Re John Bumbak And Richard Tucker As Administrators Of East Rockingham RRF Hold Co 2 Pty Ltd (Administrators Appointed) (ACN 623 897 955) & ORS
[2024] WASC 458
•4 DECEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE JOHN BUMBAK AND RICHARD TUCKER AS ADMINISTRATORS OF EAST ROCKINGHAM RRF HOLD CO 2 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 623 897 955) & ORS; EX PARTE JOHN BUMBAK AND RICHARD TUCKER AS ADMINISTRATORS OF EAST ROCKINGHAM RRF HOLD CO 2 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 623 897 955) & ORS [2024] WASC 458
CORAM: HILL J
HEARD: 21 NOVEMBER 2024
DELIVERED : 21 NOVEMBER 2024
PUBLISHED : 4 DECEMBER 2024
FILE NO/S: COR 183 of 2024
MATTER: IN THE MATTER OF JOHN BUMBAK AND RICHARD TUCKER AS ADMINISTRATORS OF EAST ROCKINGHAM RRF HOLD CO 2 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 623 897 955) & ORS
EX PARTE
JOHN BUMBAK AND RICHARD TUCKER AS ADMINISTRATORS OF EAST ROCKINGHAM RRF HOLD CO 2 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 623 897 955) & ORS
First Plaintiff
EAST ROCKINGHAM RRF HOLD CO 2 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 623 897 955)
Second Plaintiff
EAST ROCKINGHAM RRF HOLD CO PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (ACN 623 494 860)
Third Plaintiff
EAST ROCKINGHAM RRF PROJECT CO PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (ACN 623 495 278)
Fourth Plaintiff
EAST ROCKINGHAM RRF FINANCE CO PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (ACN 623 495 634)
Fifth Plaintiff
ACCIONA M&E PTY LTD
First Interested Party
ACCIONA CONSTRUCTION AUSTRALIA PTY LTD
Second Interested Party
ACCIONA INDUSTRIAL AUSTRALIA PTY LTD
Third Interested Party
Catchwords:
Corporations - Insolvency - External administration - Application by administrators to extend convening period for second creditors' meeting - Whether modification in creditors' interests as a whole - Whether interests of any persons prejudiced by modification protected by terms of orders - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 435A, s 439A
Result:
Application granted
Convening period extended to 30 June 2025
Category: B
Representation:
Counsel:
| First Plaintiff | : | K de Kerloy SC & P Keeves |
| Second Plaintiff | : | K de Kerloy SC & P Keeves |
| Third Plaintiff | : | K de Kerloy SC & P Keeves |
| Fourth Plaintiff | : | K de Kerloy SC & P Keeves |
| Fifth Plaintiff | : | K de Kerloy SC & P Keeves |
| First Interested Party | : | J R C Sippe |
| Second Interested Party | : | J R C Sippe |
| Third Interested Party | : | J R C Sippe |
Solicitors:
| First Plaintiff | : | Herbert Smith Freehills |
| Second Plaintiff | : | Herbert Smith Freehills |
| Third Plaintiff | : | Herbert Smith Freehills |
| Fourth Plaintiff | : | Herbert Smith Freehills |
| Fifth Plaintiff | : | Herbert Smith Freehills |
| First Interested Party | : | Gilbert + Tobin |
| Second Interested Party | : | Gilbert + Tobin |
| Third Interested Party | : | Gilbert + Tobin |
Case(s) referred to in decision(s):
Diamond Press Australia Limited [2001] NSWSC 313
Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480
Owen (Joint and Several Administrators of RiverCity Motorway Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed)) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255
Re Colorado Group Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2011] VSC 260
Re Harrisons Pharmacy Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458
Re Mentha (Joint and Several Administrators of Arrium Ltd (Administrators Appointed)) [2016] FCA 487; (2016) 113 ACSR 302
Re Rathner (Administrator of Citius Property Pty Ltd (Administrators Appointed)) [2023] FCA 26
Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274
Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46
HILL J:
(This judgment was delivered extemporaneously and has been edited from the transcript to include references, headings, and to correct matters of grammar and expression.)
