Re South Burnett Wines Limited (Administrators Appointed)

[2004] NSWSC 1239

Reported Decision: 52 ACSR 298

Supreme Court

CITATION:	Re South Burnett Wines Limited (Administrators Appointed) [2004] NSWSC 1239
HEARING DATE(S):	6 December 2004
JUDGMENT DATE:	6 December 2004
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Convening period extended
CATCHWORDS:	CORPORATIONS - voluntary administration - application to extend convening period under section 439A(6) Corporations Act 2001 (Cth) - intervening creditor opposes application - all potential secured creditors and majority of unsecured creditor support application - whether appropriate to order extension where purpose of extension is to enable administrator to obtain valuation of company's assets - specialised nature of asset to be valued - adjournment would also enable company to generate positive cash flow and maximise possible return to creditors - CORPORATIONS - WINDING UP - where winding up application on foot - effect on application for extension of convening period by administrator of company
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CASES CITED:	Cawthorn v Keira Constructions Pty Ltd (1994) 13 ACSR Kimberley Andrew Strickland and Christopher Michael Williamson as Administrators of Port Kennedy Resorts Pty Ltd (Administrators Appointed) (2000) 19 ACLC 328
PARTIES :	Peter Anthony Lucas and Ian Alexander Currie as joint Administrators of South Burnett Wines Limited - Plaintiffs Coskpak Pty Ltd - intervenor
FILE NUMBER(S):	SC 6603/04
COUNSEL:	M Condon - Plaintiffs CRC Newlinds SC - Cospak Pty Ltd (intervenor)
SOLICITORS:	Access Business Lawyers - Plaintiffs Cospak Pty Ltd (intervenor)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

CAMPBELL J

MONDAY 6 DECEMBER 2004

6603/04 PETER ANTHONY LUCAS AND IAN ALEXANDER CURRIE AS ADMINISTRATORS OF SOUTH BURNETT WINES LTD

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is the hearing of an application made under section 439A(6) Corporations Act 2001 to extend the convening period of an administration until 1 March 2005. The administration is of South Burnett Wines Limited (“the Company”). The application is one which is opposed by a creditor Cospak Pty Ltd (“Cospak”).

2 Cospak is a creditor which has obtained a judgment against the company in the Magistrates Court of Queensland in the sum of $50,805.31. That judgment was obtained as long ago as 27 May 2004. It is that judgment debt which is the subject of a statutory demand which has been served by Cospak, and which founded a winding up application which Cospak brought against the company on 22 October 2004.

3 On 17 November 2004 administrators were appointed to the company. The administrator held a meeting of creditors on 24 November 2004. At that meeting a committee of creditors was appointed.

4 In broad terms, the secured creditors of the company include, as its most significant creditor, Westpac, which is owed in the order of $620,000. PJ and J Benjamin, at least one of whom is a director of the company, claims to be a secured creditor in the sum of $125,000, but there is a cloud, as yet unresolved, over the validity of their security. Unsecured creditors total a little over $410,000. Of these, the most significant is the Australian Taxation Office, which is owed over $214,000.

5 The company is in the business of grape growing and wine manufacturing. It presently has a crop on the vines, which is due to be harvested in January and February 2005.

6 The administrators have attempted to obtain valuations of the company's assets. While they have obtained a valuation of plant and equipment, they have not, as yet, been able to obtain a valuation of the company's real estate. By 1 December 2004 a real estate valuer had been appointed and had visited the property. However, because of that valuer needing to be one which was approved by Westpac, if Westpac was to accept his valuation, and because of that valuer having other commitments, it has not proved possible to have a valuation prepared until near the end of December. The delay in obtaining a valuation has also been contributed to by the fact that the nature of the primary production business carried on on the property is a specialised one, concerning which not every valuer is competent to express an opinion.

7 The administrator has expressed the view that the sale of surplus wine stocks of the company will enable the administrator to generate a positive cash flow, which will enable the company to keep trading until 1 March 2005, and pay its employees and trade creditors. The administrator has also expressed the view that there may be some tax losses available to the company, which could make it more attractive to potential investors, and that those tax losses may not be available should the company go into immediate liquidation.

8 There is some mention in the evidence of the directors seeking to raise outside equity. That evidence is unsatisfactorily vague. However, the prospect of there being such an investment, or of members of Mr Benjamin's family being prepared to swap debt for equity should the company enter into a deed of company arrangement, is one which the administrator appears, from his affidavit, to take seriously. The administrator concludes his affidavit by expressing the view that an adjournment of the convening period to 1 March 2005 would enable the company to generate a positive cash flow and maximise the creditors’ possible return.

9 This application for extension of the convening period needs to be considered against the background that a winding up application against the company is already on foot. That winding up application is not before me today, and will next be before the Court on 16 December 2004. On that occasion, it will be necessary for the administrator to make an application to adjourn the winding up application. Section 440A(2) Corporations Act 2001 (Cth) requires the Court to adjourn the hearing of a winding up application if the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. On that occasion, the administrator will have the opportunity to put to the Court, and with, hopefully, some greater particularity than has been provided today, evidence of the basis upon which he says that the winding up application ought be adjourned.

10 Mr Newlinds of Senior Counsel reminds me that, even if it were ultimately to be in the interests of the company to go into administration, or to have its business disposed of through an administration process, rather than through a liquidator, section 436B Corporations Act 2001 (Cth) enables a liquidator to appoint an administrator. He also reminds me that section 439B(2) confers on a meeting a power to adjourn itself for 60 days, and that this might result in the administration period being unduly prolonged, if I were to make the order which is today sought. I take those matters into account.

11 The administrators have been hampered in their efforts so far by the fact that the books and records of the company are not complete, and the accounting is not up to date. They have needed to implement proper systems in the time since their appointment.

12 In these circumstances, it would be very difficult for the administrators to make realistic and considered recommendations to the creditors, of the kind which the Corporations Act 2001 (Cth) requires the administrator to present.

13 I am conscious that the authorities have emphasised the importance of an administration not being unduly prolonged - see e.g. Cawthorn v Keira Constructions Pty Ltd (1994) 13 ACSR 337 at 341, Kimberley Andrew Strickland and Christopher Michael Williamson as Administrators of Port Kennedy Resorts Pty Ltd (Administrator Appointed) (2000) 19 ACLC 328.

14 In the present case, I am significantly influenced by consent which there have been by several creditors to the extension which is now sought. Consent has been obtained from Westpac, the Deputy Commissioner of Taxation, from PJ and J Benjamin (the creditors who claim to be secured), and from two of the three representatives of unsecured creditors on the committee. The dissentient on the committee is Cospak Pty Ltd. The creditors who consent are a majority in value of the creditors, being all the potential secured creditors, and more than half of the unsecured creditors. In this situation, the principle that the creditors collectively ought have a significant say in how an administration operates should be given effect to.

15 I make order 1 in the originating process, and order 3 in the originating process.

16 I shall reserve the costs of Cospak Pty Ltd appearing on this application. These orders may be entered forthwith.

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Last Modified: 12/21/2004