Re Scott Bradley Kershaw joint and several administrators Sandalwood Properties Ltd (Receivers And Managers Appointed) (Administrators Appointed) (ACN 093 330 977)
[2024] WASC 161
•3 MAY 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE SCOTT BRADLEY KERSHAW joint and several administrators SANDALWOOD PROPERTIES LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 093 330 977) [2024] WASC 161
CORAM: COBBY J
HEARD: 1 MAY 2024
DELIVERED : 3 MAY 2024
FILE NO/S: COR 70 of 2024
MATTER: IN THE MATTER OF SANDALWOOD PROPERTIES LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 093 330 977) AND OTHERS
EX PARTE
SCOTT BRADLEY KERSHAW joint and several administrators SANDALWOOD PROPERTIES LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 093 330 977)
RICHARD SCOTT TUCKER joint and several administrators SANDALWOOD PROPERTIES LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 093 330 977)
First Plaintiffs
SCOTT BRADLEY KERSHAW joint and several administrators QUINTIS HOLDCO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 626 968 858)
RICHARD SCOTT TUCKER joint and several administrators QUINTIS HOLDCO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 626 968 858)
Second Plaintiffs
SCOTT BRADLEY KERSHAW joint and several administrators QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 626 970 821)
RICHARD SCOTT TUCKER joint and several administrators QUINTIS (AUSTRALIA) PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 626 970 821)
Third Plaintiffs
RICHARD SCOTT TUCKER joint and several administrators QUINTIS FORESTRY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 080 139 966)
SCOTT BRADLEY KERSHAW joint and several administrators QUINTIS FORESTRY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 080 139 966)
Fourth Plaintiffs
RICHARD SCOTT TUCKER joint and several administrators QUINTIS PRODUCTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 368 707)
SCOTT BRADLEY KERSHAW joint and several administrators QUINTIS PRODUCTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 103 368 707)
Fifth Plaintiffs
SCOTT BRADLEY KERSHAW joint and several administrators FIELDPARK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 113 440 841)
RICHARD SCOTT TUCKER joint and several administrators FIELDPARK PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 113 440 841)
Sixth Plaintiffs
SCOTT BRADLEY KERSHAW joint and several administrators MT ROMANCE HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 115 659 606)
RICHARD SCOTT TUCKER joint and several administrators MT ROMANCE HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 115 659 606)
Seventh Plaintiffs
RICHARD SCOTT TUCKER joint and several administrators QUINTIS SANDALWOOD PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 060 122 698)
SCOTT BRADLEY KERSHAW joint and several administrators QUINTIS SANDALWOOD PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 060 122 698)
Eighth Plaintiffs
SCOTT BRADLEY KERSHAW joint and several administrators ARWON FINANCE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 072 486 643)
RICHARD SCOTT TUCKER joint and several administrators ARWON FINANCE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 072 486 643)
Ninth Plaintiffs
RICHARD SCOTT TUCKER joint and several administrators ABOUT TIME WE MET PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 088 257 498)
SCOTT BRADLEY KERSHAW joint and several administrators ABOUT TIME WE MET PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 088 257 498)
Tenth Plaintiffs
Catchwords:
Corporations Law - Voluntary administrators - Application to extend time for convening the second creditors' meeting and associated orders - Extension of 90 days sought - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 439A, s 447A
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiffs | : | J Abberton |
| Second Plaintiffs | : | J Abberton |
| Third Plaintiffs | : | J Abberton |
| Fourth Plaintiffs | : | J Abberton |
| Fifth Plaintiffs | : | J Abberton |
| Sixth Plaintiffs | : | J Abberton |
| Seventh Plaintiffs | : | J Abberton |
| Eighth Plaintiffs | : | J Abberton |
| Ninth Plaintiffs | : | J Abberton |
| Tenth Plaintiffs | : | J Abberton |
Solicitors:
| First Plaintiffs | : | Lavan |
| Second Plaintiffs | : | Lavan |
| Third Plaintiffs | : | Lavan |
| Fourth Plaintiffs | : | Lavan |
| Fifth Plaintiffs | : | Lavan |
| Sixth Plaintiffs | : | Lavan |
| Seventh Plaintiffs | : | Lavan |
| Eighth Plaintiffs | : | Lavan |
| Ninth Plaintiffs | : | Lavan |
| Tenth Plaintiffs | : | Lavan |
Case(s) referred to in decision(s):
Mallee Resources Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2023] WASC 379
Re Daiseytek Australia Pty Ltd (admin apptd) (Bowen and Hall as joint admins) [2003] FCA 575; (2003) 45 ACSR 446
Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77
COBBY J:
By an originating process filed by the plaintiffs on 30 April 2024 the plaintiffs sought an extension of the period in which they are required to convene a second meeting of the creditors of 10 companies (the Companies) to which they had been appointed joint and several administrators on 3 April 2024 and certain ancillary orders.
