Federal Court of Australia

Dickerson, in the matter of Disability Services Australia Limited (Administrators Appointed) [2021] FCA 1077

ORDERS

THE COURT ORDERS THAT:

Return of Amended Originating Process

1.    The Amended Originating Process be made returnable instanter.

First meeting of creditors to be held concurrently

2.    Pursuant to section 447A(1) of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate such that the first meeting of creditors of each of the Second to Fourth Plaintiffs (together, the Companies) held pursuant to section 436E of the Act (First Meeting of Creditors) may be held concurrently.

Notice to Participant Employee Creditors of First Meeting of Creditors

3.    Pursuant to section 447A(1) of the Act, for the purpose of giving notice of the First Meeting of Creditors to the approximately 500 employee creditors with a disability (Participant Employee Creditors) where the First Plaintiffs determine that the provision of written notice may be distressing to Participant Employee Creditors:

(a)    notice will be validly provided to Participant Employee Creditors if the First Plaintiffs take reasonable steps to communicate:

(i)    the time, date and place for the First Meeting of Creditors;

(ii)    the purpose for which the First Meeting of Creditors is being convened;

(iii)    the time and date by which proofs of debt, and proxies for the meeting, are to be submitted; and

(iv)    the name and contact details of the administrator,

to the Participant Employee Creditors or their guardian, carer, family member or decision maker who provides support to them (together, the Decision Makers), in accordance with the Communications Plan annexed to these orders and marked “A” (Communications Plan); and

(b)    the notice requirements prescribed in section 436E(3) of the Act and section 75-225(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) are otherwise dispensed with.

Notices to creditors (other than of first meeting of creditors)

4.    Pursuant to section 447A(1) of the Act, if pursuant to Part 5.3A of the Act, Part 5.3A of the Corporations Regulations 2001 (Cth), the Insolvency Practice Schedule set out in Schedule 2 of the Act (IPS), or the Insolvency Practice Rules, the First Plaintiffs are required to provide any other notification to creditors of the Companies during the administration of the Companies, the applicable notice requirements will be satisfied if the First Plaintiffs give such notice by:

(a)    where the First Plaintiffs have an email address for a creditor (other than a Participating Employee Creditor), notifying each such creditor of the relevant matter via email;

(b)    where the First Plaintiffs do not have an email address for a creditor but have a postal address for that creditor (other than a Participating Employee Creditor), notifying each such creditor in writing of the relevant matter via post;

(c)    publishing notice of the relevant matter on the website maintained by the First Plaintiffs’ Firm;

(d)    if the creditor is a Participant Employee Creditor, where the First Plaintiffs determine that the provision of written notice may be harmful to Participant Employee Creditor, by taking reasonable steps to communicate with the Participant Employee Creditor or their Decision Maker in the manner set out in the Communications Plan; and

(e)    to the extent the matter relates to a meeting covered by section 75-40(4) of the Insolvency Practice Rules, publishing notice of the meeting on the ASIC published notices website.

Bank account

5.    Pursuant to section 65-45 of the IPS that the First Plaintiffs are not required to maintain a separate administration account in relation to each of the Companies as otherwise required by the operation of Division 65 of the IPS.

Costs of application and other orders

6.    The First Plaintiffs’ costs of and incidental to this application be costs and expenses in the administration of each of the Companies, and be paid out of the assets of the each of the Companies.

7.    The First Plaintiffs have liberty to apply in respect of these orders on giving all interested parties not less than 24 hours’ notice.

8.    The matter be listed for a case management hearing at 9.30 am on Friday, 10 September 2021 before the Commercial and Corporations Duty Judge, subject to the Court’s availability.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 3(b) of the orders on 1 September 2021 be amended to remove the reference to ‘section 75-225(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth)’ and instead substitute ‘section 70-30(2) and (3) of the Insolvency Practice Rules (Corporations) 2016 (Cth)’.

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

REASONS FOR JUDGMENT

(Revised from transcript)

HALLEY J:

1    This is an application brought by amended originating process filed on 1 September 2021, in which the plaintiffs seek an urgent hearing of their application. The application is brought by the first plaintiffs (Administrators), who were appointed as joint and several administrators of Disability Services Australia Limited (DSA) and two of its wholly owned subsidiaries, Macquarie Employment Training Service Limited and DSA Mentoring Services Limited (together, the Companies), on 25 August 2021.

