Re Aqua Star Pty Ltd
[2024] VSC 377
•19 June 2024 (ex tempore, revised 28 June 2024)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 03054
IN THE MATTER of AQUA STAR PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 074 614 538)
BETWEEN:
| DANIEL PETER JURATOWITCH in his capacity as an Administrator of AQUA STAR PTY LTD (ADMINISTRATORS APPOINTED) (ACN 074 614 538) & ORS (according to the attached schedule) | Plaintiffs |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 June 2024 |
DATE OF JUDGMENT: | 19 June 2024 (ex tempore, revised 28 June 2024) |
CASE MAY BE CITED AS: | Re Aqua Star Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 377 |
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CORPORATIONS — External administration — Application for extension of convening period of second meeting of creditors of company in voluntary administration pursuant to s 439A(6) of the Corporations Act 2001 (Cth) – Extension sought of approximately 3 months of convening period of administration of a single corporate enterprise conducting a large and complex business — Administrator seeking extension to enable director of the company to put forward a proposal for a Deed of Company Arrangement — Sound reasons given for extension – Extension in the interests of creditors – No significant prejudice to those affected by moratorium by grant of extension — Orders made for extension of convening period together with ancillary orders including liberty to apply to administrator and those whose interests are affected by orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Silver, of Counsel | Broadside Lawyers Pty Ltd |
HIS HONOUR:
By an originating process filed on 17 June 2024, the plaintiffs, Mr Daniel Juratowitch and Mr Shaun Matthews (together ‘Administrators’) who are the voluntary administrators of Aqua Star Pty Ltd (Administrators Appointed) (ACN 074 614 538) (‘Company’), make application under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) (‘Act’) for an extension of the convening period for the second meeting of creditors of the Company required to be held by s 439A(1) of the Act (‘Application’). Unless extended the convening period will expire at midnight on 28 June 2024.
The Administrators seek an extension until 30 September 2024. They also seek a ‘Daisytek order’,[1] allowing the Administrators to hold the second creditors’ meeting any time during, or within five business days after, the end of the period as extended, notwithstanding the operation of s 439A(2) of the Act.
[1]See Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446, 448 [10]–[14] (Lindgren J) (‘Daisytek’).
In addition, the originating process seeks orders that the Company’s creditors be informed by the several means specified of the making of the orders sought, together with liberty to apply to persons affected by the orders sought and costs.
On 19 June 2024, I made orders which are set out at the conclusion of these reasons and gave brief reasons on the return of the Application. I indicated that I would provide more elaborate reasons which I now do.
The Application is supported by an affidavit of Shaun James Matthews (‘Mr Matthews’) sworn 18 June 2024 (‘the Matthews affidavit’). That affidavit has been supplemented by an affidavit of the Administrators’ solicitor, Justin Burghardt, sworn 18 June 2024.
The Administrators were appointed as the administrators of the Company pursuant to s 436A of the Act on 23 May 2024 (‘Appointment Date’).
The first meeting of the Company’s creditors required by s 436E of the Act was held on 4 June 2024.
The Administrators calculate that, in accordance with ss 439A(1) and 439A(5) of the Act, the second meeting of creditors is required to be convened by 28 June 2024. The report to creditors about the Company’s affairs (‘Report’) required by r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (‘Insolvency Rules’) is required to be provided to creditors by that date.
The Company operates a seafood importation business providing frozen seafood to businesses and restaurants throughout Australia (‘Business’). The Company’s principal place of business is located in West Melbourne. The premises consists of a large cold store warehouse where it stores stock and from which it dispatches goods. The Company operates out of four other third-party logistics warehouses located in Melbourne and Sydney.
Since the Appointment Date, the Administrators have continued to trade the Business as they formed the view that ongoing trading was in the best interests for both the Company’s creditors and for the survival or sale of the Business.
