FEDERAL COURT OF AUSTRALIA

Motor Group Australia Pty Limited (Administrators Appointed) (ACN 101 051 101), in the matter of Motor Group Australia Pty Limited (Administrators Appointed) (ACN 101 051 101) [2005] FCA 695

IN THE MATTER OF MOTOR GROUP AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 101 051 101)

NSD 737 OF 2005

EMMETT J

13 MAY 2005

SYDNEY

IN THE MATTER OF MOTOR GROUP AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 101 051 101) AND THE CORPORATIONS ACT

THE COURT ORDERS THAT:

1.         Leave to file an originating process in the form initialled by Justice Emmett and dated with today’s date, be granted to the Applicants, returnable instanter.

2.         Pursuant to section 439A(6) of the Corporations Act 2001 (Cth), the period within which the Administrators of Motor Group Australia Pty Limited (Administrators Appointed) must convene a meeting of creditors pursuant to section 439A of the Corporations Act 2001 (Cth) be extended up to and including 22 July 2005.

3.         Pursuant to section 447A(1) of the Corporations Act 2001, the meeting of creditors of Motor Group Australia Pty Limited (Administrators Appointed) required by section 439A of that Act may be held at any time during, or within 5 business days after the end of, the convening period, as extended by Order 1 above, notwithstanding the provisions of section 439A(2) of the Corporations Act 2001 (Cth).

4.         Liberty be granted to the Applicants to apply for any further extensions of the convening period referred to in order 1 at any time prior to 22 July 2005.

5.         The costs and expenses of this application be costs and expenses of the administration of Motor Group Australia Pty Limited (Administrators Appointed).

6.         Liberty to apply pursuant to section 447A(1) be granted to any interested person.

7.         The matter be stood over to 29 July 2005 for further directions at 9.30 am.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF MOTOR GROUP AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 101 051 101) AND THE CORPORATIONS ACT

REASONS FOR JUDGMENT

1                     The applicants were appointed joint voluntary administrators of Motor Group Australia Pty Limited (‘the Company’) on 26 April 2005.  They were appointed pursuant to s 436A of the Corporations Act 2001 (Cth) (‘the Act’).  Under s 436E they were required to convene a meeting of creditors of the Company for the purposes of considering, amongst other things, whether they should be removed from office and whether to appoint a committee of creditors.  That meeting was held and neither resolution was passed.

2                     Under s 439A of the Act, the administrators were also required to convene a meeting of the Company’s creditors within the convening period as determined in accordance with ss 439A(5) and 439A(6) of the Act.  Section 439A(5) relevantly provides that the convening period is the period of 21 days beginning on the day when the administration began, which was the date of the appointment of the administrators.  Section 439A(6), however, provides that the Court may extend the convening period on an application made within that period of 21 days.

3                     Under s 439A(2) the second meeting in the present case must be held within five business days after the end of the convening period.  The convening period would end on 16 May 2005.  The application before the Court is for an order extending the convening period up to 22 July 2005. 

4                     An application for an extension of time pursuant to s 439A(6) is to be assessed by reference to whether an extension is necessary to enable the administrators to provide the report and statements, and to arrive at the opinion, required by s 439A(4).

5                     Under that provision, the notice convening the meeting of creditors must be accompanied by a report by the administrator about the company’s business, property affairs and financial circumstances.  The notice must also be accompanied by a statement setting out the administrator’s opinion about each of the following matters:

1.         whether it would be in the creditors’ interests for the company to execute a deed of company arrangement;

2.         whether it would be in the creditors’ interests for the administration to end;

3.         whether it would be in the creditors’ interests for the company to be wound up.

6                     The Company is engaged in the business of selling motor cars.  The motor cars which it sells are supplied by a United Kingdom company, which has recently gone into administration.  One of the terms upon which the Company sells motor cars is that it provides a warranty against defects and the like for various periods after the sale is effected.  Under statute, it is required to give a warranty for 12 months.  In fact, the Company has given warranties for 24 months, with that period being extended to 36 months in certain circumstances.  In order to satisfy warranty claims, the Company has relied upon the supplier in the United Kingdom for financial support.  It has now been informed by the supplier that there will no longer be any support in relation to such claims.  Accordingly, the Company will no longer be in a position to receive the financial support involved in meeting such claims.

7                     The Company had received some warranty claims prior to the date of the appointment of the administrators.  It will no doubt be possible to quantify those claims.  However, apart from claims that have already been made, there is the potential for further claims in the future, which cannot at this stage be properly or adequately quantified.  There are some 1900 vehicles which are potentially the subject of such claims.  There may be no claims.  That, of course, is probably unlikely.  There may be substantial claims.  That simply is not known. 

8                     The Company’s substantial assets consist of motor vehicles, which are the subject of a charge to its bankers.  The Company also has other assets.  The Company’s principal liability is that to its bankers, although it has other trade creditors, liabilities to employees and, of course, the warranty claims, both those made and those yet to be reported.  The directors of the Company have intimated that they wish to examine the possibility of a deed of company arrangement.  The administrators wish to take advice as to whether it is feasible to propound a deed of company arrangement and also wish to take advice as to the categories of creditors and potential creditors whose claims should be covered by any such a deed of company arrangement.

9                     Questions would arise as to the identification of potential creditors and their quantification.  Those matters would have considerable effect on the terms of any proposed deed of company arrangement.  The administrators have informed the Court that the bankers do not oppose the proposed extension.  The effect of an extension, of course, is to continue the stays imposed by Division 6, Part 5.3(a), apart from the stay on any winding up proceeding and on any proceeding against the Company in Court.

10                  Section 440B provides that, during the administration, a person cannot enforce a charge on the property of the Company, except with the administrator’s written consent or with the leave of the Court.  The administrators have already given written consent to the bankers to enforce their charge if they are so advised, although the bankers have indicated they do not intend to do so at this stage.  Section 440C provides that, during the administration of the Company, the owner or lessor of property that is used or occupied by the Company cannot take possession of the property, except with the administrator’s written consent or with the leave of the Court.  I have also been informed by the administrators that the principal property used or occupied by the Company is owned by its directors and that, since they support the present proposal, there is no prejudice likely to follow from the operation of s 440C. 

11                  In all the circumstances, I consider that it is appropriate to make an order extending the time within which a meeting can be convened in order to satisfy s 439A(1).  Section 439A(2) provides that the second meeting must be held within five business days after the end of the convening period.  I would not have thought that that requires the meeting to be held during a five day period, rather, it simply means that the meeting must be held before the date which is five days after the end of the convening period. 

12                  I understand that contrary views have at least been hinted at and, against the possibility that those contrary views may be right, the administrators have also asked the Court to make an order pursuant to s 447A(1) that the meeting of creditors required by s 439A(1) may be held at any time during, or within five business days after the end of, the convening period.  To the extent that it is necessary to make such an order, I am prepared to make such an order.

13                  It is possible that there are interested persons who might be affected by the orders that I propose to make.  Any interested person may, pursuant to s 447A(1), apply to the Court for the making of such order, as the Court thinks appropriate about how Part 5.3(a) of the Act is to operate in relation to a particular company.  It is appropriate to reserve liberty for any interested person to make such an application in this proceeding.

Associate:

Dated:              31 May 2005