Hancock, in the matter of Bradbury Industrial Services Pty Ltd (administrators appointed)
[2019] FCA 1333
•1 August 2019
FEDERAL COURT OF AUSTRALIA
Hancock, in the matter of Bradbury Industrial Services Pty Ltd (administrators appointed) [2019] FCA 1333
File number: NSD 1216 of 2019 Judge: GLEESON J Date of judgment: 1 August 2019 Date of publication of reasons: 20 August 2019 Catchwords: CORPORATIONS – voluntary administration – application to extend the convening period for the second creditors meeting – application granted Legislation: Corporations Act 2001 (Cth) ss 439A, 447A
Insolvency Practice Rules (Corporations) 2016 (Cth) rr 75‑15, 75-225
Cases cited: Sims, in the matter of Destra Corporation Limited [2009] FCA 1199
Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683
Date of hearing: 1 August 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 27 Counsel for the Plaintiff: C Harris SC Solicitor for the Plaintiff: Piper Alderman ORDERS
NSD 1216 of 2019 IN THE MATTER OF BRADBURY INDUSTRIAL SERVICES PTY LTD (ACN 121 279 847
BETWEEN: GEOFFREY TRENT HANCOCK AS VOLUNTARY ADMINISTRATOR OF BRADBURY INDUSTRIAL SERVICES PTY LTD (ADMINISTRATOR APPOINTED) (ACN 121 279 847)
Plaintiff
JUDGE:
GLEESON J
DATE OF ORDER:
1 AUGUST 2019
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the period for convening the second meeting of creditors of Bradbury Industrial Services Pty Ltd (Administrator Appointed) (ACN 121 279 847) (company) be extended for a period of up to 180 days.
2.Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to have effect in relation to the company such that the meeting of creditors required by s 439A of the Act may be held at any time before the end of the convening period as extended by order 1 above, notwithstanding the provisions of s 439A(2) of the Act.
3.By 5.00 pm on 5 August 2019, the plaintiff gives written notice of these orders to the creditors of the company.
4.Any creditor of the company or any other person with sufficient interest have liberty to apply to vary or discharge these orders on 48 hours’ notice being given to the plaintiff and to the Court.
5.Costs of this application be costs of the administration of the company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GLEESON J:
On 1 August 2019, on the ex parte application of the plaintiff (administrator), I made orders under s 439A and s 447A of the Corporations Act 2001 (Cth) (Act) to extend the convening period for the second meeting of the creditors of Bradbury Industrial Services Pty Ltd (administrator appointed) (company) to 6 February 2020 (that is, a period of up to six months), and consequential orders. The convening period had been due to expire on 6 August 2019.
The application was made in accordance with the following resolution passed by creditors at the first meeting of creditors:
[I]f it becomes necessary they agree it is appropriate for the Administrator to approach the Court to make an application under Section 439A(6) of the Corporations Act 2001 (Cth) to extend the period for convening the Second Meeting of Creditors of Bradbury Industrial Services Pty Ltd (Administrator Appointed) for a period of up to 180 days.
The application was supported by an affidavit of the administrator, sworn 1 August 2019 and by written and oral submissions made by Christopher Harris SC, senior counsel for the administrator.
My reasons for making those orders are as follows.
BACKGROUND FACTS
The administrator was appointed on 9 July 2019, pursuant to a resolution passed by the company’s sole director, Paul Bristow, pursuant to s 436A of the Act.
The administration followed a fire at the company’s factory in Campbellfield, Victoria on 5 April 2019. The property on which the factory is situated is owned by a unit trust, all units in which are owned by the company.
The company’s main business is waste management services, namely, the transportation and recycling of toxic and hazardous waste within the industrial sector.
The company holds an Environment Protection Authority (EPA) licence for the safe disposal of hazardous goods, which licence is attached to the Campbellfield facility.
The company employed 39 employees. All but nine employees were stood down following the fire as required by Work Safe Australia.
The company is continuing to trade on a limited basis. It is carrying on no recycling business but is selling virgin solvents and other cleaning products from rented premises at Derrimut, Victoria. Following the clean-up of the Campbellfield site, it is the company’s intention to rebuild its original business and the Campbellfield factory.
At the time of the administrator’s appointment, the company held various insurance policies with various insurers, including an industrial special risks policy, a public and products liability policy and pollution liability and management liabilities policies. There were also policies in relation to the transport of solvents and recycled prescribed waste. The industrial special risks policy has a limit of liability of $9.5 million for material damage and business interruption, and the public and products liability policy has a limit of liability of $20 million.
The tasks undertaken by the administrator since his appointment are itemised in his affidavit. Among other things, the administrator has been assisting the EPA and Work Safe Australia with the clean-up of the company’s site and having all dangerous goods properly and safely removed. This process has not yet concluded. The main focuses of the administration to date have been the limited operations of the business, assisting with the clean-up, and discussions and negotiations with the various insurers with a view to obtaining significant insurance payouts.
The first creditors’ meeting was held on 18 July 2019. Proofs of debt received up to that time totalled over $2.6 million. The administrator’s affidavit details the events of the first creditors’ meeting, including that he informed the creditors of:
(1)the circumstances preceding his appointment, in particular, the fire at the Campbellfield site, which had significantly contributed to the financial state of the company;
(2)the fact that he was continuing to trade the business of the company in a restricted capacity at a smaller premises, as the Campbellfield premises had been completely destroyed by the fire;
(3)that he had held meetings with insurers with whom the company has insurance policies, that the various insurers are carrying out investigations; these are continuing, and it may take some time before the investigations are concluded and the insurers respond to the insurance claims; and
(4)the aim of the administration was to proceed to a Deed Of Company Arrangement (DOCA) and the quantum of any return to creditors would be dependent on the extent of the level of insurance recovered from the various insurers.