The Australian Securities and Investments Commission’s (‘ASIC’) extract for the Company records that it was incorporated on 27 June 1996. There is one director of the Company, Allen Wu, who was appointed on 18 January 2019 (‘Director’). The Company is a wholly owned subsidiary of Superior Imports & Exports Pty Ltd. The ASIC extract records that Daniel Allison & Associates Assurance Services has been the auditor of the Company since 12 April 2016.
On 11 December 2023, CP Aquaculture (India) PVT Ltd (‘CP’) obtained a judgment against the Company in the County Court of Victoria for USD$2,487,493 (which included interest) and costs (‘Judgment’). Monies which had earlier been paid into court by the Company under a court order were ordered to be paid to CP.
On 17 January 2024, the Company filed an application for leave to appeal the Judgment. That application was dismissed on 12 April 2024.
On 22 January 2024, CP issued a creditors statutory demand against the Company for payment of the balance of the Judgment debt in the amount of USD$1,966,821.
On 9 February 2024, the Company lodged an application in this court to set aside the statutory demand which was returnable on 27 May 2024. The Administrators were informed the Company was unable to make payment or gain additional support from third party related entities in order to proceed with the appeal and the Director placed the Company into voluntary administration.
Mr Matthews deposes that at the time of swearing the Matthews Affidavit, the Administrators did not expect to be in a position to make the prescribed recommendations required for inclusion in the Report and convene a second meeting of creditors by the dates stipulated by the Act because:
(a) the Company conducts a Business with a large turnover and its affairs are complex;
(b) the Administrators have been involved in a number of tasks associated with trading on the Business during the administration period;
(c)the specialised nature of the Company’s Business and volume of the Company’s stock, plant and equipment has made preparation of the Report a complex undertaking, particularly in respect of what value should be ascribed to the stock. In this regard, there is reference in the evidence to the issue of a sizeable proportion of the stock being past its ‘best before’ date. This is an important aspect of the Report, which requires the creditors to be informed of the hypothetical return to creditors in the event the Company is placed into liquidation; and
(d) further to 16(c) above, the inability of the Administrators to obtain an accurate valuation with respect to the Company’s stock has frustrated their ability to assess the viability of a proposal for a Deed of Company Arrangement (‘DOCA’) put forward by the Director for consideration by creditors when compared with a liquidation scenario.
Certain transactions in which the Company was involved prior to being placed into administration will also require investigation as they may potentially be voidable transactions under Part 5.7B of the Act, to be referred to in the Report.
The Administrators seek an extension of the convening period for the Company from 28 June 2024 to 30 September 2024, a period of approximately three months to:
(a) facilitate and complete any sale process to ascertain the likely value of the Business and the inventory in a sale as compared to a liquidation scenario;
(b) ascertain the willingness of a potential purchaser to take on employees and obligations for employee entitlements;
(c)allow sufficient time to conduct further investigations regarding the quantity of inventory held, the appropriate method of sale and its likely value given its perishable nature;
(d) allow the Administrators sufficient time to negotiate any DOCA which the Director has indicated he intends to propose;
(e) enable the Administrators to undertake necessary investigations into the Company’s affairs and operations, major events leading to the appointment of the Administrators, validity of secured creditor claims and related party loan accounts; and
(f) enable the Administrators to finalise their investigations into whether there are any arguably voidable transactions which are available to a liquidator to pursue.
There are 32 security interests presently registered over the Company on the Personal Property Securities Register (‘PPSR’). The Company’s PPSR search extract dated 21 May 2024 records a total of $6,385,392.15 owing to the following creditors (together ‘Secured Creditors’):
(a) Hydem Pty Ltd (‘Hydem’)[2] for $5,972,886.00;
[2]Hydem is a related entity of the Company.
