Re Major Crane Logistics Pty Ltd
[2023] VSC 290
•1 June 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 02182
IN THE MATTER of MAJOR CRANE LOGISTICS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 160 384 350)
BETWEEN:
| LIAM WILLIAM PAUL BELLAMY in his capacity as administrator of MAJOR CRANE LOGISTICS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 160 384 350) | First Plaintiff |
| MAJOR CRANE LOGISTICS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 160 384 350) | Second Plaintiff |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 May 2023 |
DATE OF JUDGMENT: | 1 June 2023 |
CASE MAY BE CITED AS: | Re Major Crane Logistics Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 290 |
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CORPORATIONS — External administration — Application for extension of convening period of company in voluntary administration pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (‘Act’) — Administrator seeking extension to enable conclusion of sale of business and perform further investigations required under Pt 5.3A of the Act — Extension sought for approximately seven weeks — Orders made for extension of convening period together with ancillary orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr H Somerville | SLF Lawyers |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The business....................................................................................................................................... 3
The Company...................................................................................................................................... 3
Sale of the business........................................................................................................................... 7
Relevant legislation and legal principles.................................................................................... 13
Consideration.................................................................................................................................... 17
HIS HONOUR:
Introduction
By an originating process dated 23 May 2023 (‘originating process’), the first plaintiff (‘administrator’) makes application under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) (‘Act’) and s 90-15 of the Insolvency Practice Schedule (Corporations) (‘IPS’), being Schedule 2 to the Act, for an extension of the convening period for the second meeting of creditors of the second plaintiff, Major Crane Logistics Pty Ltd (ACN 160 384 350) (‘Major Crane Logistics’ or ‘Company’).
Unless extended by the Court, the convening period will expire on 29 May 2023 (‘convening period’). The administrator seeks an extension pursuant to s 439A(6) of the Act to 14 July 2023.
An order, which is commonly described as a Daisytek order,[1] is also sought by the administrator to allow the meeting of creditors to be held at any time during, or within five business days after, the end of the extended convening period, notwithstanding the operation of s 439A(2) of the Act.
[1]Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446, 448 [10]–[14] (Lindgren J) (‘Daisytek’).
The originating process also seeks orders that the Company’s creditors be informed of any relief granted in respect of this application by the various methods outlined in paragraph 3 of the originating process, along with a liberty to apply and costs.
On 26 May 2023, I made orders extending the convening period, together with ancillary orders, and indicated that I would subsequently publish reasons, which I now do.
The application is supported by an affidavit of the administrator, Liam William Paul Bellamy, who is the sole administrator of the Company, affirmed 23 May 2023 (‘Bellamy affidavit’), together with an affidavit of Amy Ronit Weiner, affirmed 25 May 2023. Ms Weiner’s affidavit is concerned with notice to creditors of the proposed extension. Significantly, in the present context, on 24 May 2023, an officer of the Australian Taxation Office (‘ATO’), Mr Liam Sweeney, indicated that the ATO, a significant creditor, had no objection to the extension of the convening period sought in this application.
Mr Bellamy states he was appointed as voluntary administrator of Major Crane Logistics on 1 May 2023, pursuant to s 436A of the Act.
The first meeting of creditors of the Company was held on 11 May 2023 (‘first meeting’). At the first meeting, the creditors were informed of the administrator’s intention to bring an application with respect to the extension of the convening period. Subsequently, the administrators gave notice to creditors of the application on two occasions in writing. No creditor has communicated any opposition to the relief sought.
By his calculation, Mr Bellamy states that the convening period of the second creditors’ meeting ends on 29 May 2023 and that by operation of s 439A(5) of the Act, the second meeting of creditors must be held by 5 June 2023. In addition, the report to creditors in relation to the Company’s affairs, required by r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (‘IPR’), must be provided to creditors by 29 May 2023.
Mr Bellamy deposes that he believes it would be in the best interests of Major Crane Logistics’ creditors for the convening period to be extended to 14 July 2023 for three reasons.
First, based on the current convening period, which ends on 29 May 2023, he is unable to make a comprehensive recommendation to creditors in accordance with his obligations under the Act and IPS because of an ongoing process for a sale of the business by an expression of interest campaign (‘sale campaign’), which provides for interested parties to submit binding offers by 26 May 2023.
