BH Apartments v Sutherland Nominees [2015] VSC 381

The costs of ‘convening’. Whether the person requesting a meeting of creditors, pursuant to 5.6.15(1)(b) of the Corporations Regulations 2001 (Cth) be called is only liable for the costs of calling the meeting.

Sutherland Nominees Pty Ltd (Sutherland) was being administered pursuant to a deed of company arrangement under part 5.3A of the Corporations Act 2001 (Cth).

At the request of BH Apartments pursuant to 445F(1), the administrators of Sutherland convened a meeting of its creditors. Section 445F(1) confers an obligation on the administrator of a company under a deed of company arrangement to convene a meeting of its creditors at the request of a creditor not less than 10% of the value of all creditors’ claims against the company. Regulation 5.6.15(1)(b) of the Corporations Regulations 2001 provides that the requesting person must ‘pay the costs of convening the meeting’. It provides in (full):

  1. A person (other than a liquidator or administrator of a company under administration or of a deed of company arrangement) at whose request a meeting of creditors or contributories is convened must:
    1. if the liquidator or administrator requires a security for the payment of costs before the meeting is convened – deposit with the liquidator or administrator a sum of money; and
    2. pay the costs of convening the meeting.
  2. The costs of convening a meeting of a committee of inspection or a committee of creditors must be repaid out of the assets of the company to the person causing it to be convened if:
    1. the Court so orders; or
    2. the committee by resolution so directs.

Pursuant to 5.6.15(1)(b), the Magistrates’ Court of Victoria made an order that BH Apartments was liable for the payment of the full costs of convening the meeting, which included the costs of calling and holding the meeting.

BH Apartments appealed to the Supreme Court of Victoria on a question of law, which was whether the expression ‘the costs of convening the meeting’ in reg 5.6.15(1)(b) was confined to the costs of calling, or included the costs of holding, the meeting.

Neither, the Corporations Act 2001 (Cth) nor the Corporations Regulations 2001 (Cth) defines the word ‘convene’ or its cognates [at 19].

The Court was tasked with was the proper interpretation of the word ‘convening’ within regulation 5.6.15 (1)(b),  not section 439A (where  the Courts have drawn a distinction between convening a meeting under 439(A)(1) and holding one under subsection 439A(2)).

The Court held that “the purpose of reg 5.6.15(1)(b) is to provide a safeguard against abuse of the right to request the convening of a meeting. The risk of abuse is manifest and the obligation to pay the full costs of convening a meeting is intended to minimise it. The idea is that the obligation to pay those costs would make the nominated persons think twice before making a request. The interpretation of reg 5.6.15(1)(b) that I would adopt, which is that the requestor must pay the full convening costs, is consistent with that purpose.” [at 80].

Commentary

Section 445F(1) confers an obligation on the administrator of a company under a deed of company arrangement to convene a meeting of its creditors at the request of a high-value creditor. Regulation 5.6.15(1)(b) provides that the requesting person must ‘pay the costs of convening the meeting’.

The costs of convening a meeting includes the costs of both calling and holding the meeting.