On 2 April 2024 John Richard Park, Hayden Leigh White and Daniel Hillston Woodhouse of FTI Consulting were appointed as receivers and managers over certain of the Companies.
Prior to the appointment of the external administrators, the Companies were part of a corporate group involved in the planting, growing, harvesting, processing and sale of Indian Sandalwood.
The Companies own and manage Indian Sandalwood plantations and were the world's largest producer of plantations growing Indian Sandalwood. The assets of the Companies include a wood processing facility in Kununurra and an oil distillery in Albany.
On the hearing of the application, I inferred that the receivers and managers have control of the businesses and assets of those of the Companies to which they have been appointed.
To date, the plaintiffs have undertaken, amongst other things, a preliminary investigation into the affairs of the Companies, attended town hall meetings for the employees of the Companies, and held the first meetings of the Companies' creditors.
The Court has power under s 439A(6) and s 447A of the Corporations Act 2001 (Cth) to make orders extending the period for convening a second meeting of creditors.
The principles governing the exercise of those powers are well established. They were recently summarised by Lundberg J in Re Mallee Resources Ltd (Administrators Appointed) (Receivers and Managers Appointed),[1] which summary I gratefully adopt without repeating here.
[1] Re Mallee Resources Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2023] WASC 379, [20] - [29].
Briefly, in considering an application for an extension of time in which to convene a second meeting of creditors, the court must strike a balance between the expectation that an administration will proceed in a relatively summary way against the need to ensure that sensible and constructive actions directed to maximising a return for creditors are not prejudiced.
The evidence is that following their appointment, the receivers and managers advertised for expressions of interest for the sale and/or recapitalisation of the Companies with a closing date of 19 April 2024. After 19 April 2024, the receivers issued letters to nine parties which had expressed an interest in the recapitalisation and/or sale of the business and assets of the Companies, requesting any non-binding indicative offer be made by 26 April 2024.
The receivers and managers thereafter received a further five expressions of interest.
Each party which has expressed interest in the business and assets of the Companies has been granted access to a secure online data room for, I inferred, the purposes of due diligence.
On a date not identified in the evidence the receivers and managers requested the plaintiffs seek an extension of the convening period to allow for the completion of the sales process and to keep open the possibility that an interested party's preferred transaction structure include a deed of company arrangement (DOCA).
There was no evidence as to whether the receivers and managers had received any indicative offers as at the date of the hearing.
The convening period applicable to the Companies would have expired on 2 May 2024, being 20 business days from the appointment of the plaintiffs by operation of s 438A(5)(b) of the Act. The plaintiffs would then have been required, pursuant to s 439A(2) of the Act, to convene a second meeting of the creditors of each of the companies within 5 business days after the end of that period, being on or before 9 May 2024.
The notice convening a second meeting of creditors must be, pursuant to s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth), accompanied by:
(a)a report to the company's creditors about its business, property, affairs and financial circumstances; and
(b)a statement expressing the administrator's opinion on, amongst other things, whether any DOCA proposals, made by interested parties and proposed to creditors at the meeting of creditors, would be in the best interests of creditors.
The evidence of Mr Tucker, one of the plaintiffs, was that the administration of the Companies is unusually complex due to the group structure and the interdependence of the entities that comprise the group on the viability of the group as a whole.
