Bryan Kevin Hughes as Administrator of Westgem Investments Pty Ltd (Receivers and Managers Appointed) v The Receivers and Managers of Westgem Investments Pty Ltd (Receivers and Managers Appointed) (Administrator..
[2012] WASC 412
•6 NOVEMBER 2012
BRYAN KEVIN HUGHES as Administrator of WESTGEM INVESTMENTS PTY LTD (Receivers and Managers Appointed) -v- THE RECEIVERS AND MANAGERS OF WESTGEM INVESTMENTS PTY LTD (Receivers and Managers Appointed) (Administrator Appointed) [No 4] [2012] WASC 412
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 412 | |
| 06/11/2012 | |||
| Case No: | COR:15/2011 | 9 OCTOBER 2012 | |
| Coram: | LE MIERE J | 9/10/12 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | BRYAN KEVIN HUGHES as Administrator of WESTGEM INVESTMENTS PTY LTD (Receivers and Managers Appointed) THE RECEIVERS AND MANAGERS OF WESTGEM INVESTMENTS PTY LTD (Receivers and Managers Appointed) (Administrator Appointed) |
Catchwords: | Corporations Corporations Act 2001 (Cth) s 439A Extension of time to convene a meeting Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 439A |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
THE RECEIVERS AND MANAGERS OF WESTGEM INVESTMENTS PTY LTD (Receivers and Managers Appointed) (Administrator Appointed)
Defendant
(Page 2)
Catchwords:
Corporations - Corporations Act 2001 (Cth) s 439A - Extension of time to convene a meeting - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 439A
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr P D C Robinson
Defendant : Ms K F BanksSmith
Solicitors:
Plaintiff : Williams & Hughes
Defendant : Norton Rose Australia
Case(s) referred to in judgment(s):
Nil
(Page 3)
1 LE MIERE J: On 9 October 2012 I dismissed the plaintiff's application for an order that the period within which the plaintiff must convene a meeting of the company's creditors be extended. This is an edited version of the reasons which I then delivered for dismissing the plaintiff's application.
Relief sought
2 In this matter the plaintiff, who is the administrator of Westgem Investments Pty Ltd (receivers and managers appointed) (administrator appointed), has applied by interlocutory process for an order that the period within which the administrator of Westgem Investments must convene a second meeting of creditors of Westgem Investments under s 439A(5) of the Corporations Act 2001 (Cth) (the Act) be extended, up to and including, 21 December 2012 and consequential relief if that extension is granted.
Previous extensions of convening period
3 The administrator was appointed to the property of Westgem Investments on 11 January 2011. An extension of time within which to convene a second meeting of creditors under s 439A of the Act was granted by this court on 4 February 2011, on 29 April 2011, on 19 October 2011 and most recently on 19 April 2012, when the court granted a further extension of time within which to convene a second meeting of creditors until 21 October 2012 and granted liberty to apply for a further extension of the convening period at any time prior to 21 October 2012.
Extension of convening period - legal principles
4 The court has power to extend the convening period under s 439A of the Act. It is important that the creditors should be able to make, at as early a stage as reasonably possible, a considered judgment in relation to the choices offered to them under pt 5.3A.
5 It is also important that the creditors have the advantage of sufficient and worthwhile information so that they can make sensible decisions at the meeting. There are many cases where it has been said that the complexity of an administration is a reason for granting an extension of time in which to convene a second meeting. In each case consideration must be given to the features of the administration which make it complex and how and in what manner those features call for an extension of time for the convening of the second meeting. The court must give
(Page 4)
- consideration to what it is that is required to be done by the administrator or, more generally, what are the reasons why the administrator asks for an extension of time.
Grounds for extension of convening period
6 In this case the administrator advances three reasons for seeking an extension of time to convene the meeting to 21 December 2012. In the written submissions on behalf of the administrator it was submitted in [4]:
The period Mr Hughes seeks to further extend the convening period is only short (two months). The orders sought make provision for liberty to apply to creditors to vary or discharge the orders.
In that two-month period Mr Hughes will be able to:
4.1 finalise the damages claim and reach a final view on the quantum of that claim;
4.2 explore the possibility of a commercial resolution; and
4.3 obtain the most recent valuation of the Raine Square project.
The above matters will assist Mr Hughes to determine what course of action is in the best interests of Westgem's creditors.
Consideration of grounds for extension of convening period
7 I will refer to each of those three reasons in turn. The first is that the two-month period will enable Mr Hughes to finalise the damages claim and reach a final view on the quantum of that claim. The damages claim is identified in [13] of the affidavit of Mr Hughes sworn on 8 October 2012. In [13] Mr Hughes swears to the following matters:
In my capacity as administrator of Westgem I have instructed lawyers (Jackson McDonald) to investigate a substantial claim for damages by Westgem (and others) against Commonwealth Bank of Australia, (formerly Bank of Western Australia Ltd) (Commonwealth), BOS International (Australia) Ltd (BOSI) and BOSI Security Services Ltd (BOSI Security) (collectively Banks) arising out of the Raine Square project in Central Perth (Forthcoming Claim).
