Re Billson's Beverages Pty Ltd
[2024] VSC 545
•28 August 2024 (ex tempore, revised 5 September 2024)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 04470
IN THE MATTER of BILLSON'S BEVERAGES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 621 093 061)
BETWEEN:
| ROBERT BRUCE SMITH in his capacity as Joint and Several Voluntary Administrator of BILLSON'S BEVERAGES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 621 093 061) & ORS (according to the attached Schedule) | Plaintiffs |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 August 2024 |
DATE OF JUDGMENT: | 28 August 2024 (ex tempore, revised 5 September 2024) |
CASE MAY BE CITED AS: | Re Billson’s Beverages Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 545 |
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CORPORATIONS — External administration — Part 5.3A of the Corporations Act 2001 (Cth) — 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 company—Administrators seeking extension to enable the potential sale of company’s business— Sound reasons given for extension — Extension in the interests of creditors — No significant prejudice to those affected by moratorium attending a grant of extension — Orders made for extension of convening period together with ancillary orders including liberty to apply to administrators and those whose interests are affected by orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms V Bell, of Counsel | MinterEllison |
HIS HONOUR:
By an originating process filed on 26 August 2024, the plaintiffs, Robert Bruce Smith and Matthew Russell Hutton (together ‘Administrators’) who are the voluntary administrators of Billson's Beverages Pty Ltd (Administrators Appointed) (ACN 621 093 061) (‘Billson’s Beverages’ or ‘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’), together with certain ancillary orders. Unless extended, the convening period will expire at midnight today, 28 August 2024.
The Administrators seek an extension for a period of three months until 28 November 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 there be liberty to apply to persons affected by the orders sought and costs.
On 28 August 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, which may serve to inform those affected by the Administration, including employees, creditors, and shareholders, of the current position in regard to the Company.
The Application is supported by an affidavit of one of the administrators, Mr Smith, sworn 26 August 2024 (‘Smith Affidavit’).
The Administrators were appointed as the administrators of the Company by a resolution of the director of Billson’s Beverages, Mr Nathan Cowan, pursuant to s 436A of the Act on 31 July 2024 (‘Appointment Date’).
On 5 August 2024, the Administrators issued a Notice of Meeting of Creditors of the Company convening the first meeting of the Company’s creditors on 12 August 2024 (‘First Meeting’). The First Meeting was held virtually at the offices of McGrathNicol in Melbourne. At the First Meeting, the Administrators’ appointment was confirmed by those present and a committee of creditors was appointed. The Administrators gave notice of their intention to apply for orders extending the convening period in respect of the Company pursuant to ss 439A(6) and 447A of the Act for a period of up to three months to allow for a potential sale of the business. No opposition was raised by any of the creditors in attendance at the First Meeting.
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 August 2024. The report to creditors concerning the Company’s affairs (‘Report’) required by r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) is required to be provided to creditors by that date.
The Company operates a brewery and hospitality venue in Beechworth, Victoria. The Company also produces and sells ready-to-drink alcoholic and non-alcoholic beverages, spirits and liqueurs, along with cordials and soft drinks. Those products are distributed principally through wholesale channels into major retail outlets, along with direct consumer sales through its website and from the Beechworth Brewery premises.
The Company purchased the business in August 2017. The revenue from the business grew from approximately $2 million in the financial year ending 30 June 2020 to over $100 million in the financial year ending 30 June 2023. In the financial year ending 30 June 2024, it generated over $90 million.
The Administrators understand the following premises involved in the Company's operations are currently leased. These include:
(a) the main operating facility located in Beechworth, Victoria (‘Billson's Brewery’). The lessor is Billson’s Holdings Pty Ltd (‘Billson’s Holdings’). The property is leased on a month-to-month basis;
(b) a heritage residential property referred to as the ‘Brewer's House’ located in Beechworth, Victoria. The lessor is Cowan Pty Ltd (ACN 065 394 167) as trustee for the M J Cowan Family Trust. That lease expires on 30 June 2028;
(c)another venue in Beechworth, Victoria, which is used as a staff and venue operations site. The lessor is Billson’s Holdings and the term of the lease expires on 3 October 2024;
(d) staff accommodation in Beechworth, Victoria. The lessor is Billson’s Holdings and the property is leased on a month-to-month basis;
(e) office space in Beechworth, Victoria. The lessor is Billson’s Holdings and the lease expires on 31 March 2027;
(f) storage space in Stanley, Victoria. The lessor is a third party commercial landlord. The property is leased on a month-to-month basis; and
(g) storage space in Beechworth, Victoria. The lessor is a third party commercial landlord, Evan Taylor Transport Pty Ltd. The exact date of the expiry of the lease is to be confirmed by the Administrators, however, they understand a three-year lease commenced in or around 2021 and that two further three-year terms were included as part of the agreement.
