Carson, in the matter of Hastie Group Limited (No 5)
[2012] FCA 1174
•14 September 2012
FEDERAL COURT OF AUSTRALIA
Carson, in the matter of Hastie Group Limited (No 5) [2012] FCA 1174
Citation: Carson, in the matter of Hastie Group Limited (No 5) [2012] FCA 1174 Parties: IAN MENZIES CARSON, DAVID LAURENCE MCEVOY and CRAIG DAVID CROSBIE IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF HASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040, HASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040 and 43 OTHERS File number: NSD 749 of 2012 Judge: EMMETT J Date of judgment: 14 September 2012 Legislation: Corporations Act 2001 (Cth) ss 477(2A), 477(2B) Cases cited: Carson, in the matter of Hastie Group Limited (No 4) [2012] FCA 968 Date of hearing: 14 September 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 16 Counsel for the plaintiffs: J Hynes Solicitor for the plaintiffs: Henry Davis York
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 749 of 2012
IAN MENZIES CARSON, DAVID LAURENCE MCEVOY and CRAIG DAVID CROSBIE IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF HASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040
First to Third PlaintiffsHASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040 and 43 OTHERS
Fourth to Forty-Seventh Plaintiffs
JUDGE:
EMMETT J
DATE OF ORDER:
14 SEPTEMBER 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The interlocutory process be returnable instanter before Emmett J.
2.Pursuant to Rule 9.05 of the Federal Court Rules 2011 (Cth), Ian Menzies Carson, David Laurence McEvoy and Craig David Crosbie, in their capacity as joint and several liquidators of Hastie International Pty Limited (in liquidation) (Liquidators), be joined as plaintiffs to the proceeding.
3.Pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act), the Liquidators or one of them would be justified in entering into, for and on behalf of Hastie International Pty Limited (in liquidation), the agreement with Hill International (Middle East) Limited in the form of the agreement appearing at annexure DLM7 to the affidavit of David Laurence McEvoy sworn 14 September 2012.
4.Pursuant to s 477(2B) of the Act, the Liquidators or one of them would be justified in executing the Power of Attorney in the form of the power of attorney appearing at annexure DLM8 to the affidavit of David Laurence McEvoy sworn 14 September 2012.
5.The documents appearing as annexures to the affidavit of David Laurence McEvoy sworn 14 September 2012 be returned to the solicitors for the plaintiffs.
6.The interlocutory process filed 14 September 2012 be adjourned to 19 October 2012.
7.The costs of the application be costs in the liquidation of Hastie International Pty Limited (in liquidation).
8.The proceedings be listed for directions on 19 October 2012 and the directions hearing listed on 27 September 2012 be vacated.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 749 of 2012
IAN MENZIES CARSON, DAVID LAURENCE MCEVOY AND CRAIG DAVID CROSBIE IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF HASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040
First to Third PlaintiffsHASTIE GROUP LIMITED (LIQUIDATORS APPOINTED) ABN 76 112 803 040 AND 43 OTHERS
Fourth to Forty-Seventh Plaintiffs
JUDGE:
EMMETT J
DATE:
14 SEPTEMBER 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
By interlocutory process filed today, the plaintiffs seek, amongst other things, orders under s 477(2B) of the Corporations Act 2001 (Cth) (the Act) in relation to a proposed agreement to be entered into between the first to third plaintiffs (the Liquidators), on the one hand, and Hill International (Middle East) Limited (Hill International), on the other. On 28 May 2012, the Liquidators were appointed voluntary administrators to a number of companies in the Hastie Group, including Hastie International Pty Limited (Hastie International). Hastie International represented the business interests of the Hastie Group in the United Arab Emirates through two branches, one located in Dubai and one in Abu Dhabi.
The Liquidators, in their capacity as administrators, faced considerable difficulties in investigating the affairs of Hastie International. Their appointment as administrators was not recognised in the United Arab Emirates and they faced a risk of criminal sanction if they or their staff were to attend the business premises of Hastie International in the United Arab Emirates. In their capacity as administrators, the Liquidators were without funds to investigate the affairs of Hastie International.
The administration of Hastie International came to an end on 16 August 2012 when I ordered that the company be wound up in insolvency under s 459P of the Act (see Carson, in the matter of Hastie Group Limited (No 4) [2012] FCA 968). At that time, the Liquidators were appointed as liquidators. In the course of their appointment as administrators and as liquidators, the Liquidators have become aware of the existence of a number of current bonds and ongoing letters of credit issued by Hastie International. They have also become aware of outstanding receivables owing to Hastie International. The value of the property in question is estimated to exceed $110 million. The Liquidators have formed the view that it is not possible for them to undertake the task of the identification and realisation of the property located in the United Arab Emirates. They therefore believe that it is essential to engage the assistance of a locally based agent to undertake that task.
They have explored the possibility of engaging agents in the Middle East and have considered possible arrangements with eight different firms. They have finally negotiated an agreement with Hill International on the terms of a draft agreement, which has been put before the Court. One of the terms of the agreement is that the Liquidators grant a power of attorney in favour of Hill International. The power of attorney would be fairly extensive on its face, although the terms of the proposed agreement would limit the extent to which the powers will be exercised.
