Voluntary administrators frequently obtain Court orders permitting notices to be issued to creditors electronically. Such orders are made under section 447A of the Corporations Act (the Act) on grounds of efficiency, cost and necessity. See Mothercare Australia Ltd (Administrators Appointed) [2013] NSWSC 263 and Creative Memories Australia Pty Ltd [2013] NSWSC 1294.
Can liquidators appointed under a creditors voluntary liquidation (CVL) obtain similar orders? This issue was considered recently by Justice Black of the Supreme Court in Accommodation Clearing House Pty Ltd (In Liquidation) [2013] NSWSC 784 in which:
- ACH was an online travel company which accepted internet hotel bookings from customers, who paid ACH either a deposit or full payment online;
- On liquidation ACH had thousands of customer and hotel creditors;
- ACH had always corresponded with creditors by email and the liquidators had no postal, fax or DX addresses for customer creditors. The Liquidators were unable to notify these creditors in the course usually required by the Regulations. To obtain each creditor's consent to communicate electronically under section 600G would have been costly and likely impossible.
The liquidators sought orders permitting them to issue notices required under section 497 of the Act electronically. The application was made under section 511 of the Act, which permits a Court "to determine any question" arising in a winding up or "to exercise all or any powers that the Court might exercise if the company were being wound up by the Court".
Justice Black declined to make orders under section 511, finding (with regret), that the section should not be used to authorise an act which did not comply with the Act. Unlike section 447A which permits the Court to alter the operation of the Act as regards a particular administration, section 511 is narrower and cannot be used to authorise breaches of the Act. In reaching this finding the Court indicated it was preferable to leave the liquidators to exercise their commercial judgment. The liquidators thereafter notified creditors by email and also by mail where postal addresses were known. That conduct was validated by Justice Black under section 1322 of the Act in a subsequent ex tempore decision.
Addisons acted for the applicant liquidators in the above decision and will be writing to the IPA noting the inadequacy of current legislation and suggesting reform. In the meantime the above limitation should be noted by practitioners considering appointment to insolvent companies under a CVL as opposed to a voluntary administration, particularly for companies operating in retail, media or other industries with voluminous electronically based customers.
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.
