Notice of second creditors’ meeting via SMS?

McEvoy, in the matter of Careers Australia Limited (Administrators Appointed) [2017] FCA 598

Last week the Federal Court made orders for electronic notice of the first and second creditors meetings in the administration of the Careers Australia Group Limited (Administrators Appointed).

The administrators applied orders pursuant to section 447A(1) of the Corporations Act 2001 (Cth) (Act) to modify the manner in which Part 5.3A of the Act operates as to allow:

• notice of the first meeting of creditors of the group convened pursuant to section 436E(3) of the Act; and
• notice of the second meeting of creditors of the group convened pursuant to section 439A(3) and the report issued pursuant to section 439A(4) of the Act,

to be validly given by electronic means including email and SMS.

The Court made the orders sought and provided reasons including the following:

• the group had more than 20,000 potential creditors and an external provider estimated that posting the notices of meeting and s 439A report as required under the Act and relevant regulations would cost approximately $340,000;¹
• the administrators held email addresses for most of the creditors (including students and employees); and
• the group had previously communicated with students via email.

The Court ordered that those students that the administrators did not have an email address for, could be provided with notice by SMS or text message.  The Court made the following comments:

"This is even more likely to be attractive to and attract the attention of students with its immediacy, relevancy and brevity.  Such students will then have the opportunity to receive more detailed information if they so choose."

Approach in the Supreme Court of Western Australia

The Supreme Court of Western Australia has taken a similar approach.  About a year ago, Master Sanderson permitted the administrators of Quickflix Limited to provide notice of the first meeting of creditors and second meeting of creditors to Subscriber Creditors by:

• email to the personal email address as recorded in the books;
• notice in The West Australian and The Australian newspapers and on the ASIC notices website;
• placing the notice on the website maintained by the administrators; and
• causing notice to be released on the Australia Stock Exchange platform.

Master Sanderson similarly allowed the section 439A report to be provided to Subscriber Creditors by email and by a link maintained on the administrators’ website and the Australian Stock Exchange platform.

Reforms

The Act presently allows for electronic provision of notice to creditors where those creditors have nominated an electronic address.²  Creditors had not yet nominated an electronic means of communication and the Court commented at [26]:

"..I would note that it has also been quite unusual (up to this point) for creditors in voluntary administrations to formally request electronic communication of notices and other documents."

The Act will be amended effective later this year including amendments to section 600G, but not to the subsections requiring the recipient to nominate to receive notices via electronic means (subsections 600G(2) and (3)).

Lavan comment

The Court appears to be open to novel modes of providing notice (such as via SMS) if this furthers “the statutory objective(s) of ensuring that creditors are properly informed”.³

In an age of larger creditor groups, administrators are mindful of the costs associated with giving notice to creditors.

Our recent experience suggests that the Court will take a practical approach when considering the potential detriment associated with complying with the written notice requirements under the Act.

The insolvency law reforms due to come into effect in September 2017 do not materially alter the present notice requirements, so we anticipate that applications to Court for directions to modify the notice requirements will remain common place.