Re Refap Pty Ltd

[2024] WASC 93

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   RE REFAP PTY LTD; EX PARTE ROBERT MICHAEL KIRMAN AND LINDA METHVEN SMITH as joint and several administrators of REFAP PTY LTD [2024] WASC 93

CORAM:   HILL J

HEARD:   15 MARCH 2024

DELIVERED          :   15 MARCH 2024

PUBLISHED           :   26 MARCH 2024

FILE NO/S:   COR 35 of 2024

MATTER:   IN THE MATTER OF REFAP PTY LTD

EX PARTE

ROBERT MICHAEL KIRMAN AND LINDA METHVEN SMITH as joint and several administrators of REFAP PTY LTD

First Plaintiff

ROBERT MICHAEL KIRMAN AND LINDA METHVEN SMITH as joint and several administrators of REFAP INDUSTRIAL SERVICES

Second Plaintiff

ROBERT MICHAEL KIRMAN AND LINDA METHVEN SMITH as joint and several administrators of BUSHLOLLY ENTERPRISES PTY LTD

Third Plaintiff

Catchwords:

Corporations - Insolvency - External administration - Application by administrators to extend convening period for second creditors' meeting - Whether modification in the interests of creditors as a whole - Whether interests of any persons prejudiced by modification are protected by terms of orders - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 439A, s 447A
Rules of the Supreme Court 1971 (WA), O 67B r 5(3)

Result:

Convening period extended

Category:    B

Representation:

Counsel:

First Plaintiff	:	Mr N Malone
Second Plaintiff	:	Mr N Malone
Third Plaintiff	:	Mr N Malone

Solicitors:

First Plaintiff	:	Pragma Lawyers
Second Plaintiff	:	Pragma Lawyers
Third Plaintiff	:	Pragma Lawyers

Cases referred to in decision:

AW v Rayney [No 4] [2012] WASCA 117

Diamond Press Australia Limited [2001] NSWSC 313

Mighty River International Limited v Hughes [2018] HCA 38

Re Harrisons Pharmacy Pty Ltd (admin appt'd) (recs and mgers appt'd) [2013] FCA 458

Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (admin apptd) [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:

1. On 8 March 2024, the plaintiffs filed an originating process seeking orders under s 439A(6) of the Corporations Act2001 (Cth) (Act) that the convening period with respect to Refap Pty Ltd (ACN 145 054 235), Refap Industrial Services Pty Ltd (ACN 611 560 537) and Bushlolly Enterprises Pty Ltd (ACN 611 442 098) (Group Companies) be extended for 60 days, namely up to and including 20 May 2024.

2. The plaintiffs also seek an order pursuant to s 447A(1) of the Act that the meetings of creditors of each of the Group Companies required by s 439A of the Act may be held at any time during the extended period and the period of five business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.

3. The originating process came for hearing before me on an urgent basis on 15 March 2024.  In support of the application, the plaintiffs relied on the affidavit of Linda Methven Smith filed 8 March 2024. 

4. At the conclusion of the hearing, I made orders largely in terms of the orders sought by the plaintiffs (save in respect of the confidentiality orders sought in respect of the entirety of the affidavit of Ms Smith) and advised I would later publish reasons for my decision.  These are those reasons.

Factual background

1. The factual background to this application is set out in the affidavit of Ms Smith and can be summarised as follows.

2. On 21 February 2024, the plaintiffs were appointed joint and several administrators of the Group Companies.

3. From the enquiries undertaken by the administrators, Ms Smith believes that prior to their appointment as administrators:

   (a)Refap Pty Ltd traded as an Indigenous employment services and training provider.  Its main source of revenue appears to have been derived through Federal Government payments made in relation to placing a job seeker into new work and/or training programs and facilitating community education and training programs;

   (b)Refap Industrial Services Pty Ltd traded as an industrial laundry.  Its main source of revenue appears to be from private customers, predominantly being large mining and mining camp operators in the Pilbara region of Western Australia; and

   (c)Bushlolly Enterprises Pty Ltd traded as a hospitality business.

4. Pursuant to s 439A(5)(b) of the Act, the convening period for the second creditors' meeting is the period of 20 business days beginning on the day after the administration begins or, if that day is not a business day, the next business day. On this basis, the convening period for the Group Companies ends on 21 March 2024.

5. The evidence of Ms Smith is that the plaintiffs are presently undertaking a sale process in respect of the Group Companies, which will not be completed by 21 March 2024.  In addition, the administrators are still reviewing the records of each of the Group Companies to recover the assets of each of the Group Companies and assessing the entitlements of the employees of the Group Companies. 

6. Ms Smith's evidence is that there are several parties who have expressed an interest in the group and that extra time is required to enable the administrators to finalise the sales campaign and to allow both them and creditors to properly form a view on what should occur.

