Re Palandri Ltd; [No 2]

[2008] WASC 154

RE PALANDRI LTD; EX PARTE CUSSEN [No 2] [2008] WASC 154

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2008] WASC 154
Published:	24/07/2008
Case No:	COR:31/2008	Heard:	16 MAY 2008
Coram:	MARTIN CJ	Delivered:	16/05/08
No of pages:	9	Judgment Part:	1 of 1
Result:	Application granted
Category:	B
PDF Version

Parties:	NEIL ROBERT CUSSEN, GARY PETER DORAN AND JOHN LETHBRIDGE GREIG AS ADMINISTRATORS OF PALANDRI LTD (ADMINISTRATORS APPOINTED) (ACN 087 787 415) PALANDRI WINE PRODUCTION LTD (ADMINISTRATORS APPOINTED) (ACN 085 042 879) PALANDRI WINES LTD (ADMINISTRATORS APPOINTED) (ACN 084 252 488) PALANDRI INVESTMENT MANAGEMENT LTD (ADMINISTRATORS APPOINTED) (ACN 091 709 769) MARGARET RIVER WINE INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 112 505 692)
Catchwords:	Corporations law Extension of time to convene meeting of creditors Objects of Corporations Act 2001 (Cth) Extension of the period of adjournment in s 239B(2) of the Corporations Act 2001 (Cth) Exercise of discretion in the use of court's powers under s 447A of the Corporations Act 2001 (Cth)
Legislation:	Corporations Act 2001 (Cth), s 435A, s 439A, s 439B, s 447A
Case References:	Nil

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : RE PALANDRI LTD; EX PARTE CUSSEN [No 2] [2008] WASC 154 CORAM : MARTIN CJ HEARD : 16 MAY 2008 DELIVERED : 16 MAY 2008 PUBLISHED : 24 JULY 2008 FILE NO/S : COR 31 of 2008 MATTER : PALANDRI LTD (ADMINISTRATORS APPOINTED)

(ACN 087 787 415)

PALANDRI WINE PRODUCTION LTD
(ADMINISTRATORS APPOINTED) (ACN 085 042 879)

PALANDRI WINES LTD (ADMINISTRATORS APPOINTED) (ACN 084 252 488)

PALANDRI INVESTMENT MANAGEMENT LTD (ADMINISTRATORS APPOINTED) (ACN 091 709 769)

MARGARET RIVER WINE INVESTMENTS PTY LTD
(ADMINISTRATORS APPOINTED) (ACN 112 505 692)

EX PARTE

NEIL ROBERT CUSSEN, GARY PETER DORAN AND JOHN LETHBRIDGE GREIG AS ADMINISTRATORS OF PALANDRI LTD

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(ADMINISTRATORS APPOINTED) (ACN 087 787 415)

PALANDRI WINE PRODUCTION LTD (ADMINISTRATORS APPOINTED) (ACN 085 042 879)
PALANDRI WINES LTD (ADMINISTRATORS APPOINTED) (ACN 084 252 488)
PALANDRI INVESTMENT MANAGEMENT LTD (ADMINISTRATORS APPOINTED) (ACN 091 709 769)
MARGARET RIVER WINE INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 112 505 692)
Applicants

Catchwords:

Corporations law - Extension of time to convene meeting of creditors - Objects of Corporations Act 2001 (Cth) - Extension of the period of adjournment in s 239B(2) of the Corporations Act 2001 (Cth) - Exercise of discretion in the use of court's powers under s 447A of the Corporations Act 2001 (Cth)

Legislation:

Corporations Act 2001 (Cth), s 435A, s 439A, s 439B, s 447A

Result:

Application granted

Category: B

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Representation:

Counsel:

Applicants : Mr D K Skender

Solicitors:

Applicants : McKenzie Moncrieff Lawyers

Case(s) referred to in judgment(s):

Nil

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MARTIN CJ:

1 (This judgment was delivered extemporaneously on 16 May 2008 and has been edited from the transcript.)

2 This application is brought by the administrators of a number of companies that are specified in the application for orders. The application contains two parts. First, the administrators seek an extension of the period within which the meetings of creditors (that are required to be convened pursuant to s 439A of the Corporations Act 2001 (Cth)) must be convened. Second, the administrators seek an extension of the period of adjournment set out in s 439B(2) of the Corporations Act and, indeed, further adjournment of the meeting which was held pursuant to s 439A of the Corporation Act in respect of the company Palandri Finance Ltd.