(collectively, the ‘Billson's Beverages Leased Premises’).
Shortly after the Appointment Date, the Administrators gave notice to various lessors pursuant to s 443B(3) of the Act that the Company does not propose to exercise rights in respect of the following properties:
(a) a residence adjoining the Billson’s Brewery in Beechworth;
(b) a commercial hotel property in Beechworth; and
(c)a premises referred to as Billson’s Soda Bar located in Beechworth.
In addition, several assets used in the operations of the Company are leased (‘Billson's Beverages Leased Assets’). Other fixed assets used in the Company’s operations, such as motor vehicles and plant and equipment, are company-owned and not leased.
There are a number of entities with common directors (‘Billson's Beverages Corporate Group’) which own assets that are used by the Company to operate its business. The key entities in the Billson’s Beverages Corporate Group on the Administrator’s understanding are:
(a) Billson's Beverages, the entity to which the Administrators have been appointed and the trading entity for Billson’s Brewery. Billson’s Beverages owns all inventory, debtors and fixed assets (non-real estate) required to operate the Billson’s Beverages business. It is the employer of all Billson’s Beverages’ employees and it holds the key customer contracts. The Administrators understand Billson’s Beverages also owns other intangible assets including recipes and social media accounts;
(b) Billson's Holdings owns the key intellectual property assets utilised by Billson’s Beverages, in particular the Billson’s brand and trading names (and accompanying logos) along with key designs. Billson’s Holdings is also the landowner and lessor for several of the operating sites described at para 11 above utilised by Billson’s Beverages in trading the business, in particular, Billson’s Brewery;
(c)Cowan Pty Ltd (ACN 065 394 167) as the trustee for the M J Cowan Family Trust (ABN 43 809 916 243) is a trustee for the discretionary investment trust and the property owner of the Brewer’s House. Brewer’s House is utilised by Billson’s Beverages from time to time for staff accommodation and is made available for rent to Billson’s Beverages’ customers for holiday accommodation. This entity is also the registered holder of the domain names 'Billsons.com.au', in its capacity as trustee for the M J Cowan Family Trust (ABN 43 809 916 243). The Administrators have been informed by Mark Cowan, director of Cowan Pty Ltd, that Cowan Pty Ltd is also the registrant of 'Billsons.com'.
The officeholders and shareholders of the Billson's Beverages Corporate Group are as follows:
| # | Entity | Officer/s of the company | Current Shareholder/s |
| 1 | Billson's Beverages Pty Ltd (Administrators Appointed) (ACN 621 093 061) | Nathan Cowan, sole director and secretary (appointed 15 August 2017) | Cowan Pty Ltd: (G Class shares (100%) and 80% Ordinary shares); and N Cowan Pty Ltd: (H Class shares (100%) and 20% Ordinary shares) |
| 2 | Billson's Holdings Pty Ltd (ACN 650 588 177) | Mark Cowan, director and secretary (appointed 28 May 2021); and Nathan Cowan, director (appointed 28 May 2021). | Mark Cowan (Ordinary shares - 50%); and Nathan Cowan (Ordinary shares - 50%). |
| 3 | Cowan Pty Ltd (ACN 065 394 167) | Mark Cowan, sole director and secretary (appointed 29 June 1994). | Margaret Cowan (Ordinary shares - 50%); and Mark Cowan (Ordinary shares - 50%). |
The Australian Securities and Investments Commission’s (‘ASIC’) extract for the Company records that it was incorporated on 15 August 2017. The Company is a wholly owned subsidiary of Cowan Pty Ltd and N Cowan Pty Ltd.
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 of both the Company’s creditors and the sale of the business.
