Re Ozwide Energy Group Pty Ltd (admin apptd)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2024 02719

IN THE MATTER of OZWIDE ENERGY GROUP PTY LTD (ACN 631 830 825) (Administrator Appointed)

BETWEEN:

MANUEL HANNA in his capacity as Administrator of OZWIDE ENERGY GROUP PTY LTD (ACN 631 830 825) (Administrator Appointed)	First Plaintiff
OZWIDE ENERGY GROUP PTY LTD (ACN 631 830 825) (Administrator Appointed)	Second Plaintiff

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JUDICIAL REGISTRAR:	Gitsham JR
WHERE HELD:	Melbourne
DATE OF HEARING:	3 June 2024 (ex tempore, revised on 25 July 2024)
DATE OF RULING:	25 July 2024
CASE MAY BE CITED AS:	Re Ozwide Energy Group Pty Ltd (admin apptd)
MEDIUM NEUTRAL CITATION:	[2024] VSC 433

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CORPORATIONS – External administration – Administration under pt 5.3A of the Corporations Act 2001 (Cth) – Application pursuant to s 439A(6) and 447A of the Corporations Act 2001 (Cth) for the extension of the convening period for meeting to be held under s 439A of the Corporations Act 2001 (Cth) – ‘Daisytek order’ sought – Application for extension and associated orders granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr Simon Rubenstein	Moray & Agnew

TABLE OF CONTENTS

A.. Introduction

B.. Facts

C.. Consideration

D.. Conclusion

JUDICIAL REGISTRAR:

A Introduction

On 13 May 2024, Manuel Hanna was appointed Voluntary Administrator of Ozwide Energy Group Pty Ltd (‘Company’). Mr Hanna is a partner in the corporate and insolvency division of the firm Romanis Cant. He has practised in insolvency and corporate restructuring for over 13 years and has been a registered liquidator since 2021.
Based on evidence contained in affidavits affirmed by Mr Hanna on 31 May 2024 and 2 June 2024, the Administrator applies to:
(a)extend the time to convene the second meeting of creditors of the Company by three months up to and including 11 September 2024; and
(b)obtain a ‘Daisytek’ order, such that the meeting of creditors may be convened and held at any time during the convening period as extended by the Court or within five business days thereafter and notwithstanding the provisions of s 439A(2) of the Corporations Act 2001 (Cth).
At the hearing on 3 June 2024, I was satisfied that both orders should be made. These are my reasons for doing so.

