CHRISTOPHER JAMES PATTINSON and BRYAN KEVIN HUGHES as joint and several administrators of WELLFULLY LIMITED (ADMINISTRATORS APPOINTED)

[2023] WASC 458

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CHRISTOPHER JAMES PATTINSON and BRYAN KEVIN HUGHES as joint and several administrators of WELLFULLY LIMITED (ADMINISTRATORS APPOINTED) [2023] WASC 458

CORAM:   LEMONIS J

HEARD:   21 NOVEMBER 2023

DELIVERED          :   21 NOVEMBER 2023

PUBLISHED           :   29 NOVEMBER 2023

FILE NO/S:   COR 176 of 2023

BETWEEN:   CHRISTOPHER JAMES PATTINSON and BRYAN KEVIN HUGHES as joint and several administrators of WELLFULLY LIMITED (ADMINISTRATORS APPOINTED)

First Plaintiff

CHRISTOPHER JAMES PATTINSON and BRYAN KEVIN HUGHES as joint and several administrators of BODYGUARD LIFESCIENCES PTY LTD (ADMINISTRATORS APPOINTED)

Second Plaintiff

CHRISTOPHER JAMES PATTINSON and BRYAN KEVIN HUGHES as joint and several administrators of INTERNATIONAL SCIENTIFIC PTY LTD (ADMINISTRATORS APPOINTED)

Third Plaintiff

Catchwords:

Extension of time sought within which to hold meeting convened under s 439A of the Corporations Act 2001 - Possible new transaction presented after original meeting held - Consideration of relevant factors

Legislation:

Corporations Act 2001 (Cth)
Insolvency Practice Rules (Corporations) 2016 (Cth)

Result:

Application granted

Category:    B

Representation:

Counsel:

First Plaintiff	:	D P Butler
Second Plaintiff	:	D P Butler
Third Plaintiff	:	D P Butler

Solicitors:

First Plaintiff	:	Murcia Pestell Hillard
Second Plaintiff	:	Murcia Pestell Hillard
Third Plaintiff	:	Murcia Pestell Hillard

Case(s) referred to in decision(s):

ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No 5) [2008] FCA 1947

Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733

Georges, in the matter of Vical NSW Pty Ltd (Administrators Appointed) [2018] FCA 1974

Griffiths, in the matter of Armorgalv (Aust) Pty Ltd (Administrator Appointed) [2023] FCA 752

Robert Michael Kirman and Robert Conry Bauer in their capacity as joint and several voluntary administrators of Tiger Resources Limited (Administrators Appointed) [2021] WASC 93

LEMONIS J:

(These reasons were delivered orally on 21 November 2023.  They have been amended to modify matters of language and to include full citations.  The orders made are annexed at Annexure A.)

1These proceedings concern three companies that are under administration, Wellfully Ltd (Administrators Appointed) (Wellfully), Bodyguard Lifesciences Pty Ltd (Administrators Appointed) (Bodyguard), and International Scientific Pty Ltd (Administrators Appointed) (International Scientific). 

2The plaintiffs are the joint and several administrators of each of these companies. 

3On 22 September 2023, a second meeting of creditors was held for each company. That second meeting of creditors was convened under s 439A of the Corporations Act 2001 (Cth) (Corporations Act).  A resolution of creditors was passed in respect of each company that the relevant meeting be adjourned to a date being not more than 45 business days from the date of the meeting.  That date is Monday 27 November 2023.

4Rule 75‑140 (1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) provides that a meeting may be adjourned from 'time to time and from place to place', by resolution or by the person presiding at the meeting.

5Rule 75‑140 (3), provides that a meeting convened under s 439A must not be adjourned to a day that is more than 45 business days after the first day on which the original meeting was held. Thus, as matters presently stand, the adjourned meeting must be held by 27 November 2023.

6The plaintiffs now bring these proceedings on an urgent basis pursuant to s 447A(1) of the Corporations Act . They seek orders to the effect that the adjourned s 439A meeting must be held no later than 30 April 2024.