(b) National Australia Bank (‘NAB’) for $233,999.67;
(c)Toyota Finance Australia (‘Toyota’) for $98,506.48; and
(d) FQP Food Services Pty Ltd (‘FQP’) for $80,000.00;
Mr Matthews deposes that the Administrators continue to liaise with the Secured Creditors. At the date of the Matthews Affidavit, the Administrators have:
(a) received and reviewed all relevant PPSR and security documents from NAB which confirm outstanding amounts of $233,999.67 and the validity of NAB’s registrations;
(b) received and reviewed all relevant PPSR and security documents from Toyota which confirm outstanding amounts of $98,506.48 and the validity of three registrations. This review has identified potential validity issues with the other three PPSR security registrations and the Administrators have sought legal advice with respect to the validity of the these registrations; and
(c)not received the PPSR and security documents from Hydem in support of its claim in the amount of $5,972,886.00, or FQP in support of its claim for $80,000.00. The Administrators anticipate they will be required to undertake a comprehensive review following the receipt of the PPSR and security documents from Hydem and FQP. They also anticipate that independent legal advice will be required to assess the validity of these secured claims.
Based on the Company’s books and records and the Administrators’ investigations to date,[3] the Administrators have identified 34 unsecured creditors, who are owed debts in the amount of $29,296,156.75 as at 13 June 2024.
[3]Matthews Affidavit, Exhibit SJM-1 at 78–79.
As at the Appointment Date, the Company employed 22 staff and had revenue of $51,908,167.19 for the 10 months ended 30 April 2024. As has been mentioned, the Administrators have continued to trade the Business and have retained all 22 employees since the Appointment Date. Their wages and salaries have been paid from trading proceeds and available assets.
Mr Matthews deposes that the Administrators have also:
(a) addressed the employees on site and answered their queries with respect to the progress of the administration;
(b) issued initial written correspondence to the employees formally notifying them of the Administrators’ appointment;
(c)advised employees that the Business would continue to trade during the administration period;
(d) reviewed the management accounts and other documents and reports in relation to outstanding employee entitlements; and
(e) investigated and calculated employee entitlements outstanding as at Appointment Date.
Based on the Company’s books and records and the Administrators’ investigations to date, the Administrators have calculated the following employee entitlements are outstanding at the Appointment Date:
Employment Entitlements Amount(s)
Annual Leave $134,009.08
Personal/Sick Leave $120,772.61
Payment in Lieu of Notice $95,073.81
Redundancy $235,510.99
Superannuation $26,472.91
Total $611,839.41
Between the Appointment Date and 14 June 2024, the Administrators have made sales in the amount of $1,345,695.00. Between the Appointment Date and 17 June 2024, the Administrators have collected $435,679.03 from pre-appointment and trading debtors.
In the Matthews Affidavit, the investigations into the Company’s affairs by reference to its financial records are detailed, more particularly in the draft annual report of the Company as at 30 April 2024 for the 10 months prior to that date. These investigations reveal that:
(a) a balance sheet for the Company as at 30 April 2024 indicates a net deficiency of $16,348,072; and
(b) a profit and loss statement for the Company for the 10 months ended 30 April 2024 records a net profit of $931,100.67.
Mr Matthews deposes that at the time of his affidavit, the Administrators’ review of the Company’s financial position is ongoing. However, on the basis of their review and investigations to the date of the Matthews Affidavit, they were able to ascertain the following assets and liabilities of the Company:
Item Recorded Amounts
AssetsCash at Bank $122,432
Debtors $11,404,180
Potential Bad Debts ($7,345,749)
Motor Vehicles $557,500
Office, Plant and Equipment $72,170
Inventory $34,135,537
Potential Obsolete Stock ($19,428,328)
Assets Book Value $19,517,742
LiabilitiesSecured Creditors $6,385,398
Priority Creditors $281,255
Unsecured Creditors $29,199,161
Liabilities Book Value $35,865,814
Surplus/(Deficiency) Book Value ($16,348,072)
The Company’s books suggest it was trading profitably prior to the voluntary administration. Those books recorded, for the 10 months to 30 April 2024:
(a) Trading Income of $51,908,167.19;
(b) Cost of Sales of $6,808,994.43;
(c)Other income of ($513,265.53);
(d) Operating Expenses of $5,364,628.23; and
(e) Net Profit of $931,100.67.
Mr Matthews states that since their appointment, the Administrators have carried out the following activities and investigations into the Company’s affairs:
(a) notified ASIC of their appointment;
(b) sought the Company’s books and records, including financial records from various sources;
(c)issued to the Director a statutory request to complete a Report on Company Activities and Property (‘ROCAP’);
(d) held numerous meetings and discussions with the Director and senior staff to understand various matters including the Company’s operations and history;
(e) commenced a review of the books and records provided, including financial records for the purpose of, amongst other things, assessing the Company’s financial position;
(f) taken control of the Business and the Company’s assets, including debtors, vehicles, stock, and plant and equipment;
(g) attended and secured the premises and taken control of the Business and the Company’s operations;
(h) arranged for a valuation of the plant, equipment and motor vehicles;
(i) engaged insurance brokers to provide open cover on the Company’s assets and assessed the current insurance cover;
(j) performed all necessary land and title searches to determine if the Company held any real property;
(k) made attempts to arrange for a full stocktake of the stock on hand;
(l) conducted an urgent assessment of the Business, including its trading position and income streams;
(m) established new procedures and controls to ensure they could maintain control of all facets of the Company whilst the Business continued to trade;
(n) prepared a cashflow forecast and trading budget analysis to formulate the estimated position for the period of their appointment as Administrators;
(o) attended the premises on a regular basis to assess and monitor ongoing trading;
(p) written to and liaised with suppliers to advise them of their appointment and intention to continue to trade on the Business and requested that separate Administrators’ accounts be kept;
(q) provided notice to suppliers of altered trading procedures during the administration period;
(r) written to, held discussions with and attended meetings with key customers regarding the administration process and to communicate the Administrators’ intention to continue to trade the Business;
(s) advised employees of their appointment, held meetings and discussions with them about, amongst other things, the impact of the appointment on the ongoing trading of the Business;
(t) corresponded with all Secured Creditors;
(u) held the first meeting of creditors at which they:
(i) asked the creditors to vote on whether a Committee of Inspection should be formed. There were insufficient nominations received to form a committee of inspection; and
(ii) asked the creditors to consider whether an alternative administrator should be appointed. A nomination from Ross Blakeley and Paul Harlond of FTI Consulting had been received, however the resolution to remove the current Administrators from office and appoint alternative administrators did not pass;
(v) commenced an Expression of lnterest (‘EOI’) campaign in respect of the recapitalisation of the Company (via a DOCA) or the purchase of the Business and/or its assets;
(w)attended to all other required statutory notifications and lodgements to date in respect of the administration;
(x) initiated the process of obtaining insurance cover for the assets;
(y) liaised with key personnel and insurance brokers regarding the completion of insurance policy documents and reviewed ongoing insurance requirements;
(z) obtained and reviewed the Company’s asset registers and stock listings;
(aa) taken steps to arrange a stocktake. At the Appointment Date, stock on hand as per the records of the Company was $34,135,537 (‘Inventory’);
(bb) liaised with and engaged Lloyds Auctioneers to arrange site visits and an inspection of the plant and equipment, with a view to Lloyds Auctioneers preparing an independent valuation report; and
(cc) commenced a reconciliation of the assets and the Business and the location of those assets.
In a letter dated 14 June 2024, the Administrators notified the creditors of the proposed Application. As at the date of the Matthews Affidavit, Mr Matthews deposes that the Administrators had not received any objections to that letter.
In Mr Burghardt’s affidavit, he deposes the Administrators have received written confirmation from both the Director and the director of Hydem, a major Secured Creditor, that they do not oppose the Application. The Director has also confirmed his intention to put forward a proposal for a DOCA.
Mr Matthews deposes that the Administrators have been trading the Company from the Appointment Date and have agreed to pay the staff of the Company during the administration period. Furthermore, Mr Matthews states that in the circumstances, the Administrators are not aware of any creditors that may be prejudiced by an extension of the convening period.
Mr Matthews states the Administrators’ investigations in respect of the Inventory of the Company have revealed the following:
(a) the value of the Inventory as per the Company’s books and records is $34,135,537;
(b) the Inventory is made up of 369,507 units of frozen seafood as per the Company’s books and records;
(c)to the best of the Administrators’ knowledge, the Inventory is warehoused in a number of locations at premises operated by the following entities:
(iii) Aqua Best Pty Ltd (‘Kensington Location’);
(iv) Darvill Enterprises Pty Ltd;
(v) Brooklyn Cold Storage Pty Ltd;
(vi) Lineage AUS TRS Pty Ltd;
(vii) FQP Food Services Pty Ltd; and
(viii) Tony Alecsander Warehouse;
(d) of the $34,135,537 of Inventory on hand as at the Appointment Date, $19,428,328 or 57% has been recorded in the Company’s books and records as obsolete stock, due to goods being past their ‘best before’ date;
(e) the Administrators have been informed by Australia Quality Assurance, an independent quality assurance agent, that any Inventory past its ‘best before’ date remains able to be sold, but only to a limited number of customers, at a discounted price and with appropriate disclosures;
(f) the Inventory sold in the ordinary course of the Business is capable of generating additional revenue for the Company while it is trading and will likely achieve a higher value than that obtainable in a liquidation scenario;
(g) on 7 June 2024, the Administrators engaged an external stocktaking service provider to undertake a sample stocktake of the Kensington Location, to ascertain an estimated quantity and value of stock on hand at the Appointment Date. The sample stocktake revealed a discrepancy of 16.5% in stock when compared to the Company’s inventory reporting system;
(h) in addition, the external stocktaking service provider has indicated that a number of pallets of Inventory cannot be located. The external stocktaking service provider apparently failed to record these missing pallets, and accordingly the variance may be significantly higher than the discrepancy outlined above;
(i) in order to determine the true quantities and value of the stock on hand, the Administrators sought and received two proposals from external stocktaking service providers to undertake a complete stocktake. Both providers have advised that the stocktakes are unable to be completed until the end of July 2024, given the close proximity to the end of the financial year and the volume of inventory;
(j) the valuers engaged by the Administrators, Lloyds Auctioneers, have confirmed they are unable to sell the Inventory at auction due to its nature and the Administrators are exploring potential options to sell the Inventory through a specialised asset realisation company; and
(k) the Administrators continue to collate the required information for the realisation strategy; the results of the final stocktake will be critical to this realisation strategy.
Mr Matthews states that for the Administrators to properly provide their recommendation regarding the Company’s future, which includes their opinion on any potential DOCA which is proposed, offers received for the purchase of the Business, or liquidation of the Company, the Administrators require a proper understanding of the available Inventory, its condition and ‘best before’ dates, and how the Inventory will be realised in any potential liquidation scenario.
Mr Matthews states that from the Company’s books and records, the Administrators have identified pre-appointment debtors of approximately $11,404,180. The Administrators are still conducting investigations to determine whether pre-appointment debts are collectable. Preliminary investigations indicate that $7,345,749 of the Company’s pre-appointment debts may be unrecoverable due to legal disputes and the insolvency of certain debtors. To date, the Administrators have collected $281,622.67 on account of pre-appointment debts.
Mr Matthews states the Administrators require further clarity with respect to the Company’s Inventory position before any DOCA proposal can be properly considered and submitted for creditors’ consideration.
On 1 June 2024, shortly after the Appointment Date, the Administrators undertook an EOI campaign in relation to the recapitalisation of the Company (via a DOCA) or the purchase of the Business and/or Company assets.
The Administrators commenced advertising the EOI campaign on 1 June 2024 which included:
(a) placing an advert in the Australian Financial Review on 1 June 2024 with expressions of interest regarding the Company required by 5 June 2024;
(b) issuing an advert to a database of Cor Cordis contacts;
(c)placing an advert on Google Ads Australia; and
(d) contacting and notifying industry-related competitors.
Mr Matthews states that during the week commencing 3 June 2024, the Administrators received three responses from the EOI campaign requesting non-disclosure deeds (‘NDD’) in order to receive confidential information relating to the Company for due-diligence purposes.
At the date of the Matthews Affidavit, one party has returned an executed NDD and was to be provided with the Administrators’ detailed information memorandum.
Mr Matthews states that the Administrators anticipate the following approximate timeline for the remainder of the sales campaign, on the basis that the extension sought is granted and a full stocktake is completed:
Event Date Deadline/Projected Date
Information Memorandum Available 19 June 2024
Submission of Indicative Non-Binding Offers 28 June 2024
Due Diligence Period 28 June 2024 – 5 July 2024
Submission of Final Offer 8 July 2024
Settlement TBC
Relevant legal principles
The relevant principles to be applied when considering whether an extension of a convening period is warranted have now been the subject of consideration in numerous authorities of state Supreme Courts and the Federal Court of Australia since the introduction of the voluntary administration provisions of Part 5.3A of the Act. They are referred in the decision of in Strawbridge, Re Virgin Australia Holdings Ltd (admins apptd) (No 2) (‘Strawbridge’),[4] where the principles and authorities governing an application to extend a convening period of a second meeting of creditors required to be held under s 439A are collected and considered. Middleton J stated:
[4](2020) 144 ACSR 347 (‘Strawbridge’) (Middleton J).
The circumstances in which the Court will extend a convening period 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 (Young J); Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] (Barrett J).
The approach to be adopted was recently set out by Thawley J in Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited [2019] FCA 11 at [3]-[8], where his Honour endorsed the comments of Austin J in In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs. apptd) [2009] NSWSC 585 (‘Re Riviera’) at [13] as to the categories of cases in which an extension is granted including, relevantly:
(1)where the size and scope of the business in administration is substantial
(2)where the extension will allow sale of the business as a going concern,
(3)more generally, where additional time is likely to enhance the return for unsecured creditors:
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 DOCA proposal that may provide a better return to creditors than a winding up, are well-recognised examples of situations where the Court has extended the convening period….
In Mighty River International Ltd v Hughes (as deed administrators of Mesa Minerals Ltd) (2018) 359 ALR 181 at 201-202, [73], Nettle and Gordon JJ (in dissent, but not relevantly in this respect) referred to a number of cases including Re Riviera and concluded:
… Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator’s estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators. …
Finally, the administrator’s own opinion as to the need for an extension will be given weight in an application of this kind.
In Re Riviera Group Pty Ltd (admin apptd) (recs and mgrs apptd) (‘Re Riviera’), Austin J further noted as follows:
The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator’s estimate of time has a reasonable basis.[5]
[5](2009) 72 ACSR 352, 355 [14] (Austin J) (‘Re Riviera’). Citations are omitted.
The evidence filed by the Administrators reveals that there are a number of reasons for the Application. Prominent among those reasons is to allow the Administrators sufficient time to negotiate and determine the suitability of any DOCA proposal. The authorities dealing with extensions reveal this is a proper purpose for the grant of an extension. In numerous cases, convening periods have been extended to enable the progression and assessment of a DOCA proposal.[6]
[6]See the authorities referred to in the extract of Strawbridge in para 42 above.
The Administrators are of the opinion that an extension is warranted to enable the progression and submission of a DOCA proposal which they anticipate may produce a better return to ordinary unsecured creditors. Mr Matthews states that, given the uncertainty with respect to the volume and value of the Company’s Inventory, the Administrators’ ability to report to creditors on a DOCA proposal provided by the Director, compared to the hypothetical return to creditors in the event that the Company is placed into liquidation, has been frustrated.