By originating process filed on 19 November 2024, the plaintiffs seek orders to extend the convening period of the second creditors' meeting in relation to four companies (East Rockingham RRF Hold Co 2 Pty Ltd, East Rockingham RRF Hold Co Pty Ltd, East Rockingham RRF Project Co Pty Ltd (Project Co), and East Rockingham RRF Finance Co Pty Ltd (Companies)). The extension is sought for a period of nine months, until 26 August 2025. Unless an extension is granted by the court, the meeting is required to be convened by 26 November 2024 with the meeting held by 3 December 2024.[1] The Acciona entities, who were given leave to appear at the hearing today, did not oppose an extension being granted but submitted that the extension should only be for a period of six months.
[1] Affidavit of John Allan Bumbak filed 19 November 2024 [61].
The plaintiffs were appointed as joint and several administrators of the Companies on 28 October 2024, pursuant to s 436A of the Corporations Act 2001 (Cth) (Act).[2] Shortly after their appointment, Christopher Hill, Hayden White and Daniel Woodhouse of FTI Consulting were appointed as joint and several receivers and managers of three of the four Companies (Receivers). The evidence before me is that the plaintiffs' application for an extension of time is supported by the Receivers.[3]
[2] Affidavit of John Allan Bumbak filed 19 November 2024, 'JAB-27' ‑ 'JAB-30'.
[3] Affidavit of John Allan Bumbak filed 19 November 2024 [8], 'JAB-1'.
At the hearing before me this morning, the plaintiffs read two affidavits of the first‑named first plaintiff, filed on 19 November 2024 and 21 November 2024. The interested parties read an affidavit of Mr Sorto filed 21 November 2024. I have also had the benefit of an outline of submissions filed by the plaintiffs as well as oral submissions from both senior counsel for the plaintiffs and counsel for the interested parties.
Factual background
The factual background to the application can be briefly summarised as follows.
The Companies are privately‑owned companies who are part of a corporate group developing a waste‑to‑energy facility (Facility) in the Rockingham Industry Zone in East Rockingham. There is also a parallel unit trust structure.[4]
[4] Affidavit of John Allan Bumbak filed 19 November 2024 [9], 'JAB-2'
The project involves the financing, design, constructing, testing, commissioning, operation and maintenance of the Facility. The total capital cost of the project was initially estimated to be a little over $500 million.[5]
[5] Affidavit of John Allan Bumbak filed 19 November 2024 [11].
As at the date of the appointment of the plaintiffs:
(a)the construction of the project had faced considerable delays and was almost two years behind the date scheduled for practical completion;[6] and
(b)significant claims had been made by the interested parties against Project Co. The Acciona companies are one of the entities in an unincorporated joint venture, who are the counterparties to the EPC Contract with Project Co, the other being two Hitachi Zosen Inova companies;[7] and
(c)at this stage, three separate court proceedings have been commenced: two in the Federal Court (one of which has been resolved), and one in this court, which is stayed by operation of s 440D of the Act.[8]
[6] Affidavit of John Allan Bumbak filed 19 November 2024 [29].
[7] Affidavit of John Allan Bumbak filed 19 November 2024 [23] ‑ [24].
[8] Affidavit of John Allan Bumbak filed 19 November 2024 [35].
At present, the Receivers have taken control of the project site, and the plaintiffs have not yet attended the site. The Receivers have given notice suspending all works (with immediate effect) and terminating the EPC Contract, which took effect, on their argument, at 5.00 pm on 18 November 2024.[9] The Receivers are currently supervising the process of undertaking an orderly shut‑down of the site, moving it onto care and maintenance and ascertaining the rights of parties to various goods and equipment that is located at the project site.[10] The interested parties are disputing the termination of the EPC Contract and have filed an interlocutory application in Federal Court proceedings in relation to these events.
[9] Affidavit of John Allan Bumbak filed 19 November 2024 [33], 'JAB-41'.
[10] Affidavit of John Allan Bumbak filed 19 November 2024, 'JAB-1', page 46.
The evidence before me is that the Receivers intend to:
(a)enter into a new EPC Contract to achieve practical completion; and
(b)simultaneously run a sale process for the acquisition and/or recapitalisation of the Companies and their assets, which may include a deed of company arrangement (DOCA).[11]
[11] Affidavit of John Allan Bumbak filed 19 November 2024 [60].
