Re Sky High Panels Pty Ltd
[2023] VSC 620
•24 October 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
IN THE MATTER OF SKY HIGH PANELS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 161 073 650)
S ECI 2023 04774
| ROBERT CRISPINO IN HIS CAPACITY AS ADMINISTRATOR OF SKY HIGH PANELS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 161 073 650) (and others according to the Schedule) | First Plaintiff |
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| JUDGE: | Waller J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 18 October 2023 |
| DATE OF JUDGMENT: | 24 October 2023 |
| CASE MAY BE CITED AS: | Re Sky High Panels Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2023] VSC 620 |
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CORPORATIONS — Extension of convening period for meeting of creditors pursuant to s 439A(6) Corporations Act 2001 (Cth) — Whether appropriate case for extension of convening period — Where Daisytek order sought — Where notice to creditors sought — Where additional work identified to report meaningfully at creditors’ meeting — Where additional time required to enable administrators to operate company business as a going concern — Where no objection from creditors — Where satisfied orders sought reach ‘appropriate balance’ between speed and sensible action to maximise creditor return — Orders sought granted.
Re Frisken (in his capacity as administrator of Xpress Transport Solutions Pty Ltd (recs and mgrs apptd) (admin apptd)) [2023] FCA 448; Strawbridge, Re Virgin Australa Holdings (admins apptd) (No 2) (2020) 144 ACSR 347; Farnsworth v About Life Pty Ltd (admin apptd) [2019] FCA 11; Bryand v Gunns Plantations Ltd (admins apptd) (recs and mgrs apptd) [2012] VSC 513; Re LED Builders Pty Ltd (admins apptd) [2008] NSWSC 633; Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446; Re Pan Pharmaceuticals Ltd (admins apptd) (ACN 091 032 914) (McGrath and Honey as joint liquidators) (2003) 46 ACSR 77, considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr Carroll (Solicitor) | BlueRock Law |
HIS HONOUR:
By an originating process filed 13 October 2023, the first[1] and second[2] plaintiffs, being the joint and several administrators (the ‘Administrators’) of the third plaintiff, Sky High Panels Pty Ltd (the ‘Company’), made an application under sections 439A(6) and 447A of the Corporations Act 2001 (Cth) (the ‘Act’) for an extension of the convening period for the second meeting of creditors of the Company required to be held by section 439A(1) of the Act (the ‘Application’). The extension sought is for an additional period of 45 days, to 3 December 2023. Unless extended, the convening period will end on 19 October 2023.
[1]Roberto Crispino in his capacity as an Administrator of Sky High Panels Pty Ltd (Administrators Appointed) ACN 161 073 650 (‘Mr Crispino’).
[2]Richard Albarran in his capacity as an Administrator of Sky High Panels Pty Ltd (Administrators Appointed) Acn 161 073 650 (‘Mr Albarran’).
The Administrators also sought an order, commonly described as a Daisytek order,[3] 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 section 439A(2) of the Act.
[3]Re Daisytek Australia Pty Ltd (2003) 45 ACSR 446 (‘Daisytek’), 448 [10]–[14] (Lindgren J).
The Administrators also sought supporting orders facilitating the provision of notices to creditors, providing that the costs of this application are costs in the administration of the company and providing for liberty to apply.
The Application was supported by an affidavit of the first plaintiff, Mr Crispino, affirmed 12 October 2023 (the ‘Supporting Affidavit’).
Following the hearing of the Application on 18 October 2023 I made the orders sought by the Administrators, which are set out at paragraph [35] below. These are my reasons for making those orders.
A. BACKGROUND
The Administrators were appointed by the sole director of the Company, Mr Kiparaglou, on 20 September 2023.[4] The first meeting of creditors was held on 3 October 2023. Only one creditor attended the first meeting, being the Australian Tax Office (‘ATO’), who attended by proxy.
[4]Supporting Affidavit, [3].
The Company was incorporated on 2 November 2012, and provides panel beating services for damaged vehicles, servicing insurance companies and private clients.[5] It does not own any real property, and leases two premises in Ferntree Gully (one being office premises and the other being a yard where panel beating activities are conducted). Mr Kiparaglou is the sole shareholder and sole director of the Company.[6]
[5]Ibid, [7]–[9].
[6]Ibid, 14–16 (ASIC Current & Historical Organisation Extract of the Company).
The Company currently has six employees who are owed significant unpaid superannuation and employee entitlements.
On or about August 2023, the Company received a creditor’s statutory demand from a major creditor, Capricorn Society Ltd, for the amount of $209,111.39.[7] Following receipt of that demand, Mr Kiparaglou determined that the Company was likely to become insolvent in the future and elected to appoint the Administrators.