Mr Tucker's evidence was that the plaintiffs have formed the view that an extension of the convening period is in the best interests of the Companies, and the creditors of each of them, because an extension of the convening period would allow the plaintiffs time to thoroughly investigate the Companies' affairs, and allow the receivers and managers to consider any non-binding indicative offers and undertake any necessary conferral with the offerors in order to provide an informed recommendation to the Companies' creditors regarding a sale and/or recapitalisation of the Companies.
There was no evidence as to how long that process might require. By the originating process the plaintiffs sought an extension of 90 days, but on the basis that the second meeting of creditors might be convened at an earlier date.
Nor was there any evidence as to any possible prejudice which might be suffered by creditors if the extension sought by the plaintiffs were granted.
I inferred, however, that both the receivers and managers and the plaintiffs consider that a 90 day extension of the convening period would maximise the chances of the sale or restructure of the Companies' businesses as a going concern, in part by retaining the flexibility to complete a restructure or sale by way of a DOCA, in circumstances where there had been 14 expressions of interest in the businesses and assets of the Companies.
There was no evidence of opposition to the application. However, the application was filed after close of business on 30 April 2024, and came on for hearing in the afternoon of 1 May 2024. Although creditors had been provided with a circular earlier on 1 May 2024 stating that an application had been listed for hearing, there was no disclosure of the basis for the application.
I was mindful, however, that the essential issue, as identified by Lindgren J in Re Pan Pharmaceuticals Ltd[2] is whether an extension of the convening period is necessary to enable an administrator to arrive at an opinion in order to assist creditors to choose between the company entering into a DOCA, the liquidation of the company, or the return of the company to its directors.
[2] Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77 [40] - [41].
I accepted that the plaintiffs were not in a position to form that opinion by 2 May 2024, not least because the plaintiffs are likely to place significant importance on the outcome of the sale and/or recapitalisation process in which the receivers and managers are presently engaged in forming their opinion as to the best course to be taken by the creditors of the Companies.
The balancing exercise required in determining applications of this type was made more difficult in this case by the absence of evidence of prejudice to the creditors or third parties and evidence as to the period of time the plaintiffs considered to be required, although I acknowledge, in relation to the second factor, that the plaintiffs are not themselves conducting the marketing process in relation to the Companies.
Ultimately, I considered that this was a case that an extension of time was required, sparse though the evidence in support of it may have been, because the receivers and managers had requested the extension in order to facilitate a sale of the Companies' businesses and assets as a going concern, and/or the recapitalisation of the Companies, and there appeared to be 14 persons interested in reaching an agreement with the receivers and managers. I placed significant emphasis on the plaintiffs' opinion that the extension of time was in the best interests of the creditors of the Companies in coming to that view.
Denying the extension of time sought in the circumstances of these Companies would, in all likelihood, have resulted in their liquidation, and potentially a lesser return to creditors.
The plaintiffs also sought, if the extension of time were granted for the convening of the second meeting of creditors, an order pursuant to s 447A(1) of the Act that pt 5.3A of the Act be varied in relation to each of the Companies so that s 439A(2) will provide that a meeting of the creditors of each Company may be held at any time before the end of the 5th business day after the end of the convening period, and an ancillary order as to how notice of the second meeting be provided to the creditors.
The first of those orders is what is now often referred to as a Daisytek order.[3]
[3] After Re Daiseytek Australia Pty Ltd (admin apptd) (Bowen and Hall as joint admins) [2003] FCA 575; (2003) 45 ACSR 446 [10] - [14].
I have some familiarity with the size of the administrations of the Companies from having heard a previous application in relation to them. On that basis, I considered it appropriate to make both those orders.
As there had been, at best, little notice of the application to persons who may have had an interest in opposing it, I also made orders that the plaintiff give notice of the orders made to all creditors of the Companies by 9 am on 2 May 2024, and that any person who can demonstrate a sufficient interest have liberty to apply to vary or discharge those orders have liberty to apply on two days' notice to the plaintiffs and the court.
I considered those orders would go some way to ameliorate any prejudice which might be suffered by reason of any lack of notice.
For those reasons, I considered it appropriate to grant the application and make the orders set out in Attachment A of these reasons.
Attachment A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VR
Associate to the Hon Justice Cobby
3 MAY 2024
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