2    In the amended originating process, the plaintiffs seek orders pursuant to s 447A of the Corporations Act 2001 (Cth) (Act) and ss 65-45 and 90-15 of the Insolvency Practice Schedule (Corporations) set out in Schedule 2 of the Act (IPSC) that:

(a)    the first meeting of creditors of each of the companies be held concurrently;

(b)    notice be given to employee creditors pursuant to a specially formulated communications plan;

(c)    any requirement for notification to creditors of the company with respect to meetings other than with respect to the first meeting of creditors, or notices to creditors other than with respect to the first meeting of creditors, be satisfied pursuant to particular provisions set forth in the amended originating process; and

(d)    the first plaintiffs not be required to maintain a separate administration account in relation to each of the Companies.

Background

3    The application is supported by an affidavit of Gayle Dickerson, one of the Administrators. That affidavit is dated 1 September 2021 and will be affirmed as soon as the current COVID-19 restrictions allow.

4    DSA is a not for profit organisation registered with the Australian Charities and Not-for-profits Commission and is a long-standing provider of disability support services in New South Wales since 1957.

5    Together, the Companies provide services and support to over 3,000 participants across Sydney and regional New South Wales through various programs.

6    Macquarie Employment Training Services Limited is the registered training organisation that conducts funded and for fee traineeships and qualifications as part of the employment solutions program.

7    DSA Mentoring Services Limited was established to facilitate the transition of certain supported independent living participants from the New South Wales Government to DSA in 2018 and 2019.

8    Predominately, all of the Companies’ assets and liabilities sit with DSA.

9    The Companies employ approximately 1,700 people across New South Wales, including in Sydney, the Hunter Valley, Western New South Wales, the South Coast and the Southern Highlands. Approximately 500 of those employees are participants of the Companies (Participant Employee Creditors).

10    The first meeting of creditors of each of the Companies is scheduled to take place on Monday, 6 September 2021 (First Meeting of Creditors).

11    In the short time since their appointment to the Companies, the Administrators have undertaken a number of preliminary steps consistent with their functions and duties, including:

(a)    commencing the review of the key businesses within the Companies;

(b)    engaging with relevant government stakeholders;

(c)    communicating with contractual counterparties and landlords; and

(d)    providing notifications to creditors (other than Participant Employee Creditors for the reasons that I will shortly explain).

12    Since their appointment, the Administrators have received advice from the companies’ senior management and health experts on the sensitivities of communications to participants, including the Participant Employee Creditors. In particular, the Administrators received advice from Danielle Noorbergen, who is the general manager of Enhance Health Services and a senior psychologist and manager in the professional allied health team.

13    The advice that the Administrators received, in particular from Ms Noorbergen, is that:

(a)    many of the Participant Employee Creditors have very basic literary levels, which means that they require support to aid their full comprehension of simple concepts;

(b)    approximately 70% of the Participant Employee Creditors have some form of intellectual disability, along with other psychosocial disabilities;

(c)    most of the Participant Employee Creditors are able to understand basic verbal instructions and basic concepts (such as start and finish times) with some support;

(d)    any communication about the voluntary administration process, including the details of the First Meeting of Creditors or other communications with a corporate or legal tone, would cause distress to the Participant Employee Creditors if that communication was to occur by way of a written communication sent directly to the Participant Employee Creditors;

(e)    this distress could cause some of the Participant Employee Creditors to have a violent outburst or to become harmful to themselves or others; and

(f)    while the Participant Employee Creditors have guardians, carers, family members and/or decision makers who provide support to them (together, the Decision Makers), those Decision Makers would face the same issues communicating information to the Participant Employee Creditors as described above.

14    In those circumstances, Ms Noorbergen recommended to the Administrators that a communications plan be developed to tailor the specific communications that need to be made in the course of the voluntary administration to the different levels of comprehension amongst the Participant Employee Creditors.

15    Given this recommendation, the Administrators have, in consultation with Ms Noorbergen and management, devised a structured communications plan to notify Participant Employee Creditors and/or the Decision Makers of the appointment of the Administrators and the effect of that on the Companies (Communications Plan).

16    The Communications Plan includes:

(a)    making direct telephone calls to decision-makers and Participant Employee Creditors (where appropriate);

(b)    conducting onsite meetings with Participant Employee Creditors (where possible, given COVID-19 restrictions);

(c)    holding a video-link meeting with Participant Employee Creditors and the Decision Makers;

(d)    making direct telephone calls to Decision Makers and Participant Employee Creditors (where appropriate) who did not attend either one of the onsite meetings or the video-link meeting to inform them of the First Meeting of Creditors; and

(e)    preparing easy to read documents to assist in notifying the Participant Employee Creditors of relevant events.