Second, Mr Bellamy is of the view that the sale of the business as a going concern is likely to maximise the return to creditors, preserves employment for the highest number of employees, and allows the Company’s trading relationships to continue.
Third, an extension of the convening period will permit the sale campaign to be finalised, allow time for due diligence to be completed, and offers to be made.
The business
The Company trades as ‘Major Crane Logistics’ and operates from leased premises in Epping, Victoria. The lease of those premises expires on 1 May 2024. The Company is complying with its obligations to make lease payments of $9,142.50 plus GST per month. It has a workforce of approximately 132 people. The business of the Company is the provision of what is described as ‘wet and dry’ crane hire services, as well as labour hire services, predominantly in Victoria (‘business’). The Company also performs works relating to the installation of precast concrete panels.
The Company
An Australian Securities and Investments Commission (‘ASIC’) extract of the Company records its incorporation on 17 September 2012. It has two directors, Norman D’Ambra and Shannon Egglestone, both of whom have been directors and the secretaries of the Company since it was incorporated.
There are 13 Personal Property Securities Register (‘PPSR’) registrations made against tangible property of the Company, six in respect of motor vehicles and seven in relation to other goods. These securities are expressed as covering ‘all present and after acquired property’. The secured parties in relation to these PPSR registrations are as follows:
(a) Macquarie Leasing Pty Ltd;
(b) Commonwealth Bank of Australia;
(c) Westpac Banking Corporation;
(d) Ausreo Pty Ltd;
(e) Coates Hire Operations Pty Ltd;
(f) Adapt-a-Lift Group Pty Ltd;
(g) Liebherr-Australia Pty Ltd;
(h) BMW Australia Finance Ltd; and
(i) Scope Safety Systems Pty Ltd Scope Safety Systems (Victoria) Pty Ltd.
Mr Bellamy understands that a number of these PPSR registrations have now been discharged. As of 23 May 2023, he does not believe there are any secured creditors who have sought to enforce any security interest over assets of the Company.
Since his appointment on 1 May 2023, Mr Bellamy has conducted various investigations into the affairs of the Company. Those investigations have revealed that:
(a) in the current financial year, the business turnover is approximately $29 million;
(b) the Company is well-respected within the industry, with substantial ongoing contracts and business connections, including good relations with the Construction, Forestry, Maritime, Mining and Energy Union;
(c) there is a large amount of unencumbered plant and equipment;
(d) there is a large existing base of skilled employees; and
(e) there are substantial accounts receivables outstanding, of the order of approximately $6.1 million.
Upon his appointment as administrator, Mr Bellamy and his staff attended the Company’s premises to meet with staff, inspect Company assets, access the Company’s books and records, and review the trading viability of the Company. Following a review of the Company’s trading capacity, he formed the view that it would be in the best interests of all creditors for the Company to continue trading throughout the voluntary administration period to permit a potential sale of the business as a going concern or entry into a deed of company arrangement (‘DOCA’) that would exceed any return to creditors from a sale of the business in a liquidation scenario.
Although his investigations are ongoing, Mr Bellamy has identified various factors that contributed to the Company’s current financial position:
(a) COVID-19 related issues;
(b) decline in staff productivity;
(c) lack of recoverability in relation to a loan to a related party that has been placed into external administration;
(d) loss of strategic focus from directors in relation to management of the Company;
(e) significant investment in plant and equipment; and
(f) staff error that resulted in the non-billing of recorded work in progress, which is ultimately unrecoverable.
Mr Bellamy estimates that he and his staff have spent approximately 286 hours engaging in a range of other tasks since his appointment as administrator, including:
(a) meeting with the directors on three occasions to discuss the ongoing viability of the business and the potential for any DOCA;
(b) conducting the first meeting of creditors on 11 May 2023 attended by 53 creditors (‘first creditors’ meeting’), which Mr Bellamy chaired;
(c) undertaking the sale campaign, as part of which Mr Bellamy has organised for the valuation of the Company’s plant and equipment by Pickles Auctions Pty Ltd. The Company’s assets were reported to have a fair market value in existing in use in the sum of $4,613,850 and, in a forced liquidation, a value of $3,223,530; and
(d) performing the relevant tasks required of administrators under the Act, as well as general tasks involved in a voluntary administration, such as investigations to determine the true financial position of the Company, the status of registered securities, claims made under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOPA’) together with the steps required to resolve any such claims.
