Re Grocon Pty Ltd (admins apptd) (No 4)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2020 04517

IN THE MATTER of GROCON PTY LTD (ADMINISTRATORS APPOINTED)
(ACN 006 772 238) & ORS (according to the attached Schedule)

CRAIG SHEPARD AND MARK KORDA in their capacity as joint and several voluntary administrators of the THIRD PLAINTIFF (as set out in the attached Schedule)	First Plaintiffs
CRAIG SHEPARD AND ANDREW KNIGHT in their capacity as joint and several voluntary administrators of the FOURTH to EIGHTY NINTH PLAINTIFFS (as set out in the attached Schedule)	Second Plaintiffs
CRAIG PETER SHEPARD, ANDREW LYALL KNIGHT and MARK ANTHONY KORDA in their capacity as joint and several voluntary administrators of the NINETY-FIRST PLAINTIFF	Ninetieth Plaintiffs

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATES OF HEARING:	15 March 2021
DATES OF JUDGMENT:	15 March 2021
DATE OF REASONS:	19 March 2021
CASE MAY BE CITED AS:	Re Grocon Pty Ltd (admins apptd) (No 4)
MEDIUM NEUTRAL CITATION:	[2021] VSC 129

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PRACTICE AND PROCEDURE – Application for joinder to existing proceeding of additional companies placed into administration within a large corporate group – Same administrators appointed to additional companies – Common issues arising involving parties already joined – Additional companies under administration joined to existing proceeding – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 9.06.

CORPORATIONS – Application by administrators to extend previous orders to modify Division 80 of the Insolvency Practice Schedule (Corporations) in Schedule 2 of the Corporations Act 2001 (Cth) to allow for formation of a single committee of inspection for a large group of companies under administration to additional companies within the corporate group placed under administration – Plaintiffs sought orders to be permitted to form single committee of inspection by joint resolution of creditors if deed of company arrangement entered into – Potential of some creditors of companies within the corporate group participating in single committee of inspection and other creditors to companies within the group creating separate committees of inspection impracticable and inefficient – Orders made extending provision for the formation of a single committee of inspection using the mechanism and procedure for nomination to the single committee of inspection – Insolvency Practice Schedule (Corporations) in Schedule 2 of the Corporations Act 2001 (Cth), ss 80-10, 80-15 and 90-15 – Insolvency Practice Rules (Corporations) 2016 (Cth), rr 75-190 and 80-5 – Re Techfront Australia Pty Ltd (admins apptd) [2020] FCA 542.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Fary SC	Norton Rose Fulbright

HIS HONOUR:

This is the fourth application made by administrators relating to the administration of companies in the Grocon Group.[1] On 27 November 2020, the first plaintiffs, Mark Korda and Craig Shepard (‘Grocon Administrators’), were appointed as joint and several voluntary administrators to the third plaintiff, Grocon Pty Ltd (‘Grocon’), pursuant to s 436A of the Corporations Act 2001 (Cth) (‘the Act’). On the same day, the second plaintiffs, Mr Shepard and Andrew Knight were appointed as joint and several administrators of the fourth to forty-first plaintiffs (‘Grocon Companies’). On 10 and 14 December 2020, I made orders on the application of the first and second plaintiffs regarding the conduct of the administration of these companies.
[1]The Grocon Group is a group of 96 companies which include companies incorporated and operating in Australia, the United States and the Middle East. See affidavit of Craig Shepard sworn 7 December 2020, [9]-[11].

On 31 December 2020, Mr Shepard and Mr Knight were appointed as joint and several administrators of the forty-second, forty-third and forty-fourth plaintiffs (‘Northumberland Companies’). On 29 January and 2 February 2021, I made orders joining the Northumberland Companies to this proceeding, extending the convening period for the Northumberland Companies and allowing for creditors to resolve to form a single committee of inspection in relation to all the companies that were under administration within the Grocon Group at that time.

I published reasons for the making of all the orders referred to above which set out the background to the proceeding.[2] These reasons assume familiarity with those earlier reasons.
[2]See Re Grocon Pty Ltd (admins apptd) (No 1) [2020] VSC 833 (‘Grocon No 1’), Re Grocon Pty Ltd (admins apptd) (No 2) [2020] VSC 859 (‘Grocon No 2’) and Re Grocon Pty Ltd (admins apptd) (No 3) [2021] VSC 36 (‘Grocon No 3’).

On 22 February 2021, Mr Korda, Mr Knight and Mr Shepard (‘Grocon Holdings Administrators’) were appointed joint and several administrators of Grocon Group Holdings Pty Ltd (administrators appointed) (ACN 148 964 890) (‘Grocon Holdings’). On the same day, Mr Knight and Mr Shepard (‘Grocon III Administrators’) were appointed joint and several administrators of a further 44 companies within the Grocon Group.[3] These 45 companies will collectively be referred to as the ‘Grocon III Companies’. On 26 February 2021, Mr Knight and Mr Shepard were appointed joint and several administrators of Grocon Property (Vic) Pty Ltd (administrators appointed) (ACN 125 697 850) (‘Grocon Property (Vic)’). All appointments were made pursuant to s 436A of the Act.
[3]These companies are now the Forty-fifth to Eighty-ninth plaintiffs. See the Schedule of Parties annexed to these reasons.

Mr Korda, Mr Knight and Mr Shepard will be referred to collectively in their various capacities as ‘the Administrators’ and all companies within the Grocon Group that are now in administration will be referred to as ‘the Companies’.

On 5 March 2021, an interlocutory process for additional relief was filed in the proceeding seeking:

(a) joinder of the Grocon III Companies, Grocon Property (Vic) and the Grocon Holdings Administrators to this proceeding and leave to file a second further amended originating process reflecting this;

(b) variation of the orders made in this proceeding on 10 December 2020, which were amended by the orders made on 29 January 2021, to include the Grocon III Companies and Grocon Property (Vic), and amendments to the names of the relevant administrators accordingly. These orders relate to the provision of documents by persons wishing to participate in the second meeting of creditors by electronic means only; and

(c) variation of the orders made on 2 February 2021 to include the Grocon III Companies and Grocon Property (Vic), and amendments to the names of the relevant administrators accordingly. These orders relate to the ability of creditors to resolve to form a single committee of inspection for all companies under administration that were party to the proceeding at that time.