7Before turning to the applicable principles, it is useful to set out the background to the application. 

8Wellfully is a public company whose shares were listed for quotation on the Australian Stock Exchange (ASX).  Trading in its shares is currently suspended. 

9Wellfully is the ultimate parent company for Bodyguard and International Scientific. 

10The only secured creditor of Wellfully is Celtic Capital Pty Ltd as trustee for the Celtic Capital Trust (Celtic).  Wellfully has unsecured creditors. 

11Bodyguard does not hold any assets in its own right and is not trading.  At some stage prior to 2023, it operated as a holding company for Wellfully's intellectual property.  Wellfully and International Scientific are the only creditors of Bodyguard. 

12International Scientific operates as a holding company for the majority of Wellfully's intellectual property.  It does not currently trade.  Wellfully is the sole creditor of International Scientific. 

13On 18 August 2023, the plaintiffs were appointed as joint and several administrators of Wellfully.  On 24 August 2023, the plaintiffs were appointed as joint and several administrators of Bodyguard and International Scientific. 

14The first meeting of creditors of Wellfully was held on 30 August 2023. The first meeting of creditors of Bodyguard and International Scientific was held on 5 September 2023. As I have said, the second meeting of creditors for each company (being the meeting convened under s 439A) was held on 22 September 2023.

15The plaintiffs have engaged in an asset realisation process in respect of each of the companies.  However, that is yet to realise an outcome which the plaintiffs consider to be satisfactory. 

16Since the second meeting of creditors, an approach was made to the plaintiffs on 6 November 2023 for a transaction commonly understood as a reverse takeover of Wellfully.  It will provide a return to Wellfully's creditors.  The estimated return in a liquidation for all companies is nil.  As I understand it, the restructuring needs to be undertaken as a group restructure which is why the modification is sought for all three companies. 

17The proponent of the transaction has indicated that it is conditional upon Wellfully not entering into a deed of company arrangement because the proponent is concerned this would significantly impair the ability for the shares in Wellfully to be returned to quotation on the ASX.  The plaintiffs' current assessment is that such a transaction cannot be finalised before 27 November 2023. 

18The orders the subject of this application are sought so as to allow the plaintiffs sufficient time to engage with the proponent and to finalise an acceptable transaction, and if that does not occur, to receive and consider other potential restructuring proposals. 

19I turn now to the applicable principles and disposition. 

20Section 447A of the Corporations Act provides the court with power to make orders that modify the maximum period prescribed by rule 75‑140(3) for the adjournment of a meeting of creditors convened under s 439A.[1]  The power to do so applies where the relevant meeting has already been held.[2] 

[1] Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733; see, for example, Georges, in the matter of Vical NSW Pty Ltd (Administrators Appointed) [2018] FCA 1974 [25] ‑ [27].

[2] Griffiths, in the matter of Armorgalv (Aust) Pty Ltd (Administrator Appointed) [2023] FCA 752; Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733; Robert Michael Kirman and Robert Conry Bauer in their capacity as joint and several voluntary administrators of Tiger Resources Limited (Administrators Appointed) [2021] WASC 93.

21In Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed)[3] Yates J observed in relation to an application of the type that is before me that:

[A]n appropriate balance must be struck between the expectation that an administration will be a relatively speedy and summary matter, and recognition that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return to creditors and any return to shareholders.  (citation omitted)

[3] Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733 [20].

22Further to those observations, if the court is persuaded that the prospects of a better outcome for creditors will be improved by a potentially longer period of administration, then the court would ordinarily grant an extension.[4] 

[4] See ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No 5) [2008] FCA 1947 [8], albeit in the context of an application to extend the time for convening the meeting under s 439A.

23In Megacrane, his Honour made orders modifying the adjournment period so as to permit a longer period than prescribed by rule 75‑140(3).  The form of orders sought by the plaintiffs in this matter are in similar terms to the orders made in Megacrane to the extent that they effected the required modification. 

24The affidavit of Mr Pattinson (who is one of the joint and several administrators) sworn 16 November 2023 in support of the application states as follows:

47.If further time is not granted, creditors of Wellfully may not have an opportunity to consider any viable restructuring options available to Wellfully and will either be forced to vote to liquidate Wellfully or vote for Wellfully to execute a 'holding' DOCA.  Given that [the] proposed transaction is conditional on Wellfully not proceeding to a DOCA, the only current viable prospect of a recapitalisation of Wellfully would effectively fall away.

48.In addition, if Wellfully enters into a DOCA, it will be increasingly difficult for Wellfully to return to quotation on the ASX and therefore a recapitalisation of Wellfully will be significantly harder to achieve.

49.Given that Bodyguard and International Scientific are wholly owned subsidiaries of Wellfully, there will also be no viable restructuring options for Bodyguard and International Scientific without one for Wellfully.

25In terms of the adjournment that has taken place so far, the adjournment resolution passed at the second creditors' meeting for each company was in these terms:

That the meeting be adjourned for up to 45 business days.

26As can be seen, the resolution does not adjourn the meeting to a particular time and place.  However, I think the resolution properly understood conveys that the meeting is adjourned to a time and place to be fixed by the chairperson subject to that date being within the 45 business day period.  The time and place ultimately fixed must be reasonable, having regard to all of the circumstances.[5] 

[5]See Lang AD, Horsley's Meetings: Procedure, Law and Practice (7th ed, 2015) 185.

27By a supplementary report to creditors for each company issued 15 November 2023, the plaintiffs gave notice that the reconvened meeting for the subject company would be held on 27 November 2023.  The times for the meetings are to be staggered such that the Wellfully meeting will occur first, then the International Scientific meeting, and finally the Bodyguard meeting. 

28In respect of the time period sought for the modified adjournment period, 30 April 2024 is a long period of time.  However, the plaintiffs point to the upcoming Christmas/New Year period.  Furthermore, I expect that if the proposed transaction does proceed, there would need to be engagement with the ASX to achieve the readmission to quotation on the ASX of the securities in Wellfully.  Also, the transaction may require approval from an extraordinary general meeting of the proponent. 

29Celtic does not oppose the extension sought the subject of the application.  Further, the supplementary report to creditors advised of the plaintiffs' intention to seek the extension the subject of this application.  The plaintiffs' counsel informed me at the hearing that no creditors have indicated to the plaintiffs any objection to the extension. 

30Also, the orders sought only modify the permissible end date of the meeting.  Thus, the orders do not have the effect automatically of adjourning the second meeting to 30 April 2024.  When the adjourned meeting is held may be earlier than that, depending on the circumstances. 

31It is not quite clear to me why Bodyguard needs to be preserved to effect the proposed restructure.  However, given it did previously hold intellectual property for Wellfully, it is probably best it be preserved in case in the future it turns out there is a lacuna in the transition of intellectual property from Bodyguard to International Scientific.  Also, there may be a need to deal with intercompany loans. 

32Having regard to all of the circumstances, I am satisfied the modification sought gives to creditors the best prospect of return within a relatively compressed timeframe, although that timeframe is getting towards the outer edges of what is acceptable given that the objectives of pt 5.3A of the Corporations Act are to achieve a relatively speedy and summary administration.

33For these reasons, I make orders in terms of paragraph 1 of the originating summons. 

34An order for confidentiality has already been made by the Acting Principal Registrar in relation to Mr Pattinson's affidavit.  That order is varied such that it does not apply to the publication of these reasons. 

35I will also make orders for notice to be given to affected parties and the Australian Securities and Investments Commission, for there to be liberty to apply and for costs.

ANNEXURE A

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

RH

Research Associate to the Honourable Justice Lemonis

29 NOVEMBER 2023