In Autodom Ltd (Administrators Appointed) (Receivers and
Managers Appointed), in the matter of Autodom Ltd (Administrators
Appointed) (Receivers and Managers Appointed)  FCA 1393,
the Federal Court considered an application from Administrators to
extend the convening period of an administration of a group of
companies, in circumstances where there was strenuous opposition by
certain creditors to the granting of such an extension.
Ultimately, the application was unsuccessful.
The Administrators sought a four month extension to the
convening period as they had encountered difficulties in collating
essential information about the Group necessary to prepare the
report to creditors and make recommendations to creditors at the
second meeting of creditors.
The unions representing the employees of the Group opposed the
extension on the basis that employees would be seriously
disadvantaged until the group companies entered liquidation and
access by employees to GEERS became available.
Extension of convening periods generally
As Justice McKerracher noted in his judgment, since the
enactment of Part 5.3A of the Act there have been many applications
for extensions. The overarching principle that the Courts have
regard to when considering such applications is the balancing of
the interests of creditors in a relatively speedy administration
and the need to allow sufficient time to administrators to carry
out their function and maximise the benefit to creditors through a
Applications for extensions of the convening period are
regularly successful. Perhaps the most notable example being the
administration of ABC Learning Centres Limited where the
Administrators applied to the Court on three separate occasions to
have the convening period extended, resulting in the longest
administration in Australian history.
In the present case, the Administrators found themselves in a
struggle between the interests of particular creditors (the
employees) and the carrying out of their statutory functions and
On the basis of the information obtained during their
investigations the Administrators could not form the view that the
only option was to place the Group into liquidation. The Unions
argued that any further delay in the administration of the Group
would prejudice the employees as access to their entitlements under
the GEERS scheme would be delayed.
Regarding these competing interests, the Administrators
submitted that the employees were not the only creditor of the
Group and the Administrators required the opportunity to form their
own opinion as to what was in the best interests of the creditors
as a whole, as required by the Act.
As to this dilemma faced by the Administrators, McKerracher J
noted that was an unusual case, and there appeared to no precedent
for extending the convening period in circumstances where there was
"strenuous and apparently well-founded opposition".
The Court ultimately held there would be real prejudice to the
employees of the Group in prolonging the administration, which
outweighed the low degree of certainty of a better outcome being
achieved by prolonging the administration as sought by the
This decision provides helpful guidance to Administrators as to
the circumstances in which the Court may decline to extend the
convening period of an administration. Administrators should be
mindful that such an application may be unsuccessful where there is
opposition to the extension, and that opposition has a well-founded
basis (particularly where employees are involved) which, on
balance, may outweigh other considerations that Administrators are
required to take into account during an administration.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).