Ancillary orders were also sought granting liberty to apply to the plaintiffs or any person with sufficient interest to modify or discharge the orders and the plaintiffs’ costs of the application be costs in the administration of each of the Grocon III Companies and Grocon Property (Vic).

On 15 March 2021, I made orders granting the relief sought and indicated I would publish reasons for the making of those orders at a later date.

Notice of the application

The Australian Securities and Investments Commission (‘ASIC’) was served with a sealed copy of the interlocutory process and affidavit in support of Mr Shepard sworn 5 March 2021 (excluding exhibits) via email on 5 March 2021. As at 11 March 2021, no response had been received from ASIC. A representative of ASIC was present as an observer at the first meetings of creditors of the Grocon III Companies and Grocon Property (Vic).

Daniel Grollo, the sole director of the Companies, was previously married to Katherina Grollo but they are now estranged. Mrs Grollo has asserted an entitlement to property held by certain of the Grocon III Companies which is further detailed below and was put on notice of the application by way of letter to her solicitors dated 4 March 2021.

First meeting of creditors
Grocon III Companies

On 4 March 2021, the first meetings of creditors were held pursuant to s 436E of the Act for the Grocon III Companies. Mr Shepard was Chairman of the meetings which were conducted concurrently. The meetings were attended by the Australian Taxation Office (‘ATO’), related party unsecured creditors, contingent creditors, APN DF2 Project Pty Ltd and the Trust Company (Re Services) Ltd as trustee of the 163 Property Trust, and professional service and investment firms Range Capital Pty Ltd, Clayton Utz and KPMG.

At the first meetings, Mr Shepard informed creditors of the Administrators’ intention to make the application the subject of these reasons and outlined the orders previously made in relation to the Grocon Companies and Northumberland Companies. Mr Shepard indicated to creditors that no extension of the convening period would be sought and that a final draft deed of company arrangement (‘DOCA’) proposal (‘DOCA proposal’) had been received by the Administrators. Further, the Grocon III Administrators did not recommend the formation of committees of inspection for the Grocon III Companies and strongly encouraged creditors to form a single committee of inspection at the second meeting of creditors for any company which voted in favour of executing a DOCA (assuming that the Court would make orders allowing such a course to be adopted). No objections or questions were raised by any creditors and no resolution was proposed by creditors for the formation of any committee(s) of inspection.

Five secured creditors did not attend the first meetings of creditors for the Grocon III Companies: Bank of Queensland Ltd, Tianlong Ribbon Pty Ltd, AIG Australia Ltd, Swiss Re International SE and Westpac Administration Pty Ltd. These secured creditors were notified by email on 10 March 2021 of the application. As at 11 March 2021, no responses had been received.

Grocon Property (Vic)

On 11 March 2021, the first meeting of creditors for Grocon Property (Vic) was held. The ATO and Charter Keck Kramer, who are creditors, attended the meeting. Mr Shepard was also the Chairman of this meeting and, as was the case with the creditors of the Grocon III Companies, he informed creditors of the Administrators’ intention to make this application and the orders previously made in the proceeding.

No objections or questions were raised by creditors in relation to the orders sought in the application and creditors did not resolve to appoint a committee of inspection.

Evidence in support of the application

The interlocutory process was supported by an affidavit of Mr Shepard sworn 5 March 2021 (‘Sixth Shepard Affidavit’). The plaintiffs rely on this and the other five affidavits sworn by Mr Shepard in the proceeding. The plaintiffs also rely on an affidavit of Leo Freckelton, a solicitor employed by Norton Rose Fulbright Australia, affirmed 11 March 2021.

The Grocon III Companies and Grocon Property (Vic)

Mr Shepard deposes that each of the Grocon III Companies and Grocon Property (Vic) are incorporated in Australia and understands from managers of the Grocon Group that Grocon International Investments Pty Ltd and Grocon International Pty Ltd are also holding companies of international entities incorporated in the United States of America and Dubai respectively. Mr Grollo is the sole director of each of the Grocon III Companies and Grocon Property (Vic).

Grocon Holdings is the ultimate holding company of the Grocon Group and the head of the income tax consolidated group and GST Group. Mr Shepard understands from his preliminary investigations that a majority, if not all, of the Grocon III Companies and Grocon Property (Vic) are part of those respective groups. Entities within the GST group are jointly and severally liable for the tax obligations of other entities within the GST group.

Each of the Grocon III Companies and Grocon Property (Vic) ceased trading prior to the appointment of administrators. None of the companies are lessees of real or personal property save for Grocon Constructors (NSW) Pty Ltd (‘Grocon Constructors (NSW)’), which held a lease of office premises at Legion House, 161 Castlereagh St, Sydney, New South Wales. On 26 February 2021, the Grocon III Administrators gave notice to the landlord of that property that pursuant to s 443B(2)[4] of the Act that the administrators did not intend to exercise any rights in respect of the premises.
[4]This appears to be a typographical error in the Sixth Shepard affidavit as the context would indicate that the Grocon III Administrators provided a notice under s 443B(3)(b) of the Act.

Four of the Grocon III Companies, although no longer trading, continue to be counterparties to contractual arrangements with respect to ‘The Ribbon’ hotel project in Darling Harbour, Sydney. Those companies are:

(a) Grocon Constructors (NSW);

(b) Grocon (Darling Harbour) Pty Ltd;

(c) Grocon (Darling Harbour) Holdings Pty Ltd; and

(d) Grocon (Darling Harbour) Developments Pty Ltd.

Mr Shepard deposes that the Grocon III Administrators are in the process of negotiating the novation of the relevant subcontracts to the construction company Probuild and that recoveries of amounts outstanding to the relevant Grocon III Companies under the subcontracts will also be undertaken by the Grocon III Administrators.