The Company has creditors in a total projected amount of approximately $22.3 million, comprising of:
(a) three secured creditors, namely BMW Australia Finance Ltd ($94,376.69), Commonwealth Bank of Australia ($3,768.80), and Westpac Banking Corporation ($87,338.81), totalling $185,484.30;
(b) over 130 priority creditors, including employee creditors, of a projected amount of approximately $1.09 million;
(c) tax liabilities to the ATO of the order of approximately $19.96 million; and
(d) eighty unsecured creditors with a projected amount of approximately $1.07 million.
Furthermore, the Company has received 13 proofs of debt from unsecured creditors. Mr Bellamy is continuing with the proof of debt process which will require a further four to six weeks to ascertain accurate figures in relation to a sums totalling approximately $20.7 million.
Mr Bellamy deposes that the Company’s records, especially with respect to ongoing construction contracts, are not located in a single, convenient location. He has been able to locate some of these contracts and has obtained progress payment claims issued during April 2023, which provides him with an indication of progress claims that would likely need to be issued for May 2023. Upon his review of these invoices, Mr Bellamy estimates the Company invoices an average of around $3.6 million per month. He states that SOPA claims are critical for the cash flow of the Company. He is currently seeking legal advice on various SOPA claims.
On the time provided by the statutory convening period which expires on 29 May 2023, Mr Bellamy states he will not be in a position to satisfy himself in relation to each SOPA claim, such that he can properly execute the accompanying statements. Moreover, if the extension sought is not granted by the Court and the Company goes into liquidation, s 32B of the SOPA operates to preclude the Company from serving or enforcing any payment claims as any adjudication applications that have not been determined will have been taken to be withdrawn.
Sale of the business
The campaign for the sale of the business commenced on 10 May 2023 when an advertisement was published in the Australian Financial Review inviting for expressions of interest in acquiring the business by close of business on Friday 26 May 2023. Further information was to be provided to interested parties pending the execution of a confidentiality agreement and payment of a security deposit of $10,000. At the time of swearing his affidavit on 23 May 2023, Mr Bellamy has received expressions of interest from three parties and confidentiality agreements have been provided to them. Mr Bellamy has stipulated that final offers be lodged by 20 June 2023 following a due diligence process by the most viable bidders.
Mr Bellamy is of the view that the extension of convening period would allow him to make a comprehensive and complete recommendation to creditors and for the finalisation of the sale campaign, both of which would be in the best interests of the Company’s creditors. If the application for the extension of the convening period is unsuccessful and the current stator convening period applies, Mr Bellamy will likely be required to recommend that the Company be placed into liquidation as he has yet to receive a proposal for the purchase of the business, such that no DOCA would be recommended. Alternatively, even if a proposal to purchase the business is received, he would have to expedite the proposed sale within the current convening period, at a significantly discounted price as the purchaser would not be given the opportunity to conduct proper due diligence. By allowing the sale campaign to run its full course, it is likely that, if successful, the process will produce a better price for the sale of the business than if it had been conducted in a liquidation scenario. This is because a sale of the business as a going concern would preserve existing relationships with employees, creditors, and other stakeholders of the Company and therefore preserve the goodwill in the Company. Mr Bellamy states that a sale in a liquidation scenario by public auction might be perceived as a ‘fire sale’ of the Company’s assets. Further, as has been mentioned, if the Company went into liquidation, it is precluded from serving or enforcing the SOPA claims.
Mr Bellamy is of the opinion that any extension of the moratorium imposed by Part 5.3 of the Act will not unduly prejudice the Company’s creditors as it is proposed that the Company will continue trading during the extended convening period sought. This means employees will continue in their roles and the Company will continue to meet its obligations under ongoing building contracts, thereby limiting the number of contingent claims arising from incomplete construction contracts.
