is not a case in which an extension of the convening period is supported primarily on the basis of the need to consider and the potential to obtain an enhanced return from a DOCA proposal, but from the circumstance that the interests of creditors lie in a going concern sale, the prospect of which is dependant upon the statutory moratorium associated with administration, which would not prevail in the event of immediate liquidation. 8. That brings into stark relief the interests of the secured creditors, which include not only the lessor, but also the PPSA creditors. At this stage - although, predictably enough, the principal secured creditor, Bankwest, which appointed the administrators has indicated that it supports the administrators' application - no response has been received from Westfield Management Limited (the lessor) or Symbian Pty Limited, another secured creditor. Nor has formal notice of the application been given to them. In those circumstances, I have had some reservations as to whether it is appropriate to make the orders sought by the administrators, or whether it might be appropriate, as has sometimes been done in the past, to grant a short extension and bring the matter back with a view to considering a further extension, resorting if it be necessary to s 447A for that purpose. However, it seems to me that the interests of the secured creditors can be adequately protected by reserving to them leave to apply to set aside the order upon being served with notice of the application. 9. As the order will have been made in their absence, the hurdle they will have to overcome to have it set aside would be a very low one, and I would not see that in those circumstances they would be significantly prejudiced were I to make the order sought at this stage, as I have said, reserving leave to them to apply to set it aside. That course has the additional benefit of avoiding the costs of further appearances, unless there is to be serious opposition to the relief sought. 10. Accordingly, upon the undertaking of Brendan William Wyhoon, solicitor to pay the appropriate filing fees, I grant leave to Phillip Cambell-Wilson and Simon John Kathrow to file an originating process in the form initialled by me, dated this day and placed with the papers. I direct that the originating process be returnable instanter. 11. The Court orders that: 1. Pursuant to Corporations Act, s 449A(6), the period within which the plaintiffs must convene the meetings of creditors of Vical NSW Pty Limited (administrators appointed) ACN 065 390 016 and Arsenello Pty Limited (administrators appointed) ACN 080 140 843 as fixed by s 439A(5) be extended up to and including 26 March 2015. 2. The plaintiffs serve notice of these orders on the lessor and all known secured creditors of the companies. 3. Leave be reserved to any person with sufficient interest to do so to apply to set aside or vary order 1. These orders are to 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: 03 February 2015