Since the Appointment Date, the Administrators and their staff have undertaken the following tasks with respect to the Company’s administration:
(a) facilitated the ongoing trading of the business of the Company, including:
(i) reducing the business’ overhead structure by making 53 staff (31 permanent and 22 casual) redundant on the Appointment Date; and
(ii) stabilising operations by ensuring key suppliers would continue to make supply available to the Administrators and enable the business to continue trading;
(b) notified the major financial institutions of the appointments and established control of the Company's banking facilities and accounts;
(c)established an Administrators’ bank account;
(d) attended to the Administrators’ statutory duties, including informing ASIC, the ATO, the various state revenue offices and other statutory authorities of the appointments;
(e) held meetings with the sole director, Mr Nathan Cowan, and key employees of the Company to understand its operating structure, financial position, and critical operating requirements;
(f) issued a request to the Company’s director to complete a Report On Company Activities And Property and deliver the Company’s books and records to the Administrators;
(g) secured the Company’s books and records, including electronic accounting records;
(h) liaised with the following key stakeholders, including issuing circulars and answering queries where possible, to stabilise operations of the business:
(i) employees;
(ii) suppliers;
(iii) the Company's financier, National Australia Bank (‘NAB’);
(iv) other lenders, including Ms Margaret Cowan (‘Ms Cowan’);
(v) secured creditors who have registered financing statements against the Company on the Personal Property Securities Register (‘PPSR’);
(vi) the Federal Department of Employment and Workplace Relations which administers the Fair Entitlements Guarantee Scheme (‘FEG Scheme’) in accordance with the Fair Entitlements Guarantee Act 2012 (Cth); and
(vii) trade creditors and other unsecured creditors;
(i) commenced a sale of business and/or recapitalisation process, calling for expressions of interest for the proposed sale and/or recapitalisation of the business, and commenced preparing the information memorandum, confidentiality deeds, and other sale materials (including data room materials) to facilitate the sale and/or recapitalisation process of the Company;
(j) convened, prepared for and attended the First Meeting on 12 August 2024;
(k) prepared this Application to extend the convening period;
(l) commenced the quantification of employee entitlements;
(m) commenced an initial review of the Company's books and records to understand the Company’s financial position, and commenced investigating the reasons for failure and any transactions that may be recoverable by a liquidator; and
(n) attended to other general and statutory requirements.
Mr Smith states the Administrators have been provided with full access to the Company’s books and records, including its financial system, and expects this access to remain for the term of the administration.
As at 30 July 2024, the day prior to the Appointment Date, based on the Administrators’ review of the Company’s books, the cash (and cash-like) resources of the Company comprised the following amounts (‘Pre- Bank AccountsAppointment’):
Account Amount
Billson’s NAB business bank account (*6971) $279,716.55
Billson's NAB business bank account (*6590) $172,439.23
Billson’s CBA transaction account (*7021) $6,726.38
Paypal bank account $31,441.70
Cash on Hand $2,500.00
Till Floats $3,900.00
Total $496,723.86
The Administrators expect NAB will assert a security over any credit balances in the Pre-Appointment Bank Accounts as at 30 July 2024. As noted at para 29(a) below, NAB has all asset security over the Company’s assets that has been perfected by registration on the PPSR.
Prior to the Administrators' appointment, the Company’s director transferred $500,000 from the Pre-Appointment Bank Accounts into the McGrathNicol trust account (‘McGrathNicol Trust Account’), to ensure the Administrators had funds following their appointment to meet any urgent payment requirements (including payroll).
All post-appointment trading receipts, primarily trade debtor receipts and any realisation of stock, are now under the Administrators’ control, with after transfers from Pre-Appointment Bank Accounts to accounts controlled by the Administrators in place as necessary.
The McGrathNicol Trust Account currently holds a cash balance of $480,000 on the Company’s behalf. As at 23 August 2024, the Company holds a cash balance of $3,712,040 (including pre-appointment debtors’ receipts in the Pre-Appointment Bank Accounts yet to be transferred to the accounts controlled by the Administrators).
As at the Appointment Date, the Company’s records showed net accounts receivable from the Company’s trade debtors in the amount of $6,233,743.42. The Administrators are continuing to collect payment of the Company's pre-appointment receivables. A significant quantum of the trade debtor balance relates to only two to three key customers, with whom the Administrators are engaged regarding collectability and repayment in terms of amounts outstanding, along with securing ongoing supply during the course of the voluntary administration.