Based on the current financial resources available, Mr Bellamy expects the business to be able to continue in operation until 6 August 2023. In particular, there is over $1.1 million in cash at bank, pre-appointment debtors in the amount of over $6.4 million, revenues from contracts projected at $3.2 million per month, progress payments or SOPA claims and rental payments. He forecasts, that as at 17 May 2023, a positive cash flow position for the Company for the period 1 May 2023 to 6 August 2023.
At the first meeting of creditors on 11 May 2023, Mr Bellamy foreshadowed his intention to make the present application and no creditors raised any queries or objections in this regard. Subsequently, on 12 May 2023, he circulated a letter to known creditors of the Company (’12 May letter’), confirming his intention to proceed with the making of the present application and invited any objections to be communicated to his office by 5:00pm on Tuesday 16 May 2023. Mr Bellamy deposes that at the time of swearing his affidavit on 23 May 2023, no creditors have raised any queries or objections in response to the 12 May letter.
The administrator submits that in the present case, there can be no doubt that this is a voluntary administration that is attended by a reasonable degree of complexity, such that the extension sought is warranted. This submission is based on the following several factors.
First, the Company has a large number of creditors with substantial claims.
Secondly, the voluntary administration has been involved with the trading on of the business, concurrent with the investigative period during which the administrator has been required to consider the numerous issues deposed to in his affidavit, as well as engaging in an active sale campaign. To use the vernacular, the administrator has his eye on the multiple ‘balls in the air’ and this imposes greater time demands than the normal situation.
Thirdly, the affairs of the Company are somewhat complicated by particular arrangements with respect to progress payments, possible retention sums, and securities. These inherent complexities are amplified by the unsatisfactory state of the books and records.
Fourthly, the sale campaign is ongoing and requires more than the usual stipulated time permitted under Part 5.3A of the Act to complete. Given the administrator has formed the view that it is in the interests of creditors for the campaign to run its course, it is said that this is a factor of particular weight that tends in favour of the extension.
Fifthly, the foreshadowed DOCA proposal will involve refinancing the Company, using the existing assets of the Company as collateral or security for the proposed facility. For a proper consideration of any such proposal, the administrator will need to properly understand the value of the assets, together with a proper understanding of the financial position of the Company.
The administrator submits that in the absence of an extension of the convening period, it is more than likely that he would recommend the Company be wound up given there is no finalised DOCA proposal to recommend and given that the Company is otherwise insolvent. In that context, the administrator submits the following factors favouring the extension of the convening period until 15 July 2023.
First, it is submitted that further time is necessary to allow the administrator:
(a)to continue negotiating and dealing with the counterparties to the Company’s ongoing contracts;
(b)to pursue recovery actions, including for progress payments under SOPA provisions (which will not be available if the Company goes into liquidation[2]);
[2]Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247, [90].
(c) to continue discussions with the directors as to the potential DOCA;
(d)to deal with ongoing emerging issues arising in the administration that require further investigation, including:
(i)security arrangements with creditors so far as there are 13 registered charges recorded on the PPSR and the possibility that such security may have vested where the security interest was not registered on the PPSR;
(ii)reconciling, reconstructing or otherwise addressing the issues currently attending the books and records;
(iii) to further understand the contractual arrangements of the Company; and
(e)to progress an orderly sale of the Company’s assets and undertaking if appropriate.
Secondly, the administrator submits there are clear advantages in continuing to take the steps that he proposes to take during the extended period, through the machinery of a voluntary administration (as distinct from liquidation), those advantages including:
(a)the statutory moratoria under the Act that prevent creditors from commencing or continuing proceedings against the Company, exercising third party property rights, enforcing security interests, and calling on personal guarantees provided by the directors of the Company;[3]
(b)potentially allowing the Company to pursue progress claims under the SOPA legislation (which are available in Victoria while the Company is under administration but not when it is in liquidation).[4] This approach was recently endorsed as a matter justifying an extension in Colbran, Re PBS Building Pty Limited (admins apptd);[5]
(c)the ongoing ability to negotiate with counterparties to contracts, including the prospect of successful novation or termination of the Company’s contracts, which may reduce or, at the very least, clarify the quantum of creditors’ claims against the Company;
(d)the conferral of additional time for a DOCA to be put forward by the director of the Company, once greater clarity as to the creditors’ claims and the available assets of the Company has been ascertained; and
(e)the continuation of the Company’s business, which will preserve goodwill as well as the ongoing employment of 132 employees.
