IMO One World Grain Pty Ltd
[2012] VSC 652
•20 November 2012
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2012 6444
| ROBYN LEE ERSKINE & PETER GOODIN AS JOINT AND SEVERAL ADMINISTRATORS OF ONE WORLD GRAIN PTY LTD (ACN 135 234 678) (ADMINISTRATORS APPOINTED) | Plaintiffs |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 November 2012 | |
DATE OF JUDGMENT: | 20 November 2012 | |
CASE MAY BE CITED AS: | IMO One World Grain Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 652 | |
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CORPORATIONS – Application for extension of convening period under section 439A (6) of the Corporations Act 2001 (Cth) – Extension granted - Affidavit in support to be kept confidential during period of sensitive commercial negotiations.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Stops (Solicitor) | Piper Alderman |
HIS HONOUR:
The plaintiffs, who are the administrators of One World Grain Pty Ltd (“the company”) make application by originating motion filed 20 November 2012 pursuant to s 439A(6) of the Corporations Act (“the Act”) for an extension of the convening period of the second meeting of creditors for a period of 21 days from 26 November 2012 until 17 December 2012. The application is supported by an affidavit of one of the plaintiffs, Ms Erskine, sworn today.
The plaintiffs were appointed administrators of the company by resolution of the directors on 29 October 2012. The first meeting of creditors of the company was held pursuant to s 436E of the Act on 8 November 2012. At that meeting a committee of creditors of eight creditors was appointed pursuant to s 436G of the Act.
On 13 November 2012, the committee advised Ms Erskine that they were proposing to put forward a proposal for Deed of Company Arrangement (“DoCA”).
Unless extended, the convening period of the company in administration concludes on 26 November 2012.
The company has creditors in excess of $5 million recorded in its books, of which $1.33 million is owing to the secured creditor, National Australia Bank. Since the cessation of the company’s business on 28 August 2012, the directors of the company have been seeking to sell the business assets of the company. The company has $365,000 in book debts of which Ms Erskine anticipates $200,000 will be collectable.
The company has four employees whose wages total approximately $10,000 per fortnight. The company rents premises at a monthly rental of $4,252. The wages are continuing to be paid by reason that since the administrators’ appointment, a purchaser has been sought for the business or its assets. Parties who have expressed an interest in buying the business or assets of the company have made offers conditional on the employees being available. It is Ms Erskine’s opinion that the assets of the company, including the lease, plant and equipment, if coupled with the availability of the employees, would realise a greater sum than if the individual assets were auctioned.
The company operates a grain and storage distribution business from Pipe Road in Laverton North. The auction realisation value of the company’s plant and equipment has been assessed by Dominion Group at $125,875 and as a going concern at $611,000.
Ms Erskine says that there are a number of opportunities available to realise the assets of the company and they are detailed at paragraphs 16 to 23 of her affidavit. The proposals include a sale of the business to Queensland Cotton, a proposal for a DoCA by certain creditors of the company who are members of the committee of creditors, and the possible or proposed DoCA proposal from the directors.
It is fair to say that each of those proposals has not reached the point at which the administrators could provide an analysis or recommendation as they are required to do pursuant to s 439A of the Act in the report to creditors for their consideration at the second meeting of creditors. The proposals are described as uncertain. The proposal from Queensland Cotton is said to be highly conditional, the proposal by the directors has not been formalised and that proposed by the committee is also yet to be submitted. None of them will be sufficiently certain so as to be capable of recommendations in the s 439A report by 26 November 2012. Because of this, unless the convening period is extended, Ms Erskine is concerned that she will have to make a recommendation that the company be placed into liquidation in the absence of concrete proposals. If that occurs, she says the creditors will receive very little, if any, return.
The National Australia Bank (“NAB”) consents to the extension of the convening period for 21 days. It has been informed of this application and on 19 November 2012, Mr Watson of NAB wrote to Ms Erskine indicating the consent of NAB.
The directors also consent to the extension. If a proposal for a Deed of Company Arrangement leading to creditors being paid 20 to 50 cents in the dollar is accepted, the directors may avoid liabilities they have as guarantors.
The committee also consent to the extension presumably because it will enable them to provide the foreshadowed proposal by them for a DoCA.
One party affected by the consequent extension of the moratorium period which arises by the granting of the plaintiffs’ application is the lessor, Grindale Pty Ltd. The rent on the premises is $4,252 per month which has presently been paid up to date. During the administration, Ms Erskine accepts that she is responsible for the rent but if the application is not granted, the lease will terminate and the plant and equipment may be sold at salvage value. On the other hand, it is said if one of the proposals is accepted, the lease of the premises will be assigned and the lessor will not suffer any loss.
On 13 November 2012, Ms Erskine met with Mr Rafael Strocklitz of Grindale Pty Ltd, and on 15 November 2012 Mr Strocklitz told her that as a consequence of the administration he wanted to have a tenant and would consider any proposed assignment of the lease.
Ms Erskine describes the tasks to be performed in the 21 day extension period which is sought. These include the conduct of negotiations with Queensland Cotton so as to reduce or avoid the onerous conditions presently sought by that party set to purchase the business. In addition, any proposal for a DoCA from the directors can emerge and in this regard it might be necessary to obtain security or assurances that the funds to pay the unsecured creditors can and will be paid. Further, a firm proposal may be able to be obtained from the committee of creditors for a DoCA. The committee consists of farmers or those involved in agricultural business who appear to be contemplating an arrangement whereby they get control of the company or its business. Being farmers involved in the grain industry, they are distracted by harvesting at this time of the year. It is in fact this activity that makes the business attractive to sell at this time of the year. When these tasks have been completed, Ms Erskine says that she will be in a position to provide the requisite opinion that she is required to provide pursuant to the provisions of s 439A(4)(b) of the Act.
The commercial position of the administration has not been disclosed to the parties with whom the administrators are presently treating. Queensland Cotton does not know that it is presently the only potential purchaser for the plant and equipment. The directors do not know of the other proposal for a DoCA by the committee of creditors. Ms Erskine states that her negotiating position could be prejudiced if the content of the affidavit was made publicly available, however the commercial value of this information will have dissipated within 90 days of her swearing the affidavit because at that point the administration will be concluded. I accept that this is a proper reason for ordering that the affidavit of Ms Erskine sworn 20 November 2012 be placed in a sealed envelope, together with the exhibits to that affidavit, and that that sealed envelope not be opened except by order of a Judge or Associate Judge of this Court. For similar reasons, I will not publish on the internet my reasons in making orders in this matter for that same period.
The principles to be applied in these types of applications have been conveniently collected by Austin J in Re Riviera Group Pty Ltd (Administrators Appointed) (Receiver and Managers Appointed).[1] I consider on the application of the principles set out in Riviera Group that it is appropriate to grant the extension sought in this case. The extension is for a relatively short period and is supported by the secured creditor, the committee of creditors (who have, of course, their own commercial considerations for such support) and the directors who are currently wishing to put forward a proposal. The evidence indicates, in my view, that the short extension sought is justified. If a further extension is sought, the prejudice attending the extension of the convening period suffered by the lessor of the property may come to a head. It is for that reason I will order that a copy of this order be served on the lessor.
[1](2009) 72 ACSR 352, especially at [12] and following.
I will make orders as follows:
1.Pursuant to s 439A(6) of the Corporations Act 2001 that the period within which the plaintiffs must convene the second meeting of creditors of the company be extended up to and including 17 December 2012.
2.The plaintiffs have liberty to apply for any purpose connected with the administration of the company including but not limited to seeking a further extension of the convening period prior to 17 December 2011.
3.Any person having a sufficient interest may apply to the Court to vary any of the orders 1 or 2 above.
4.With respect to Grindale Pty Ltd or their representatives, the plaintiffs or their solicitors inform Grindale of the orders made pursuant to this application by means of post within 7 days of this date.
5.The affidavit of Robin Lee Erskine sworn 20 November 2012 be placed in a sealed envelope and except by order of a Judge or Associate Judge of this Court, no person is to be given access to such affidavit or the exhibits to it for 90 days from this date and it is to remain confidential during that period.
6.The plaintiffs’ costs of this application be costs in the administration of the company.
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