The Company’s balance sheet as at 30 July 2024 indicates it owns other circulating and non-circulating assets as follows:
Asset Value
Stock and Goods (net of provisions for
obsolescence and estimated excise payable) $7,539,687.39
Deferred Tax Asset $2,514,484.87
Other Debtors (prepayments) $129,931.53
Grouped low value assets (net of depreciation) $1,343,287.31
Furniture and Fittings (net of depreciation) $506,969.92
Motor Vehicles (net of depreciation) $436,861.34
Plant and Equipment (net of depreciation) $4,994,430.56
Property Improvements (net of depreciation) $1,930,756.88
Total $19,396,409.80[2][2]Value shown is according to the balance sheet as at 30 July 2024 and has not been independently verified or valued by the Administrators.
Following investigations into the ownership of the intellectual property utilised by the Company, the Administrators have confirmed Billson’s Holdings owns the key trademarks associated with the Company's business.
Creditors
At the time of the Administrators’ appointment on 31 July 2024, based on their review of the Company’s books and the proofs of debt received for the First Meeting, the Administrators understand the debts and liabilities owed to the Company’s creditors are of the order of at least $22,038,093.84.
Of this amount:
(a) $12,218,550.15 was owed under numerous facilities (including a business markets loan, a credit card facility, and a hire purchase facility) provided by NAB to the Company in its capacity as the first ranking secured creditor. The Company also appears to have guaranteed various facilities provided by NAB to Billson’s Holdings. The Administrators are informed by Allens, NAB’s solicitors, that as at 22 August 2024, NAB estimates Billson's Beverages’ contingent liability as guarantor of Billson's Holdings debts to NAB to be $9,546,600;
(b) $530,847.16 was owed under the Loan and Debt Security Deed dated 4 June 2024 with Ms Cowan. The loan was advanced for the specific purpose of the Company’s payment of employee wages and entitlements as prescribed by s 560 of the Act;
(c)approximately $1,106,000 is considered to be owed to employees (this assumes crystallisation of retrenchment entitlements for all 102 staff, of which 49 remain employed by the Company);
(d) $3,365,396 was owed to 10 creditors with other PPSR registrations, principally stock suppliers asserting retention of title claims over inventory supplied to Billson’s Beverages that remain unpaid. The Administrators’ review of these retention of title claims is ongoing; and
(e) approximately $4,817,300 was owed to ordinary unsecured creditors, including:
(viii) $1,822,424.75 owed to the Commissioner of Taxation in respect of unpaid excise duties and pre-appointment taxation amounts; and
(ix)$1,016,752.21 owed to TT Logistics (Australasia) Pty Ltd pursuant to a logistics service agreement dated 2 February 2023 for the storage of the Company's inventory at third-party warehouse locations.
Future of the Company
The Administrators are currently of the opinion that the best outcome for all stakeholders (employees, creditors, and shareholders) will be served by a sale or recapitalisation via a deed of company arrangement (‘DOCA’) of the Company’s business on a going concern basis. Should a sale in this form not be achievable, it is likely the Administrators will have to cease operations and wind down the business in an orderly fashion to realise any remaining assets.
The Administrators contend however, that the sale is ultimately structured to maximise the sale proceeds and provide the best opportunity for the secured creditors (principally NAB) to be paid out, with any surplus funds to be made available to unsecured creditors. They consider that maintaining business operations is important while a sale remains a reasonable possibility, as it ensures that a going concern sale is feasible.
A going concern sale is also likely to maximise:
(a) recoverability of circulating assets (in particular debtors and inventory), the net recovery of which would be available to meet priority creditor claims; and
(b) prospects of those Company employees retained by the Administrators remaining employed post transaction.
Aside from being a clear benefit to those retained employees, a going concern sale will also minimise the priority creditor claims in the Company’s administration that need to be met through net circulating asset recoveries.
On 13 August 2024, the Administrators formally commenced a sale process with respect to the Company and its assets (‘Sale Process’). The advertisement for the Sale Process, published in the Australian Financial Review on 13 August 2024, sought expressions of interest for the recapitalisation, restructure and/or sale of the business from interested parties by 15 August 2024.