[3]See Corporations Act 2001 (Cth) ss 440B–440J.
[4]Kennedy Civil Contracting Pty Ltd (admins apptd) v Richard Crookes Construction Pty Ltd [2023] NSWSC 99 (Ball J).
[5][2023] FCA 276, [96] (Halley J).
Thirdly, the administrator contends that the extension of time will put him in a better position:
(a) to assess the true financial position of the Company;
(b) to allow them to prepare a report to creditors that provides:
(i) greater clarity as to the quantum of creditors’ claims;
(ii)detail as to the Company’s transactions prior to the appointment of the administrator with a view to an assessment of recovery actions available in a winding up (such as voidable transactions that might be set aside by a liquidator of the Company);
(iii) meaningful information as to the future options for the Company; and
(c)to express an informed opinion to creditors under r 75-225(3)(b) of the IPR when the second meeting of the Company is convened and held.
Fourthly, the evidence in the administrator’s affidavit supports the position that there is unlikely to be any unfair prejudice to creditors. As set out in paragraphs 79 to 81 of the Bellamy affidavit, there is unlikely to be any unfair prejudice to creditors or other stakeholders consequent to the extension (and, to the extent there is any prejudice to specific creditors, that is likely to be outweighed by the overall benefit to creditors from a continuation of the administration):
(a)there is only one lessor of real property leased by the Company, and the administrator is continuing to meet all rental payments due and considers that this will continue if the extension if granted; and
(b)there is no clear evidence that there is any other creditor who will unduly suffer if the extension is granted. The absence of opposition to the application is itself evidence of this.
Fifthly, it is said that the proposed extension of approximately two months is not particularly lengthy and is shorter than the extensions granted in Algeri, Re WBHO Australia Pty Ltd (admins apptd) (No 2)[6] (‘WBHO’) and Algeri (Administrator), Re Murray & Roberts Pty Ltd (admins apptd) (No 3)[7] (‘Murray & Roberts’). In any case, the orders sought provide that the administrator may convene the second meeting of creditors at an earlier date than the latest possible time during the extended period to the extent that that is possible and appropriate and, in that regard, the administrator seeks a Daisytek order,[8] permitting them to hold the meeting at any time during the extended period, the desirability of which is clear.[9]
[6][2022] FCA 234 (‘WBHO’).
[7][2023] FCA 98 (‘Murray & Roberts’).
[8]Daisytek (n 1).
[9]Silvia, Re Austcorp Group Limited (admins apptd) [2009] FCA 636, [18] (Lindgren J).
Sixthly, the proposed orders provide that creditors and other interested persons be granted liberty to apply to set aside or vary the orders if circumstances so dictate. That adds a further level of protection for stakeholders who may be affected by the extension of the administration.
The administrator’s submissions conclude with a contention that the administrator has provided a rational and cogent explanation for the proposed extension of the convening period, including the steps proposed to be taken, which are directed towards maximising the returns for creditors, and which are otherwise advantageous to the Company.
Relevant legislation and legal principles
I now turn to the applicable legislative provisions and legal principles.
Section 439A of the Act provides that:
(1) The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6).
(2) The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.
(5) The convening period is:
(a) if the day after the administration begins is in December, or is less than 25 business days before Good Friday—the period of 25 business days beginning on:
(i) that day; or
(ii) if that day is not a business day—the next business day; or
(b) otherwise—the period of 20 business days beginning on:
(i) the day after the administration begins; or
(ii) if that day is not a business day—the next business day.
(6)The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires. …
There are numerous authorities of State Supreme Courts and the Federal Court that canvass the question of when an extension of convening period ought to be granted.[10] In Strawbridge, Re Virgin Australia Holdings Ltd (admins apptd) (No 2),[11] Middleton J comprehensively collected and considered the principles and authorities concerning an application to extend the convening period of a second meeting of creditors required to be held under Part 5.3A of the Act. His Honour stated:
[10]See, eg, Walker, Re Plumbfirst Pty Ltd (admins apptd) [2023] FCA 441 (Cheeseman J).
[11](2020) 144 ACSR 347, cited in Frisken, Re Xpress Transport Solutions Pty Ltd (recs and mgrs apptd) (admin apptd) [2023] FCA 448, [36] (Cheeseman J) (‘Frisken’).