3 Dealing first with the application to extend the convening period under s 439A(6) of the Corporations Act, I approach this application having regard to the objects of the part of the Corporations Act in which these provisions are found. These objects are specified in s 435A as being

to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.

4 It is in that context that s 439A of the Corporations Act provides that a meeting of the creditors of the company is to be held within a specified period. Other parts of that section limit the period over which such meetings may be adjourned. It is evident from a consideration of s 439A as a whole, that it is the legislative intention to ensure that the creditors of companies which are under administration pursuant to this part of the Corporations Act, are given a prompt opportunity in which to consider the future of the administration and, in particular, to resolve that the administration should end, that the company execute a deed of company arrangement or that the company be wound up.

5 So I start from the proposition that expedition is clearly within the legislative intention revealed by the legislation. But it is also the case that the legislature has expressly contemplated the extension of a convening

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period which would otherwise result in a meeting having to be held under s 439A of the Corporations Act. It seems to me that in the exercise of the discretion conferred upon a court in that regard, it is appropriate to take account of the objects of this part of the Act to which I have already referred. In that context, I will now consider the first part of the application which relates to the extension of the convening period in respect of the five companies named in these proceedings and in the application.

6 The application is brought in reliance upon the affidavit of Mr Doran, who is one of the administrators of these companies. He deposes to a number of matters which he submits justify the extension sought. He points out, of course, that the purpose of a meeting of creditors convened under s 439A of the Corporations Act is to make the decisions to which I have referred - namely, to determine whether a deed of company arrangement should be executed, whether the administration should end or whether the company should be wound up.

7 Creditors are assisted in the decision-making processes in that regard by a report which is to be provided by the administrator prior to the meeting being held. The capacity of Mr Doran to provide such a report, and the capacity of the creditors to meaningfully evaluate which of the courses they should favour in relation to the company of which they are a creditor, is inhibited by a number of considerations which Mr Doran identifies in his affidavit.

8 The first is that, as expected on the last occasion upon which this court granted an extension of the convening period, a conditional agreement for the sale of a number of the assets of the companies has been entered into. That conditional agreement is in evidence but subject to a confidentiality order. I have, however, reviewed the agreement and it is clear that it is subject to a number of conditions precedent, some of which are due to be completed not later than 4 June 2008. So, as time goes by and conditions precedent are either satisfied or unsatisfied, it will be possible for the administrators to evaluate the likelihood of the agreement for sale becoming unconditional and to advise creditors accordingly.

9 Another factor which compounds the difficulties of the administrators in providing the information to the creditors which they need to evaluate the proper course to follow is the lack of up-to-date books and records in relation to the companies concerned. That has necessitated a significant amount of work on the part of the administrators

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and their employees. The administrator does, however, estimate that within 14 days or so the books and records of the company can be brought up to date, or at least sufficiently up to date, to the point where they can be used for the purpose of formulating the advice to creditors to which I have referred.

10 A further compounding factor in this case is the complexity of the interlocking schemes between the various companies' administration and the growers who are parties to those schemes and, therefore, the financial relationships between those schemes, the growers who are parties to those schemes and the differential financial positions of the respective companies. On the information available to me, that appears to be a somewhat tangled web and I can appreciate that the task of untangling that web is a significant one. It is also a task that requires financial evaluation which would lead to an assessment of the ongoing viability of the schemes to which the various growers are parties. It is that process of assessing the ongoing viability of the schemes that provides perhaps the most significant delays that are relied upon by the administrator as a basis for these applications.

11 The administrator deposes that it will take approximately 14 days from the date of his affidavit to prepare a discounted cash flow in relation to the various schemes that are in existence. Thereafter the administrator proposes to seek the advice of a viticultural expert with respect to the conclusions properly drawn in relation to the future viability of those schemes as a basis for providing advice to growers about the position they should adopt. The administrator estimates that it will take approximately 30 days from the time the discounted cash flow is available to obtain the advice of a viticultural expert.