Prior to the advertisement on 13 August 2024, the Administrators had already received approximately 50 expressions of interest in the sale of the business. These resulted from the media in circulation regarding the voluntary administration. Following the publication of the advertisement of the proposed sale of the business the Administrators received approximately 10 additional expressions of interest.
As of 24 August 2024:
(a) the Administrators have issued non-disclosure agreements (‘NDAs’) to 65 interested parties that have registered their interest (noting a signed NDA is required before more detailed sales materials can be provided); and
(b) 39 signed NDAs have been returned by these interested parties, with a small number under negotiation currently and expected to be executed in the coming days.
The Administrators are in the final stages of preparing:
(a) the information memorandum and other sales documentation; and
(b) a Sale Process letter setting out the proposed sale and/or recapitalisation timeline for the business, along with details of the requirements for non-binding indicative offers (‘NBIOs’), and potential considerations for parties regarding proposed transaction structures. The Administrators intend to provide these sale materials to those that have signed NDAs after close of business on Monday, 26 August 2024.
In respect of the Sale Process:
(a) as outlined above, 65 parties have expressed interest in participating in the Sale Process;
(b) the interest includes interest for a purchase of the Company's business on a going concern basis;*
(c)in Mr Smith’s opinion, any going concern sale would optimally be structured as a joint sale with certain assets of Billson’s Holdings, so that a buyer could acquire the intellectual property used in the business and some or all of the freehold interests in land referred to in paras 11 and 27 above; and
(d) the Sale Process may also result in interested persons putting forward proposals for the Company to execute a DOCA.
Mr Smith states that the structure of the Sale Process currently being implemented by the Administrators is likely to take around three months to complete, as follows:
(a) NBIOs will be due on Friday 13 September 2024;
(b) shortlisted bidders (assuming attractive bids are received) will then be invited to undertake more detailed due diligence, including being provided access to a data room;
(c)final offers will be due on Friday 11 October 2024 (four weeks post NBIOs) (‘Final Offers’); and
(d) the Administrators propose to consider and enter into contractual documentation (assuming an appropriate Final Offer is received) with a view to settle a transaction as soon as possible following receipt of Final Offers, subject to the transaction structure and any creditor approval requirements.
The subsequent stages and timing of the Sale Process are subject to the Administrators’ assessment of the NBIOs and funding, and will be determined by:
(a) the overall number of interested parties;
(b) the price and terms offered;
(c)availability of sufficient funding to complete a sales transaction;
(d) due diligence requirements, particularly for the larger corporate entities and financial parties;
(e) time required for multi-party negotiations between interested parties and Billson’s Holdings (being both the landlord and owner of key property assets) and the M J Cowan Family Trust (ABN 43 809 916 243) being the registrant of the domain name 'Billsons.com.au';
(f) support of the employees, key suppliers and other interested parties;
(g) support of the Billson's Beverages Corporate Group's financier, NAB; and
(h) the proposed timing to complete, based on the offers made and conditions precedent to any transaction.
Mr Smith states that if the extension of the convening period sought in the Originating Process is granted, the Administrators anticipate undertaking the following activities prior to the second meeting of creditors:
(a) continuing and completing the Sale Process, including:
(x) receiving and assessing NBIOs;
(xi)identifying short listed bidders with the most favourable NBIOs to undertake detailed due diligence and submit Final Offers for the sale and/or recapitalisation of the business;
(xii) entering negotiations (and potentially exclusivity) with a preferred bidder (or bidders);
(xiii) negotiating and entering transaction documentation with an identified purchaser; and
(xiv) settling the transaction with the identified purchaser;
(b) continuing operations at Billson’s Beverages’ Beechworth sites in parallel to the Sale Process and assessing and reviewing the recovery of circulating assets, and in the event there are sufficient net circulating asset surpluses to meet all priority claims in the administration, process payment to priority creditors.
Mr Smith states the Administrators consider the Sale Process to be appropriate for a transaction of this size and nature, and based on the Administrators’ experience in the restructuring industry and the Administrators’ knowledge of the Company and the industry in which it operates.