Legal principles

1. The legal principles that govern this application are well-known and not in dispute. 

2. Pursuant to s 439A(6) of the Act, the court may extend the convening period on an application made during or after the period referred to in s 439A(5)(a) or s 439A(5)(b) of the Act as the case requires.

3. In determining the application, it is necessary for the court to consider the objects and scheme of pt 5.3A of the Act. 

4. These objects are set out in s 435A of the Act, namely, to maximise the chances of the company (or as much as possible of its business) continuing in existence or, if not this is not possible, for the administration to be done in a way as to result in a better return for the company's creditors and members than would result from an immediate winding up of the company.

5. 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 a need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders.[1]

   [1] 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].

6. The court must also take into account the detriment to third parties (if any), including the suspension of rights and remedies of secured creditors, lessors and others.[2]

   [2] Shaw and Albarran (Joint and Several Administrators of Home Art Building Group Pty Ltd) v Home Art Building Group Pty Ltd (admin apptd) [2016] WASC 274 [18].

7. In this regard, creditors' interests can be prejudiced by not only delay, but by convening meetings prematurely.  Instances where creditors have been prejudiced include 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.[3]

   [3] Re Harrisons Pharmacy Pty Ltd (admin appt'd) (recs and mgers appt'd) [2013] FCA 458 [13].

8. 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 administrators' estimate of time has a reasonable basis.[4]

   [4] Mighty River International Limited v Hughes [2018] HCA 38 [73].

9. The relevant established categories include:

   (a)whether the convening period allows enough time for the administrator to produce a satisfactory report;

   (b)where there is a need to extend the administration period to facilitate the sale of the business of the company as a going concern or to progress and assess a deed of company arrangement proposal;

   (c)the complexity of the administration, including transactions entered into by the company;

   (d)whether creditors support the extension;

   (e)the administrators' own opinion as to the need for an extension, particularly where the administration is complex; and

   (f)more generally, where additional time is likely to enhance the return for unsecured creditors.

Disposition

1. On the basis of the affidavit of Ms Smith, for the following reasons, I am satisfied that the application for an extension of the convening period should be granted. 

2. First, I accept that the convening period mandated under the Act does not enable the administrators to produce a report containing a considered recommendation to creditors.  I specifically accept Ms Smith's evidence that there are a number of steps that still need to occur and that, without the extension, neither the plaintiffs nor creditors will be in a position to make an informed decision about the future of the Group Companies given the sales campaign has not yet concluded.

3. Second, I accept that the convening period is required to be extended in order to facilitate the sale of the businesses or their assets, or to enable a deed of company arrangement to be proposed.  These matters are consistent with the purposes of pt 5.3A of the Act. 

4. Third, I accept there is some complexity to the administration of the Group Companies.[5]

   [5] Affidavit of Linda Methven Smith filed 8 March 2024 [8] - [10].

5. Fourth, no creditor has raised any opposition to the extension nor has any creditor appeared before me today to oppose the orders sought. 

6. Fifth, the opinion of the administrators is that an extension is required for a period of 60 days.  On the basis of the evidence before me, I am satisfied that there is a reasonable basis for this estimate. 

7. Finally, I am satisfied on all the evidence that the potential benefit of the extension will outweigh any prejudice to creditors and is in the best interests of creditors of the Group Companies as a whole.

Confidentiality order

1. In their minute of proposed orders, the plaintiffs sought an order that the entirety of Ms Smith's affidavit dated 8 March 2024 as well as their submissions be treated as confidential and that they not be published or disclosed without an order of the court.

2. The basis for this order was that it was contended the affidavit contained commercially sensitive information in respect of the Group Companies, which was not known to the public. 

3. Counsel for the plaintiffs acknowledged that the court will only make a confidentiality order where it is necessary for the administration of justice and that an essential feature of the courts within Australia is that they sit in public.[6] 

   [6] AW v Rayney [No 4] [2012] WASCA 117.

4. In making an order under O 67B r 5(3) of the Rules of the Supreme Court 1971 (WA), it is necessary for the court to set out the basis for the order and to include sufficient information to clearly identify the information to which the order applies, whose access to the information is restricted, and the period of the order.[7]

   [7] Rules of the Supreme Court 1971 (WA) O 67B r 4.

5. Having reviewed the affidavit of Ms Smith, I do not consider that it is appropriate to make the orders sought by the plaintiffs.  In my view, significant portions of the affidavit contain information that cannot be said to be confidential or require the protection of an order.  That said, I accept that one paragraph of the affidavit, namely [42] of the affidavit, expresses the preliminary views of the plaintiffs in respect of certain matters in relation to the Group Companies.  I accept that the preliminary views expressed in this paragraph are confidential to the plaintiffs and should be the subject of an order. 

6. On this basis, I was prepared to make an order restricting access to this paragraph of the affidavit without an order of the court.

Conclusion

1. For these reasons, I am and was satisfied that it was appropriate for orders to be made in the terms of Annexure 'A' to these reasons.

Annexure A

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

26 MARCH 2024