12 The administrator further estimates that, when all of that information is to hand, it will take approximately 21 days for him to prepare a report to creditors and a report to the growers that would advise them of his views in relation to the future viability of their schemes. Other factors which impact upon this process, but probably not upon the critical time path, are issues which have arisen in relation to the possibility of claims being made by the companies for the refund of goods and services tax and wine equalisation tax which has been paid by the insolvent companies. The administrator estimates that those amounts could be as much as $6 million. However, before he is in a position to provide meaningful advice in relation to those matters, he requires the advice of an accountant with expertise in this area. There also needs to be an evaluation of the

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particular persons who might have interests as beneficiaries in those refunds. So these are other matters that require investigation and report.

13 The administrator also deposes that, in his view, it would be not only convenient but much more efficient and productive if the meetings of the various persons with an interest in these companies were held simultaneously. By 'the various persons with an interest in the companies' I mean the growers and the creditors of the companies.

14 Because the time that is required to convene a meeting of the growers is 21 days, the administrator deposes that if that objective is to be achieved, a further 21 days from the time upon which his report is prepared would be needed to give notice to the growers before those simultaneous meetings could be convened. So, adding the periods of 14 days, 30 days, 21 days and 21 days, to which I have already referred, there is a critical time path of some 86 days from the time the administrator's affidavit was sworn.

15 I am satisfied that, consistently with the objectives identified in s 435A of the Corporations Act, it is in the interests of all those with an interest in these companies to enable the steps which the administrator proposes to be taken before the meetings of creditors, referred to in s 439A of the Act, are convened.

16 On that basis, there is a need to balance the desire for expedition, which is evident in s 439A of the Corporations Act, with the utility of the meeting which is to be convened under that section. A meeting which is convened before a time at which all relevant information is available to enable the creditors to meaningfully evaluate their position and make an informed decision about the way forward is likely to result in either an unwise decision being taken at that meeting or, more likely, a further adjournment of that meeting which is not in the interests of creditors given that reconvening meetings of this magnitude involves significant expense.

17 So for those various reasons, it seems to me that a proper exercise of my discretion in this case under s 439A(6) of the Corporations Act is to grant the extension sought.

18 I turn now to the orders that are sought in respect of the meeting that was convened in relation to the company Palandri Finance Ltd. Similar, but not identical, considerations apply to the relief that is sought in relation to that meeting. I say that they are not identical because, of course, in that case a meeting was in fact convened and the creditors

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present at that meeting resolved that it should be adjourned for a period of 45 business days (that being the maximum period available for the adjournment of a meeting under s 439B(2) of the Corporations Act).

19 For the reasons that have been advanced in relation to the other companies in respect of which an extension of the convening period is sought, the administrators propose that the meeting of Palandri Finance Ltd should also be adjourned to enable that meeting to be held at or about the same time as the other meetings. This is because of the overlap and interrelationship of the interests of the creditors of Palandri Finance Ltd with the various other matters that arise for consideration in relation to the other companies within the group.

20 There are two alternative ways in which that objective, which appears to me to be desirable and practical, could be achieved. The first would be for me to simply extend the period over which the creditors might themselves adjourn their meeting. It would then be left to the administrator to convene a further meeting of the creditors and put before them the question of whether their meeting should be further adjourned.

21 The other course would be to myself exercise the sweeping powers given by s 447A of the Corporations Act to direct that the meeting itself be adjourned and, indeed, to direct that s 439B of the Corporations Act operates on the basis that the meeting has itself been adjourned to a date to be fixed not later than the dates upon which the convening period is to be extended in respect of the other companies.

22 On the one hand, there is an advantage in giving to the creditors, who have already met once, the power to determine whether there should be a further adjournment beyond that which they have already agreed. On the other hand, I have been told that the administrator estimates that the cost of convening such a meeting would be around $30,000. Further, provision would have to be made for simultaneous meetings to be held in a number of Australian cities because of the potential numbers of persons who might be interested in that meeting.

23 The administrator proposes that all interested parties, including creditors of all companies, be given notice of the orders that the administrator seeks today, and also that such persons be given liberty to apply to vary any of those orders. In those circumstances, that course appears to me to be more practical, in that if any creditor of Palandri Finance Ltd is aggrieved by the adjournment of the meeting to a date beyond that which was the subject of the resolution put at the meeting on

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28 March 2008, then they will have the opportunity under the orders proposed by the administrator to come to the court and put their position, in which event the orders can be varied.

24 So for those reasons it seems to me that the appropriate course is that which is favoured by the administrator - namely, that I exercise the powers given by s 447A of the Corporations Act to actually adjourn the meeting.

25 Accordingly, both parts of the application are granted.