Grocon Constructors (NSW) continues as a respondent to litigation in both the Victorian Registry of the Federal Court of Australia (‘Hastie Litigation’) and the Supreme Court of New South Wales. The litigation was stayed pursuant to s 440D(1) of the Act upon the appointment of the Grocon III Administrators and that litigation will only be able to proceed with the consent of the Grocon III Administrators or leave being granted by the Court pursuant to s 440D(1). Mr Shepard deposes that he is aware that the applicants in the Hastie Litigation intend to proceed with the litigation.

Grocon Holdings is a plaintiff in a Supreme Court of New South Wales proceeding (‘Central Barangaroo Litigation’) along with Grocon (CB) Developments Pty Ltd and Grocon Developments Group Pty Ltd (neither of which companies are in voluntary administration). The Grocon Holdings Administrators are currently considering how to proceed in the Central Barangaroo Litigation. The matter is next before the New South Wales Supreme Court on 9 April 2021.

Asset position

Mr Shepard states that the administrators of the Grocon III Companies and Grocon Property (Vic) have not completed their investigations but to date have identified a number of Grocon III Companies as being registered proprietors of the following properties:

(a) Grocon ET 80 Pty Ltd (‘Grocon ET 80’) at an apartment complex known as the ‘Eureka Tower’ in Melbourne (‘Eureka Tower’) of a sub-penthouse apartment on level 80 (‘Eureka Apartment’) together with eight car parks;

(b) Grocon ET Apartments Pty Ltd (‘Grocon ET Apartments’) of storage cages located at the Eureka Tower;

(c) Grocon Riverside Development Pty Ltd (‘Grocon Riverside’);

(i) of premises located on the second floor of the Eureka Tower. This premise is currently subject to a month to month lease to an unrelated third party; and

(ii) shares in Eureka Tower Pty Ltd, which is the registered proprietor of two parcels of real property at the Eureka Tower. Mr Shepard understands that the two parcels of real property are ‘niche’ parcels and likely to be of negligible realisable value with limited future use. The unique parcels are small outdoor areas at the Eureka Tower that are surrounded by common property and have significant issues in respect of access. The Grocon III Administrators understand that other parcels of real property, consisting of ledges, shoulders or extensions of the Eureka Tower controlled by its Owners Corporation, are used for window cleaning purposes and contain tracks for a building maintenance unit.

(d) Grocon Property (Vic) is the registered proprietor of the rooftop of the Eureka Tower (‘Eureka Rooftop’). The Eureka Rooftop is an area of the Eureka Tower building that is part owned by the Owners Corporation for the complex and part owned by Grocon Property (Vic), which leases it to a third party for the storage of telecommunications equipment.

It is Mr Shepard’s understanding that other than the companies mentioned in paragraphs 19 to 24 above, all other Grocon III Companies are dormant and were not undertaking any business activities or holding any assets at the time they were placed into administration.

Assertion of interests in property held by Grocon III Companies

Mr Shepard states that Katherina Grollo, through her solicitors, has asserted an entitlement to the Eureka Tower property held by Grocon ET 80, Grocon ET Apartments, and Grocon Property (Vic) (‘Eureka Assets’). The administrators of the Grocon III Companies and Grocon Property (Vic) have responded to those claims and state that, amongst other things, neither Mr Grollo nor Katherina Grollo are shareholders in the companies that hold the Eureka Assets and that these companies are subsidiaries of entities in voluntary administration and ultimately held by Grocon, which has also been placed into administration. As this issue is of peripheral relevance to the current application I will not elaborate further on the evidence in this regard.

Mrs Grollo was provided with notice of the application the subject of these reasons but did not appear.

Creditors

Reports on company activities and property (ROCAPs) have been received from Mr Grollo for all the Grocon III Companies and Grocon Property (Vic).

Mr Shepard was not able to confirm the accuracy of the creditor estimates provided in the ROCAPs by reason of the short period from receipt to the hearing of the application, however, by reference to the ROCAPs, observed that:

(a) the ATO is a significant creditor for each of the Grocon III Companies with debt totalling $14,734,710.60, including a general interest charge of $678,335.60. Mr Shepard understands that this is the identical to the debt owed to the ATO by each of the companies within the Grocon Group and is consistent with his understanding of the joint and several liability of all companies within the GST group; and

(b) the remaining third party creditors for each of the Grocon III Companies appear to be a combination of:

(iii) other companies within the Grocon Group relating to the various intercompany loan arrangements;

(iv) financial institutions;

(v) professional services firms;

(vi) trade creditors; and

(vii) utilities providers relevant to the construction industries.

Secured creditors

Mr Shepard states that Grocon ET 80 is indebted for $12,029,640.73 to the Bank of Queensland Ltd, which holds a registered mortgage over the Eureka Apartment.

There are mortgages registered on title:

(a) in favour of BWA Custodians Ltd registered over the premises at the second floor of the Eureka Tower, which is owned by Grocon Riverside; and

(b) in favour of One Managed Investment Funds Ltd over the Eureka Rooftop, which is owned by Grocon Property (Vic);

however, Mr Shepard is informed by management of the Grocon Group that in both instances, while the mortgages remain on title, the secured debt has been paid out and the mortgages await discharge.

The Administrators have undertaken searches of the Personal Property Securities Register (‘PPSR’) which have disclosed a number of All present and after-acquired property (‘All-PAP’) security interests over the following entities:

(a) Grocon Riverside and Grocon ET Apartments in favour of Westpac Administration 2 Pty Ltd. The Grocon III Administrators contend this has been paid out and understand the registration will be removed;

(b) Grocon Developments (Parklands) Pty Ltd in favour of ANZ Fiduciary Services Pty Ltd (‘ANZ’). ANZ has confirmed that there is no longer a debt payable and as such will cause the registration to be removed;

(c) Grocon (Darling Harbour) Pty Ltd in favour of Tianlong Ribbon Pty Ltd;

(d) Grocon Constructors (NSW) Pty Ltd in favour of AIG Australia Limited; and

(e) Grocon Holdings in favour of Swiss Re International SE.