The minutes of the meeting also record that the company’s lawyer advised that “the quantum of insurance policies was significant and that she was confident that the insurance policies would be able to cover returns to creditors”. The minutes do not record whether the lawyer expressed any view about the likely returns in a liquidation scenario.
The administrator estimated that the creditors of the company at the time of his appointment included:
(1)106 unsecured creditors totalling approximately $2.5 million;
(2)employee entitlements for 37 employees totalling almost $48,000; and
(3)27 secured creditors totalling almost $1.5 million.
It is also likely that claims may be made by contingent creditors against the company due to damage caused by the fire.
As a result of the other activities that have required the administrator’s attention, he has not had an opportunity to finalise his investigations. The administrator’s evidence was that he did not believe he would be able to discharge adequately his duty under the Act and meet the requirements of s 439A for the purposes of any second meeting of creditors of the company by 6 August 2019.
Further, as the administrator indicated to the first meeting of creditors, it is intended that a DOCA will be proposed but the proposal cannot be formulated until the insurance investigations have been concluded. The administrator’s view, as expressed to the first meeting of creditors, is that allowing the insurers to carry out their investigations would be the best way of achieving an outcome that is in the best interests of creditors. Accordingly, the administrator’s view is that he is not in a position to make a recommendation as to the future of the company as required by the Act.
The administrator’s view was that an extension of time to convene the second meeting of creditors for a period of up to 180 days ought to be sufficient time to enable the company’s contaminated site to be cleaned up and for the insurers’ investigations to have concluded.
The administrator expressed the view that it was in the best interests of creditors if the company remains in administration. The administrator’s reasons for holding that view included the following:
(1)The company is cooperating with the Victorian government with the clean-up of the site, and this could be affected if the company were to go into liquidation.
(2)Otherwise, the EPA licence would be lost, the company’s EPA licensed trucks would not be authorised to transport waste material, customers of the company would be lost and thereby the company would have no business.
(3)The employment of 33 employees will be preserved. If the administration ends, the company’s employees would have to make claims to the Fair Entitlements Guarantee scheme (FEG) to recover their employee entitlements.
(4)Otherwise, the company would not be able to rebuild on the Campbellfield site and restart its business.
(5)In his view, there is a likelihood of recovering more insurance proceeds if the company remains a going concern. In particular, the administrator stated that liquidation is likely to have a material effect on the business continuity policy.
Finally, the administrator stated that the Campbellfield land is the subject of a mortgage to the Bank of Melbourne in an amount of approximately $1.2 million. The Bank has agreed to forbear on any action whilst the clean-up and restoration of the land occurs, which the Bank acknowledges may take two years. The Bank has also agreed to capitalise its interest for the next 12 months. However, if the company were placed into liquidation, it is likely that the Bank will appoint a receiver over the land.
LEGAL FRAMEWORK
Section 439A of the Act provides relevantly:
(1)The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6).
(2)The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.
(5) The convening period is:
(a)if the day after the administration begins is in December, or is less than 25 business days before Good Friday—the period of 25 business days beginning on:
(i) that day; or
(ii) if that day is not a business day—the next business day; or
(b) otherwise—the period of 20 business days beginning on:
(i) the day after the administration begins; or
(ii) if that day is not a business day—the next business day.
(6)The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.
Requirements for giving notice of a meeting pursuant to s 439A are set out in r 75-15 and r 75‑225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Rules).
By s 447A(1), the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company.
In Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683, Jacobson J said (at [22]):
The statutory and legal framework is well-known. The principles have been stated in a number of authorities. The essential principle is that the Court attempts to strike a balance between the expectation that the administration be conducted relatively quickly and the need to ensure that the speed with which it is dealt does not prejudice sensible and constructive actions directed towards maximising the return for creditors and shareholders. That principle was stated by Barrett J in Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] and has been cited on numerous occasions in decisions of this Court and in the Supreme Court of New South Wales.
CONSIDERATION AND CONCLUSION
I was satisfied that the Court had power to make the orders sought and that those orders were appropriate. In particular, I was satisfied that the proposed extension for a period of up to 180 days was reasonable having regard to the following matters:
(1)The creditors’ resolution in favour of an extension of time, if necessary.
(2)An extension is required to afford the administrator sufficient time to form the opinions required for compliance with his obligations under r 75-225 of the Insolvency Rules.
(3)The administrator anticipates that there will be significant recoveries from the insurance policies and that, when the position with the policies is more settled (which should be within the next six months), a DOCA will be proposed.
(4)The administrator considers that continuing the administration until the insurers have carried out their investigations is the best way of achieving an outcome that is in the best interests of creditors.
(5)The administrator’s view that, if the extension of time were not granted, the company would go into liquidation which would complicate, and perhaps adversely affect, the company’s rights under its insurance policies and would prevent creditors from potentially obtaining the benefit of a DOCA which might otherwise have come forward.
(6)The extension of time avoided immediate termination of employment for a substantial number of employees.
(7)The orders proposed make provision for any person who can demonstrate sufficient interest to apply to the Court for modification of those orders.
Notwithstanding s 439A(2), which requires the second meeting to be held within five business days before or within five business days after the end of the convening period, I accepted that, if the position with the insurance policies becomes sufficiently clear for a DOCA to be proposed, and the administrator is able to comply with his obligations under r 75-225 earlier than expected, the administrator should be able to convene the second meeting of creditors without “sitting on his hands”: cf. Sims, in the matter of Destra Corporation Limited [2009] FCA 1199 at [25].
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 20 August 2019
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