Hughes, in the matter of Lyon Infrastructure Investments 1 Pty Ltd (administrators appointed)
[2019] FCA 919
•31 May 2019
FEDERAL COURT OF AUSTRALIA
Hughes, in the matter of Lyon Infrastructure Investments 1 Pty Ltd (administrators appointed) [2019] FCA 919
File number: QUD 345 of 2019 Judge: REEVES J Date of judgment: 31 May 2019 Catchwords: CORPORATIONS – urgent ex parte application under s 439A(6) of the Corporations Act 2001 (Cth) (the Act) to extend the convening period fixed by s 439A(5) of the Act – where facilitating orders are also sought under s 447A(1) of the Act – extension granted Legislation: Corporations Act 2001 (Cth) Cases cited: Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (ACN 102 298 279) (2009) 72 ACSR 352; [2009] NSWSC 585 Date of hearing: 31 May 2019 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 9 Counsel for the Plaintiff: Mr L Copley Solicitor for the Plaintiff: McCullough Robertson ORDERS
QUD 345 of 2019 IN THE MATTER OF LYON INFRASTRUCTURE INVESTMENTS 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 613 957 109, LYON SOLAR PTY LTD (ADMINISTRATORS APPOINTED) ACN 616 160 073 AND LYON BATTERY AND STORAGE PTY LTD (ADMINISTRATORS APPOINTED) ACN 618 500 744
RICHARD HUGHES AND DAVID ORR IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF LYON INFRASTRUCTURE INVESTMENTS 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 613 957 109, LYON SOLAR PTY LTD (ADMINISTRATORS APPOINTED) ACN 616 160 073 AND LYON BATTERY STORAGE PTY LTD (ADMINISTRATORS APPOINTED) ACN 618 500 744
Plaintiffs
JUDGE:
REEVES J
DATE OF ORDER:
31 MAY 2019
THE COURT ORDERS THAT:
1.Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) that the period within which the Plaintiffs must convene a meeting of the creditors of each company in the Lyon Group of Companies (Second Meetings) be extended up to and including 2 August 2019.
2.Pursuant to section 447A(1) of the Corporations Act 2001 (Cth) that Part 5.3A of the Act is to operate in relation to each company in the Lyon Group of Companies such that the Second Meetings may be held at any time during, or within five business days after the end of, the convening period as extended by the Court notwithstanding the provisions of section 439A(2) of the Corporations Act 2001 (Cth).
3.The Plaintiffs must, within seven business days of making these orders, take all reasonable steps to give notice of the orders to the Companies’ creditors (including the persons claiming to be creditors), by means of a circular.
4.The Plaintiffs and any creditor of the Lyon Group of Companies affected by any order made pursuant to these Orders shall have liberty to apply upon two business days’ written notice to the parties.
5.Costs of and incidental to this application be costs and expenses in the administration of the Lyon Group of Companies.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
EX TEMPORE REASONS FOR JUDGMENT
REEVES J:
This is an urgent ex parte application under s 439A(6) of the Corporations Act 2001 (Cth) (the Act) to extend the convening period fixed by s 439A(5) of the Act. Facilitating orders are also sought under s 447A(1) of the Act. The application has been brought by Mr Richard Hughes and Mr David Orr in their capacities as the joint and several administrators of three companies:
(a)Lyon Infrastructure Investments l Pty Ltd (administrators appointed) ACN 613 957 109 (Lyon 1);
(b)Lyon Solar Pty Ltd (administrators appointed) ACN 616 160 073 (Lyon Solar); and
(c)Lyon Battery and Storage Pty Ltd (administrators appointed) ACN 618 500 744 (Lyon Battery);
collectively, the “Lyon Group”.
The administrators were appointed by resolutions of the three companies under s 436A of the Act on 3 May 2019. Mr David Orr has made an affidavit in support of the application. The administrators have provided a set of written submissions. Those submissions summarise the factual background to the application as follows:
6.The Lyon Group is an Australian-based business established to focus on investment opportunities at the nexus of the energy, carbon, water and agricultural sectors. As at the time the administrators were appointed, the Lyon Group was in the process of developing three integrated solar photovoltaic systems with battery systems.
7. At the time the administrators were appointed, the Lyon Group had:
(a) no employees;
(b) $428,000 in cash at bank;
(c)40 contracts with various parties pertaining to planning approvals, procurement and construction of hardware and infrastructure, call options for leasehold rights to land sites and finance agreements for three projects; and
(d) creditors of approximately $45,000,000 across the three entities.
8.Since their appointment, the administrators have undertaken a number of tasks including the ‘usual” investigations into the affairs of the Lyon Group. Importantly, the administrators have undertaken a sale process to sell the primary contracts associated with the Lyon Group by way of expression of interest campaign.
9.To date, 40 parties have expressed an interest in the Lyon Group. The next step is to provide these parties with an information memorandum and access to the on-line data-room which will contain confidential company information for investment decision making purposes and allow those parties to put forward a formal offer. This process will take a minimum of one month.
10.The administrators believe there is value to be obtained from this sale process as:
(a)two separate funders have invested a total of approximately $15million into the projects and the projects have partially progressed;
(b)the $15million invested by funders is $15million less than any incoming purchaser would have to spend on various components of the projects;
(c)the projects, if ran to completion, are expected to generate considerable returns for any potential purchaser;
(d)the projects, particularly in their partially progressed state, are attractive to prospective purchasers because they are unique in that they:
(i)address the provision of dispatchable renewable energy to the grid from wind or solar generation; and
(ii)utilise proven technology in that they fully integrate four-hour duration lithium battery storage with solar PV to provide dispatchable, renewable energy to the national electricity market via a single connection point, with a single power plant controller managing the integrated plant. This can be contrasted to competitor projects which co-locate battery storage with renewable energy generation and suffer from issues with intermittent energy and with battery energy storage systems that draw power from the grid, which is predominately non-renewable generation.
(Errors in original) (Footnotes omitted)
At [41]–[45] of his affidavit, Mr Orr explained why the administrators require two months to complete the sales process as follows:
41To ensure there was a reasonable period of time between the advertisement and the closing date for any expressions of interest, the expression of interest campaign remains open until 31 May 2019. At the time of affirming this affidavit, there are approximately 40 parties who have expressed an initial interest.
42It is the Administrators' intention to engage with, and assess, all expressions and to provide all genuine parties with an information memorandum and access to an online data-room which will contain confidential company information for investment decision making purposes and allow those parties to put forward a formal offer.
43The Administrators consider it will take a minimum of a month for any genuine party to complete the due diligence process and to submit an offer.
44The Administrators then expect they will require further time to extract the best and highest offers.
45The Administrators are of the opinion that a sale of the contracts in their current form, and whilst the Lyon Group remains in administration, is preferable to a sale of the same contracts that could be effected if the Lyon Group entities were in liquidation because:
(a)the numerous contracts of the projects have not been reviewed in full and the Administrators are not yet in a position to determine whether the other contracting parties can, and if they can whether they intend to, terminate the contracts;
(b)the number of contracts has meant that the Administrators have not yet completed investigations and any necessary discussions with all contracting parties to determine their position and/or the complete status of each contract; and
(c)the committee of inspection for Lyon 1 has expressed an interest in the Administrators completing their investigations whilst the moratorium imposed by the voluntary administration is in place to try and obtain maximum value.
The convening period for the meeting of creditors under s 439A(5) is due to expire on 3 June 2019, that is, next Monday, thus the urgency of the application. As explained in Mr Orr’s affidavit, the administrators require the extra time for the following reasons:
(a)to complete the sale process described above;
(b)to examine and consider all the books and records of the Lyon Group as the administrators presently believe the books and records may be incomplete;
(c)to determine whether there has been any insolvent trading; and
(d)to review and examine whether there are any voidable transactions.
The principles applicable to an application of this kind were outlined in the administrators’ written submissions as follows:
(a)first, the Court is to have regard to the expectation inherent within the statutory scheme that the administration will proceed in a relatively summary way. But this should be balanced against the need to give administrators time to present meaningful choices to the creditors at the second meeting so as to enhance the objectives of s.435A of the Act;
(b)secondly, the statutory objects of an administration are to maximize the chances of a company continuing in existence or, alternatively, if that is not possible, terminating its existence in a way that maximizes the return for the company’s creditors and members than would result from an immediate winding up of the company: s.435A.
(Footnotes omitted)
In Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (ACN 102 298 279) (2009) 72 ACSR 352; [2009] NSWSC 585, Austin J listed 11 circumstances where courts have in the past allowed an extension of time of the kind sought here (at [13]). They are:
(a)“the size and scope of the business”;
(b)“substantial offshore activities”;
(c)“large number of employees with complex entitlements”;
(d)“complex corporate group structure and intercompany loans”;
(e)“complex transactions entered into by the company (for example securities lending or derivatives transactions)”;
(f)“complex prospects of recovery proceedings”;
(g)“lack of access to corporate financial records”;
(h)“the time needed to execute an orderly process of disposal of assets”;
(i)“the time needed for thorough assessment of a proposal for a deed of company arrangement”;
(j)“where the extension will allow sale of the business as a going concern”; and
(k)“more generally, that additional time is likely to enhance the return for unsecured creditors”.
His Honour went on to observe (at [14]) that where a substantial issue falls into any of the above categories and, in particular, where the facts fit more than one category, then:
(a)“the court tends to grant an extension”;
(b)“the extension tends to be for the time sought by the administrator[s] provided that”:
(i)“the evidentiary case has been properly prepared”;
(ii)“there is no evidence or material prejudice to those affected by the moratorium imposed by an administration”; and
(iii)“the court is satisfied that the administrator’s estimate of time has a reasonable basis”.
Based on Mr Orr’s affidavit, I am satisfied that in this instance there is an evidentiary foundation for the circumstances identified in (a), (d), (g), (h), (j) and (k) above.
As to the other two factors mentioned by Austin J, Mr Copley, counsel for the plaintiffs, informed me that one of the three creditors on the committee of creditors has expressed a preference for the extension to be one month rather than two months as sought by the administrators. However, I am assured that view reflects a preference rather than some material prejudice. Nonetheless, to allow that creditor, and any of the other creditors, to agitate for a shorter period, the administrators have proposed, and I agree, that the orders should require notice of these orders to be given to all of the creditors of the three companies so that any creditor who claims to be adversely affected by these orders is given the opportunity to apply to the Court on two days’ notice.
Having regard to the matters referred to above, I consider it is appropriate in the circumstances to allow the two months extension sought by the administrators.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. Associate:
Dated: 14 June 2019
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