[7]Ibid, [13].
Following their appointment, the Administrators conducted a review of the financial position of the Company. The review concluded that the Company had debts that were likely to exceed $3 million in total, however this was noted by the Administrators to be a preliminary figure only which would need to be refined through the proof of debt process. In any case, the amount of debts owing by the Company is substantial, and any return to secured creditors is unlikely to exceed $0.10 for each dollar owed. By far the largest secured creditor is the ATO, which has lodged a proof of debt totalling almost $2 million, largely consisting of a superannuation guarantee charge.
In conducting their review, the Administrators prepared a cashflow forecast for the Company which concluded that, if the Company continued to trade and completed already quoted jobs through the extended convening period, it would generate a net surplus of approximately $30,000. By contrast, if the Company were to cease trading and the Administrators were unable to secure a sale of its business, the Administrators estimate that there would be no return to creditors.
The Administrators have also initiated a sale campaign for the Company’s business, and have so far received four expressions of interest from potential purchasers.[8] The Administrators expressed a view that selling the Company’s business as a going concern would result in a higher purchase price compared to a liquidation of the Company’s assets.
[8]Ibid, [28]–[32].
The Administrators have not received any proposal for a Deed of Company Arrangement (‘DOCA’) to date, nor have they received an indication that one will be forthcoming.
B. LEGAL PRINCIPLES
Section 439A of the Act relevantly 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.
…
(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.
Section 447A(1) of the Act provides that:
The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.
Rule 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (‘IPRC’) requires an administrator to provide a report to creditors about the company’s business, property, affairs and financial circumstances to assist creditors with making their decision at the second meeting.
The principles relating to an extension under sections 439A(6) and 447A of the Act are well established. In Strawbridge, Re Virgin Australa Holdings (admins apptd) (No 2),[9] Middleton J summarised the relevant principles as follows:[10]
[9](2020) 144 ACSR 347 (‘Strawbridge’).
[10]Strawbridge (2020) 144 ACSR 347, 370-371 [64]–[68] (Middleton J).
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…[11]
[11]Citing Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 (Young J); Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, [10] (Barrett J).
The approach to be adopted was recently set out by Thawley J in Farnsworth v About Life Pty Ltd (admin apptd) [2019] FCA 11 at [3]–[8], where his Honour endorsed the comments of Austin J in Re Riviera Group Pty Ltd (admins apptd) (recrs and mgrs apptd) (2009) 72 ACSR 352; [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…;[12]
[12]Citing Lombe, Re Babcock & Brown Ltd (admins apptd) [2009] FCA 349; Worrell; Re Storm Financial Ltd (recs and mgrs apptd) (2009) 69 ACSR 584; [2009] FCA 70; ABC Learning Centres Ltd, Re ABC Learning Centres Ltd; Application by Walker (No 5) [2008] FCA 1947.
(2)where the extension will allow sale of the business as a going concern…;[13] and
[13]Citing Lombe Re Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, Re Kleins Franchising Pty Ltd (admins apptd) [2008] FCA 721; Re Uni-Aire Security Pty Ltd (admins apptd) [2006] FCA 1423.
(3)more generally, where additional time is likely to enhance the return for unsecured creditors…[14]
[14]Citing Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd (No 2) [2009] FCA 190; Fitzgerald, Re Primebroker Securities Ltd (admin apptd) (recs and mgrs apptd) [2008] FCA 1247; Ex parte Vouris; Re 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…[15]
In Mighty River International Ltd v Hughes (as deed administrators of Mesa Minerals Ltd (subject to deed of company arrangement)) (2018) 359 ALR 181; 130 ACSR 427; [2018] HCA 38 at [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…[16]
[15]Citing Mentha, Re Hans Continental Smallgoods Pty Ltd (admins apptd) [2008] FCA 1933 (Jacobson J); Re Riviera (Austin J); Re Austcorp Group Ltd (admins apptd) [2009] FCA 636 (Re Austcorp) (Lindgren J); Re Kavia Holdings Pty Ltd (admins apptd) (recs and mgrs apptd) [2013] NSWSC 737 (Black J).
[16]Citing Owen (in their capacity as joint and several administrators ofRivercity Motorway Pty Ltd (admins apptd) (recs and mgrs apptd)) v Madden (recs and mgrs) (No 4) (2012) 92 ACSR 255; [2012] FCA 1491, [26] (Logan J); Re Belmont Sportsmans Club Co-Operative Ltd (admin apptd) [2015] NSWSC 543, [9] (Black J); Re application by Jahani (in their capacity as joint and several administrators of Northern Energy Corporation Ltd (admins apptd)) (No 2) [2019] FCA 382, [67] (Farrell J); Re Duro Felguera Australia Pty Ltd (admins apptd) [2020] FCA 422, [32] (Gleeson J).
