FEDERAL COURT OF AUSTRALIA

Hayes, in the matter of Dick Smith Holdings Limited (Administrators Appointed) (Receivers and Managers Appointed) (No 2) [2016] FCA 529

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory process be made returnable instanter.

2.    Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act) the requirement on the plaintiffs to issue notices under s 439A(3) of the Act be modified such that notice of the second meeting of creditors of Dick Smith Holdings Limited (Administrators Appointed) (Receivers and Managers Appointed) and each of the companies listed in the attached schedule (together, the Companies) will be validly given to any creditors by, not less than five business days prior to the date of the proposed meeting:

(a)    giving such notice electronically by email sent to the email address of any creditor (including persons claiming to be creditors) of the Companies for whom or which the plaintiffs hold an email address;

(b)    sending such notice to the postal address or facsimile number, or otherwise as provided for by the Act or the Corporations Regulations 2001 (Cth), to any creditors not being a creditor referred to in sub-paragraph (a);

(c)    causing such notice to be made available on the website maintained by the plaintiffs’ firm at http://www.mcgrathnicol.com/assignments/dick-smith-group-companies/#; and

(d)    causing such notice to be published in The Australian newspaper.

3.    Pursuant to s 447A(1) of the Act, s 439A(4) of the Act be modified such that the information required under s 439A(4) to accompany the said notice to creditors may be validly given if it is:

(a)    available for download from the website that is maintained by the plaintiffs; and

(b)    referred to in the notices issued and published in accordance with Order 1, as being available for download from the website that is maintained by the plaintiffs.

4.    The plaintiffs’ costs of the proceedings be paid pro rata as a cost in the administration of each of the Companies.

5.    Liberty be granted to any person affected by these orders to apply on three days’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

YATES J:

1    By an interlocutory process filed today, 13 May 2016, the plaintiffs, who are the administrators appointed to a number of companies, which I will call the Dick Smith Group or the Group, seek orders pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act), that Pt 5.3A is to operate as though s 439A(3) and (4) were modified such that notice of the second meetings of creditors may be given:

    electronically by email;

    by post for those creditors for whom the administrators do not have an email address;

    by placing the notice of the meetings on the website that is maintained by the administrators, and

    by causing notice of the meetings to be published in The Australian newspaper.

2    The application is supported by an affidavit of one of the plaintiffs, Joseph David Hayes, made 12 May 2016. This matter has previously come before the Court for orders extending the convening periods for the second meetings of creditors: Hayes, in the matter of Dick Smith Holdings Limited (Administrators Appointed) (Receivers and Managers Appointed) [2016] FCA 24 (my earlier reasons). My earlier reasons provide the background to the administration.

financial position of the group

3    In his affidavit, Mr Hayes has provided an update on the financial position of the Dick Smith Group. He has identified the creditors as comprising a number of different classes. They can be categorised as:

    secured lenders who are owed approximately $130 million;

    secured trade creditors with registered interests on the Personal Property Securities Register;

    approximately 3,950 trade creditors who are owed in excess of $300 million; and

    approximately 3,400 employee creditors whose entitlements are currently in excess of $4.5 million, based upon the proofs of debt that have been received.

4    On about 16 March 2016, the administrators entered into a funding agreement with the receivers and managers (on behalf of the secured lenders) for the additional professional costs and disbursements incurred in taking various steps in the course of the voluntary administration of the Group. Outside this agreement, no other source of funds is available or is expected to be made available to the administrators, other than in respect of the company known as A.C.N. 136 849 584 Pty Limited (formerly known as Mac 1 Pty Limited) (Mac 1), prior to the second meetings of creditors. The funding agreement with the receivers and managers does not provide for the costs of convening the second meetings of creditors. The convening period, under s 439A(6) of the Act, has been extended up to midnight on 2 August 2016, in each case.

notice of second meetings of creditors

5    Mr Hayes expects that the second meetings of creditors will be held in or around June 2016. For that purpose, he will be required to issue notice of the meetings along with proposed resolutions and a report to creditors pursuant to s 439A(4) of the Act. This report will be issued to approximately 7,300 creditors of the companies in the Group, other than Mac 1, and 164 creditors of Mac 1.