On an application of the criteria collected in Strawbridge, I consider that there is a clear and compelling case for the granting of an extension of the convening period. One of the prominent criteria mentioned in Strawbridge is the progression and assessment of a DOCA proposal that may provide a better return to creditors than a winding up. The Administrators are of the opinion that this may achieve a better return for the creditors. The authorities indicate that the opinion of the administrator who is applying for an extension should be given considerable weight. There is no obvious prejudice to persons constrained by the moratorium provisions of Part 5.3A.
As has become commonplace in these types of applications, the Administrators seek a ‘Daisytek order’[7] pursuant to s 447A of the Act to enable flexibility as to the date on which the meeting of creditors is required to be convened. I consider that to be an appropriate order to be made in these circumstances.
[7]Daisytek (n 1).
In the circumstances, on the return of this Application on 19 June 2024, I considered that there were sound reasons for the grant of an extension and that it was appropriate to make the orders sought. I agree that the reasons put forward by the Administrators at paras 16-18 above form the proper basis for an extension. In addition, if I were not to grant the extension, it would be necessary for the Administrators to convene a second meeting of creditors and then adjourn it. I see no sensible purpose in requiring them to take such a course with all the attendant costs to the administration which the Administrators estimate could be up to $30,000.
I now recite the orders I made on 19 June 2024:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (‘Act’), the period within which the first and second plaintiff must convene the second meeting of the creditors of Aqua Star Pty Ltd (Administrators Appointed) (ACN 074 614 538) (‘the Company’) is extended up to and including 30 September 2024.
2.Pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate in relation to the Company as if the second meeting of the creditors of the Company required by s 439A of the Act may be held at any time during, or within 5 business days after the end of, the convening period as extended by order 1 above, notwithstanding the provisions of s 439A(2) of the Act.
3.Pursuant to s 447A(1) of the Act and s 90-15 of the Insolvency Practice Schedule (Corporations) (‘IPSC’) if, pursuant to any provision in any of Part 5.3A of the Act, the IPSC, or the Insolvency Practice Rules 2016 (Cth) (‘IPR’), the plaintiffs are required to provide any other notification to creditors during the administration of the Company, the applicable notice requirements will be satisfied if the plaintiffs give such notice by taking the following steps:
(a)where the plaintiffs are in possession of an email address for a creditor, by notifying each such creditor of the relevant matter by an email sent to that email address;
(b)where the plaintiffs are not in possession of an email address for a creditor, but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with (a) above), by notifying each such creditor in writing of the relevant matter via ordinary pre-paid post; and
(c)to the extent that the matter relates to a meeting that is the subject of s 75-40(4) of the IPR, by causing notice of the meeting to be published on the ASIC published notices website at 2 business days of the making of these orders, the plaintiffs cause notice of this originating process, and the orders made, to be given to creditors of the Company in accordance with order 3 above.
5.Liberty is granted to any person who can demonstrate sufficient interest to modify or discharge the orders made pursuant to this application on not less than 48 hours’ written notice to the plaintiffs.
6.The plaintiffs’ costs of the application are costs in the administration of the Company.
7.Liberty to apply.
SCHEDULE OF PARTIES
| S ECI 2024 03054 | |
| BETWEEN: | |
| DANIEL PETER JURATOWITCH in his capacity as an Administrator of AQUA STAR PTY LTD (ADMINISTRATORS APPOINTED) (ACN 074 614 538) | First Plaintiff |
| SHAUN JAMES MATTHEWS in his capacity as an Administrator of AQUA STAR PTY LTD (ADMINISTRATORS APPOINTED) (ACN 074 614 538) | Second Plaintiff |
| AQUA STAR PTY LTD (ADMINISTRATORS APPOINTED) (ACN 074 614 538) | Third Plaintiff |
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