The Liquidators have formed the view that the proposed power of attorney, in its broad terms, is necessary to enable Hill International to act as their agent in relation to the property in the United Arab Emirates and to enable Hill International to engage in transactions with third parties on behalf of Hastie International. The terms of the proposed agreement will prevail over the terms of the power of attorney. Nevertheless, of course, third parties dealing in good faith with the attorneys would be entitled to rely on the broader terms of the power of attorney.
The Liquidators have formed the view that Hill International has the benefit of extensive experience and expertise in international construction projects and in attempting recoveries in distressed scenarios. They believe that Hill International is the most appropriate contractor to undertake the work required by the Liquidators for several reasons. First, Hill International has a presence in the United Arab Emirates and has established relationships in the Middle East with a number of sponsors of Hastie Group, as well as its joint venture partners and builders. Second, Hill International has a record of settling construction disputes in the United Arab Emirates, and the Liquidators understand that Hill International has an understanding of the Australian and United Kingdom insolvency processes. Hill International has already begun the recovery of books and records in Dubai on behalf of the Liquidators, in anticipation of the proposed arrangements between the Liquidators and Hill International.
Under the terms of the proposed agreement, Hill International will prepare and provide to the Liquidators and Hastie International a review and recommendations report, which will detail Hill International’s findings and provide a recommended settlement range for each of the projects under review. The report is to be provided within one month after the agreement is signed. The Liquidators and Hastie International are to provide their comments and any acceptance of the terms within 10 working days after receipt of the report from Hill International. Hill International will be provided with the necessary authority to settle the recovery of the various assets that are believed to exist in the United Arab Emirates.
The assets consist of current bonds issued in compliance with various construction contracts, letters of credit issued to subcontractors or suppliers for the provision of services or the supply of materials and equipment, and receivables outstanding under various construction contracts to which Hastie International or its branches are a party. The essential task of Hill International will be to recover whatever benefit is available in relation to those assets. The proposal is that Hill International would be authorised to settle the recovery of the bonds, letters of credit and receivables within the ranges agreed between Hill International, on the one hand, and the Liquidators and Hastie International, on the other.
Under the terms of the proposed arrangement, Hill International will negotiate with each of the entities holding bonds with a view to recovering the bonds, reducing their face value or reducing the prospect of their being called. They will also negotiate with each of the entities holding letters of credit with a view to returning the originals to the issuing bank, reducing their face value or reducing the prospect of their being called. They will also enter into termination valuation negotiations with each of the entities owing receivables and endeavour to conclude full and final settlement agreements.
The Liquidators have no funds available to them to pay any contractor to undertake the work that Hill International will undertake. Accordingly, the terms of the proposed arrangement with Hill International involve payment by way of a success fee. The Liquidators consider that they have negotiated as best they could in relation to the appropriate remuneration. Hill International has agreed to be remunerated by way of the success fee only. The arrangement sets out the proportion of the value by which the bonds or the letters of credit are reduced, which is to be the success fee payable to Hill International. They are also to receive a substantial proportion of the net sum recovered in respect of receivables.
The Liquidators believe that it is in the best interests of the creditors for them to enter into the proposed arrangement with Hill International. The Hastie Group, including Hastie International, owe a sum in excess of $536 million to the syndicate of lenders, who have securities over the assets of most of the companies in the group. The employees of Hastie International are likely to be owed significant, but unknown, amounts. The estimated value of the property is in excess of $110 million which, if recovered through the process that is proposed, will be distributed for the benefit of creditors. Having regard to the difficulties that the Liquidators would experience in having any presence in the United Arab Emirates, they have formed the view that it is not possible to convene a meeting of creditors of Hastie International to obtain their approval in relation to the entry into the proposed agreement with Hill International.
While the proposed arrangement contemplates the review and recommendations report be provided within a month, and a response from the Liquidators and Hastie International within a further 10 days, it is clearly possible that the negotiations that are contemplated by the proposed agreement could extend beyond three months. The Liquidators have therefore sought approval under s 477(2B) of the Act. Section 477(2B) relevantly provides that, except with the approval of the Court, of a committee of inspection or of a resolution of the creditors, the liquidator of a company must not enter into an agreement on the company’s behalf if the term of the agreement may end, or obligations of a party to the agreement may be discharged by performance, more than three months after the agreement is entered into, even if that term may end or the obligations may be discharged within that period of three months.
It is not for the Court to determine the commercial merits of a proposed arrangement that the Liquidators wish to enter into. That is a matter for their judgment. The function of the Court, in considering an application for approval under s 477(2B), is to ensure that the Liquidators have, having regard to their commercial judgment, given appropriate attention to all of the possible adverse consequences that might result from the proposed agreement.
It is clearly in the interests of the creditors of Hastie International that further steps be taken in the United Arab Emirates. In all of the circumstances, I am satisfied that it is appropriate to accede to the Liquidators’ application and to give approval under s 477(2B), not only to the proposed agreement, but also to the proposed power of attorney.
In their interlocutory process, the Liquidators also foreshadow seeking the Court’s approval under s 477(2A) in relation to any proposed compromise resulting from the review and recommendations report to be provided by Hill International. Clearly, it is not appropriate to deal with that application until such time as a compromise has been reached. The interlocutory process, therefore, should be stood over for further hearing before the Corporations Duty Judge at an appropriate time.
The proceeding was commenced at a time when the Liquidators were administrators. It is appropriate that the record be amended to show their joinder in their capacity as liquidators of Hastie International.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 5 November 2012
0
1
1