6    Mr Hayes has deposed that two separate reports will need to be prepared. One report will relate to the companies over which the secured lenders hold security. This report will be up to 150 pages in length. The other report will go to creditors of Mac 1. This report is expected to be up to 100 pages in length. It will be necessary to prepare two separate reports to ensure that information in relation to the companies in the Group is presented in a clear and effective way for the different groups of creditors. However, as a result of a deed of cross-guarantee dated 7 January 2014, both s 439A reports will be required to be made available to the creditors of each of the companies in the Group.

7    Mr Hayes has deposed that, given the significant number of creditors who are entitled to receive notice of the second meetings of creditors, he believes that it will be logistically difficult, costly and time consuming to send a notice of meeting, along with the resolutions and the two s 439A reports to each creditor by post.

8    Mr Hayes says that if the administrators are required to send notices by post to all creditors, it will be necessary to engage the services of an external provider to provide mailing and printing support and to assist in sending notices to creditors. His office does not have those facilities or ready resources to undertake such a task. Mr Hayes has estimated that the cost per creditor to be incurred, if the administrators were required to send hard copies of the notice of meetings, resolutions and reports to each creditor, would be approximately $20 each. This amounts to approximately $146,000 for the 7,300 creditors (other than in relation to Mac 1) and $3,280 for the 164 creditors of Mac 1, bringing the total cost to approximately $149,280.

9    Given this cost and the logistical difficulties to which I have briefly referred, Mr Hayes has expressed the view that the most expedient and efficient approach to notifying creditors will be to advertise the second meetings by the following means, namely:

    providing a one-page notice to all creditors containing details of the second meetings of creditors, including instructions as to where to download the notice of meeting, the proposed resolutions, the two reports and other documentation. He proposes that the notice be emailed to creditors who have provided an email address to the companies and posted to the remaining creditors. Mr Hayes estimates that the total cost of this exercise would be approximately $7,000. A draft of the document headed Update to Creditors and the Notice of Second Meetings of Creditors, proposed to be sent, is exhibit A in this application;

    making the documents referred to above available for download on the administrators’ website;

    advertising the details of the meetings in the print media, namely The Australian newspaper; and

    issuing a media release regarding the details of the second meetings of creditors.

10    Mr Hayes says that the administrators hold email addresses for 2,070 of the total 7,464 creditors. Postal addresses are held for the remainder. Mr Hayes has expressed the view, based on his experience in similar insolvencies, that giving notice of this kind will provide adequate notice to creditors. He also refers to the fact that this administration has received quite a high level of publicity to date which would assist in promoting the notice to creditors generally.

notice of application

11    On 10 May 2016, the administrators posted on their webpage a copy of a notice stating that they would approach the Court for the purposes of the present application. Mr Hayes says that he has received no notice from any creditor raising any objection in respect of this application.

consideration

12    I have been referred to two decisions where a procedure, similar to the one proposed in this application, has been adopted: In the matter of Creative Memories Australia Pty Limited (Administrators Appointed) [2013] 31 ACLC 13-020; NSWSC 732; In the matter of BBY Limited [2015] NSWSC 974.

13    In light of the matters advanced in Mr Hayes’ affidavit, I am satisfied that the present proposal is appropriate and is likely to be a most effective means of giving notice of the second meetings of creditors to all creditors, as well as providing, in an efficient manner, the documents that are required to be provided to creditors under the Act.

Disposition

14    For these reasons I will make the orders in the form of the draft orders that have been placed before me.

Associate:

Dated:    18 May 2016

SCHEDULE

DICK SMITH SUB-HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 160 162 925

DSE HOLDINGS PTY LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 001 456 720

DICK SMITH MANAGEMENT PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 001 585 735

DICK SMITH ELECTRONICS FRANCHISING PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 054 295 733

INTERTAN AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 002 511 944

DICK SMITH (WHOLESALE) PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 000 445 956

DICK SMITH ELECTRONICS PTY LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 000 908 716

DICK SMITH ELECTRONICS STAFF SUPERANNUATION FUND PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 059 802 470

A.C.N. 136 849 584 PTY LIMITED (FORMERLY KNOWN AS MAC 1 PTY LIMITED) ACN 136 849 584