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 (citing Lombe, in the matter of Babcock & Brown Limited (Administrators Appointed) [2009] FCA 349; Worrell; In the matter of Storm Financial Ltd (Receivers and Managers Appointed) (Administrators Appointed) [2009] FCA 70; and ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No 5) [2008] FCA 1947);
(2)where the extension will allow sale of the business as a going concern, citing Lombe re Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, in the matter of Kleins Franchising Pty Ltd (Administrators appointed) (ACN 007 348 236) [2008] FCA 721; Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619, in the matter of Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619 [2006] FCA 1423; and
(3)more generally, where additional time is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd (No 2) [2009] FCA 190; Fitzgerald, In the matter of Primebroker Securities Limited (Administrator Appointed) (Receivers and Managers Appointed) [2008] FCA 1247; Ex parte Vouris; in the matter of Marrickville Bowling & Recreation Club Ltd (under Administration) [2008] FCA 622.
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: Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 (Jacobson J); Re Riviera (Austin J); Silvia, in the matter of Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636 (Lindgren J) (‘Re Austcorp’); and In the matter of Kavia Holdings Pty Limited (Administrators appointed) (receivers and managers appointed) [2013] NSWSC 737 (Black J).
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: Owen and Others in their capacity as joint and several administrators of Rivercity Motorway Pty Ltd (ACN 116 665 304) (admins apptd) (recs and mgrs. Apptd)) v Madden (No 4) (2012) 92 ACSR 255 at [26] (Logan J); In the matter of Belmont Sportsmans Club Co-Operative Limited (Administrators Appointed) [2015] NSWSC 543 at [9] (Black J); Jahani, in the matter of Northern Energy Corporation Ltd (Administrators Appointed) (No 2) [2019] FCA 382 at [67] (Farrell J); Bumbak (Administrator), in the matter of Duro Felguera Australia Pty Limited (Administrators Appointed) [2020] FCA 422 at [32] (Gleeson J).[12]
[12]Ibid 370–1 [64]–[68].
Moreover, in exercise of the Court’s discretion to extend a convening period, a relevant factor is ‘the need for information to be provided to creditors in a way that would allow them to exercise their decision at the second meeting in as informed a manner as possible’.[13]
[13]Frisken (n 11) [37] (Cheeseman J), citing Re Foodora Australia Pty Ltd (admins apptd) [2018] NSWSC 1426, [11] (Black J); Albarran, Re BCJWY Aboriginal Society Ltd [2019] FCA 491, [12] (Farrell J); Eagle, Re Techfront Australia Pty Ltd (admins apptd) (No 2) [2020] FCA 618, [31(2)] (Farrell J).
The administrator’s submissions made reference to several recent cases involving complex administrations of building companies where extensions to convening periods have been granted.
In WBHO,[14] a second application by the administrators of the Probuild group to, inter alia, extend the convening period for the second meeting of creditors in respect of each of the companies by three months, Beach J of the Federal Court of Australia granted the application, observing the broader context whereby the administration of the group of companies is complex due to the number of companies involved; the ongoing trade of three businesses; the numerous and disparate groups of interests to be considered; the interconnectedness between the assets, liabilities and interests of the companies; and the guarantee obligations given by some of the companies to other companies in the group.[15] His Honour formed the view that the extension would allow the administrators sufficient time to complete outstanding tasks that would be in the best interests of the companies’ creditors and allow them to report to creditors ‘in a meaningful way’.[16]
[14]WBHO (n 6).
[15]Ibid [5].
[16]Ibid [7]–[11].
Similarly, in Murray & Roberts,[17] which involved the large and complex administration of the Clough group of companies, Banks-Smith J granted a second extension of time of approximately seven weeks.[18] In considering the application, her Honour was:
[G]uided by the desirability of reaching an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need on the part of the Administrators to consider sensible and constructive options directed towards maximising the returns for creditors and other stakeholders.[19]
[17]Murray & Roberts (n 7).
[18]Ibid [36].
[19]Ibid [12].