Based on the investigations that have been done by the administrators to date, their preliminary assessment of the consolidated creditor position of the Companies can be summarised as follows:[12]
(a)there are four secured creditors across the Companies (including inter‑company security) of approximately $483 million, including senior secured debt of $318 million;
(b)there are almost $300 million of unsecured claims under the EPC Contract; and
(c)almost $9 million in claims by other unsecured creditors, including those of its employees.
[12] Affidavit of John Allan Bumbak filed 19 November 2024 [5], [50].
At this stage, proofs of debt have not been called for, and there has been no formal adjudication of any proofs of debt.
The first meetings of creditors of the Companies were held concurrently on 7 November 2024.[13] At this meeting, the first plaintiffs foreshadowed an extension of time to convene the second meeting of creditors and said that a lengthy extension was likely to be required.
[13] Affidavit of John Allan Bumbak filed 19 November 2024, 'JAB-48'.
Should an extension of time to convene the second creditors' meeting be granted?
The principles that govern this application are well‑known and can be briefly summarised as follows. The court has power under s 439A(6) of the Act to extend the convening period on an application. The application can be made during or after the period referred to in s 439A(5)(a) or s 439A(5)(b), as the case requires.
In determining the application, the court must take into account the objects and scheme of pt 5.3A of the Act, which is set out in s 435A. Briefly, these are to maximise the chances of the company or as much of its business as possible continuing in existence, or, if this is not possible, for the administration to be done in a way so as to result in a better return for the company's creditors and members than would result from an immediate winding up.
In reaching its decision, the court must maintain an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure that the administration is not concluded without consideration of sensible and constructive options which are directed towards maximising returns for creditors and any return that is possible for shareholders.[14]
[14] Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46 [54], citing Barrett J in Diamond Press Australia Limited [2001] NSWSC 313 [10].
In addition, the court is required to take into account the detriment to third parties, including the suspension of rights and remedies of secured creditors, lessors and other creditors.[15] However, it is also important to note that creditors' interests can be prejudiced not only by delay, but also by convening meetings prematurely. This can occur where an administrator has been unable to obtain adequate information for the preparation of an administrator's report in a form which enables creditors to make an informed decision.[16]
[15] Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (Administrators Appointed) [2016] WASC 274 [18].
[16] Re Harrisons Pharmacy Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 [13].
In Mighty River International Limited v Hughes, Nettle and Gordon JJ stated that the court will generally exercise its discretion to extend the convening period where one or more of the established categories are raised, where there is no evidence of material prejudice to those affected by the extension of time, and the court is satisfied that the administrator's estimate of time required has a reasonable basis.[17]
[17] Mighty River International Limited v Hughes [2018] HCA 38; (2018) 265 CLR 480 [73].
The established categories include, relevantly, in this case, the complexity of the administration.
In this case, the plaintiffs seek an extension of nine months to the convening period. As senior counsel for the plaintiffs accepted, this is a relatively long extension to the statutory period and reflects what is an increasing trend towards lengthier convening periods and complexities of administrations.
Courts have previously granted extensions of a similar length to the convening period, including in the administrations of Arrium and the Colorado Group.[18] In both of these cases, an extension of nine months was said to be necessary so that the administrators could prepare a meaningful report to creditors, having regard to the size and complexity of the businesses in question; and in the case of the Colorado Group, having regard to the progress of a sale process commenced by the company's receivers, which would require up to nine months to complete. I also note that even longer extensions have been granted by O'Bryan J in the administration of Citius Property Pty Ltd, where a 12‑month extension was granted; and by Logan J in the administration of RiverCity Motorway Pty Ltd, where an initial extension of 21 months was granted, subsequently, extended by a period of 12 months.[19]
[18] Re Colorado Group Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2011] VSC 260; Re Mentha (Joint and Several Administrators of Arrium Ltd (Administrators Appointed)) [2016] FCA 487; (2016) 113 ACSR 302.
[19] Re Rathner (Administrator of Citius Property Pty Ltd (Administrators Appointed)) [2023] FCA 26; Owen (Joint and Several Administrators of RiverCity Motorway Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed)) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255.
