FEDERAL COURT OF AUSTRALIA

Silvia v Fea Carbon Pty Ltd (ACN 009 505 195) (Administrators Appointed) (Receivers and Managers Appointed) (No 2) [2010] FCA 572

REASONS FOR JUDGMENT

1                     On 30 April 2010 orders were made giving the administrators of FEA Plantations Ltd (FEAP) an extension of the time within which they must serve a notice under s 443B of the Corporations Act 2001 (Cth) to advise lessors of properties leased by FEAP that the administrators do not intend to exercise any rights in relation to those properties. The ‘grace period’ during which the administrators are not deemed to be personally liable for rent under the leases was also extended.  The extensions were granted because the administrators did not have “a complete understanding of what payments [were] due in respect of [an uncertain number of] leases”. 

2                     In the reasons that were given to explain why the extension had been granted it was said that if “this extension is insufficient time to track down all outstanding leases then it may be appropriate for the administrators to seek further relief”.  This is what has occurred.  The administrators have made further application to seek an extension that will allow them to give notice under subsection 443B at any time up to 30 June 2010, and to be excused from personal liability for rent until then. 

3                     The most recent application is also based on the administrators’ lack of information about the leases.  It was submitted that the liquidators still did not know precisely which leases had been granted by related companies, which related companies had granted those leases and how much was due to be paid to the landlord for the next instalment of rent which fell due for payment on 1 June. 

4                     The administrators also had other issues concerning the status of rent due under the leases from related companies.  I do not need to go into those issues in any great detail.  It is sufficient to note that the following broad categories of concern were raised:  (1) the precise identity of the related company landlords, a point which arose because invoices for rent which had recently been received were from companies other than Forest Enterprises Australia Ltd (FEA), FEAP’s parent company which had previously been thought to be the landlord under the relevant sub-leases to FEAP; (2) whether there had been any prepayment of rent; (3) what was the status of the inter-company accounts (ie the accounts between FEAP and FEA) to see whether there was a credit balance in FEAP’s favour which it might apply in discharge of its obligation to pay rent; and (4) whether FEAP had a right of set off against the rent due by reason of correspondence from FEA which, on one view, constitutes a promise to provide funding sufficient to cover the rent.

5                     During the course of the application I requested the receivers of FEA to provide information to the administrators about the status of the inter-company accounts and the prepayment of rent.  That information was received via a letter dated 2 June 2010 addressed to my associate with a copy to the administrators. 

6                     The letter sets out what the receivers understand to be the position as regards the inter-company accounts and the prepayments.  It is only their understanding because they obtained the information from the Chief Financial Officer and the Deputy CFO of FEA.  For present purposes it matters not whether the receivers’ understanding is correct.  If for some reason the information that was provided to them is inaccurate, the administrators would be able to apply to the court for relevant relief. 

7                     However that may be, the information has cleared up the uncertainty about the inter-company accounts and the prepayment of rent.  There is no balance standing to the credit of FEAP in the books of FEA.  The prepayments do not appear to affect the current rental obligations. 

8                     There is still one outstanding area of factual uncertainty and it is the identity of the precise related company which is the landlord.  As I have said, until invoices for rent were delivered it was assumed by both the administrators and the receivers that FEA was the landlord.  The invoices suggest that other related companies are the landlord.  Identifying the landlord is a matter of some importance, especially if a set off against rent is available. 

9                     It is for this reason appropriate to grant a further short extension of the time within which a s 443B notice can be given and during which the administrators will not be liable for rent.  A period of 10 days should suffice.  If the receivers provide the information very quickly then the period of 10 days can be shortened, if there is any value in shortening that period. 

10                  The relief sought by the administrators also covered notices and liabilities in respect of leases granted by third parties.   Because the evidence indicates that no rent to external landlords will fall due for payment prior to 1 July 2010, I do not propose to allow the order to go so far.  In any event, no external landlord is on notice that an application which might affect it is before the court.

11                  So far as the costs are concerned, I think that on this application they should lie where they fall.

12                  The administrators should bring in short minutes of orders to give effect to these reasons.

Associate:

Dated:         4 June 2010