A further factor which is relevant to the exercise of the Court’s discretion to extend a convening period is ‘the need for information to be provided to creditors in a way that would allow them to exercise their discretion at the second meeting in as informed a manner as possible’.[17] It has been recognised that the interests of creditors can be prejudiced not only by delay but also by the convening of premature meetings where the administrators have been unable to obtain information for the preparation of the report and statement required and, in particular, to arrive at the opinion referred to in rule 75-225(3) of the IPRC.[18]
[17]Re Frisken (in his capacity as administrator of Xpress Transport Solutions Pty Ltd (recs and mgrs apptd) (admin apptd)) [2023] FCA 448, [37] (Cheeseman J).
[18]Re Pan Pharmaceuticals Ltd (admins apptd) (ACN 091 032 914) (McGrath and Honey as joint liquidators) (2003) 46 ACSR 77; Bryand v Gunns Plantations Ltd (admins apptd) (recs and mgrs apptd) [2012] VSC 513, [23] (Gardiner AsJ).
C. SUBMISSIONS
The Administrators submitted that the requested extension should be granted on the basis that it is in the best interests of creditors and stakeholders and is consistent with the objects of Part 5.3A of the Act.[19]
[19]Outline of Submissions of the Plaintiffs filed 16 October 2023 (the ‘Submissions’), [16].
First, it was said that the extension would enable the Company to continue to trade by completing the quoted jobs, which would in turn maximise the potential return for creditors.[20] It would also enable the Administrators to continue their sale campaign and identify whether any potential sale of the Company’s business will eventuate.
[20]Ibid, [17].
The Administrators also made submissions in respect of the interaction between the ‘ipso facto’ regime[21] in the Act and the power of administrators to adjourn the second creditors meeting. It was said that limited judicial consideration had been given to the operation of the ipso facto regime, but that the regime would only clearly operate if the Court grants an extension to the convening period; otherwise, it was said, the Company may lose the benefit of the stay on any enforcement from, for example, its landlords, which could compromise the operation of the business as a going concern (in order to obtain the benefit of the quoted jobs) and preclude any potential sale. This, it was said, would clearly not be in the interests of creditors. It was also said that the ipso facto regime will not apply in the case of a winding up, being one of the potential outcomes of the second creditors meeting.
[21]That is, the amendments to the Act to broaden the ‘safe harbours’ for directors on an insolvency, amend the operation of ‘ipso facto’ clauses with the imposition of a stay on contractual rights of termination: Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 (Cth). See, in particular, section 451E of the Act.
Secondly, it was observed that the extension sought in this case is relatively short, with extensions of three months being commonplace,[22] and longer extensions being granted in other cases. On that basis, the requested 45-day extension is modest.
[22]Strawbridge (2020) 144 ACSR 347, 369-370 [62]–[63] (Middleton J).
Thirdly, it was submitted that the Administrators require additional time to prepare the report to creditors as required by rule 75-225 of the IPRC.[23] At present, it was said, the Administrators have not had sufficient time to prepare the report regarding the Company’s business, property, affairs and financial circumstances, and therefore require additional time to provide a meaningful and considered recommendation to creditors in their report.
[23]Submissions, [22].
Fourthly, it was identified that the proposed extension would not have any obvious prejudice to creditors, particularly on the basis that the convening of an earlier creditors meeting (without further trading to complete the quoted jobs, or a sale of the Company’s business) would likely result in no return to the creditors for the reasons set out above.[24] The activities proposed by the Administrators are intended to improve the potential return to creditors, and particularly for the employees who would be, it was said, in a much better position should the sale campaign be allowed to continue.
[24]Ibid, [23].
Fifthly, it was identified that the expressions of interest received from the Administrators demonstrated that a potential sale of the Company’s business was ‘more than speculative’.[25]
[25]Ibid, [24].
Finally, it was submitted that the Administrators’ proposed orders would reserve liberty to apply to vary the orders to any person who can demonstrate sufficient interest, which, it was said, militates against any prejudicial effect that the extension may have on creditors.[26]
[26]Ibid, [25].
The Administrators also stated at the hearing that they had received no objection from any of the creditors of the Company to the making of the application, including the ATO (being the most significant creditor).[27]
[27]Transcript of Hearing, T3 L26–31, T4 L1–13.
In respect of the s 447A ‘Daisytek’ orders sought, it was submitted that those orders have the effect of providing flexibility to the Administrators as to the date on which the meeting of creditors is convened, by allowing the meeting to be held at any time within the extended convening period and the period of five business days thereafter.[28] Such an order, it was said, permitted the Administrators to convene the second meeting earlier than otherwise required if they were in a position to do so, so as not to unduly prolong the administration. Such orders, it was said, were ‘sensible and now almost routine’.[29]
[28]Submissions, [26].