An advanced draft of the statement of claim (over which privilege is not waived) has been prepared (in excess of 250 pages) and given to me and other plaintiffs for review and instruction.
As presently advised, the Forthcoming Claim will seek in excess of $200 million in damages from the Banks.
(Page 5)
- My current intention is that the Forthcoming Claim will be filed on or before 18 October 2012. If it is not filed by that date I am told by my solicitors, and verily believe, the limitation period (on certain of the claims) may expire.
Once the Forthcoming Claim is filed the banks will need to review the claim and all parties will need to determine whether there is any prospect of a commercial resolution and, if not, how best to organise the future conduct of the litigation.
8 That foreshadowed litigation was referred to by Mr Hughes in his affidavit sworn on 24 May 2011. There Mr Hughes deposed at [12]:
I have been informed that Hugh McLernon ('McLernon') of IMF at IMF, at the request of the director and shareholders of Westgem, commenced an investigation into the affairs of Westgem and has identified the claims referred to in paragraph 12(b) above as worth pursuing for the benefit of Westgem and its creditors (other than those financiers).
9 Mr Hughes reference to [12(b)] appears to be an erroneous reference to [11(b)] in which Mr Hughes referred to the following claim or claims:
Possible claims which Westgem may have against Bank of Western Australia, BOS International Ltd and BOSI Security Services Ltd arising out of the financing facility for the Raine Square building project and the receivers and managers of Westgem, 333 Real Estate Pty Ltd and John Gowdie as a result of their activities on behalf of the financiers relating to that project.
10 In [12] of his affidavit of 24 May 2011 Mr Hughes continued:
I have discussed the claims with McLernon and I have formed the view that as administrator, I should proceed with a full investigation of these claims on behalf of the company which may take several months, with the possibility that examinations under Division 1 of Part 5.9 of the Corporations Act may be required.
The Claims are potentially for many millions of dollars and my initial view is that they have merit. If the Claims become the subject of litigation they will, in my opinion be relatively complex and take some time (at least a year) to go to trial.
11 From that evidence I draw the following conclusions. First, the administrator has been investigating and considering the forthcoming claim since at least May 2011. Secondly, the administrator has undertaken substantial investigation into that claim. Thirdly, the administrator has sufficiently investigated and sufficiently formulated the claim that an advance draft of the statement of claim has been prepared
(Page 6)
- which is in excess of 250 pages. Fourthly, the state of the forthcoming claim is such that Mr Hughes has sworn that a draft statement of claim has been provided to him for his review and instruction and he intends that the claim will be filed within nine days. Fifthly, the claim has been formulated to a sufficient degree that it is now able to be the subject of a statement of claim filed in this or some other superior court.
12 In his affidavit of 24 May 2011 Mr Hughes identified the complexity of the claim and of the forthcoming litigation and offered his opinion that it will be relatively complex and take at least a year to go to trial. Having regard to the experience of this court in relation to complex commercial litigation, Mr Hughes' opinion that the matter will take at least a year to go to trial is a reasonable opinion.
13 In my view, Mr Hughes has been able to finalise the damages claim and reach a view on the quantum of that claim sufficiently for the purpose of commencing proceedings and delivering a detailed statement of claim.
14 There is no evidence before the court that anything is likely to happen between 21 October 2012 and 21 December 2012 that would relevantly finalise the damages claim or enable Mr Hughes to reach a final or more final view of the quantum of that claim.
15 The second reason advanced for the extension of time is to explore the possibility of a commercial resolution of the damages claim. Counsel for the administrator informed the court that there has been communication between the company or administrator on its behalf or its solicitors and those representing the defendants or potential defendants in the action. The court would expect that to be so, but there has been no resolution of the matter and there is no evidence before the court of anything that has occurred which makes it likely that there would be any commercial resolution of the matter within a two-month period.
16 The third reason advanced for the extension of time is to obtain the most recent valuation of the Raine Square project. That matter is referred to by Mr Hughes in his affidavit of 8 October 2012 in [13.6], where he says:
On the basis of the latest account and statements filed by the receivers on 10 August 2012 I understand the Bank's claim is that Westgem owes approximately $511 million under the financing arrangements of the Raine Square project. The Receivers have obtained a valuation for the Raine Square project (now it appears the project has been largely completed). Despite requests the Receivers have refused to provide a copy of that
(Page 7)
- valuation. As a result I have no up-to-date information as to the value of the Raine Square project.
17 The receivers have, as Mr Hughes says, refused to provide a copy of that valuation, and there is no reason to believe that if the time for the second meeting is extended by two months the receivers will provide a copy of that valuation. It has not been submitted on behalf of the administrator that there are any proceedings which can be taken by the administrator to compel the receiver to provide the valuation. In any event, it is not likely that any such proceedings would be completed within two months.