The Grocon III Administrators have also identified a number of registrations on the PPSR where the granters are Grocon Constructors (NSW) Pty Ltd and Grocon (Parklands) Pty Ltd which are in relation to collateral in ‘Motor Vehicles’, ‘Other Goods’ and/or ‘Chattel Paper’ and ‘Negotiable Instrument’ and a number of registrations over CR 163 Pty Ltd which are described as relating ‘General Intangible’, ‘Intermediated Security’ and ‘Investment Instrument’ interests.

The PPSR search undertaken in respect of Grocon Property (Vic) disclosed no security interests granted by the company.

Bond holders

Grocon Holdings, Grocon (Darling Harbour) Pty Ltd, Grocon Constructors (NSW) and Grocon (CB) Management Pty Ltd act as sureties for performance bonds which are yet to be called upon and remain contingent liabilities of the respective companies.

Grocon Holdings also holds contingent liabilities to indemnify performance bond providers for companies in the Grocon Group. It currently holds a liability to Swiss Re International, which has an All-PAP registration on the PPSR in this regard.

Intercompany Loan Liabilities

Mr Shepard states that the Grocon III Companies and Grocon Property (Vic) are party to the same intercompany financial arrangements as other entities in the Grocon Group for which Grocon undertook a centralised treasury function.[5] The intercompany transactions are recorded in spreadsheets and show that:
[5]See Grocon No 1 (n 2) [21]-[40].

(a) there are various liabilities owed by the Grocon III Companies to other Grocon Group companies, both within the Grocon III Companies and within the larger Grocon Group;

(b) Grocon Group companies (both within the Grocon III Companies and within the larger Grocon Group) owe various amounts to entities comprising the Grocon III Companies;

(c) the most significant intercompany loans (both as credits and debits) are recorded in the books and records of Grocon Holdings;

(d) there are only six Grocon III Companies that do not appear to have any liabilities for intercompany loans, which is consistent with these companies being dormant entities; and

(e) Grocon Property (Vic) has four intercompany debts owing to other Grocon Group companies totalling approximately $1,388,729. It does not have any intercompany debtors.

Third party unsecured creditors

The preliminary investigations of the administrators of the Grocon III Companies and Grocon Property (Vic) indicate that, while the companies have their own unique creditors, there remains some cross-exposure with other entities in the Grocon Group, which includes the claim of the ATO for $14.7 million.

Mr Shepard states that eight of the Grocon III Companies have approximately 64 third party unsecured creditors in the nature of professional services creditors, utilities and telecommunications providers, government regulators and other statutory bodies such as the ATO and trade creditors in the construction industry.

Employees

Except for Grocon Constructors (NSW), the Grocon III Companies and Grocon Property (Vic) do not have any employees and did not have any employees prior to the appointment of the Administrators. The employment of all employees of Grocon Constructors (NSW) was terminated prior to the appointment of administrators. All of their statutory entitlements were paid prior to the Administrators’ appointment except for two employees. One employee is working out a notice period. The other employee is yet to be paid a contractual bonus, which is contingent on the outcome of the Central Barangaroo Litigation and, if paid, will be paid as part of any single DOCA on a pooled basis, or multiple DOCAs on an interlocking basis that the creditors of Grocon Constructors (NSW) resolve to execute.

Tasks undertaken to date

In relation to the Grocon III Companies and Grocon Property (Vic) companies, the Administrators have undertaken the same tasks as outlined in respect of the Grocon Companies and Northumberland Companies in the Third and Fourth Shepard Affidavits.[6]
[6]See Grocon No 2 (n 2) [17] and Sixth Shepard affidavit [50]-[51].

Mr Shepard states that the Administrators have received a confidential DOCA proposal from Mr Grollo and the Administrators of the companies the subject of the confidential proposal have not concluded their review. As such, the Administrators cannot comment on what their recommendation to creditors may be.

Joinder

The plaintiffs apply for an order pursuant to r 9.06(b)(i) of the Supreme Court (General Civil Procedure) Rules (2015) (‘Rules’) that each of the Grocon III Companies, Grocon Property (Vic) and the Grocon Holdings Administrators be added to the proceedings as the Forty-fifth to Ninety-first plaintiffs and for the plaintiffs to have leave to file and serve a further amended originating process reflecting this joinder. The need for the joinder and the amendment arises by reason that the these companies went into administration subsequent to the prior applications in this proceeding.

The plaintiffs submit that the companies and administrators should be joined as:

(a) the Administrators are continuing their discussions with Mr Grollo with a view to securing a viable DOCA proposal which the Administrators understand is now intended to include a single pooled DOCA, or multiple interlocking DOCAs, for each of the Grocon Companies, Northumberland Companies, Grocon III Companies, and Grocon Property (Vic);

(b) the Administrators have now received a confidential DOCA proposal from Mr Grollo which they are in the process of reviewing but are not yet in a position to comment on further;

(c) the Administrators intend to hold the second meetings of creditors of the Grocon III Companies and Grocon Property (Vic) on the same date as the second meetings of creditors of the Grocon Companies and Northumberland Companies;

(d) the Administrators intend to employ the same administrative and procedural steps for the second meetings of creditors of the Grocon III Companies and Grocon Property (Vic) as those in respect of the Grocon Companies and Northumberland Companies recorded in the orders I made on 10 December 2020 and varied on 27 January 2021, save for the amendments sought in this application to have those orders include Grocon III Companies and Grocon Property (Vic); and

(e) the Administrators are seeking a variation to the 2 February 2021 orders for the establishment of a single committee of inspection for the Companies in respect of which the creditors resolve to enter into a single pooled DOCA or multiple interlocking DOCAs, with a view to extending such orders to also include the Grocon III Companies and Grocon Property (Vic) (as applicable).