[29]Re LED Builders Pty Ltd (admins apptd) [2008] NSWSC 633, [2] (Austin J).
The Administrators also sought an order permitting them to send notices to creditors electronically where email addresses were available to them.[30] Such orders are now considered commonplace,[31] and serve the overall purpose of Part 5.3A of the Act by reducing the costs and delay of administration, and thus conserving the limited available assets for the benefit of creditors.
[30]Submissions, [27].
[31]Re BBY Ltd [2015] NSWSC 974, [7] (Brereton J).
D. CONSIDERATION
I determined to make the orders sought, for the reasons advanced by the Administrators.
Although this case does not represent an overly complex administration, I am satisfied that the Administrators have identified additional work that will need to be completed in order for them to report meaningfully to creditors at the second creditors’ meeting. In particular, I am satisfied that the additional time will enable the Administrators to continue to operate the Company’s business as a going concern, which will provide a benefit to the Company (and its creditors) in the form of additional cashflow, and also enable the business to be potentially sold as a going concern (which will in turn achieve a better result for creditors). It is particularly advantageous to the Company’s employees, as their employment will continue pending a sale, and may be extended if the business is sold.
As set out above at [17], the opinion of the Administrators has been identified in previous cases as being particularly important.[32] In this case, Mr Crispino deposed that he was of the opinion that, in order to secure the highest price for the business to provide the best return to creditors, the business should trade on until 3 December 2023.[33] Although not determinative, this does weigh in favour of granting the extension.
[32]Farnsworth v About Life Pty Ltd (admin apptd) [2019] FCA 11, [8] (Thawley J).
[33]Supporting Affidavit, [29].
I am also satisfied that the lack of any objection from creditors, as well as the relatively short period of the extension and the right of creditors to apply to the Court for variation to the orders ameliorates any potential detriment they may suffer and also weighs in favour of granting the extension.
Accordingly, I am satisfied that the orders sought 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’.[34]
[34]Strawbridge (2020) 144 ACSR 347, 370 [64] (Middleton J).
E. DISPOSITION
For the reasons set out above, on 18 October 2023 I made the following orders sought by the Administrators:
1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the period within which the first Plaintiff must convene the second meeting of the creditors of Sky High Panels Pty Ltd (Administrator Appointed) ACN 161 073 650 (the Company) is extended up to and including 3 December 2023.
2. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company as if the second meeting of the creditors of the Company required by s 439A of the Act be held at any time during, or within 5 business days after the end of, the convening period as extended by order 1 above, notwithstanding the provisions of s 439A(2) of the Act.
3. Pursuant to s 447A(1) of the Act and s 90-15 of the IPSC if, pursuant to any provision in any of Part 5.3A of the Act, the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Act), or the Insolvency Practice Rules 2016 (Cth) (the IPR), the Plaintiffs are required to provide any other notification to creditors during the administration of the Company, the applicable notice requirements will be satisfied if the Plaintiffs give such notice by taking the following steps:
a) where the Plaintiffs are in possession of an email address for a creditor, by notifying each such creditor of the relevant matter by an email sent to that email address;
b) where the Plaintiffs are not in possession of an email address for a creditor, but have a postal address for that creditor (or have received notification of non-delivery of a notice sent by email in accordance with paragraph (a) above), by notifying each such creditor in writing of the relevant matter via ordinary pre-paid post; and
c) to the extent that the matter relates to a meeting that is the subject of s 75-40(4) of the IPR, by causing notice of the meeting to be published on the ASIC published notices website at 2 business days of the making of these orders, the Plaintiffs cause notice of the originating process, and the orders made, to be given to creditors of the Company in accordance with order 3 above.
5. Liberty is granted to any person who can demonstrate sufficient interest to modify or discharge the orders made pursuant to the Plaintiffs’ application on not less than 48 hours’ written notice to the Plaintiffs.
6. The Plaintiffs’ costs of the application are costs in the administration of the Company.
7. There is liberty to apply.
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SCHEDULE OF PARTIES
BETWEEN:
| ROBERT CRISPINO IN HIS CAPACITY AS ADMINISTRATOR OF SKY HIGH PANELS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 161 073 650) | First Plaintiff |
| RICHARD ALBARRAN IN HIS CAPACITY AS AN ADMINISTRATOR OF SKY HIGH PANELS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 161 073 650) | Second Plaintiff |
| SKY HIGH PANELS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 161 073 650) | Third Plaintiff |
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