The evidence before me is that further time is needed to facilitate the sale of the business of the Companies as a going concern, or to progress any proposal for a DOCA. Mr Bumbak's evidence is that a sale process will maximise the chances of achieving a restructure or sale of the Companies' business or assets, and that there is insufficient time at present to prepare a creditors' report before the end of the convening period.
Their opinion, based on the request received from the Receivers, is that a restructure sale process is likely to produce a better outcome, and that an extension of nine months is required.
Further details as to the basis for the estimate of nine months were provided in Mr Bumbak's second affidavit. This affidavit sets out the seven matters that have been taken into account in the estimate of nine months.[20]
[20] Affidavit of John Allan Bumbak filed 21 November 2024 [24].
The first step is that the Receivers need to undertake a technical evaluation of the status of the project which is said to be ongoing. Secondly, the Receivers will seek directions and other orders for the court to address the Companies' arrangements with various counterparties, including the interested parties, which is estimated to take until at least the end of 2024. Following this, the Receivers will make an informed estimate of the time required to prepare to re‑contract the EPC works, which is said will occur in early 2024 and then commence the intended sale process, which is estimated to take three to four months.
On the timetable, it is estimated that bidders will submit binding bids in quarter two of 2024, and that the sale or recapitalisation transactions will be documented and implemented by the end of June 2025.
The seventh stage is what is referred to in the affidavit as a contingency, and that takes the estimate through until late August 2025, which is the period of time sought by the plaintiffs.
Mr Bumbak's evidence is that it is reasonable to allow a contingency of the additional two months because it is likely that there will be slippages in the timetable, particularly in relation to transactions of this complexity. His evidence is that if an extension of time in the amount sought is granted, it will avoid the necessity of a further extension application. In the event that it is possible to convene a second creditors' meeting at an earlier time, he has indicated that this will occur.
I note that the plaintiffs have given notice to all creditors at the first creditors' meeting of their intention to seek orders for the extension of the convening period; and that it is only the Acciona companies who objected to the proposed extension; and that their objection is limited to the length of the extension. Counsel who appeared for these parties at the hearing today submitted that an appropriate extension, which balanced the interests of all parties, was an extension of six months.
This was largely based on, in addition to the uncertainties of the matters that are referred to in Mr Bumbak's evidence, two additional matters; first, as to the funding of the receivership and administration and, secondly, the decision involved to terminate the pre‑existing EPC Contract and to re‑contract this process.
In my view, for the following reasons, I consider that the application for an extension of time should be granted, and that the order should be made extending this period until 30 June 2025.
First, it is clear from the evidence before the court that there is significant complexity involved in the administration and receivership of the Companies. This complexity arises from a number of matters, including the structure of the Companies and the parallel trust structure, the technical complexity of the project, the incomplete construction of the Facility, as well as the significant claims that have been made to date and those that are foreshadowed. In particular, I note that following the termination of the EPC Contract, there were disputes between the relevant parties regarding site access and title issues that require resolution before many of the steps referred to in Mr Bumbak's second affidavit can occur.
Second, Mr Bumbak's evidence, which I accept, is that further time will be required to prepare a report to creditors containing a considered recommendation to creditors. I consider that without a lengthy extension, the plaintiffs will simply not be in a position to provide any informed recommendation, given that, at this stage, no sale or other process has yet commenced.
Third, while I take into account the opinion of the administrators that, based on information received from the Receivers, an extension of time is required for a period of nine months.
On the evidence before me, I am satisfied that the evidence supports an extension until the end of June 2025. This is because the remaining time is allowed for what is described in Mr Bumbak's affidavit as contingencies. While I accept that there is certainly a significant prospect that the estimated timetable may slip, at this stage, on the evidence before me, it is simply not possible to assess either the likelihood of this occurring or the extent to which the timetable will slip.
In my view, this is likely to be influenced by a number of factors, including the extent to which there are continuing disputes between the relevant parties and how quickly these can be resolved.
In my view, an extension of time to 30 June 2025 is consistent with the evidence currently before me and strikes the appropriate balance between the interests of all parties. The primary reason advanced for making a longer extension at this stage is to avoid the time and expense of a further application. As indicated in my discussions with counsel at the hearing today, given the complexity of the administration and receivership and the likely costs that will be involved, in my view, these costs are not material or should be the sole reason that a further extension is granted at this stage.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
4 DECEMBER 2024
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