Consideration

I consider that it is appropriate to make the orders sought for joinder of Grocon III Companies, Grocon Property (Vic) and the Grocon Holdings Administrators. The position is entirely akin to that the subject of my consideration in Grocon No 3[7] and my reasons given there are apt for application here. In succinct terms, it is clear that common issues have arisen and will continue to arise in the course of the administrations and, as was the case the subject of my reasons in Grocon No 3, the companies which have now gone into administration subsequent to that application should now also be brought into the proceeding and the originating process be amended accordingly. I made orders accordingly.
[7](n 2) [27]-[30].

Orders sought relating to the conduct of the second meetings of creditors

Mr Shepard states that the same orders as previously granted in this proceeding regarding the conduct of the second meetings of creditors by electronic means are sought here. There said to be uncertainties regarding restrictions that may be implemented on short notice within Victoria, including the number of staff that can attend offices and the number of creditors and observers that may be able to attend meetings in person for the 88 companies now under administration.

In the circumstances, the Administrators consider it appropriate to maintain their intention to:

(a) conduct the second meetings of creditors of the Companies concurrently with the use of virtual technology;

(b) seek confirmation from all creditors of the Companies that they will participate in those meetings electronically; and

(c) facilitate the conduct of those concurrent meetings by the orders sought in this application.

Mr Shepard states that it is anticipated that all of the second meetings of creditors for the companies in the Grocon Group under administration, including the Grocon III Companies and Grocon Property (Vic) will be conducted on 30 March 2021.

Consideration

I refer to the discussion concerning this subject of the conduct of the administrations in paragraphs 40 to 50 of Grocon No 3.[8] I consider that this application gives rise to identical reasoning and consideration. There are no relevant differences in the circumstances applying to the companies the subject of this application and I will make orders in the same terms that I made in this regard and which appear at Annexure 1, and elaborated upon in Annexure A to those orders, in Grocon No 3.
[8](n 2).

Orders sought regarding the single committee of inspection

The reasons the Administrators seek the orders to enable creditors to resolve that a single committee of inspection to be formed for all companies who execute a DOCA remain unchanged from the previous occasion[9] and that they seek that the orders apply equally to creditors of any of the Grocon III Companies and/or Grocon Property (Vic) which may resolve to execute a DOCA, be it on a pooled or interlocking basis.
[9]See Grocon No 3 (n 2) [51]-[62].

Mr Shepard states that the mechanism and process through which any single committee of inspection is to be formed remains the same as that proposed on the previous occasion.[10] Further, Mr Shepard considers that it would be appropriate for a single committee of inspection to be appointed to those Companies (including the Grocon III Companies and Grocon Property (Vic)) for which either a single pooled DOCA is, or multiple interlocking DOCAs are, executed in order to facilitate efficient creditor oversight and decision making under the DOCA(s). These orders are being sought as a result of the significant number of creditors and cross-exposure between the Companies.
[10]See Ibid Annexure 2.

The Administrators consider that it is even less practicable and less cost effective for the them to employ the prescribed procedures in which creditors of each of the relevant Grocon III Companies and Grocon Property (Vic) would vote at the second meetings of those companies for the formation of separate committees of inspection for each such company for which entry into the foreshadowed DOCA(s) is approved, while the creditors of the Grocon Companies and Northumberland Companies are in a position to vote for the creation of a single committee of inspection.

Finally, Mr Shepard considers that requiring creditors of Grocon III and Grocon Property (Vic) to vote in the traditional manner prescribed by the legislation is likely to produce duplicative procedures and inconsistency, resulting in unequal treatment of creditors.

The Administrators now seek orders which extend and apply paragraphs 3 to 6 of the 2 February 2021 orders[11] to each of the Grocon III Companies and Grocon Property (Vic), so as to facilitate the nomination to, and participation in, the single committee of inspection by creditors of some or all of the Companies upon the passing of a resolution by the creditors of any of those entities (‘DOCA Entities’) to execute a either a singled pooled DOCA or multiple ‘interlocking’ DOCAs.
[11]Ibid.

As has been mentioned, the Administrators are continuing their discussions with Mr Grollo with a view to securing a viable DOCA proposal which the Administrators understand, based on discussions with Mr Grollo, will include a single pooled DOCA, or multiple interlocking DOCAs, for each of the Grocon Companies, Northumberland Companies, Grocon III Companies, and Grocon Property (Vic). The Administrators have now received a confidential DOCA proposal from Mr Grollo which they are in the process of reviewing but are not yet in a position to comment on further.

The plaintiffs submitted that in determining the utility to the administrations of making such an order the Court can, and should, have regard to the opinion of the administrators. Mr Shepard deposes that, as the Grocon III Companies and Grocon Property (Vic) will participate in the concurrent second meetings of creditors, the Administrators are of the opinion that:

(a) the procedure provided for in the 2 February 2021 orders will highlight the importance of the committee of inspection as a mechanism to ensure creditor representation from the DOCA Entities while balancing the practicalities and cost effectiveness of the administrations given the form of the DOCA proposal;

(b) it would be appropriate for a single committee of inspection to be appointed to the Companies for which either a single pooled DOCA is, or multiple interlocking DOCAs are, executed in order to facilitate efficient creditor oversight and decision making under the DOCA(s). There are a significant number of creditors and cross-exposure between the Companies;

(c) it is even less practicable and not cost effective for the Administrators to employ the prescribed procedures in which creditors of each of the relevant Grocon III Companies and Grocon Property (Vic) would vote at the respective second meetings of those companies for the formation of separate committees of inspection for each company for which entry into a DOCA is approved, while the creditors of the Grocon Companies and Northumberland Companies are in a position to vote for the creation of a single committee of inspection; and

(d) requiring creditors of Grocon III and Grocon Property (Vic) to vote in the traditional manner is likely to unnecessary duplication and inconsistency resulting in unequal treatment of creditors.

The plaintiffs further submitted that in the absence of the orders sought by the Administrators, creditors of the DOCA Entities and the members of a single committee of inspection may be left in doubt as to the validity of the appointment of creditors of Grocon III Companies or Grocon Property (Vic) to the single committee of inspection and, consequently, the validity of any resolution passed by the single committee of inspection. It was submitted that, as recognised by Farrell J in Re Techfront Australia Pty Ltd (admins apptd)[12], this should not be the case and administrators (and creditors) should not be left in doubt as to whether a meeting has been validly convened and held. If left unclarified, avenues of dispute about the validity of resolutions remain and may necessitate further applications for validation under s 1322(4) of the Act.
[12][2020] FCA 542.

Consideration

The consideration of the issue as to whether prescribed provisions should be modified so as to allow the creditors to determine that there be a single committee of inspection in the event that the creditors of the Companies resolve to enter into DOCAs either of a pooled or interlocking basis are the subject of consideration in paragraphs 51 to 62 in Grocon No 3.[13] The same circumstances and considerations apply in respect of the application made in that regard concerning the Grocon III Companies and Grocon Property (Vic) administrations and in fact the addition of the further 46 companies to those within the Grocon Group under administration means that adhering to the prescribed regime of singular committees of inspection is not feasible or practicable. Resolution of this issue involves a consideration of what amounts to the diminution of the entitlements of the creditors for each of the Companies to form a committee for each company, against the benefits to the creditors and the conduct of the administrations of the expedition and economy which ensue from the formation of a single committee of inspection.
[13](n 2).

I consider that when that exercise is undertaken that the result is that the benefits of adopting the course of a single committee of inspection regime outweigh the individual entitlements of the creditors. I repeat the observations that I made in Grocon No 3[14] that if creditors are disgruntled with the resulting process, application can be made to the Court varying the orders that have been made if it is considered that there has been an unwarranted and significant infringement of their entitlements in this regard.
[14]Ibid [62].

For completeness, the orders that I made on 15 March 2021 were as follows:

THE COURT DIRECTS THAT:
1.All persons shall appear, give evidence and make submissions in this proceeding this day by audio link.
2.The First Plaintiffs, Second Plaintiffs and Ninetieth Plaintiffs (collectively referred to as ‘Administrators’) take all reasonable steps to cause notice of the Court’s orders to be published on the Kordamentha website, set up for the purposes of the administration of the Grocon Group (as defined in paragraph 9 of the affidavit of Craig Peter Shepard sworn 7 December 2020), within one (1) business day after the making of these orders.

THE COURT ORDERS THAT:
3. Pursuant to rule 9.06(b) of the Rules:
a.each of entities listed in Annexure A be joined to the proceedings as the Forty Fifth to Eighty-Eighth Plaintiffs and the Ninety-First Plaintiff (collectively referred to as the ‘Grocon III Companies’);
b.the Eighty-Ninth Plaintiff listed in Annexure A be joined to the proceedings (‘Grocon Property (Vic)’); and
c.Craig Peter Shepard, Andrew Lyall Knight and Mark Anthony Korda in their capacity as joint and several voluntary administrators of the Ninety-First Plaintiff be joined to the proceedings as the Ninetieth Plaintiff.

4.Pursuant to rule 36.01 of the Rules that the Plaintiffs have leave to file and serve a second further amended originating process in the form of the amended document exhibited as “CPS-28” to the Affidavit of Craig Peter Shepard sworn on 5 March 2021 and filed in this proceeding.
5.Subject to Order 3 above, Paragraphs 7 to 9 of the orders made 10 December 2020 (as amended by order 7 of the orders made 29 January 2021) be varied such that:
a.the words “and all the Grocon III Companies and Grocon Property (Vic)” be inserted following each reference to the “Northumberland Companies”; and
b.each reference to the “First Plaintiffs and the Second Plaintiffs” be deleted and replaced with the phrase “First Plaintiffs, Second Plaintiffs and Ninetieth Plaintiffs”.

6.Subject to Order 3 above, paragraphs 3 and 4 of the orders made 2 February 2021 be varied such that:
a.the reference in paragraph 3 to “Forty-Fourth Plaintiffs” be deleted and replaced with the phrase “Eighty-Eighth Plaintiffs and the Ninety-First Plaintiff”; and
b.the reference to “First and/or Second Plaintiffs” in paragraph 3(c)(iii) is deleted and replaced with “First, Second and/or Ninetieth Plaintiffs”; and
c.the reference in paragraph 4 to the “Administrators” is deleted and replaced with “First, Second and/or Ninetieth Plaintiffs”.

7.Liberty be granted to any person who can demonstrate sufficient interest to discharge or modify these orders on 3 business days’ notice to the Plaintiffs and to the Registry of the Commercial Court.

8.Liberty be granted to the Plaintiffs to apply on 1 business day’s written notice to the Court in relation to any variation or discharge of the Court’s orders.
9.The Plaintiffs’ costs of this application be costs in the administration of each of the Grocon III Companies and Grocon Property (Vic), jointly and severally.