Consideration
On the evidence before the Court, it is apparent to me that the voluntary administration of the Company possesses a degree of complexity that favours the granting of the extension sought by the administrator. Notably, there are a large number of creditors totalling in excess of $22 million, of which the ATO is one of the most significant creditors. Moreover, the conduct of the administration involves the business continuing its trading activities while the administrator performs his investigative work to satisfy not only his statutory obligations and duties to creditors, but also conducting a campaign for the sale of the business. These activities will likely impose great demands on the administrator and his staff and so, a modest extension to the convening period of less than seven weeks will permit the administrator to better inform himself as to the affairs of the Company and present creditors with a more comprehensive report for their consideration when they are deciding how they will vote at the second meeting of creditors.
The evidence also reveals there are further investigations for the administrator to complete in respect of the PPSR registrations, the proofs of debts submitted and SOPA claims. The Company’s books and records are apparently not kept in a single location, which might impede expeditious progress of the voluntary administration.
Any DOCA proposal will involve the Company obtaining finance over the assets of the Company. A formal valuation of the Company’s plant and equipment has already been conducted by Pickles Auctions Pty Ltd.
The extension sought by the administrator is relatively modest so as to not unduly prejudice creditors of the Company. As mentioned, during the extended convening period, the administrator proposes to continue the trading of the business, which will cause employees to continue in their roles, the Company to continue to occupy the leased premises and pay rent to the lessor, and for the Company to meet its obligations under ongoing building contracts. All of this ensures that good relationships between the business and key stakeholders are maintained, preserving the goodwill of the business and therefore the potential sale price and return to creditors.
Further, the extension sought by the administrator would allow prospective purchasers of the business more time to conduct their due diligence and therefore increase the prospect of the business being sold as a going concern, thereby maximising return to creditors.
As has become commonplace in these kinds of application, Mr Bellamy seeks a Daisytek order 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 that is an appropriate order to be made in these circumstances.
If I were not to grant the extension sought, it would be necessary for Mr Bellamy to convene the second meeting of creditors and then adjourn it. I see no sensible purpose in requiring him to take such a course with all the attendant costs to the administration and the Company’s creditors.
For completeness, I recite the orders made by me at the hearing of this application on 26 May 2023:
(1)The Court orders under s 42E(1) of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) that all persons shall appear, give evidence and make submissions in the hearing of this proceeding on 26 May 2023 by audio-visual link.
(2)Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (‘Act’) the period within which the first plaintiff must convene a meeting of creditors of Major Crane Logistics Pty Ltd (ACN 160 384 350) (Administrator Appointed) (‘Company’) under s 439A of the Act be extended up to and including 14 July 2023.
(3)Pursuant to s 447A(1) of the Act, the meeting of creditors of the Company required by s 439A may be held at any time during, or within five business days after, the end of the convening period as extended by the order in paragraph 1 above, notwithstanding the provisions of s 439A(2) of the Act.
(4)The first plaintiff give notice of these orders to the Company’s creditors:
(a)by sending a circular letter by email in respect of those creditors who have informed the first plaintiff that email is their preferred method of communication; or
(b)by sending a circular letter by post in respect of all other known creditors informing them of the substance of these orders and enclosing a copy of the orders; or
(c)with respect to all creditors for whom the first plaintiff do not have a current email or postal address, the first plaintiff is to inform those creditors by making copies available on the Resources section of the website maintained by the first plaintiff’s firm, RRI Advisory at within seven days of the making of any orders by the Court.
(5)The first plaintiff has liberty to apply in respect of the administration of the Company, including any application for a further extension of the convening period.
(6)There be liberty to apply to any person who can demonstrate sufficient interest to modify or discharge paragraph 2 or 3 of these orders above on not less than 48 hours’ notice to the first plaintiff.
(7)The plaintiffs’ costs of this application be costs in the external administration of the Company within the meaning of s 5-15 of the Insolvency Practice Schedule (Corporations) (Schedule 2 of the Act) and be paid out of the assets of the Company.
SCHEDULE OF PARTIES
| S ECI 2023 02182 | |
| BETWEEN: | |
| LIAM WILLIAM PAUL BELLAMY in his capacity as administrator of MAJOR CRANE LOGISTICS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 160 384 350) | First Plaintiff |
| MAJOR CRANE LOGISTICS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 160 384 350) | Second Plaintiff |
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