Hodgkinson, in the matter of Settlers Operations Pty Ltd and Settlers Company Pty Ltd atf Settlers Property Trust
[2019] FCA 1557
•19 September 2019
FEDERAL COURT OF AUSTRALIA
Hodgkinson, in the matter of Settlers Operations Pty Ltd and Settlers Company Pty Ltd atf Settlers Property Trust [2019] FCA 1557
File number: NSD 1515 of 2019 Judge: YATES J Date of judgment: 19 September 2019 Catchwords: CORPORATIONS – application for extension of convening period for second meeting of creditors – form of notice to be given to creditors – application granted Legislation: Corporations Act 2011 (Cth), ss 439A(2), 439A(5), 439A(6), 447A(1), Pt 5.3A
Insolvency Practice Rules (Corporations) 2016 (Cth), rr 75-225(1), 75‑15(1)
Retirement Villages Act 1992 (WA)
Retirement Villages Act 1999 (Qld)
Retirement Villages Act 1999 (NSW)
Date of hearing: 19 September 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: 19 Counsel for the Plaintiff: Mr M L Rose Solicitor for the Plaintiff: Squire Patton Boggs ORDERS
NSD 1515 of 2019 IN THE MATTER OF SETTLERS OPERATIONS PTY LTD (ADMINISTRATOR APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) AND SETTLERS COMPANY LTD ATF SETTLERS PROPERTY TRUST (ADMINISTRATOR APPOINTED) (RECEIVERS AND MANAGERS APPOINTED)
BETWEEN: DAMIEN HODGKINSON IN HIS CAPACITY AS VOLUNTARY ADMINISTRATOR OF SETTLERS OPERATIONS PTY LTD (ADMINISTRATOR APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 609 526 605 AND SETTLERS COMPANY PTY LTD ATF SETTLERS PROPERTY TRUST (ADMINISTRATOR APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 606 610 904
Plaintiff
JUDGE:
YATES J
DATE OF ORDER:
19 SEPTEMBER 2019
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2011 (Cth) (the Act), the convening period, as defined by s 439A(5) of the Act, with respect to:
(a)Settlers Operations Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) ACN 609 526 605; and
(b)Settlers Company Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) ACN 606 610 904 (together, the Companies),
be extended up to and including 23 May 2020.
2.Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate in relation to the Companies as if the meeting of creditors of the Companies required by s 439A of the Act may be convened and held at any time during the period as extended under Order 1 above, and the period of five (5) business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.
3.Liberty to apply be granted to any person, including the plaintiff, any creditor of the Companies or the Australian Securities and Investment Commission (ASIC), who can demonstrate sufficient interest to vary or supplement these orders on the giving of reasonable notice to the plaintiff (as the case might be), and to the Court.
4.The plaintiff, within seven (7) business days of making these orders, shall take all reasonable steps to give notice of these orders to the Companies’ creditors (including the persons claiming to be, or potential, creditors), by means of a notice which is to be:
(a)published on the ASIC published notices website at
(b)published on the website maintained by the plaintiff at (Administrator’s Website);
(c)sent by hyperlink to the Administrator’s website, by email to the email address of each creditor at such email address as is recorded in the books and records of the Companies;
(d)sent by email transmission to creditors for whom the plaintiff has a current email address;
(e)sent by ordinary post to creditors for whom the plaintiff has only a postal address;
(f)published in the common areas, or an appropriate notice board, of the following retirement villages:
(i)Settlers Forrest Lake, 41 High Street, Forest Lake QLD; and
(ii)Pioneers Avenue, Ravenswood WA; and
(iii)Ridgewood Rise, 714 Ridgewood Boulevard, Ridgewood WA; and
(iv)Settlers Rockhampton, 14 Paulina Martin Drive; and
(v)Ridge Estate Retirement Village, 276 Cessnock Road, (together, the Retirement Villages); and
(g)sent to the village manager of each of the Retirement Villages with instructions to deliver a copy of that notice to each of the residents of the relevant Retirement Village by leaving a copy of that notice in the mailbox for those residents at each Retirement Village.