B Facts

The Company was incorporated on 22 February 2019 and carried on a business trading environmental commodities focused on directional trading. In particular, the commodities traded included carbon credit certificates under Commonwealth and State Government renewable energy legislative schemes.
The Company was part of a larger group of companies operating under the name ‘Ozwide Energy+Carbon’ (‘Ozwide Group’) which operated in the energy and renewables industry. There are seven other companies in the Ozwide Group. One of the companies, Ozwide AFSL Pty Ltd, holds the Australian Financial Services Licence for the Ozwide Group. The remaining entities also operate in the carbon services and compliance markets. Mark Ploenges is the sole director of the Company and a director (either sole or co-director) of each of the other entities in the Ozwide Group. The Company the subject of this application is the only company in the group in voluntary administration.
To date, the Administrator has undertaken the usual tasks required of an Administrator under pt 5.3A of the Act. Those tasks include collating and reviewing the books and records of the Company; reviewing the Report on Company Activities and Property (‘ROCAP’) provided by the director; investigating the nature and operation of the Company’s business which includes the broader Ozwide Group; assessing and determining to cease trading the business of the Company; identifying and terminating the employment of employees with the Company; investigating the assets held by the Company, in particular, the trading commodities and their value; securing chattels, plant and equipment; liaising with the director and the solicitors for the Ozwide Group in relation to various matters including the possible sale of the business and the assets of the Group; advertising for expressions of interest in a proposed sale or recapitalisation; preparing for and convening a first meeting of creditors on 23 May 2024; and liaising with creditors, including a Committee of Inspection.
The Administrator’s investigations show that as at 13 May 2024, the Company had a total asset base of about $1,167,000 of which approximately $631,106 are trading commodities. Given their nature, those trading commodities are subject to fluctuation and significant price variation over a short period of time. The Administrator has identified one secured creditor, the National Australia Bank, in the amount of approximately $998,540 and unsecured creditors of approximately $26.9 million. These unsecured creditors add some complexity to the administration task.
The Administrator’s evidence is that a large number of the unsecured creditor claims relate to contingent liabilities arising out of future contracts for commodities traded by the Company. The value of these claims is dependent upon the day to day spot price for the relevant commodity. The Administrator says investigating these claims has been and remains a complex exercise requiring legal advice.
As part of the voluntary administration, the Administrator has been negotiating with the director of the Company and Ozwide Group’s solicitors in relation to either a collective sale of the Ozwide Group’s business and assets; or a recapitalisation of the Company by a Deed of Company Arrangement. The Administrator is of the view that given the volatile nature of the business (i.e. commodities trading), the minimal assets held by the Company compared to its liabilities, and the fact that the Company operates within the broader Ozwide Group, a sale or recapitalisation of the Ozwide Group is likely to attract more interest than if the Company’s business and assets were to be sold or recapitalised separate from the Ozwide Group.
Accordingly, the Administrator has taken the following steps to achieve that outcome. On 17 May 2024, the Administrator advertised for expressions of interest to be submitted by 24 May 2024 in relation to either a proposed sale or recapitalisation. As at 3 June 2024, 11 expressions of interest had been received, two of which are from ASX listed entities. The Administrator considers this to be a strong response to the advertisement and considers it worth extending the date for expressions of interest should the convening period be extended.
The first creditors’ meeting was held on 23 May 2024. The minutes of that meeting are not yet finalised but were provided to me in draft form. They show that the Administrator informed creditors that he was considering applying for an extension to the convening period given the complexity of the matters in the administration. No questions or objections were raised at that meeting in respect of any proposed application.
A Committee of Inspection was also formed at the first creditors’ meeting. The Committee of Inspection held an informal meeting on 29 May 2024 at which the subject of this application was again addressed. The Committee asked what process was involved in extending the convening period. The Administrator informed the Committee of Inspection that in his view it was in the best interests of creditors to extend the convening period to allow more time to explore the proposed sale or recapitalisation; that the application to extend the convening period would be filed in the Supreme Court of Victoria and was scheduled for a hearing at 10:30am on 3 June 2024; and that the Committee was at liberty to appear at the hearing of the application.
Again, no objection appears to have been made at the first creditors’ meeting. The hearing of the application was unopposed.
As it presently stands, the last day of the convening period for the administration of the Company under s 439A(5) of the Act is 11 June 2024. Pursuant to s 439A(2) of the Act, the Administrator must therefore hold the meeting on or before 18 June 2024. Section 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) requires the Administrator to provide his report to creditors in advance of the second creditors’ meeting and by no later than 6 June 2024.
Whilst the Administrator is of the view that the opportunity of sale or recapitalisation is most beneficial to creditors, based on his current investigations, he will not be able to make a comprehensive recommendation to creditors by 6 June 2024 and prior to the end of the convening period. The Administrator seeks an extension to allow him time to:
(a)explore the Proposed Sale or Recapitalisation of the Company and the Ozwide Group;
(b)consider the complexities that will be associated with implementing a sale or recapitalisation if a binding offer is made and approved; and
(c)gain a clearer understanding of the Company’s business, the value of the commodities it holds and the quantum of contingent liabilities that form a significant part of the unsecured creditors’ claims.
To further facilitate this process, the Administrator intends to extend the date for the advertising campaign to 6 June 2024, the entry into a confidentiality deed and issuance of an information memorandum by 13 June 2024, non-binding offers to be made by 28 June 2024 and completion of a due diligence and binding offer period on 19 July 2024.