18 The administrator says in [14] of his affidavit of 8 October 2012 that an extension of the convening period for two months would allow time to obtain the most recent valuation of the Raine Square project. As I have said, the administrator or counsel on his behalf has not advanced any basis upon which the administrator will be able to obtain the most recent valuation from the receivers if that extension period is granted.
Events leading to this application for extension of convening period
19 There is evidence before the court of the events leading up to this application for an extension of time.
20 On 5 October 2012 at 12.59 pm the administrator's solicitor sent an email to the receiver's solicitors in which the solicitor said:
I am instructed that the administrator will not be applying to extend the convening period and that he will be writing to the Receivers shortly.
21 Later, on 5 October 2012, the administrator's solicitors emailed a letter to the receiver's solicitor in which they stated:
We refer to our email of earlier today in which we told you our client, the administrator of Westgem (Mr Hughes) did not intend to apply to extend the convening period for the meeting of Westgem's creditors.
Matters have come to light which indicate, subject to your response to this letter, it would be appropriate for Mr Hughes to apply to extend the convening period. In particular Mr Hughes is aware that your client (Bank) is accumulating assignments of other creditors' claims from Westem's creditors. The inference that Mr Hughes draws from this is that the bank is now considering, if Westgem goes into liquidation, preventing Mr Hughes being appointed as liquidator and attempting to put in place a liquidator appointed by the bank.
(Page 8)
- Accordingly, can you please provide us with an undertaking that if Westgem does enter into liquidation the bank won't seek to prevent Mr Hughes being appointed as liquidator and appoint its own liquidator (and thus achieve, under a different guise, what the bank failed to achieve when it sought to appoint a special purpose administrator).
If we do not receive an undertaking in the above terms by midday on Monday, 8 October 2012 WST we will have no option but to apply to the Court for an extension of the convening period.
22 The solicitors for the receivers responded with a letter of 8 October 2012. The receiver's solicitors said, amongst other things:
The allegation 'the bank' is accumulating assignments of other creditors' claims from Westgem creditors is, as your client is aware, wrong.
The receivers have taken a number of assignments of the claims of creditors of Westgem. They commenced doing so in late January or early February 2011 as part of ensuring continuity of the Raine Square project. Mr Hughes has been provided with these assignments and Rene Rowlands of this office has been in regular contact with the staff of the receivers' staff about them.
Accordingly, the factual foundation for your request for an undertaking from 'the Bank' does not exist.
23 Neither the bank nor the solicitors on their behalf gave the undertaking that had been requested. On 8 October 2012 the administrator then applied for the extension of time the subject of this application. On 9 October 2012, Ms Rowlands from the administrator's office sent an email to Mr Langdon, a representative of the receivers, in which she said:
In the event that the Administrator's request for an extension to the convening period is denied, a report will most likely be sent to creditors tomorrow.
24 The conclusions which I draw from those communications are as follows. First, on 5 October 2012 the administrator had considered the position and determined that he would not seek an extension of time for the convening of the meeting. Secondly, the administrator has prepared a report which he is able to send out to creditors within a day if the extension of time is not granted. Thirdly, the matter which moved the administrator to seek the extension of time is the matter referred to in the letter of Williams & Hughes of 5 October 2012 relating to the assignment of debts from creditors of Westgem to the bank.
(Page 9)
25 I am not satisfied that the evidence is such that I should draw the inference referred to in the letter of Williams & Hughes; that is, that the bank is now considering, if Westgem goes into liquidation, preventing Mr Hughes being appointed as liquidator and putting in place, or attempting to put in place, a liquidator appointed by the bank. Mr McLeod, on information and belief, has set out the commercial reasons why the receiver took the assignment of debts. The receiver embarked upon that course as early as January 2011. That has not been a covert practice but rather a matter of which the administrator has previously been informed.
26 In any event, I am not satisfied that those matters provide a reason for extending the period for convening of the meeting. Counsel for the administrator has not advanced any course that might be followed between now and 21 December 2012 which will alter that course. Indeed, counsel submitted in effect that that matter is exhausted in the sense that it has now occurred and there is nothing which is going to occur between now and 21 December 2012 which will alter that position.
27 Furthermore, in any event, I am not satisfied that the concern of the administrator that the creditors may choose to appoint a different person as liquidator is a reason for extending the period for convening of the meeting. A liquidator has statutory duties. There is no reason for the court to assume that the creditors, and in particular the bank, will seek to appoint as liquidator a person who has a conflict of interest or should not otherwise be appointed as liquidator, and there is no evidence before the court of any such intention.
Decision
28 Having regard to all of those matters, I am not satisfied that the administrator has established a sufficient reason for a further extension of the time in which to convene the second meeting.
29 It has not been established that there is a sufficient reason to further delay the creditors in considering the matters which they should properly consider under pt 5.3A of the Act.
30 I am not satisfied that the administrator is not able to provide a proper report and recommendation to the creditors or that there are any significant events which are likely to occur between now and 21 December 2012 to alter that position.
31 For those reasons the application will be dismissed.
(Page 10)
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