ACN 168 479 614 Pty Ltd (formerly known as Steller Developments Pty Ltd) (Administrator Appointed)

1. [1]

   GLEESON J: On 31 January 2020, the Court made consent orders in this proceeding disposing of the matter. Given that the orders included the exercise by the Court of the discretion under s 90-15 of the Insolvency Practice Schedule (Corporations), it is appropriate that the Court give reasons for acceding to that aspect of the parties’ request.

2. [2]

   A brief outline of the circumstances giving rise to the proceeding is as follows. The first defendant, formerly known as Steller Developments Pty Ltd (the company), was placed into voluntary administration by resolution of the directors under s 436A of the Corporations Act on 20 December 2019 and the second defendant, Mr Malcolm Howell, was appointed as administrator of the company. The plaintiff, Atlas Advisors Australia Pty Ltd (ACN 164 576 569) as trustee of the QCAX Australian Property Income Fund II (Atlas), claims to be a creditor of the company in the amount of $101,914,374.04.

3. [3]

   The first meeting of creditors convened pursuant to s 436E of the Corporations Act 2001 (Cth) was held on 6 January 2020. At that meeting, Atlas proposed a resolution for the replacement of Mr Howell as administrator of the company and for the appointment of Mr Richard Stone and Mr David Mutton as administrators of the company (the replacement resolution). For the purposes of voting at the meeting, Mr Howell allowed the proof of debt from Atlas in the amount of $101,914,374.04, and the proofs of debt from the third defendant, Mr Nicholas Smedley, in the amount of $1,090.90, and the fourth defendant, TF Partners Pty Ltd, in the amount of $495.00.

4. [4]

   The replacement resolution was determined by Mr Howell to have been lost on the voices, with Atlas in favour and Mr Smedley and T F Partners against. The affidavit evidence of Atlas is that when the representative of Atlas sought a poll and requested Mr Howell, as chairperson of the meeting, exercise his casting vote, Mr Howell took the position that as the resolution had already been lost on the voices he could not conduct a poll and, in any event, if a poll had been called he would not be using his casting vote to vote in favour of the resolution: Insolvency Practice Rules (Corporations), r 75-115(5).

5. [5]

   On 17 January 2020, Atlas commenced proceedings seeking urgent interlocutory relief challenging various decisions of Mr Howell as chairperson of the meeting on 6 January 2002, including the decisions to admit proofs of debt of Mr Smedley and TF Partners for the purposes of voting at the meeting. Atlas asserted that the administrator had admitted those debts for voting purposes without proper scrutiny. Atlas also challenged the failure of the administrator to call a poll as requested by Atlas as the major creditor, and his failure to exercise his casting vote as chairperson in favour of the replacement resolution, referring to Ausino International Pty Ltd v Apex Sports Pty Ltd [2007] NSWSC 289; (2007) 61 ACSR 532 at [16].

6. [6]

   On 22 January 2020, Henry J made orders by consent extending the period within which the second meeting of creditors of the company must be convened, up to and including 28 February 2020. The proceedings were stood over to the Corporations Motions List on 3 February 2020.

7. [7]

   On 31 January 2020, the solicitor for Atlas provided the Court by email with consent orders signed by all parties which, if made, would dispose of the entirety of the proceedings. In short, the consent orders noted that Atlas, the company and Mr Howell had agreed to resolve the dispute by removing and replacing Mr Howell as administrator of the company, with no admission by any party. To that end, order 1 provided that, pursuant to ss 90-15(1) and (3) of the Insolvency Practice Schedule (Corporations), Mr Howell be removed as voluntary administrator of the company and Mr Stone and Mr Mutton be appointed as joint and several voluntary administrators of the company.

8. [8]

   The balance of the consent orders dealt with the transfer of control and books and records of the company by Mr Howell and TF Partners to Mr Stone and Mr Mutton and the disposal of the proceedings.

9. [9]

   Section 90-15(1) and (3)(b) and (c) empower the Court to remove an administrator and appoint a replacement. Like the predecessor provision, s 449B of the Corporations Act, it says nothing about the grounds upon which an order can be made. In Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544, Hayne J said at 550:

10. [10]

    In Dallinger v Halcha Holdings Pty Ltd (ADMR Apptd) (1995) 18 ACSR 835 at 841, after referring to the test stated by Hayne J in Network Exchange, Sundberg J adverted to the possibility of a different test based on the remarks of Santow J in Advanced Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230 at 234 as follows:

11. [11]

    My own view is that the “better conduct of the administration” test favoured by Hayne J in Network Exchange is the appropriate test in this case. The test referred to by Santow J in Advanced Housing is directed to the particular circumstance where the administrator’s removal is sought on the basis that he or she has an apparent or actual conflict of interest, in which event it is appropriate that similar principles are applied to those which are applicable to removal of a liquidator. That is not the present case where the administrator seeks to be removed.

12. [12]

    The proposed replacement administrators, Messrs Stone and Mutton, are qualified for appointment: Corporations Act, ss 448A and 448B. There is evidence that they have given their written consent to their appointment dated 4 January 2020, together with a declaration of independence, relevant relationships and indemnities dated 6 January 2020. Whilst the replacement administrators have been proposed by Atlas, there is no material suggesting that either of them has a conflict of interest: Corporations Act, s 448C.

13. [13]

    Plainly, it is in the interests of creditors of the company that the dispute concerning the conduct of the first meeting of creditors be resolved by the parties themselves, who are all legally represented, and may be taken to have received advice as to the likely outcome of the proceeding and the time and costs likely to be incurred in the determination of such proceedings.

14. [14]

    Given that Mr Howell seeks to be removed as administrator, and there is no evidence that if Mr Howell resigned as administrator, the company, by its board of directors, is willing to appoint someone else as administrator of the company in the exercise of its power to fill a vacancy under s 449C(1)(c) of the Corporations Act, the “better conduct of the administration” favours the Court exercising its power under s 90-15 of the Insolvency Practice Schedule (Corporations) by approving the most cost effective means of facilitating that outcome and appointing replacement administrators. That has been achieved by the Court acceding to the parties’ request and making the consent orders as requested.

Order

1. [15]

   For the above reasons, on 31 January 2020 the Court noted the agreement of the plaintiff, the first defendant and the second defendant referred to in the Notation below and the agreement of the respective parties to the making of various orders by consent, and made orders in terms of pars (1)-(10) below: