Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 2)
[2024] FCA 968
•23 August 2024
FEDERAL COURT OF AUSTRALIA
Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 2) [2024] FCA 968
File number(s): NSD 1050 of 2024 Judgment of: CHEESEMAN J Date of judgment: 23 August 2024 Date of publication of reasons: 27 August 2024 Catchwords: CORPORATIONS – application for extension of convening period for second meetings of creditors under s 439A of the Corporations Act 2001 (Cth) – application for limitation of administrators’ personal liability in respect of a confidential deed of guarantee with the Commonwealth under s 447A(1) of the Act – application to modify requirements of the Insolvency Practice Rules (Corporations) 2016 (Cth) relating to the conduct of the second creditors meetings pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (being Sch 2 to the Act) – application for ancillary orders and suppression orders relating to the deed of guarantee and related confidentiality deed and commercially sensitive information the subject of non-disclosure agreements – Held: applications granted Legislation: Corporations Act 2001 (Cth) ss 435A, 436A, 439(5)(b), 439A(5), 439A(6), 443A(1), 443D, 443E, 443F, 447A, 553, Sch 2 (Insolvency Practice Schedule (Corporations) (Cth)) s 90-15
Federal Court of Australia Act 1976 (Cth) ss 37AF(1)(b)(i), 37AG(1)(a)
Insolvency Practice Rules (Corporations) 2016 (Cth) rr 75-75(1), 75-75(4)(b), 75-85(3)(b), 75-150, 75-155(2), 75-225
Cases cited: ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No. 8) [2009] FCA 994; 73 ACSR 478
Algeri, in the matter of WBHO Australia Pty Ltd (Administrators appointed) (No 2) [2022] FCA 234
Arrium Finance Limited v National Australia Bank Ltd [2017] FCA 818
Bonza Aviation Pty Ltd (Administrators Appointed) [2024] FCA 575
Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24
Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25
Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (Administrators Appointed) [2017] FCA 635
Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) [2018] FCA 983; 129 ACSR 115
Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited (Administrator Appointed) [2019] FCA 11
Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) [2024] FCA 929
GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541
Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167
Hill, in the matter of Ovato Limited (administrators appointed) [2022] FCA 903
In the matter of Kavia Holdings Pty Limited (administrators appointed) (receivers and managers appointed) [2013] NSWSC 737
Kelly (administrator), in the matter of Lutum Holdings Pty Ltd (administrators appointed) [2024] FCA 554
Krejci, in the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111
Lord, in the matter of Invigor Group Limited (administrators appointed) [2022] FCA 1064
Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611
Mentha, in the matter of Griffin Coal Mining Co Pty Ltd (administrators appointed) [2010] FCA 1469; 82 ACSR 142
Metha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933
Mentha, in the matter of Spyglass Management Group Pty Ltd (Administrators Appointed) [2004] FCA 1469; 51 ACSR 432
Morgan, in the matter Traditional Values Management Limited (in liq) [2024] FCA 74
Park, in the matter of Surfstitch Group Ltd (Administrators Appointed) [2017] FCA 1244
Re Courtenay House Capital Trading Group Pty Ltd (in liq) [2021] NSWSC 256
Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446
Re Diamond Press Australia Pty Ltd [2001] NSWSC 313
Re Equiticorp Australia Ltd (in liq) [2020] NSWSC 143
Re Evans and Tate Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte Jones [2007] WASC 235
Re Foodora Australia Pty Ltd (Administrators Appointed) [2018] NSWSC 1426
Re Mudgee Dolomite & Lime Pty Limited (in liq) [2021] NSWSC 1350
Re Nexus Energy Ltd [2014] NSWSC 1041
Re Plutus Payroll Australia Pty Ltd (in liq) [2019] NSWSC 1171; 139 ACSR 536
Re South Burnett Wines (2004) 52 ACSR 298
Re Surfstich Group Limited [2018] NSWSC 164
Selim v McGrath [2003] NSWSC 927; 177 FLR 85
Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571; 144 ACSR 310
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; 144 ACSR 347
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 4) [2020] FCA 927
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 6) [2020] FCA 1172
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182
Tucker, in the matter of Aurora Metals Limited (Administrators Appointed) [2023] FCA 761
Walker, in the matter of Plumbfirst Pty Ltd (Administrators Appointed) [2023] FCA 441
Walley, in the matter of PGP Group (Aust) Pty Ltd [2023] FCA 1554
Walley, Re Poles & Underground Pty Ltd (admins apptd) [2017] FCA 486
Wight, in the matter of Responsible Entity Services Ltd (Administrators Appointed) [2024] FCA 458
Woodhouse (Liquidator), in the matter of Forex Capital Trading Pty Ltd (in liq) [2022] FCA 600; 159 ACSR 669
Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 89 Date of hearing: 23 August 2024 Counsel for the Plaintiffs:
Mr D Krochmalik
Mr B Smith
Solicitor for the Plaintiffs: White & Case
ORDERS
NSD 1050 of 2024 IN THE MATTER OF REGIONAL EXPRESS HOLDINGS LIMITED (ACN 099 57 270) (ADMINISTRATORS APPOINTED)
SAMUEL FREEMAN, JUSTIN WALSH AND ADAM NIKITINS IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF EACH OF THE SECOND TO SIXTH PLAINTIFFS
First Plaintiff
REGIONAL EXPRESS HOLDINGS LIMITED (ACN 099 547 270) (ADMINISTRATORS APPOINTED)
Second Plaintiff
REX INVESTMENT HOLDINGS PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 101 317 677) (and others named in the Schedule)
Third Plaintiff
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
23 AUGUST 2024
THE COURT ORDERS THAT:
Extension of Convening Period
1.Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (Corporations Act), the convening period (as defined in section 439A(5)(b) of the Corporations Act) within which the First Plaintiffs (Administrators) must convene the second meeting of creditors in respect of each of the Second to Sixth Plaintiffs (Companies) be extended up to and including 25 November 2024.
2.Pursuant to section 447A of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Rex Companies such that, notwithstanding the provisions in section 439A(2) of the Corporations Act, the second meetings of the creditors of each of the Rex Companies required under section 439A of the Corporations Act (SecondMeetings) may be convened and held at any time during, or within, five (5) business days after the end of, the convening period as extended by order 1 above, provided that the Administrators give notice of the meeting to creditors of each of the Rex Companies (including the persons or entities claiming to be creditors of the Rex Companies) at least five business days before the meeting.
Limitation of Liability – Deed of Guarantee
3.Pursuant to section 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate, nunc pro tunc, in relation to the Administrators, the Second Plaintiff (Rex Holdings) and the Fifth Plaintiff (Regional Express) as if section 443A(1) of the Corporations Act provides that:
(a)the liabilities of the Administrators incurred with respect to any obligations arising out of, or in connection with, the Deed of Guarantee (supporting future ticket purchases) dated 15 August 2024 between the Commonwealth of Australia, the Administrators, Rex Holdings and Regional Express (Deed) (including any variation to the terms of that Deed), are in the nature of debts incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of Rex Holdings and Regional Express; and
(b)notwithstanding that the liabilities in subparagraph 3(a) are debts or liabilities incurred by the Administrators in the performance and exercise of their functions as joint and several administrators of Rex Holdings and Regional Express, if the property and assets of Rex Holdings and Regional Express are insufficient to satisfy these debts and liabilities, such that the indemnity under section 443D of the Corporations Act is insufficient to meet any amount for which the Administrators may be liable, then the Administrators will not be personally liable to repay such debts or satisfy such liabilities to the extent of that insufficiency.
4.Until further order of the Court, pursuant to sections 37AF(1)(b)(i) of the Federal Court of Australia Act 1976 (Cth), on the ground stated in section 37AG(1)(a), being that the order is necessary to prevent prejudice to the proper administration of justice,
(a)pages 26-83 of Exhibit SJF-4 to the affidavit of Samuel Freeman affirmed 21 August 2024;
(b)Confidential Exhibit SJF-5 to the affidavit of Samuel Freeman affirmed 21 August 2024; and
(c)Confidential Exhibit 1, being the Amendment and Restatement of Confidentiality Deed dated 16 August 2024 tendered on 23 August 2024,
be kept confidential and be prohibited from disclosure to any person other than:
(a)a Judge of the Court and that Judge’s personal staff and assistants;
(b)the plaintiffs and their legal representatives; and
(c)the Commonwealth of Australia and its legal representatives.
Conduct of Second Meeting of Creditors
5.Pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations) (Cth) (IPSC), the Administrators are justified in permitting only those persons who have lodged particulars of a debt or claim in the administration of one or more of the Rex Companies, and by no later than midday on the second business day before the second meetings are held (POD Lodgement Date), to participate and vote in respect of the resolutions to be determined at the second meetings.
6.Pursuant to section 90-15 of the IPSC, in respect of any debt or claim submitted by a person to the Administrators in respect of the Rex Companies, the Administrators are justified in disregarding for voting purposes any such debt or claim (or particulars thereof) that is lodged after the expiry of the POD Lodgement Date.
7.Pursuant to section 90-15 of the IPSC, the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) are to operate in relation to the Rex Companies such that persons (or their proxy or attorney) may not at any time after the POD Lodgement Date, without the express written consent of the Administrators, amend or replace any proof of debt.
8.Pursuant to section 447A of the Corporations Act and/or section 90-15 of the IPSC, Part 5.3A of the Corporations Act (and rule 75-150 of the IPR) is to operate in relation to the Rex Companies such that a person appointed as a proxy, by a person otherwise entitled to vote at the second meetings, will not be entitled to vote, unless:
(a)in the case of a person appointed by special proxy, that special proxy has been received by the Administrators by no later than midday on the second business day before the second meetings; or
(b)in the case of a person appointed by general proxy, that general proxy names either an Administrator or the chairperson of the meeting as the person appointed as proxy and has been received by the Administrators by no later than midday on the second business day before the second meetings,
(together the Proxy Lodgement Date).
9.Pursuant to section 90-15 of the IPSC, in respect of any appointment of proxy forms submitted by a person to the Administrators in respect of the Rex Companies, the Administrators are justified in disregarding any such proposed appointment of proxy that is lodged after the expiry of the Proxy Lodgement Date.
10.Pursuant to section 90-15 of the IPSC, the IPR are to operate in relation to the Rex Companies such that the requirements of a person to:
(a)lodge particulars of a debt or claim for the purposes of section 75-85(3)(b) of the IPR;
(b)provide an instrument of appointment of proxy pursuant to section 75-150(3) of the IPR; and
(c)provide an instrument evidencing the appointment of a power of attorney pursuant to section 75-155(2) of the IPR,
in order to establish an entitlement to vote at the second meetings may only be satisfied by a person submitting a claim lodged on the creditor portal maintained by the Administrators accessible on the website prior to the expiry of the POD Lodgement Date (in the case of subparagraph (a)) and the Proxy Lodgement Date (in the case of subparagraphs (b) and (c)).
11.Pursuant to section 447A of the Corporations Act and/or section 90-15 of the IPSC, Part 5.3A of the Corporations Act is to operate in relation to the Rex Companies such that where a person has appointed one of the Administrators as general proxy, and that Administrator is not present at a meeting and/or is not chairing the meeting, the chairperson is treated as that Administrator’s deputy in accordance with rule
75-152(2) of the IPR.
12.Pursuant to section 90-15 of the IPSC, the IPR are to operate in relation to the Rex Companies such that all resolutions to be determined at the second meetings are to be decided by a poll and voted on electronically by creditors or, if relevant, their proxies or attorneys.
13.Pursuant to section 90-15 of the IPSC, the Administrators would be justified in counting, on any poll taken during the second meetings, all votes lodged by creditors (by proxy or otherwise), regardless of whether it can be shown that those creditors (or their proxy or attorney) were present at the second meetings.
14.Pursuant to section 90-15 of the IPSC, the requirement of rule 75-75(4)(b) of the IPR may be taken to be satisfied, in the case of the Rex Companies, by the provision to creditors (including persons or entities claiming to be creditors) of the Rex Companies of notice of the method and time for voting no less than five (5) business days before the date of the second meetings, with such notice to be in accordance with Order 4 of the Orders dated 6 August 2024 (6 August Orders).
15.Pursuant to section 90-15 of the IPSC, the requirements of rule 75-75(1) of the IPR may be taken to be satisfied, in the case of the Rex Companies, if:
(a)the Administrators hold the second meetings via audio-visual conference technology, such as (but not limited to) Kaltura, with the details of the audio-visual conference to be provided by a notice to creditors (including persons or entities claiming to be creditors) of the Rex Companies in accordance with Order 4 of the 6 August Orders;
(b)the Administrators conduct a virtual meeting by way of a live stream format, where participants are able to participate in the meeting by way of a written live chat function which is visible only to the Chairperson of the meeting (or his or her delegate), but where the participants cannot orally address the meeting;
(c)the Administrators have given a notice to creditors (including persons or entities claiming to be creditors) of the Rex Companies (in accordance with Order 4 of the 6 August Orders) that specifies that questions, requests for information, or comments that they wish to raise at the second meetings should be submitted, to the extent possible, to the Administrators by midday on the day that is two (2) business days before the second meetings; and
(d)the Administrators:
(i)answer or address at the second meetings, as far as practicable, questions, requests for information, or comments submitted by creditors prior to midday on the day that is two (2) business days before the second meetings, for a period of not less than two (2) hours or until all such questions, requests for information and comments have been responded to (whichever occurs sooner); and
(ii)otherwise may, but are not required at the second meetings to, answer or address any questions, requests for information, or comments submitted by creditors after midday on the day that is two (2) business days before the second meetings.
16.Within five (5) business days of the second meetings, the Administrators publish on the creditor portal information responding to the substance of all questions, requests for information, and comments received prior to or during the second meetings which are not in substance addressed at the second meetings.
Ancillary Orders
17.The Administrators take all reasonable steps to cause notice of these orders to be given, within one (1) business day of the making of the orders to:
(a)creditors (including persons or entities claiming to be creditors) of the Rex Companies, in accordance with Order 4 of the 6 August Orders; and
(b)the Australian Securities and Investments Commission.
18.Liberty be granted to any person demonstrating a sufficient interest to apply to vary or discharge any orders made above, on one (1) business day’s written notice being given to the Plaintiffs and to the Court.
19.The Plaintiffs’ costs of the application be treated as costs in the administrations of each of the Rex Companies, jointly and severally.
20.These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
CHEESEMAN J:
INTRODUCTION
This is an interlocutory application brought by the Plaintiffs, Regional Express Holdings Limited (administrators appointed) (Rex Holdings); Air Partners Pty Ltd (administrators appointed) (Air Partners); Rex Investment Holdings Pty Limited (administrators appointed) (Rex Investment); Regional Express Pty Limited (administrators appointed) (Regional Express); and Rex Airlines Pty Ltd (administrators appointed) (Rex Airlines) (together, the Rex Companies) and their Administrators, Samuel Freeman, Justin Walsh and Adam Nikitins filed on 21 August 2024. The matter came before me as the Commercial and Corporations duty judge on 23 August 2024 at which time I made orders substantially as sought by the Plaintiffs. These are my reasons for doing so.
NATURE OF THE APPLICATION
The Plaintiffs seek orders pursuant to s 439A(6) of the Corporations Act 2011 (Cth) extending the convening period for the second meeting of creditors of each of the Rex Companies for a period of about three months, to 25 November 2024 and ancillary orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (Sch 2 to the Act) (the IPSC) relating to the conduct of the second meetings. They also seek orders pursuant to s 447A(1) of the Act which will have the effect of limiting the personal liability of the Administrators with respect to a deed recently entered into with the Commonwealth of Australia as represented by the Department of Infrastructure, Transport, Regional Development and the Arts (the Commonwealth).
The Plaintiffs also seek ancillary orders, including a suppression order in respect of three categories of confidential documents:
(1)a Deed of Guarantee (supporting future ticket purchases) entered into between the Commonwealth and the Plaintiffs dated 15 August 2024;
(2)documentation containing confidential information relating to the recapitalisation and sale process that the Administrators are presently undertaking; and
(3)an amendment and restatement of confidentiality deed entered into between the Administrators, Rex Holdings, Regional Express and the Commonwealth dated 16 August 2024.
The Plaintiffs read the following affidavits in support of the application:
(1)Samuel John Freeman, one of the three joint and several administrators appointed to the Rex Companies, affirmed 4 August 2024 and Exhibit SJF-1 thereto;
(2)Paragraphs [1] to [12] of the affidavit of Mr Freeman affirmed 5 August 2024 and Exhibit SJF-3 thereto;
(3)Mr Freeman affirmed 21 August 2024 and Exhibit SJF-4 (pages 26-83 of which are subject to a claim of confidentiality) and Confidential Exhibit SJF-5 thereto; and
(4)Mr Freeman affirmed 22 August 2024 and Exhibit SJF-6 thereto.
Mr Freeman is authorised to make affidavits on behalf of Mr Nikitins and Mr Walsh, the other joint and several administrators. Mr Freeman deposes to his qualifications and experience as a chartered accountant and registered liquidator. He is also a member of the Australian Restructuring Insolvency and Turnaround Association and the Turnaround Management Association. I accept that is an experienced insolvency practitioner.
The Plaintiffs relied on evidence as to the provision of notice of this application being given to creditors of the Rex Companies, the Commonwealth and the Australian Securities and Investments Commission (ASIC). The potential to bring an application to extend the convening period for the second meetings was raised at the first meeting of creditors on 9 August 2024. As at the hearing of the application the Administrators had not received any responses from any person notified of the application indicating an intention of seeking to be heard on the application or to otherwise oppose the application. At the hearing of the application the matter was called outside the courtroom and no one sought to be heard.
BACKGROUND
The Rex Companies are part of a corporate group which includes other companies incorporated and operating in Australia (the Rex Group). On 30 July 2024, the Administrators were appointed jointly and severally, as Administrators of each of the Rex Companies by resolution of the directors of each of the Rex Companies pursuant to s 436A of the Act.
The corporate Plaintiffs are the only companies in the Rex Group to which administrators have been appointed.
On 4 August 2024, the Plaintiffs filed an originating process seeking orders directed to modifying the requirements of the Act in relation to:
(1)providing notice of the first meetings of creditors and as to the conduct of those meetings and the appointment and conduct of the Committee of Inspection;
(2)extending the time for Administrators to respond to creditor enquiries;
(3)limiting the Administrators’ personal liability in particular respects; and
(4)extending the convening period for the first meeting of creditors.
On 6 August 2024, Yates J sitting as Commercial and Corporations duty judge, heard the application and made orders (6 August Orders): Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) [2024] FCA 929 (Rex (No 1)).
In Rex (No 1) Yates J set out in detail the background to the appointment of the Administrators and the conduct of the administrations up until 6 August 2024: Rex (No 1) at [4]-[23]. The principal evidence that was relied on by the Administrators in Rex (No 1) was also read in the present applications. I will not recite the matters summarised in Rex (No 1). Familiarity with Rex (No 1) is assumed for the purpose of these reasons.
The additional evidence led on the present applications confirms that the summary given in Rex (No 1) at [6] continues to reflect the Administrators’ understanding. I further note that Rex Airlines is primarily responsible for operating the metropolitan routes that have ceased since the commencement of the administration. It also holds the leases for the Boeing 737 aircraft utilised by the Rex Group and employed the staff required to operate the metropolitan routes.
Mr Freeman confirms that the Administrators continue to trade most (but not all) of the Rex business on a “business as usual” basis. In particular, all bookings for flights on regional routes continue to be provided, but all bookings for flights on metropolitan routes have been cancelled until further notice.
During the period up to 14 August 2024 Virgin Australia Airlines Pty Ltd and its related entities had in place an offer to re-book customers with cancelled Rex flights on metropolitan routes on equivalent Virgin Australia flights free of charge in respect of some customers of the business. A similar offer made by Qantas is due to expire on 31 August 2024.
On this application the Administrators confirm that their present position continues to be that:
(a)customers with bookings for flights on regional routes are not creditors of Rex Airlines, as those services are continuing to be provided; and
(b)customers with bookings for flights on metropolitan routes are, depending on the particular circumstances, either actual or contingent creditors of Rex Airlines as there is no certainty as to whether those bookings will be honoured or passengers will take up alternative bookings with either Virgin Australia or Qantas: see Rex (No 1) at [14].
The characterisation of customers with bookings for flights on metropolitan routes (Customer Creditors), as contingent creditors is consistent with Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24 at 33 and Selim v McGrath [2003] NSWSC 927; 177 FLR 85 at 105, where it has been concluded that a “creditor” for the purposes of Part 5.3A of the Act is a person who has a claim that would be provable under s 553 in a winding up; that is, a present or future claim, certain or contingent, ascertained or only sounding in damages.
Flights on routes between major metropolitan cities and regional locations (or vice versa), or between two regional locations, are continuing to be provided by Regional Express and so customers with bookings of this type are not considered by the Administrators to be contingent creditors of Rex Airlines.
The Administrators’ present best estimate of the number of creditors, excluding Customer Creditors, could be up to approximately 4,800 including:
(a)3,584 creditors of Rex Holdings (including the 251 employee creditors whose employment the Administrators have terminated);
(b)two creditors of Air Partners;
(c)two creditors of Rex Investment;
(d)ten creditors of Regional Express; and
(e)894 creditors of Rex Airlines (including the 343 employee creditors whose employment the Administrators have terminated).
This is broadly consistent with the position summarised in Rex (No 1) at [17].
Mr Freeman deposes that the Administrators are not in a position to state with any certainty the number of Customer Creditors. That is for a number of reasons including the delay in reconciling whether passengers with cancelled flights have been rebooked on Virgin Australia or Qantas flights, and also reconciling the true number of Customer Creditors in circumstances where customers may have had multiple bookings using different email addresses and or mobile telephone numbers. For example, the Administrators have identified more than 54,000 email addresses for Customer Creditors but this is likely to involve instances where individual customers used more than one email to make separate bookings. There is expected to be some reduction in the total number of Customer Creditors compared to the total number of email addresses identified for Customer Creditors. However, it is still the case that the pool of customer creditors is likely to be very large: see Rex (No 1) at [20]-[22].
Mr Freeman deposes that apart from Customer Creditors and employees, the creditors of the Rex Companies include:
(a)PAGAC Regulus Holding Pte. Ltd, which is a secured creditor and a party to certain finance arrangements with the Rex Companies;
(b)Westpac Banking Corporation Ltd, which is party to various cash advance facilities with, or guaranteed by, the Rex Companies;
(c)other creditors with security interests registered on the Personal Property Securities Register;
(d)trade creditors and statutory authorities; and
(e)related party creditors.
As described in Rex (No 1) at [6], Rex Holdings is a public company whose shares are listed on the Australian Securities Exchange (ASX) and is the parent company of the Rex Group. The Rex Companies are jointly and severally liable for the debts of each other company within the group through a deed of cross guarantee in the event that a company goes into liquidation. As mentioned, not all of the companies in the Rex Group are presently in administration.
Immediately after their appointment, the Administrators caused the Rex Companies to enter into a Loan Agreement and General Security Deed with PAGAC, the major secured creditor, to provide the Administrators with funding to continue to trade the business during the administration. An order was made on 6 August 2024 limiting the Administrators’ personal liability in respect of the agreements pursuant to which finance has been provided to the Administrators in the course of the administrations (see Rex (No 1) at [71]-[82]; order 10 of the 6 August Orders).
Since their appointment, the Administrators have undertaken a wide range of tasks, in addition to continuing to trade most of the business relevantly, including retaining investment bank Houlihan Lokey to assist the Administrators in conducting a competitive process for the recapitalisation of the business or sale of the assets of the Rex Companies (Sale Process). Since their appointment, the Administrators have sought to maximise the prospect of a sale or restructure of the business as a going concern.
From 2 August 2024 onwards, Houlihan Lokey issued a flyer and non-disclosure agreement to potential interested parties and from 14 August 2024, Houlihan Lokey issued a more detailed information memorandum to potential interested parties and established a data room containing information relating to the business and financial position of the Rex Companies.
The current indicative timeline of the Sale Process which is necessarily attended by some flexibility is that:
(a)non-binding indicative offers were due to be provided on 21 August 2024; and
(b)binding offers are due to be provided on 16 September 2024.
The Administrators have explained that they intend to try and keep to the indicative timing as closely as possible and that, based on the advice received by them from Houlihan Lokey, this timeframe strikes an appropriate balance between the Sale Process proceeding as quickly as possible whilst also maintaining competitive tension amongst potential bidders.
The following developments have occurred in the administrations of the Rex Companies in the period since 6 August 2024 when the matter was last before the Court.
On 9 August 2024, the first meeting of the creditors of each of the Rex Companies was held concurrently, by virtual means utilising video conference technology. Approximately 387 creditors and approximately 34 observers attended the first meetings. Mr Freeman deposes that the meetings were conducted efficiently and in an orderly manner; that the live chat feature (only visible to the Administrators and their staff and representatives) functioned effectively, enabling seamless communication and allowing all creditor questions to be addressed in real‑time. Mr Freeman confirms that he is not aware of any complaints being received after the first meetings concerning any difficulties experienced by persons seeking to participate at the first meetings using the relevant technology.
In accordance with order 7 of the 6 August Orders, following the first meetings, on 13 August 2024, the Administrators published a proposal to creditors in relation to the formation of the committee of inspection of the Rex Companies. Voting on that proposal completed on 21 August 2024. The members of the committee of inspection are:
No. Representative Representing Stakeholder group Rex Entity 1 James Marshall PAGAC Secured Creditor All 2 Jodie Kampf Westpac Finance Creditor Rex Airlines 3 Henry Carr Department of Employment and Workplace Relations (DEWR) Employees Observer 4 Simon Lutton AFAP Union as Employee Nomination Employees Rex Airlines / Rex Holdings 5 Teri O'Toole FAAA Union as Employee Nomination Employees Rex Airlines 6 Edward Knell TWU Union as Employee Nomination Employees Rex Airlines 7 Christopher Swan Self (Employee) Employees Rex Airlines 8 Michael Gilderdale Australian Pacific Airports (Melbourne) Pty Ltd Airport Rex Holdings 9 Cameron Hoffman Maranoa Regional Council Airport Rex Airlines 10 Stuart Richardson Aus Flight Handling Pty Ltd Ground Handling Rex Airlines 11 Tony Troiani Sabre Asia Pacific Pte Ltd / Sabre GLBL Inc Supplier Rex Holdings 12 James Keen Killick Aerospace Limited Supplier Rex Airlines 13 Justin Cheng Kim Chuen The Branksome Residences Pty Ltd Supplier Rex Holdings 14 Sam Hardy National Jet Express Pty Ltd Airline Rex Airlines / Rex Holdings / Air Partners
The evidence before me demonstrates that the Administrators have been proactive in bringing this application forward in a timely manner.
EXTENSION OF THE CONVENING PERIOD
By prayers 1-2 of the Interlocutory Process, the Administrators seek orders extending the convening period for each of the administrations of the Rex Companies up to and including 25 November 2024 (as well as a Daisytek order permitting the second meetings to be convened at any point during that period).
Applicable principles
The principles applicable in relation to when the Court will extend the convening period for the second meeting of creditors pursuant to s 439A(6) of the Act are well established. In making such an order, the Court must reach an appropriate balance between an expectation that the administration will be relatively speedy and summary and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]. See also Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; 144 ACSR 347 at [64]-[68], Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (Administrators Appointed) [2017] FCA 635 at [18]-[20] and Walker, in the matter of Plumbfirst Pty Ltd (Administrators Appointed) [2023] FCA 441 at [16].
It is clear that the Court should not allow longer than is required for the diligent exercise of the powers of the administrator. It may be appropriate to grant an extension in circumstances where:
(a)there is a proper evidentiary case for the extension;
(b)there is no evidence of material prejudice to those affected by the moratorium during the continued period of administration; and
(c)the length of the extension sought by the administrator is exposed as having a reasonable basis.
In exercising the discretion to extend the convening period the Court will generally afford significant weight to the view of the administrator as to the needs and circumstances of the particular company in considering whether it is appropriate to grant an extension having regard to the objects of Pt 5.3A: Wight, in the matter of Responsible Entity Services Ltd (Administrators Appointed) [2024] FCA 458 at [36], [38] (and the authorities cited therein).
The particular circumstances in which an extension may be granted include, where the size and scope of the business is substantial, where the extension will allow a sale of the business as a going concern, and more generally, where additional time is likely to enhance the return for unsecured creditors: Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited (Administrator Appointed) [2019] FCA 11 at [3]-[8]; In the matter of Kavia Holdings Pty Limited (administrators appointed) (receivers and managers appointed) [2013] NSWSC 737 at [15]; Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18]; Metha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 at [20].
An extension of the administration period to facilitate either (or both) of: (a) the sale of the business of the company as a going concern, so as to maximise the value of the company’s assets; or (b) the progression and assessment of a deed of company arrangement (DOCA) proposal that may provide a better return to creditors than a winding up, are well-recognised examples where the court has extended the convening period: Virgin (No 2) at [66]; Bonza Aviation Pty Ltd (Administrators Appointed) [2024] FCA 575 at [12].
An additional factor in favour of extending the convening period is the need for creditors to have sufficient information at the second meeting to allow them to exercise their decision as to the future of the company in as informed a manner as possible: Re Foodora Australia Pty Ltd (Administrators Appointed) [2018] NSWSC 1426 at [11]; Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 at [28].
The interests of creditors who are affected by the statutory moratorium are relevant, but are not decisive: Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 at [9]; ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No. 8) (2009) 73 ACSR 478 at [52]-[53]; Re South Burnett Wines (2004) 52 ACSR 298 at [14] (Campbell J, as his Honour then was)).
Ultimately, it is necessary to consider the best interests of the creditors as a whole, having regard to the purpose of Part 5.3A of the Act.
Consideration
Mr Freeman is an experienced insolvency practitioner. Based on his evidence and having regard to the lack of opposition from those who have been notified of this application, including ASIC, and applying the principles outlined above, I was satisfied that it was appropriate to make orders 1 and 2 as sought by the Plaintiffs. My reasons for doing so are as follows.
First, the proposed extension of the administration period is designed principally to facilitate the sale of as much as possible of the business of the Rex Companies as a going concern, so as to maximise the value of the Rex Companies’ assets in the interests of employees, creditors and other stakeholders (including suppliers and customers). That is a well-recognised and orthodox circumstance warranting an extension of the convening period.
The Sale Process which the Administrators are currently undertaking is likely to bring about the greatest return to creditors. The Administrators’ view is that a sale of the Rex Companies as a going concern maximises the chances of the business continuing in existence and is likely to result in a better return to creditors than an immediate winding up. There is no reason for the Court to doubt Mr Freeman’s opinion in that regard, particularly taking into account the support that the Administrators have been able to secure from PAGAC and the Commonwealth.
Secondly, given the size and complexity of the business, the ongoing Sale Process will not be completed within the standard convening period, which expires on 3 September 2024. The non‑binding indicative offers were due to be submitted on 21 August 2024 and binding offers are not due until 16 September 2024. That period of time is reasonable given that an information memorandum and data room were provided from 14 August 2024 and interested parties must have adequate time to consider that data and formulate their offers. In the context of the cross guarantees between the companies in the Rex Group, including the Rex Companies the subject of this application, any proposals emanating from the Sale Process will need to be assessed by reference to the overall position of the consolidated group: Re Evans and Tate Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte Jones [2007] WASC 235 at [5]. That is a further complexity that goes towards justifying the time sought by the Administrators as being reasonable. In light of the fact that the Rex Companies are under insolvent administration, if the convening period is not extended, it is almost inevitable that creditors would resolve at the second meetings that the Rex Companies be wound up. The Administrators’ view is that the Rex Companies are likely insolvent and no DOCA proposal is likely unless the Sale Process runs its course.
Thirdly, although the Administrator acknowledges that a sale of the business in a liquidation would be possible, they consider that the current Sale Process is likely to result in a much better return to creditors. I accept that it so — an orderly sale of the business as a going concern will preserve existing business relationships and contracts and will ensure that the price obtained for the sale of the business includes a substantial component for goodwill. Also, and importantly, a liquidation will imperil the employment of the remaining large workforce of the Rex Companies and will increase the creditor pool by triggering further employee claims (for example, deemed redundancies as per section 558 of the Act).
Fourthly, an extension of the convening period will afford the Administrators the opportunity to provide a comprehensive and complete recommendation to creditors on the future of the Rex Companies in their report under s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPRC) in advance of the second meetings. It is desirable that creditors have the benefit of a comprehensive report before the second meetings in order to be in a position to best determine the future of the Rex Companies.
Fifthly, the period of extension sought, of approximately three months, is appropriate in view of the scale of the business and the complexity of the administrations. The proposed length of the extension is designed to enable the Sale Process to be completed and provide for competitive tension between the potential bidders (by permitting due diligence to be completed, final binding offers to be made, and negotiations to take place leading to the execution of a binding agreement and, thereafter, for that agreement to be completed and/or put forward as a DOCA proposal for creditors). Once binding offers are received on or about 16 September 2024, the Administrators will need time to review and consider those offers in conjunction with Houlihan Lokey, negotiate the terms of any sale agreement (and associated DOCA, if applicable), take steps to obtain relevant regulatory approvals and prepare their report to creditors in advance of the second meetings. The extension sought will provide the Administrators with a maximum of just over two months after the receipt of binding offers to undertake those steps, which ensures that they can be undertaken properly and thoroughly.
The three-month extension in the particular circumstances of the Rex Companies is appropriately tailored so as to strike the right balance between the needs and circumstances of the particular companies and ensuring that the objectives of Part 5.3A of the Act are not undermined.
In any event, Mr Freeman has given evidence that the Administrators may convene the second meetings at an earlier time than the latest available date to the extent that it is possible and desirable to do so (depending on the course of the Sale Process) and has also sought in accordance an order to permit the meeting to be called earlier: see Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446 at [10]-[18]. It is appropriate for the Administrators to be afforded flexibility in this way in relation to timing of the meeting: see Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18].
Sixthly, as a general proposition, I was satisfied that the extension is consistent with the objectives of Part 5.3A of the Act (as embodied in s 435A) as it maximises the prospects of the Rex Companies, or as much as possible of their business, continuing in existence (and otherwise increases the likely return to creditors): Algeri, in the matter of WBHO Australia Pty Ltd (Administrators appointed) (No 2) [2022] FCA 234 at [16]. I was also satisfied that Mr Freeman has demonstrated a reasonable basis for his opinion that the Sale Process, if successful, is very likely to result in many of the Rex Companies’ employees continuing in their employment.
Seventhly, the Plaintiffs submit, and I accept, that the extension will not unduly prejudice the interests of non-employee creditors of the Rex Companies. The Administrators are continuing to trade the business and are confident that they will have sufficient funding to continue to do so until the end of the convening period, if extended. The Deed of Guarantee with the Commonwealth provides a greater assurance that the business be able to continue to provide flights on regional routes. I accept the Administrators’ conclusion that the assets of the Rex Companies will not be materially eroded by the extension of the convening period and the business continuing to trade during this period.
Eighthly, the Administrators submit, and I accept, that any delay in former employees of the Rex Companies being able to access the Fair Entitlements Guarantee (FEG) Scheme maintained by the Commonwealth is outweighed by the likely benefit to other creditors and current employees. The Administrators acknowledge that any extension of the convening period will delay the ability of the 594 employees (being 251 employees of Rex Holdings and 343 employees of Rex Airlines) whose employment has been terminated during the administration to access the FEG Scheme. Against this they submit that a successful restructuring of the business may avoid a winding up of Rex Holdings and Rex Airlines, in which case the FEG Scheme would not be available in any event. In this context it is necessary to consider the interests of the non-employee creditors of the Rex Companies, and the 1,057 employees who remain employed by the Rex Companies. The prospect of their employment continuing will be maximised by the sale or recapitalisation of the business as a going concern. In Bonza Aviation, in not dissimilar circumstances, Jackman J, at [20] regarded the potential benefit to the interests of creditors as a whole of the extension of the convening period as outweighing the prejudice to employees who may seek to access the FEG Scheme. Indeed, the present circumstances militate more strongly where the business continues to trade, whereas in Bonza Aviation, the business had ceased to trade.
Finally, I note that no person has sought to be heard to oppose the application and although notice of the application was circulated fairly recently, it was also foreshadowed by the Administrators at the first meetings. Counsel appearing for the Plaintiffs confirmed that as at the hearing of the application the Administrators were not aware of any opposition to extension of the convening period.
Accordingly, I made an order extending the convening period for the second meetings accompanied by a Daisytek order.
LIMITATION OF THE ADMINISTRATORS’ PERSONAL LIABILITY UNDER THE DEED OF GUARANTEE
By prayer 3 of the Interlocutory Process, the Administrators seek an order limiting their liability under the Deed of Guarantee that has been entered into with the Commonwealth.
Applicable principles
Section 443A of the Act, which forms part of Part 5.3A, relevantly provides that:
(1)The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:
…
(d) the repayment of money borrowed; or
(e) interest in respect of money borrowed; or
(f) borrowing costs.
(2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator’s rights against the company or anyone else.
Sections 443D, 443E and 443F of the Act provide a right of indemnity out of the company’s property (other than certain property that is not relevant for present purposes) for the debts for which an administrator is liable under section 443A; and that right is secured by a statutory lien over the company’s property (as well as an equitable lien that operates in addition to the statutory regime). In substance, that means that the Administrators are entitled to be reimbursed out of the assets of the applicable Rex Companies (secured over the assets of those companies) to meet debts for which they are personally liable.
In Rex (No 1), Yates J stated at [81]:
It is not in doubt that the power under s 447A of the Corporations Act extends to making orders limiting an administrator’s personal liability under s 443A(1) of the Corporations Act, particularly in relation to funding arrangements to facilitate trading in the administration period. Such orders are commonplace: Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd) (administrators appointed) [2010] FCA 1469; 82 ACSR 142 at [29] – [31]; Re Nexus Energy Ltd [2014] NSWSC 1041 at [14]; Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 at [90]; Hill, in the matter of Ovato Limited (administrators appointed) [2022] FCA 903 at [14]; Lord, in the matter of Invigor Group Limited (administrators appointed) [2022] FCA 1064 at [24]; Kelly (administrator), in the matter of Lutum Holdings Pty Ltd (administrators appointed) [2024] FCA 554 at [42]-[43].
The principles were summarised in some detail by Middleton J in Virgin (No 2) In particular, his Honour, at [91], stated that:
There can be no doubt that in the appropriate circumstances, personal liability can be excluded with respect to any arrangement where that enables the company’s business to continue to trade for the benefit of the company’s creditors…
Finally, the personal liability of an administrator for debts incurred by a company under administration extends to contingent debts (in the context of Part 5.3A of the Act): Virgin (No 2) at [137] (and the authorities cited therein).
Consideration
Applying the principles outlined above, I was satisfied that it was appropriate to make orders limiting the personal liability of the Administrators with respect to their obligations under the Deed of Guarantee. My reasons for doing so are as follows.
First, the Administrators have reasonably formed the view that the ongoing trade of the business is in the best interests of creditors. The Deed of Guarantee assists the Rex Companies to continue providing regional flights by providing assurance to customers that any funds used to purchase flights offered by Rex Holdings and Regional Express will be guaranteed by the Commonwealth. This clearly functions to enhance the ongoing viability from the perspective of customers to that part of the business that is continuing. This is in the interests of creditors (and future customers).
Secondly, the Administrators may incur debts under the Deed of Guarantee as a result of any contingent obligation to repay funds transferred to Rex Holdings and Regional Express for pre‑paid ticket bookings before those flights are flown. The Administrators submit, and I accept, that they should not be expected to incur personal liability beyond the extent of their indemnity out of the assets of the Rex Companies, when the purpose of entry into the Deed of Guarantee is to enable the Rex Companies to continue to trade.
Thirdly, it is the Commonwealth, as the guarantor under the Deed of Guarantee, that could potentially be prejudiced by the limitation of the Administrators’ personal liability that is presently sought. The Commonwealth has agreed to and positively supports the orders sought.
Fourthly, the limitation of liability will not occasion prejudice to any of the unsecured creditors of the Rex Companies, as they have no real interest in a limitation of the Administrators’ personal liability for contingent indebtedness of this kind: Mentha, in the matter of Spyglass Management Group Pty Ltd (Administrators Appointed) [2004] FCA 1469; 51 ACSR 432 at [6].
Fifthly, the secured creditors, being on notice of the application, have not sought to be heard to oppose the limitation of liability orders being made.
Sixthly, although the interests of creditors are unaffected, to the extent there are any creditors who may in due course oppose the orders, their interests are adequately preserved through an order permitting creditors to apply to vary or discharge the order: Tucker, in the matter of Aurora Metals Limited (Administrators Appointed) [2023] FCA 761 at [24(4)].
For these reasons, I was satisfied that it was appropriate to make an order in the terms sought by the Plaintiffs.
MODIFICATION OF THE INSOLVENCY PRACTICE RULES IN RESPECT OF THE SECOND MEETINGS
By prayers 5-15 of the Interlocutory Process, the Administrators seek a number of orders in relation to the conduct of the second meetings which would have the following effect:
(a)only creditors who have lodged a proof of debt by midday on the day that is two business days prior to the second meetings (POD Lodgement Date) will be entitled to participate in and vote at the second meetings;
(b)proofs of debt lodged before the POD Lodgement Date can only be amended or replaced before that same date unless the Administrators expressly consent in writing to amendment or replacement after that date.;
(c)only proxies received by the same time as the POD Lodgement Date (that is, midday on the day that is two business days prior to the second meetings) (Proxy Lodgement Date) will be effective, and, in the case of general proxies, must name an Administrator or chairperson of the meeting as proxy;
(d)the lodgement of proofs of debt and proxies can only be done through the creditor portal maintained by the Administrators (Creditor Portal);
(e)all resolutions to be determined at the second meetings are to be determined by poll and voted on electronically and, further, the Administrators are justified in counting all votes lodged by creditors irrespective of whether it can be shown that those creditors were present at the second meetings;
(f)notice of the second meetings will be provided to creditors in accordance with order 4 of the 6 August 2024 Orders; and
(g)the Administrators may conduct the second meetings virtually by using live-stream technology with creditors able to participate by way of a written live chat function visible only to the Administrators.
Applicable principles
Section 90-15 of the IPSC confers power on the Court to make orders modifying the operation of the IPSC and the IPR and, generally, to give directions to external administrators. The principles relating to s 90-15 were recently summarised by Button J in Morgan, in the matter Traditional Values Management Limited (in liq) [2024] FCA 74 at [26]-[31], incorporating the statements of principle in Krejci, In the matter of Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 1111 at [7]-[11] and Woodhouse (Liquidator), in the matter of Forex Capital Trading Pty Ltd (in liq) [2022] FCA 600; 159 ACSR 669 at [51]-[54].
Relevantly, the Court’s power to make judicial directions under s 90-15 is not a determination of rights and liabilities arising out of a particular transaction. It serves the function of conferring a level of protection on the administrator on an issue of “substance or procedure” or “of power, propriety or reasonableness”, including a matter arising in connection with the performance or exercise of an administrator’s functions or powers.
The relevant power under s 90-15 is, in its terms, unconstrained but having regard to the authorities above, in the case of an administration, must be exercised consistently with Part 5.3A of the Act: GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [32]-[33]; Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) [2018] FCA 983; 129 ACSR 115 at [36].
Consideration
Prayers 5-15 of the Interlocutory Process are concerned with matters of procedure. This is an appropriate subject matter on which directions may be given by the Court: Re Equiticorp Australia Ltd (in liq) [2020] NSWSC 143 at [45] (Gleeson JA, sitting at first instance); Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182 at [31].
I was satisfied that was appropriate to make orders facilitating the regime summarised at paragraph [69] above supplemented by the additional order identified during the course of argument and that to do so was consistent with Part 5.3A of the Act. My reasons are as follows.
First, in the particular circumstances of the Rex Companies, the Administrators have taken steps to obtain orders in relation to the first meetings of creditors that are both practically efficient and cost effective in achieving the objectives of the legislative regime. Those orders were granted by Yates J and were based in part on earlier orders made in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571; 144 ACSR 310 (see orders 24 April 2020), Virgin (No 2) (see orders 13 May 2020), and Bonza Aviation (see Bonza Aviation orders 9 May 2024). The orders have been tested and proved effective in the first meetings of the Rex Companies. In these circumstances, I was satisfied that it was appropriate to make orders to permit a similar meeting procedure to be followed in the second meetings of creditors.
Secondly, the Rex Companies have a very large creditor pool, consisting of at least 4,800 non-customer creditors, as well as an extremely large number of Customer Creditors, although the precise number of Customer Creditors is not known. As discussed above, this is consistent with the observations in Rex (No 1) at [17]-[21]. In order to deal with a creditor pool of that magnitude at the second meetings, it is necessary to impose cut-off dates by which proofs of debt and proxies must be lodged to enable the Administrators to cope with the significant number of proofs of debt and proxies that may be lodged.
Section 75-225(2)(b)(vii) of the IPR already requires the notice to creditors of the second meetings to specify a date by which proofs of debt and proxies are to be submitted. The proposed application is consistent with similar orders made by this Court justifying administrators disregarding proofs of debt and proxies submitted after the proposed cut-off date: see Virgin (No 7) at [38]-[39].
Thirdly, creditors will have sufficient time to lodge proofs of debt and proxies after receipt of the report to creditors and prior to the POD Lodgement Date. Creditors will have three business days between receipt of the report (which is to be provided at least five business days prior to the meeting in accordance with s 75-225 of the IPR) and the POD Lodgement Date / Proxy Lodgement Date, which is 48 hours before the second meetings.
Fourthly, the Administrators’ view is that the lodgement of proofs of debt and proxies through the Creditor Portal is the most efficient means of ensuring that the Administrators can effectively assess and manage all such lodgements. I was satisfied that the Creditor Portal will enable streamlined handling, accurate record-keeping and timely processing of the large number of anticipated lodgements for the second meetings: see Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 6) [2020] FCA 1172 at [32], [35], where orders were made in very similar terms to the orders now sought.
Fifthly, the Administrators propose a cut-off time for lodgement of creditor questions and requests for information, as was ordered in Rex (No 1) (order 5 of 6 August Orders), to allow the second meetings to be conducted efficiently whilst also maximising the Administrators’ ability to respond usefully and comprehensively to such enquiries from creditors. The Administrators will respond to any questions, requests for information and comments which are not addressed in substance at the second meetings by publishing information on the Creditor Portal.
Sixthly, the Administrators propose to use the “Kultura” platform (or a similar platform), which the Administrators have previously used for the first meetings (pursuant to the 6 August Orders) without difficulty, to enable creditors to participate adequately in the second meetings. The efficiencies were addressed in Mr Freeman’s evidence and considered in Rex (No 1) at [44] and [48]. For the same reasons as were given by Yates J with respect to the first meetings, I was persuaded that the arrangements are appropriate in respect of the second meetings.
SUPPRESSION ORDERS OVER CONFIDENTIAL MATERIAL
The Administrators seek suppression orders under ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) with respect to the documents identified at paragraph [3] above. I was satisfied that it was appropriate to make orders as sought by the Administrators in relation to each of the categories of documents. The orders will take effect subject to further order of the Court. It is the Plaintiffs’ obligation having obtained suppression orders to proactively take steps to have the suppression orders lifted at an appropriate point in the future when the matters that justified the making of the suppression orders no longer outweigh the imperative of open justice.
The first category of documents are the counterparts of the Deed of Guarantee. These documents contain confidential information about the terms on which the Commonwealth has agreed to provide a guarantee as part of the assistance for the continued operation of the business of the Rex Companies during the administrations. The Deed of Guarantee contains confidentiality provisions, the document is not in the public domain, and the Commonwealth supports appropriate suppression orders being made. Disclosure of the terms of the Deed of Guarantee may undermine ongoing discussions between the Administrators and the Commonwealth in relation to the administrations. Disclosure of the Deed of Guarantee may also prejudice the administration of justice by making the Commonwealth less willing to enter into such agreements lest they be made publicly available in applications of this kind. I was satisfied that it was appropriate to make suppression orders in relation to these documents and that to do so is in accordance with similar orders being made in the context of funding arrangements entered into by administrators: Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 at [51]-[53]; Hill, in the matter of Ovato Limited (administrators appointed) [2022] FCA 903 at [23] and Walley, in the matter of PGP Group (Aust) Pty Ltd [2023] FCA 1554 at [25]. I further note that although the Deed of Guarantee has been provided to PAGAC that it was so provided pursuant to an obligation that PAGAC keep it confidential.
The second category of documents contain commercially and market sensitive information and have been disclosed to interested parties who have signed non-disclosure agreements. Disclosure of these documents, especially to competitors of the Rex Companies, may be commercially harmful to the Rex Companies, thereby prejudicing the Sale Process and in turn, the interests of creditors. Commercial sensitivity of this kind supports the making of suppression orders, especially as they concern the future operations of the Rex Companies: Arrium Finance Limited v National Australia Bank Ltd [2017] FCA 818 at [27]; Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836 at [30]-[38]; Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 4) [2020] FCA 927 at [12]. There is no public interest in the disclosure of these documents at this time or for the foreseeable future while the companies continue in administration.
The third category of documents is described as an amendment and restatement of a confidentiality deed entered into between the Administrators, Rex Holdings, Regional Express and the Commonwealth dated 16 August 2024. The subject matter of the confidentiality deed is related to that of the Deed of Guarantee. The confidentiality deed imposes obligations of confidentiality on the parties to the deed. Similar considerations as I have identified with respect to the Deed of Guarantee apply equally to this deed. I was satisfied that it was appropriate to make suppression orders as sought in relation to this deed.
Taking all of the above into account I was satisfied it was appropriate to make suppression orders in the form sought which will be subject to any further order of the Court.
ANCILLARY ORDERS
The orders in relation to notice made in respect of the first meetings of creditors proved to be effective. I was satisfied that orders in the same form ought to be made in relation to the second meetings of creditors.
Finally, the Plaintiffs properly seek, and it was appropriate to make for the abundance of clarity, the usual order granting liberty to any person whose interests may be affected by the making of the orders to apply to vary or discharge the orders.
CONCLUSION
For these reasons, I made orders substantially as sought by the Plaintiffs at the conclusion of the hearing on 23 August 2024.
I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 27 August 2024
SCHEDULE OF PARTIES
NSD 1050 of 2024 Plaintiffs
Fourth Plaintiff:
REGIONAL EXPRESS PTY LIMITED (ADMINISTRATORS APPOINTED) (ACN 101 325 642)
Fifth Plaintiff:
AIR PARTNERS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 065 221 356)
Sixth Plaintiff:
REX AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 642 400 048)
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