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Rex’s board spill should be delayed, administrators tell court
Administrators of Rex Airlines have asked the court to put a temporary stop to a former chairman’s attempt to trigger a board spill.
Naomi Neilson
Appearing in the Federal Court to outline next steps, the voluntary administrators of Rex Airlines’ five companies said it would be “inutile” and costly for former chairman Lim Kim Hai to move forward with an extraordinary general meeting while directors do not have any power.
Lim had been the executive chairman for 21 years until Sharp had him suddenly ousted from the top job on 5 June.
The notice of the meeting was made under the Corporations Act on 18 July, and Lim, through his solicitors at Baker McKenzie, told the administrators he intended to move forward with the plan.
Under the act, the directors are obliged to call the meeting within 21 days, but by the time the deadline had rolled around, the administrators were on the verge of being appointed.
They now seek an order from the court to extend the period for calling the meeting until 20 business days after the second meeting of creditors and extend the holding of the meeting until 28 business days later.
Counsel for the administrators, Daniel Krochmalik, said the general meeting would incur “substantial” costs and was not currently in the interests of Rex Airline’s creditors, including its customers.
“The submission we advance is, in practical terms, creditors are the ones that determine the future of the company and the creditors’ interests are paramount in the administration process,” he said.
Krochmalik added to call the meeting now while the directors hold no power and the administration process is ongoing would be pointless.
There was also the particular “curiosity” that Lim was present at the meeting of directors when the decision to enter voluntary administration was made. Krochmalik said there was no evidence to suggest Lim had voted against the administrators’ appointments.
Lim was also of the view the company might be able to emerge without a deed of company arrangements or liquidation.
Krochmalik said after discussions with his solicitors, Lim appeared to accept the administrators’ request that the meeting be postponed, given he did not make a formal objection or request to appear in court.
In earlier submissions, Krochmalik said the administration process would be “large and complex”, and they were still looking through the “very large number of contingent creditors” – that is, customers whose flights between major metropolitan cities were cancelled.
These customers could bring a claim against Rex as a result, provided they have not rebooked a flight through Virgin free-of-charge, Krochmalik told the court.
It does not include customers on the continuing regional flights.
Krochmalik said during the investigation, the administrators found about 180,000 text messages about cancelled flights were sent.
However, this does not account for passengers who have multiple flights booked and may have received more than one text.
Going off the email addresses of Rex’s customers, the administrators said it was more likely there were 54,000 customers affected.
“On either view of things, it’s a very large number,” Krochmalik said.
“Each of these matters … the nature of the business carrying out and the fluidity of the position has made this a complex administration, or series of administrations,” Krochmalik said.
In addition to an order to push back Lim’s deadlines, the administrators have also asked the court for orders relating to the contacting of customers and a creditor meeting at the end of the week.
Justice David Yates will make his orders shortly.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