Mr Smith states the expected timing for completion of a transaction is dependent on the terms of the NBIOs and preferred Final Offers and the ultimate structure of the transaction to be pursued. Further, the larger corporate entities and financial parties which have expressed an interest in the sale of the business will likely require longer timeframes to complete more detailed due diligence on the Company's business. The Administrators currently anticipate that accommodating these larger entities will likely result in a higher sale price for the business.
Mr Smith states it will not be possible for a sale to be completed within the convening period for the second meeting of creditors if the Application for an extension of the convening period is not granted.
Notification of this Application to the Federal Department of Employment and Workplace Relations, ASIC and Creditors
The Administrators have been informed by Christopher Hodge, a staff member in the employ of the Administrators, that on 22 August 2024, he contacted the Federal Department of Employment and Workplace Relations (‘Department’), which administers the FEG Scheme, and spoke with Ms Michelle Williams (‘Ms Williams’), who is employed in the unit which administers the FEG Scheme. Mr Hodge provided Ms Williams with an update on the Company’s administration and Sale Process. Mr Hodge also provided notice to FEG that the Administrators intended to apply to this Court for a three month extension to the convening period. Ms Williams requested the Department be provided with copies of the Originating Process and the Smith Affidavit filed with the Court, along with a copy of the minutes from the First Meeting.
The Administrators have instructed their solicitors, MinterEllison, to provide a copy of the Originating Process and the Smith Affidavit, along with a copy of the First Meeting minutes, to the Department.
On 23 August 2024, the Administrators were copied into an email from MinterEllison to ASIC which gave notice that the Administrators would be making this Application pursuant to ss 439A(6) and 447A of the Act, and that a hearing would be sought on an urgent basis. In this email, MinterEllison also enquired of ASIC if it could indicate whether it had an interest in or wished to be heard on the Application.
On 23 August 2024, the Administrators were copied into an email from ASIC to MinterEllison that confirmed receipt of MinterEllison's email but which did not express a position on whether ASIC had an interest in, or wished to be heard on this Application.
Mr Smith states that on 12 August 2024, at the First Meeting, the Administrators informed the creditors that the Administrators intended to apply for an order extending the convening period in respect of the Company. As at the date of the Smith Affidavit, no responses have been received from any creditors or members of the committee of inspection (which was established at the First Meeting).
On 23 August 2024 a notice was sent via email to known creditors of the Company for which the Administrators have an email address (approximately 80% of creditors). This notice indicated that the Administrators intended to apply for an extension of the convening period of three months. The email included a link to an 'Update to Creditors' dated 23 August 2024 that was uploaded to the McGrathNicol Creditors' information page maintained on McGrathNicol's website. As at the date of the Smith Affidavit, the Administrators have not received any objections in response to this notice.
Mr Smith states that the reason why the Administrators consider an urgent hearing to be necessary is because if an extension is not granted, the Administrators will need to prepare a report to creditors, convene the second meeting of creditors by 28 August 2024 and hold it by no later than 4 September 2024. It is the Administrators’ belief that this will be an extremely difficult deadline to meet in light of the Sale Process. Even if creditors were to vote to adjourn the meeting, it would need to resume within 45 business days, as it is required to be held by 6 November 2024. Adjourning the meeting would also require multiple reports to creditors to be prepared for no marginal benefit to creditors.
Mr Smith states the Administrators do not believe that any creditors or other stakeholders will be prejudiced by the Application being heard on an urgent basis. The Administrators are of the opinion the extension is in the interests of all creditors. In relation to the Company’s employees specifically, as the Administrators explain at paras 52(h) to 52(i) below, the Administrators' preliminary analysis indicates there are likely to be sufficient net circulating asset proceeds realised during the course of the voluntary administration to satisfy all priority creditor claims. As such, priority creditors will not be prejudiced through the extension sought as the Administrators expect priority claims will be paid before any claims could practically be processed by the FEG Scheme and paid if the Company were to transition to liquidation.