C Consideration

The power to extend a convening period is not one that should be exercised as a matter of course. It should, however, be exercised bearing in mind the spirit and object of pt 5.3A of the Act.[1]
[1]Re Geraldton Building Co Pty Ltd (Administrators Appointed); ex parte Trevor [2000] WASC 320.
The function and purpose of pt 5.3A of the Act is well understood. Its objective is to provide for the administration of the business, property and affairs of an insolvent company in a manner that either maximises the chances the business will continue in existence or, where that is not possible, result in a better return for creditors and shareholders than would result from immediate liquidation.[2]
[2]Corporations Act 2001 (Cth) s 435A.
The purpose of the second meeting of creditors is to consider the future of the Company. Section 439C of the Act states that at that meeting, creditors may resolve that the company execute a deed of company arrangement; the administration end and the company continue; or the company be wound up. That resolution is assisted in no small part by the report to creditors provided by an administrator about the company’s business, property, affairs and financial circumstances. Any deed of company arrangement proposed by the director will form part of that report along with recommendations made by the administrator as to the likely benefit to creditors in a range of liquidation and non-liquidation scenarios. Whilst it is critical that this information is prepared in a timely way, it is equally important that it be as fulsome as possible to allow creditors to make the best informed decision.[3]
[3]See for example the decision of Matthews AsJ in Re Zeto 6 Malcolm Pty Ltd (Admins Apptd) & Ors [2021] VSC 169.
There is now a well-established body of case law in respect of applications for extensions of time under s 439A(6) of the Act.
The function of the Court on an application to extend the convening period is to balance between:
the expectation that the administration will be a relatively speedy and summary matter, and … the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directors towards maximising the return for creditors and any shareholders.[4]
[4]Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, [10] (Barrett J).
More recently, Courts have recognised that the proper administration of large or complex groups and companies can require significant time and effort and have adopted a commercially realistic approach in such applications.[5]
[5]Re Unlocked Ltd (Administrators Appointed) [2018] VSC 345.
It can also be the case that whilst the best interests of creditors can be prejudiced by delay, a similar prejudice may occur where a meeting is convened prematurely and an administrator does not have sufficient information to hand to properly report to creditors and on which creditors can make an informed decision.[6]
[6]Re Echuca Insured Housing Loans Pty Ltd (admin apptd) (Supreme Court of Victoria, Harper J, No 4376 of 1994, 4 February 1994), unreported; Re Brash Holdings Ltd (admin apptd) (1994) 13 ACSR 793; Re Pan
Pharmaceuticals Ltd (admins apptd) (2003) 21 ACLC 1144.
In Re Riviera Group Pty Ltd,[7] Austin J set out, in broad categories, the reasons given for extending a convening period. Those categories, summarised by Judd J in Re Colorado Group Limited,[8] included relevantly, the size and scope of the business; a complex corporate group structure and intercompany loans; complex transactions entered into by the company (i.e., securities lending or derivatives transactions); the time needed to execute an orderly process of disposal of assets; the time needed for thorough assessment of a proposal for a deed of company arrangement; where the extension will allow sale of the business as a going concern; more generally, that additional time is likely to enhance the return for unsecured creditors.
[7](2009) 72 ACSR 32, [13].
[8][2011] VSC 260, [25].
At [14], his Honour went on to say:
The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator’s estimate of time has a reasonable basis.[9]
[9]Re Riviera Group Pty Ltd (2009) 72 ACSR 32, [14]; Re Unlockd Ltd (Administrators Appointed) [2018] VSC 345, [26].
Insofar as the Daisytek order is concerned, s 447A of the Act provides the Court with a general power to make such orders as it thinks appropriate about how pt 5.3A of the Act is to operate in relation to a particular company.[10]
[10]Re Unlockd Ltd (Administrators Appointed) [2018] VSC 345, [20].
Such orders include orders with the effect that the second meeting of creditors could be held at any time during an extended convening period or the period of five business days thereafter, notwithstanding the effect of s 439A(2) of the Act. This type of order was made in Re Daisytek Australia Pty Ltd — the decision which is now the order’s namesake — and has been judicially considered in cases such as these to be ’sensible and now almost routine’.[11]
[11][2003] 45 ACSR 446; Re LED Builders Pty Ltd (admin apptd) [2008] NSWSC 633, [2] (Austin J).

D Conclusion

I am of the view it is appropriate to extend the convening period because of the following.
I am satisfied that the nature of the business and its operation within the Ozwide Group justifies the steps taken by the Administrator exploring the sale or recapitalisation in respect of not just the Company but the whole Group. Whilst that sale/recapitalisation process has commenced, the commercial reality is that it will take some time. I am satisfied that the length of time sought by the Administrator is justified.
The expression of interest process is already underway. Given the interest already received in response to the advertisement, it seems likely that an extension will increase the chances of the sale or recapitalisation of the business of the Company and the future of the Ozwide Group as a whole.
In the circumstances it naturally follows that until that sale/recapitalisation process can be completed, the Administrator is not in a position to fully inform creditors as to what course is in their best interests having regard to all the options. I consider this factor to outweigh the delay that will occur in arriving at that recommendation.
There is also a level of complexity to the business of the Company and the broader Ozwide Group. As the Administrator submits, further time afforded to him to investigate the value of the traded commodities the Company holds as well as the value of the contingent liabilities will result in better financial information to creditors and a better understanding of their options.
Finally, I am satisfied that both the creditors and the Committee of Inspection have been informed of this application and have not opposed it. To the extent that there are persons who are affected by the deadlines imposed by division 6 of pt 5.3A of the Act, those interests are protected. The Administrator seeks an order that those persons have the ability, on notice, to apply to set aside my orders and I intend to make such an order.
I am also satisfied that a Daisytek order should be made thus allowing the Administrator to hold the second creditors’ meeting at an earlier date should the circumstances permit. In this way, the statutory intention that the administration of a company happens in an efficient way is appropriately preserved.
I will make orders in the form sought by the Administrator.

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[2024] VSC 433

25 July 2024