17    In addition, since their appointment, the Administrators have made the following notifications:

(a)    on 25 August 2021, a circular and “frequently asked questions” document was made available to employees (excluding the Participant Employee Creditors) via their individual email addresses;

(b)    on 26 August 2021, a circular and “frequently asked questions” document was made available to frontline staff to distribute to participants, including Participant Employee Creditors (as appropriate) and prior to the distribution of that document, these documents were provided to the National Disability Insurance Scheme for comment about the accessibility of language used in the letter; and

(c)    on 27 August 2021, a circular was made available to all creditors (excluding the Participant Employee Creditors) via their individual email addresses, notifying them of the First Meeting of Creditors amongst other matters.

Principles

18    Section 447A(1) of the Act provides that the Court may make such order as it thinks appropriate about how Part 5.3A of the Act is to operate in relation to a particular company.

19    As Ward CJ in Eq recently emphasised In the matter of Parker Logan Property Pty Ltd [2021] NSWSC 792 at [24]:

[T]he section confers wide discretionary powers on the Court, including to do what it thinks just in all of the circumstances, having regard to the rights of those affected by the administration, and including making orders that would alter what would otherwise by the operation of Pt 5.3A of the Corporations Act.

20    Section 436E(2) of the Act provides that an administrator of a company must convene a meeting of the company’s creditors within eight business days after the commencement of the administration.

21    Section 436E(3) of the Act requires the administrator to convene such a meeting by giving written notice of the meeting to as many of the company’s creditors as reasonably practicable and causing a notice setting out the prescribed information about the meeting to be published in the prescribed matter. Both of these actions must occur at least five business days before the meeting.

22    Division 65 of the IPSC governs the handling of funds by the external administrator of a company and makes a number of provisions in relation to bank accounts that are maintained in relation to the administration. Section 65-45 of the IPSC gives the Court the power to make directions regarding the handling of money and securities that are payable to, or held by, an administrator of a company.

23    Part 3 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) contains general rules relating to external administrations. Relevantly, s 70-30 of the Insolvency Practice Rules governs the initial information that is required to be given to creditors in certain administrations.

24    The Court has on occasion made orders for creditors to be notified of meetings in electronic form, as well as orders dispensing with the requirement to maintain separate administration bank accounts for companies, where appropriate: see In the matter of RCR Tomlinson Limited (administrators appointed) & Ors [2018] NSWSC 1859 at [15]-[16] (Black J).

Consideration

25    I am satisfied that it is appropriate, given the relationship between the Companies, for each of the first meetings of creditors to be held concurrently.

26    I am also satisfied that the Communications Plan, which is annexed to the amended originating process, sets out an appropriate means by which the First Meeting of Creditors can be notified in an appropriate and sensitive manner to Participant Employee Creditors. In those circumstances, it is therefore appropriate for the Court to make orders that that notification be done pursuant to the Communications Plan and to otherwise dispense with the notice and information requirements prescribed in s 436E(3) of the Act and ss 75-30(2) and (3) of the Insolvency Practice Rules. I note that dispensation orders with respect to notification of Participant Employee Creditors were originally granted at the hearing on 1 September 2021 in relation to s 75-225(2) of the Insolvency Practice Rules. The legal representatives of the plaintiffs confirmed after the hearing that this was an error and dispensation was in fact sought in relation to the requirements under ss 75-30(2) and (3) of the Insolvency Practice Rules. As a result, I subsequently made an order on 7 September 2021 amending the reference in the orders made on 1 September 2021 to provide that the dispensation was with respect to ss 75-30(2) and (3) rather than s 75-225(2) of the Insolvency Practice Rules.

27    Further, given the utility and likely more effective use of electronic communications, I accept that it is appropriate to make orders as sought by the plaintiffs with respect to the notification to creditors (other than with respect to the First Meeting of Creditors) in the terms set forth in the amended originating process.

28    Finally, the Administrators submitted that if they are required to comply with Division 65 of the IPSC, they would need to open three separate bank accounts in the names of each of the Companies. The Administrators would then be required to regularly transfer funds between those accounts in order to make payments. The Administrators consider that this would result in the incurring of unnecessary administrative costs with no associated benefits to creditors. Ms Dickerson confirmed in her affidavit that the Administrators’ systems are able to capture the relevant entity incurring the costs (or receiving the funds) regardless of the bank account the funds travel through. For these reasons, I am satisfied that an order should be made that the first plaintiffs are not required to maintain separate administration bank accounts in relation to each of the Companies, as otherwise would be required by the operation of Division 65 of the IPSC.

Disposition

29    For the reasons outlined above, I make each of the orders sought in paragraphs 1 to 5 of the amended originating process (and the subsequent amending order) and, further, in the circumstances, it is appropriate that the first plaintiffs’ costs of and incidental to the application be costs and expenses in the administration of each of the Companies, and that they be paid out of the assets of each of the Companies.

Associate:    

Dated:    7 September 2021

SCHEDULE OF PARTIES