In his affidavit, Mr Smith states the Administrators are seeking an extension of the convening period to 28 November 2024, an extension of three months, for the following reasons:
(a) the Administrators are currently implementing the Sale Process. For the Sale Process to run in an orderly fashion and as intended, a three month extension to the convening period is necessary. There is a level of complexity involved in coordinating the Sale Process as there are multiple participants. As explained at para 37(c) above, the Administrators currently contemplate that any terms of sale will ideally include some or all of the freehold interests and the intellectual property owned by other members of the Billson's Beverages Corporate Group. A joint sale of this kind requires the Administrators to consider and negotiate additional terms (such as the allocation of cost and value) between the seller participants;
(b) the Administrators expect a successful sale of the business on a going concern basis will maximise the possible returns to creditors. The Administrators consider that the only realistic way to achieve a going concern sale is through the Sale Process. The Administrators consider that a joint sale which includes the freehold properties and intellectual property owned by other members of the Billson's Beverages Corporate Group will enhance any return which could otherwise be earned if the Company's business assets were sold separately;
(c)based on the volume of the expressions of interest received before the Administrators formally launched the Sale Process, the Administrators are of the view that a going concern sale is reasonably feasible;
(d) facilitating the Sale Process running its intended course will also place the Administrators in a better position to advise the creditors of the options available to them and to provide an informed recommendation for the future of the Company. The Administrators believe this will be true even if the Sale Process fails or needs to be truncated, as such a failure or truncation will provide a clear indication about the prospects of achieving a sale. The Administrators state that should this Application be granted, but the Sale Process ultimately fail or otherwise finish early, the Administrators currently intend to convene the second meeting of creditors soon after the Sale Process ceases, rather than waiting for the 28 November 2024 deadline. As the Administrators have indicated, it is possible that as part of the Sale Process, a DOCA proposal will be received. An extension to the convening period will ensure that any DOCA proposal can be properly assessed, evaluated and negotiated by the Administrators, to maximise benefit for creditors and other stakeholders. If the Administrators were to recommend that creditors approve a DOCA proposal, it would need to be anticipated that implementing the DOCA will result in returns to creditors greater than under a liquidation scenario. It is the Administrators' current belief that unless a suitable DOCA proposal is received, at the second meeting of creditors, they will recommend that creditors resolve to liquidate the Company;
(e) an ancillary benefit of extending the convening period is that it will allow the Administrators to complete investigations about possible recoveries in a liquidation scenario. This means that even if the Sale Process fails, creditors may still be advantaged by being more fully informed of their options at the second meeting of creditors;
(f) for the reasons set out above, the Administrators consider that an extension to the convening period for three months provides the best opportunity for maximising returns to creditors and is therefore in the interests of creditors. Likewise, it is the Administrators’ belief that the extension will not prejudice any creditor, and the Administrators have to date not received any indication from any creditor that they oppose the granting of the extension in circumstances where reasonable notice has been given to all creditors:
(xv) at the First Meeting, the Administrators informed the creditors present that it was likely the Administrators would apply for an extension to the convening period of three months to allow the Administrators to run the Sale Process. At the time, no creditors expressed an objection.
(xvi) as noted at para 49 above, a notice was sent via email to known creditors of the Company (for which the Administrators hold an email address for) indicating that the Administrators intended make this Application and that a copy of the notice was uploaded to the McGrathNicol Creditors' information page. As at the date of the Smith Affidavit, no creditors have expressed an objection;
(g) the Administrators are informed by representatives of the first ranking secured creditor of the Company, NAB, that it has no opposition to the extension Application;
(h) the proposed extension of the convening period will preserve the possibility for the Company’s remaining employees to retain their employment should a going concern sale be achieved in respect of all or part of the Company's business;
(i) in addition, as a matter of prudence, the Administrators have calculated the estimated amount of priority entitlements that could become payable to priority creditors being employees other than excluded employees (see para 29(c) above) and, potentially, Ms Cowan (see para 29(b) above, subject to the Administrators completing their investigations), should a going concern transaction not be achieved, and the employees be made redundant. The amount of priority entitlements is currently estimated to be $1,637,000. Such claims may be entitled to be satisfied from net circulating asset realisations at the date of the appointment of the Administrators in priority to secured creditors (but subject to the determination of the actual employee entitlements and their priority as the administration progresses);
(j) the Administrators intend to continue to pay rent in respect of the Billson's Beverages Leased Premises and Billson's Beverages Leased Assets;
(k) in addition to no creditors expressing opposition to the Application in substance, the Administrators are also unaware of any creditor expressing opposition with the Application being filed and heard in the Supreme Court of Victoria, given:
(i)
the Company's main operating facilities are located in Beechworth,
Victoria;
(ii) the Administrators are based in McGrathNicol's Melbourne office, and the majority of the McGrathNicol staff engaged by the Administrators to assist with the administration are based in Melbourne;
(iii) the First Meeting of creditors was held virtually, with the notional address for compliance purposes being the Melbourne office of McGrathNicol; and
(iv) the solicitors for the Administrators are based in Melbourne;
(l) the Administrators are not presently aware of any other stakeholder expressing opposition to the extension Application, nor do the Administrators believe there are any stakeholders who may be prejudiced, but has not expressed opposition; and
(m) the Administrators believe an extension of three months to be reasonable in light of the Administrators' Sale Process, and the nature of the business.