5.Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate in relation to the Companies, such that any notice (including those pursuant to rr 75-225(1) and 75‑15(1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPRC)) (other than the notice referred to in Order 4 above), report or communication that the plaintiff must or may give or send to actual or potential creditors of the Companies (Notices) will be validly given to those creditors provided that that such Notices are:
(a)published on the ASIC published notices website at
(b)published on the Administrator’s Website;
(c)sent by hyperlink to the Administrator’s Website, by email to the email address of each creditor at such email address as is recorded in the books and records of the Companies;
(d)sent by email transmission to creditors for whom the plaintiff has a current email address;
(e)sent by ordinary post to creditors for whom the plaintiff has only a postal address;
(f)published in the common areas, or an appropriate notice board, of the Retirement Villages; and
(g)sent to the village manager of each of the Retirement Villages with instructions to deliver a copy of that notice to each of the residents of the relevant Retirement Village by leaving a copy of that notice in the mailbox for those residents at each Retirement Village.
6.The costs and expenses of and incidental to the Originating Process be costs and expenses in the administration of the Companies.
7.Within seven (7) days of giving notice in accordance with Orders 4(f) and (g) above, or of giving Notices in accordance with Orders 5(f) and (g) above, the plaintiff is to file, and to send the Associate to Yates J, an affidavit verifying compliance with those orders.
8.Pursuant to s 37AF of the Federal Court Act 1976 (Cth), the affidavit of Damien Mark Hodgkinson dated 18 September 2019 comprising 18 paragraphs and Confidential Exhibit DMH-2 to that affidavit are not to be published or disclosed, except to pursuant of an order of the Court, until 30 June 2020, on the ground that disclosure of that affidavit and those documents would be prejudicial to the proper administration of justice.
9.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
(Revised from transcript)YATES J:
The plaintiff, Damien Mark Hodgkinson, is the administrator of Settlers Operations Pty Ltd (Administrator Appointed) (Receivers and Managers Appointed) (Settlers Operations) and Settlers Company Pty Ltd (Administrator Appointed) (Receivers and Managers Appointed) (Settlers Company), which acts as the trustee of the Settlers Property Trust (together, the companies). He was appointed on 26 August 2019 by a resolution of the director of each company. On 28 August 2019, receivers were appointed in respect of the “Collateral” of each company, as referred to in the deed appointing them. The receivers were appointed by a secured creditor, Investec Australia Limited (Investec).
Mr Hodgkinson applies to extend, in respect of the creditors meetings for each company, the convening period referred to in s 439A(5) of the Corporations Act 2001 (Cth) (the Act) and for other related relief. If not extended, the convening periods will expire on 23 September 2019. Mr Hodgkinson seeks an extension of the convening periods to 23 May 2020.
The companies own and operate a portfolio of retirement villages in New South Wales, Queensland and Western Australia. Settlers Company holds the legal title to land located at 41 High Street, Forest Lake, Queensland (Settlers Forrest Lake), Pioneers Avenue, Ravenswood, Western Australia (Settlers Lakeside Village), 714 Ridgewood Boulevard, Ridgewood, Western Australia (Ridgewood Rise) and 14 Pauline Martin Drive, Rockhampton, Queensland (Settlers Rockhampton). A further property at 276 Cessnock Road, Gillieston Heights, New South Wales (Ridge Estate Retirement Village) is held by Settlers Company as a trustee. Settlers Company leases all the properties to Settlers Operations for the purposes of managing and operating retirement village-type estates. On present information, these properties appear to be the most significant assets held by the companies.
As part of its business, Settlers Operations leases individual apartment or villa-style accommodation to residents in consideration for an interest-free loan provided by those residents. These arrangements are governed by different State-based laws, including but not limited to the Retirement Villages Act 1999 (Qld), the Retirement Villages Act 1999 (NSW), and the Retirement Villages Act 1992 (WA). It seems that given the requirements of the specific State legislation, related legislation (for example, State-based real property laws) and for commercial reasons, the companies have entered into different lease arrangements across these retirement villages. In general terms, the residents living within the retirement villages are individuals or couples aged 55 years and older. They are from diverse demographic, occupational and cultural backgrounds.
Mr Hodgkinson has made an affidavit in support of his application comprising 88 paragraphs. He has also made a separate affidavit comprising 18 paragraphs in respect of which I have made a confidentiality order. In the first-mentioned affidavit, he has provided an account of the activities he and his staff have undertaken in respect of the companies’ property, affairs and financial circumstances since his appointment. Mr Hodgkinson’s investigations are far from complete. Apart from anything else, he has not, as yet, been provided with all the books and records of the companies, which he believes may be in various locations in New South Wales, Queensland and Western Australia, or held by previous owners of the properties to which I have referred.
His preliminary assessment is that the totality of the books and records is likely to be significant and that they are likely to be affected by State-based “peculiarities and complexities”. As I have said, it seems that the most significant assets of the companies are the properties to which I have referred. There is evidence before me of cash at bank for a substantial amount. However, the larger part of this amount appears to be funds held for each retirement village as contributions paid by residents for the ongoing care and maintenance of those villages.
As at 11 September 2019, and on the basis of the documents and information currently available to Mr Hodgkinson, the companies have 36 secured and unsecured creditors claiming total amounts of approximately $28,442,047.53, and 17 employee priority creditors claiming total amounts of approximately $236,618.03. Also as at 11 September 29, there were 1009 residents living in the five villages to which I have referred.
A first creditors’ meeting for each company was held on 4 September 2019. At those meetings, notice was given to creditors of Mr Hodgkinson’s intention to apply to extend the convening periods. At that time, he informed creditors that he proposed to seek an extension of three months. However, he has since formed the opinion that a longer extension is warranted, particularly in the context of an ongoing sales campaign (to which I will refer), the complexity of the companies’ operations, the geographical spread of their operations and the need for him to obtain further information in relation to their affairs, including, as I have said, their books and records. Time is also required for him to properly report to the companies’ creditors, as is his obligation.
I have referred to the fact that the villages operated by Settlers Operations are subject to different legislative regimes. In the limited time available to him, Mr Hodgkinson has not been able to form a concluded view as to the impact that the State-specific legislation might have on the external administration of the companies. He considers that he will be required, amongst other things, to obtain legal and other advice in respect of that legislation and its impact on the companies’ administrations; engage with appropriate State-based government bodies; engage with individual residents at the villages; engage with and, to the extent necessary and appropriate, work alongside the receivers to ensure the best possible outcome for all stakeholders in the external administration (and I include within the expression “stakeholders” the residents at the villages); and engage with Investec and, importantly, any potential Deed of Company Arrangement (DOCA) proponents, including investigating and, where appropriate, developing those proposals.
Given the scope of those matters, Mr Hodgkinson does not believe that he is in a position to engage meaningfully with creditors and stakeholders generally within the current convening periods, although he does believe that he will be able to undertake these and similar tasks within the period of the extensions he seeks.
One particular complication referred to by Mr Hodgkinson is the effect of certain amendments to the Retirement Villages Act 1999 (Qld), which introduced mandatory buybacks in favour of residents living in freehold retirement village units. It seems that these amendments, which came into force on 23 May 2019, have retrospective effect. As at that date, there were 10 mandatory buybacks in respect of Settlers Rockhampton. These buybacks represent an estimated liability of $1.5 million. Settlers Operations was not able to fund those buybacks. This remains the position at the present time. Mr Hodgkinson understands that there may be proposed legislation in New South Wales to implement a similar buyback regime. If that legislation is enacted, then it may further impact upon the companies and the claims of creditors which are made on those companies.
Mr Hodgkinson has deposed that the companies have made previous attempts to sell the retirement villages. In May 2018, the companies took part in a sales campaign where it was intended that the entire portfolio of the villages and the corresponding real property assets be sold. It seems that the offers received at that time were insufficient to cover the amount paid for the properties, including money ultimately owed to Investec. As a result, a decision was made to retain the properties. However, in April this year, the companies undertook a further sales campaign at Investec’s direction, once again with the intention of selling the entire portfolio of retirement villages and the land on which they are located. Only one offer was received, which was commercially unacceptable to the companies’ shareholders and Investec. It seems that this circumstance triggered Mr Hodgkinson’s appointment as administrator. The receivers propose to undertake a further sales campaign. As to this, Mr Hodgkinson has drawn attention to the following matters as relevant to the period of the extensions he seeks:
(a)Any potential sale of some or all of the companies’ assets may take place by way of a DOCA if that provides a more favourable outcome for creditors.
(b)The retirement villages are located across three different States. As I have said, State-specific legislation applies to them. The leasing arrangements across the retirement villages differ substantially. Realising the most value from any sale will likely require an “in-one-line” sale, and preservation of the retirement villages and the corresponding operating and management business as a group. The receivers, who will be in charge of the sales campaign, will need to engage competent, market-specific property sales and marketing advisers in three different States.
(c)The receivers will need to engage with the residents in the retirement villages.
(d)The forthcoming Christmas, New Year and Australia Day holiday periods will likely intervene in, if not disrupt, any sales and marketing campaigns and any subsequent negotiations with potential buyers.
Mr Hodgkinson has deposed that an extension of the convening periods to 23 May 2019 will allow adequate time for the external administrators to engage meaningfully in an orderly and market-specific sales campaign to reach a wider market, and otherwise enable the companies to preserve the value of the assets in administration and seek an “in-one-line” sale or appropriate restructure. Further, an orderly sales campaign conducted in the manner proposed by the receivers would also allow any potential purchaser to structure that purchase by way of a DOCA, and is likely to maximise the value obtained for the assets. Thus, in Mr Hodgkinson’s view, an extension to allow the receivers’ proposed sales campaign to take place will be in the best interests of creditors.
Mr Hodgkinson does not consider that the extensions he seeks will unduly prejudice the companies’ creditors. Indeed, he considers that granting the extensions will be in the best interests of the creditors because this would provide the best opportunity to maximise the returns to them without any specific prejudice.
The 17 employees who are employed by Settlers Operations (Settlers Company does not have employees) are still receiving their wages, which are paid by the receivers as and when those wages fall due. An extension of the convening periods will provide the opportunity for a greater return to the employee creditors because it is intended that an incoming purchaser will take on current employees. Sufficient time to complete a successful campaign will ensure that the current employees retain their employment, rather than if the companies are sold off individually in a quick sale or, worse still, in a liquidation scenario, in which event their continued employment would be in jeopardy.
The companies’ secured creditors are Investec (or subsidiaries of Investec) and the Office of State Revenue Western Australia. Investec’s claim against the companies on a joint and several basis is $25,544,074.00. There is no specific prejudice to Investec because it wishes the future sale process to take place. Indeed, the receivers support the extensions sought by Mr Hodgkinson. The Office of State Revenue Western Australia has not lodged a proof of debt, but based on Mr Hodgkinson’s review of the books and records of Settlers Company, its claim as at 19 May 2018 was for the amount of $364,658.00. Mr Hodgkinson does not perceive any specific prejudice to the Office of State Revenue if the extensions are granted.
The principles on which the Court proceeds in applications to extend the convening period for the second meeting of creditors have been discussed in a number of cases. I have been provided with written submissions which set out the relevant case law and which discuss how those principles apply to the present case. A redacted version of those submissions will be placed on the Court’s file. The period of the extensions sought is lengthy, but it is driven principally by the proposed sales process and what are anticipated to be the post-completion steps in combination with the obvious complexity of the administrations, as I have endeavoured to describe.
For these reasons, I am satisfied that it is appropriate to grant the extensions that are sought to 23 May 2020 and to grant the related relief which Mr Hodgkinson seeks. Part of that relief includes a particular form of notification, not only of the orders that I will make, but in respect of other communications that, as administrator, Mr Hodgkinson must give or send to creditors and other interested persons.
Essentially, what is proposed is that those creditors who have provided email addresses will be sent notices by that means, with other creditors being given notice by post. Further, it is proposed that notice be given in the common areas or on an appropriate noticeboard at the retirement villages, with each village manager also delivering a copy of the notice to each resident at that resident’s mailbox at the retirement village. It is also proposed that notice be published on ASIC’s website and on a website maintained by Mr Hodgkinson, and by sending a hyperlink to notices published on Mr Hodgkinson’s website by email to the email addresses of each creditor, as recorded in the books and records of the companies.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 26 September 2019
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