SCHEDULE OF PARTIES

CRAIG PETER SHEPARD and MARK ANTHONY KORDA in their capacity as Joint and Several Voluntary Administrators of the Third Plaintiff	First plaintiffs
CRAIG SHEPARD and ANDREW KNIGHT in their capacity as joint and several voluntary administrators of the Fourth to Forty-fourth Plaintiffs	Second plaintiffs
GROCON PTY LTD (ACN 006 772 238) (Administrators Appointed)	Third plaintiff
GROCON BUILDERS (VIC) PTY LTD (ACN 133 299 162) (Administrators Appointed)	Fourth plaintiff
GROCON SERVICES PTY LTD (ACN 143 758 605) (Administrators Appointed)	Fifth plaintiff
61 LT COLLINS STREET PTY LTD (ACN 079 970 479) (Administrators Appointed)	Sixth plaintiff
BELGRAVE STREET DEVELOPMENTS PTY LTD (ACN 606 647 072) (Administrators Appointed)	Seventh plaintiff
GROCON (FAIRFIELD) PTY LTD (ACN 137 871 231) (Administrators Appointed)	Eighth plaintiff
GROCON (PARKLANDS) HOLDINGS PTY LTD (ACN 148 964 836) (Administrators Appointed)	Ninth plaintiff
QV NO 1 PTY LTD (ACN 092 065 248) (Administrators Appointed)	Tenth plaintiff
QV NO 2 PTY LTD (ACN 092 065 257) (Administrators Appointed)	Eleventh plaintiff
QV NO 3 PTY LTD (ACN 092 065 284) (Administrators Appointed)	Twelfth plaintiff
QV NO 4 PTY LTD (ACN 092 065 319) (Administrators Appointed)	Thirteenth plaintiff
QV NO 5 PTY LTD (ACN 092 065 337) (Administrators Appointed)	Fourteenth plaintiff
GROCON OPERATIONS (ACN 113 588 702) (Administrators Appointed)	Fifteenth plaintiff
GROCON DEVELOPMENTS NSW PTY LTD (ACN 115 182 682) (Administrators Appointed)	Sixteenth plaintiff
GROCON (VICTORIA STREET) PTY LTD (ACN 120 542 707) (Administrators Appointed)	Seventeenth plaintiff
GROCON DEVELOPMENTS (BOX HILL) PTY LTD (ACN 152 818 221) (Administrators Appointed)	Eighteenth plaintiff
GROCON (480 QUEEN STREET) PTY LTD (ACN 149 586 603) (Administrators Appointed)	Nineteenth plaintiff
GROCON (SCOTS CHURCH) PTY LTD (ACN 143 388 087) (Administrators Appointed)	Twentieth plaintiff
QV PTY LTD (ACN 092 065 195) (Administrators Appointed)	Twenty-first plaintiff
GROCON (BOUVERIE STREET) PTY LTD (ACN 079 970 353) (Administrators Appointed)	Twenty-second plaintiff
GROCON (PITT STREET) DEVELOPMENTS PTY LTD (ACN 626 888 588) (Administrators Appointed)	Twenty-third plaintiff
GROCON DEVELOPMENTS (55 ELIZABETH ST) PTY LTD (ACN 149 678 482) (Administrators Appointed)	Twenty-fourth plaintiff
GROCON CONSTRUCTORS (SA) PTY LTD (ACN 137 871 213) (Administrators Appointed)	Twenty-fifth plaintiff
GROCON (BAROONA RD) HOLDINGS PTY LTD (ACN 617 571 007) (Administrators Appointed)	Twenty-sixth plaintiff
GROCON (BOUVERIE ST) HOLDINGS PTY LTD (ACN 092 065 355) (Administrators Appointed)	Twenty-seventh plaintiff
GROCON (CB) DEVELOPMENT MANAGER PTY LTD (ACN 615 590 684) (Administrators Appointed)	Twenty-eighth plaintiff
GROCON (SPRING STREET) PTY LTD (ACN 151 382 722) (Administrators Appointed)	Twenty-ninth plaintiff
GROCON QV INVESTMENTS PTY LTD (ACN 100 045 574) (Administrators Appointed)	Thirtieth plaintiff
QV PROPERTY MANAGEMENT PTY LTD (ACN 104 652 913) (Administrators Appointed)	Thirty-first plaintiff
GROCON (PIXEL) PTY LTD (ACN 144 954 487) (Administrators Appointed)	Thirty-second plaintiff
GROCON (SWANSTON SQUARE) HOLDINGS PTY LTD (ACN 158 618 841) (Administrators Appointed)	Thirty-third plaintiff
GROCON (CARLTON BREWERY) DEVELOPMENTS PTY LTD (ACN 158 619 053) (Administrators Appointed)	Thirty-fourth plaintiff
GROCON (SQ STAGE 2) DEVELOPMENTS PTY LTD (ACN 124 614 704) (Administrators Appointed)	Thirty-fifth plaintiff
GROCON (VICTORIA STREET) DEVELOPMENTS PTY LTD (ACN 126 741 802) (Administrators Appointed)	Thirty-sixth plaintiff
GROCON (FCAD) PTY LTD (ACN 143 621 514) (Administrators Appointed)	Thirty-seventh plaintiff
GROCON (CASTLEREAGH ST, NSW) PTY LTD (ACN 094 111 510) (Administrators Appointed)	Thirty-eighth plaintiff
GROCON DEVELOPMENT HOLDINGS PTY LTD (ACN 133 519 114) (Administrators Appointed)	Thirty-ninth plaintiff
GROCON (BELGRAVE ST) DEVELOPER PTY LTD (ACN 617 489 639) (Administrators Appointed)	Fortieth plaintiff
GROCON (FAIRFIELD) DEVELOPER PTY LTD (ACN 145 290 795) (Administrators Appointed)	Forty-first plaintiff
GROCON CONTRACTORS PTY LTD (ACN 006 703 091) (Administrators Appointed)	Forty-second plaintiff
GROCON CONTRACTORS (VICTORIA) PTY LTD (ACN 148 006 624) (Administrators Appointed)	Forty-third plaintiff
GROCON (NORTHUMBERLAND ST) DEVELOPER PTY LTD (ACN 612 370 966) (Administrators Appointed)	Forty-fourth plaintiff
Grocon (CB) JV Holdings Pty Ltd (ACN 627 007 078) (Administrators Appointed)	Forty-fifth plaintiff
Grocon Constructors (NSW) Pty Ltd (ACN 132 035 280) (Administrators Appointed)	Forty-sixth plaintiff
Grocon (SQ Stage 2) Holdings Pty Ltd (ACN 600 071 761) (Administrators Appointed)	Forty-seventh plaintiff
Grocon (Darling Harbour) Developments Pty Ltd (ACN 603 512 527) (Administrators Appointed) in its own capacity and as trustee of Darling Harbour Trust ABN 94 272 453 041	Forty-eighth plaintiff
Grocon (Darling Harbour) Pty Ltd (ACN 158 135 927) (Administrators Appointed)	Forty-ninth plaintiff
Grocon (Darling Harbour) Holdings Pty Ltd (ACN 603 512 518) (Administrators Appointed)	Fiftieth plaintiff
Grocon Developments (Parklands) Pty Ltd (ACN 142 747 046) (Administrators Appointed)	Fifty-first plaintiff
Grocon ET 80 Pty Ltd (ACN 081 087 738) (Administrators Appointed)	Fifty-second plaintiff
Grocon ET Apartments Pty Ltd (ACN 124 669 361) (Administrators Appointed)	Fifty-third plaintiff
Grocon Riverside Development Pty Ltd (ACN 086 827 661) (Administrators Appointed)	Fifty-fourth plaintiff
Grocon Equity Pty Ltd (ACN 092 670 936) (Administrators Appointed)	Fifty-fifth plaintiff
Grocon (Parklands) Pty Ltd (ACN 149 522 458) (Administrators Appointed)	Fifty-sixth plaintiff
Grocon (Wickham St) Developer Pty Ltd (ACN 125 697 841) (Administrators Appointed)	Fifty-seventh plaintiff
Grocon (Burleigh Rd) Developer Pty Ltd (ACN 622 276 475) (Administrators Appointed)	Fifty-eighth plaintiff
Grocon (288 Exhibition Street) Pty Ltd (ACN 159 477 513) (Administrators Appointed)	Fifty-ninth plaintiff
Grocon Constructors (VBRR) Pty Ltd (ACN 135 828 910) (Administrators Appointed)	Sixtieth plaintiff
Grocon (South Melbourne) Developer Pty Ltd (ACN 619 133 390) (Administrators Appointed)	Sixty-first plaintiff
Grocon (South Melbourne) Holdings Pty Ltd (ACN 619 121 694) (Administrators Appointed)	Sixty-second plaintiff
iO Centre for Digital Culture Pty Ltd (ACN 615 554 517) (Administrators Appointed)	Sixty-third plaintiff
A.C.N. 627 016 335 Pty Ltd (ACN 627 016 335) (Administrators Appointed)	Sixty-fourth plaintiff
Denmark Street Developments Pty Ltd (ACN 614 115 141) (Administrators Appointed)	Sixty-fifth plaintiff
Denmark Street Holdings Pty Ltd (ACN 614 113 638) (Administrators Appointed)	Sixty-sixth plaintiff
Grocon (St Leonards) Holdings Pty Ltd (ACN 094 605 222) (Administrators Appointed)	Sixty-seventh plaintiff
QV Custodian Pty Ltd (ACN 104 877 045) (Administrators Appointed)	Sixty-eighth plaintiff
Grocon (CB) Holdings Pty Ltd (ACN 615 036 489) (Administrators Appointed)	Sixty-ninth plaintiff
Grocon (CB) Management Pty Ltd (ACN 615 035 937) (Administrators Appointed)	Seventieth plaintiff
Grocon (Spring Street) Holdings Pty Ltd (ACN 087 004 706) (Administrators Appointed)	Seventy-first plaintiff
GRD Real Estate Pty Ltd (ACN 079 970 264) (Administrators Appointed)	Seventy-second plaintiff
QV Carpark Pty Ltd (ACN 125 718 390) (Administrators Appointed)	Seventy-third plaintiff
Grocon (Victoria Street) Holdings Pty Ltd (ACN 126 741 759) (Administrators Appointed)	Seventy-fourth plaintiff
Grocon QV Holdings No. 2 Pty Ltd (ACN 100 486 084) (Administrators Appointed) in its own capacity and as trustee of Grocon QV Holding Trust 2 ABN 15 821 270 611	Seventy-fifth plaintiff
Grocon (Gaffney Street, Coburg) Pty Ltd (ACN 100 341 259) (Administrators Appointed)	Seventy-sixth plaintiff
Grocon QV Holdings No. 3 Pty Ltd (ACN 100 486 075) (Administrators Appointed) in its own capacity and as trustee of Grocon Holding Trust ABN 92 198 367 532	Seventy-seventh plaintiff
Grocon Developments VIC Pty Ltd (ACN 119 214 103) (Administrators Appointed)	Seventh-eighth plaintiff
Grocon QV Holdings No. 4 Pty Ltd (ACN 100 486 066) (Administrators Appointed) in its own capacity and as trustee of Grocon Holding Trust 15 929 038 006	Seventy-ninth plaintiff
Grocon International Investments Pty Ltd (ACN 071 960 908) (Administrators Appointed)	Eightieth plaintiff
Grocon QV Holdings No. 5 Pty Ltd (ACN 100 486 093) (Administrators Appointed) in its own capacity and as trustee of Grocon Holding Trust ABN 92 116 249 170	Eighty-first plaintiff
GPFA Pty Ltd (ACN 141 955 302) (Administrators Appointed)	Eighty-second plaintiff
Grocon International Pty Ltd (ACN 100 341 268) (Administrators Appointed)	Eighty-third plaintiff
CR 163 Pty Ltd (ACN 141 955 320) (Administrators Appointed) in its own capacity and as trustee of 163 Canterbury Road Investments Trust ABN 70 412 978 380	Eighty-fourth plaintiff
Grocon Capital Pty Ltd (ACN 142 837 821) (Administrators Appointed)	Eighty-fifth plaintiff
Grocon (Carlton Brewery) Holdings Pty Ltd (ACN 158 618 887) (Administrators Appointed)	Eighty-sixth plaintiff
Grocon (Victoria Street) Developments No.1 Pty Ltd (ACN 126 741 839) (Administrators Appointed) in its own capacity and as trustee of Victoria Street Development Trust No 1 ABN 44 529 404 099	Eighty-seventh plaintiff
Grocon Media House Investments Pty Ltd (ACN 132 262 849) (Administrators Appointed)	Eighty-eighth plaintiff
Grocon Property (Vic) Pty Ltd (ACN 125 697 850) (Administrators Appointed)	Eighty-ninth plaintiff
CRAIG PETER SHEPARD, ANDREW LYALL KNIGHT and MARK ANTHONY KORDA in their capacity as joint and several Voluntary Administrators of the NINETY-FIRST PLAINTIFF	Ninetieth plaintiffs
Grocon Group Holdings Pty Ltd (ACN 148 964 890) (Administrators Appointed)	Ninety-first plaintiff

[2021] VSC 129

19 March 2021