Mr Smith states that in light of the above, the Administrators consider that it is in the best interests of the Company’s creditors as a whole for the convening period to be extended by a period of three months.
The Administrators intend to convene the second meeting of creditors as soon as practicable, such that it may be held earlier than 28 November 2024 depending on the outcome of the Sale Process.
Mr Smith states that at the Appointment Date, the Company had 102 permanent and casual employees. The majority of the remaining employees work at the Company's various operating facilities located in Beechworth, Victoria.
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. Ms Bell of counsel, who appeared on behalf of the Administrators, referred to the decision of Middleton J in Strawbridge, Re Virgin Australia Holdings Ltd (admins apptd) (No 2) (‘Strawbridge’),[3] 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:
[3](2020) 144 ACSR 347 (Middleton J) (‘Strawbridge’).
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.[4]
[4](2009) 72 ACSR 352, 355 [14] (Austin J) (‘Re Riviera’). Citations are omitted.
The evidence filed by the Administrators reveals there are a number of reasons for the Application, the most prominent of which is to allow the Administrators sufficient time to negotiate and determine the suitability of a sale of the Company’s business. The authorities dealing with extensions reveal this is a proper purpose for the grant of an extension. In numerous instances, convening periods have been extended to enable the sale of the business.[5]
[5]See the authorities referred to in the extract of Strawbridge in para 56 above.
The Administrators are of the opinion that an extension is warranted to enable the sale of the business which they anticipate may produce the best outcome for all stakeholders (employees, creditors, and shareholders). Mr Smith states that maximising the Sale Process will provide the best opportunity for secured creditors to be paid out.
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 to enable the sale of the business of the company as a going concern, so as to maximise the value of the company’s assets 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’[6] 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.
[6]Daisytek (n 1).
On the return of this Application on 28 August 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 51-53 above form the proper basis for an extension. In addition, if I were not to grant the extension, the Administrators would need to prepare a report to creditors and convene a second meeting of creditors by 28 August 2024 and hold it by no later than 4 September 2024. Even if the creditors were to vote to adjourn the meeting, the meeting would need to resume within 45 days requiring it to be held by 6 November 2024[7] and also require multiple reports to creditors to be prepared for no marginal benefit to creditors. I see no sensible purpose in requiring them to take such a course with all the attendant costs to the administration.
[7]See r75-140(3) Insolvency Practice Rules (Corporations) 2016.
I now recite the orders I made on 28 August 2024:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (‘Act’), the period within which the first and second plaintiffs must convene the second meeting of the creditors of Billson's Beverages Pty Ltd (Administrators Appointed) (ACN 621 093 061) (‘the Company’) is extended up to and including 28 November 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.Within 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 by email where the first and second plaintiffs have an email address for the relevant creditor and otherwise by uploading a copy to the McGrathNicol creditors’ information page at 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 72 hours’ written notice to the plaintiffs.
5.The plaintiffs’ costs of and incidental to this application are costs in the administration of the Company.
6.Liberty to apply is granted to the plaintiffs generally and in particular in respect of any application for a further extension of the convening period.
SCHEDULE OF PARTIES
| S ECI 2024 04470 | |
| BETWEEN: | |
| ROBERT BRUCE SMITH in his capacity as Joint and Several Voluntary Administrator of BILLSON'S BEVERAGES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 621 093 061) | First Plaintiff |
| MATTHEW RUSSELL HUTTON in his capacity as Joint and Several Voluntary Administrator of BILLSON'S BEVERAGES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 621 093 061) | Second Plaintiff |
| BILLSON'S BEVERAGES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 621 093 061) | Third Plaintiff |
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