Albarran, in the matter of BCJWY Aboriginal Society Limited [2019] FCA 491

Federal Court of Australia|2019-04-05|Before: Farrell J

The period for the administrators to convene a meeting of the creditors of BCJWY Aboriginal Society Limited ACN 150 290 234 (Administrators Appointed) (the Company) under ss 439A(1) and 439A(5) of the Corporations Act 2001 (Cth) be extended by 49 days so that it ends on 24 May 2019.
Part 5.3A of the Corporations Act is to operate such that meetings of creditors of the Company may be held at any time during, or within five business days after, the end of the convening period as extended in accordance with order 1.
Notice of these orders is to be given to the known creditors of the Company within seven (7) days of the making of these orders.
Order 1 be subject to terms that liberty be reserved to any creditor of the Company to apply on three (3) days' notice to discharge or vary this order prior to any meeting of the creditors of the Company being held.
The costs of and incidental to these proceedings be costs and expenses of the administration of the Company and paid out of the assets of the Company.
These orders be entered forthwith. THE COURT NOTES THAT: A. Having regard to s 439A(7) of the Corporations Act and the fact that the application for the extension of the convening period was made after the end of the convening period, the Court considers it is in the best interests of the creditors of the Company that the convening period be extended. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background 2 The Company was incorporated in Queensland on 6 April 2011. Its principal activity was to distribute funds received from QGC Pty Limited in accordance with terms stipulated in an Indigenous Land Use Agreement between QGC (which is a gas explorer and producer) and the Company. The Agreement was registered on the Register of Indigenous Land Use Agreements on 22 December 2010. The Company was the "nominated entity" for the purpose of holding "financial benefits" received from QGC under the Agreement for the benefit of a number of native title holders. The "financial benefits" include annual payments of $350,000 for 10 years, to be adjusted annually in accordance with cl 3.2 of Annexure 3 to the Agreement. 3 There is a dispute about who is entitled to receive funds flowing from QGC under the Agreement. On 23 May 2018, QGC commenced proceedings QUD334/2018 in this Court against 14 parties, including the Company (FCA proceedings). Instead of paying "financial benefits" to the Company, QGC has paid moneys into Court pending the resolution of the dispute and QGC is seeking directions from the Court concerning to whom the moneys should be paid. 4 Under cl 1.2(a) of Annexure 3 to the Agreement, the nominated entity for receiving "financial benefits" must be an "incorporated body", its membership must be restricted by its constitution to members of "families" identified in the Agreement, and it must not be "in administration, receivership or liquidation under any laws applicable to the incorporated body". 5 A mediation was held in the FCA proceedings in February 2019 and it was adjourned. 6 An affidavit in support of the application for an extension of the convening period was sworn by Deucalion Wolfgramm, an associate in the Business Recovery and Insolvency Services section at Hall Chadwick, in the absence of Mr Albarran and Mr Pleash overseas. Mr Wolfgramm deposed to efforts made to obtain documents related to the FCA proceedings from 8 March 2019 until 25 March 2019, two days before a case management hearing in the FCA proceedings. The administrators received the documents on 25 March 2019 and appointed new lawyers to represent the Company in the proceedings on that day. 7 The administrators say that they require an extension of time until 24 May 2019 to convene the second meeting of creditors of the Company in order to allow them sufficient time to: (1) Properly review and consider the material filed to date in the FCA proceedings; and (2) Ascertain what, if any, benefits the Company is entitled to receive from QGC and what, if any, entitlement the Company has to funds paid into Court. They say that it is only then that they will be in a position to prepare a report to the creditors of the Company as required by s 75-225(3) of the Insolvency Practice Schedule (Corporations) 2016 and form an opinion as to the matters required by s 75-225(4) and prepare the required statement. 8 The administrators have received proofs of debt for an aggregate amount of $383,000. The priority and unsecured creditors are employees of the Company save for one trade creditor who claims an amount of $60,000. None of the proofs of debt have been lodged by a member of the families as such. 9 The administrators say that it is particularly important that they have sufficient time to perform the tasks identified above because: (1) They are not aware of any assets, or potential assets of the Company other than any benefits that the Company may be entitled to receive from QGC; and (2) It is unlikely that there would be any return to the creditors of the Company if they do not recover any benefits that the Company may be entitled to receive from QGC or from the funds paid into Court in the FCA proceedings.

Consideration 10 Section 439A provides as follows: 439A Administrator to convene meeting and inform creditors (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). Note: For body corporate representatives' powers at a meeting of the company's creditors, see section 250D. (2) The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period. (5) The convening period is: (a) if the day after the administration begins is in December, or is less than 25 business days before Good Friday - the period of 25 business days beginning on: (i) that day; or (ii) if that day is not a business day - the next business day; or (b) otherwise - the period of 20 business days beginning on: (i) the day after the administration begins; or (ii) if that day is not a business day - the next business day. (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. (7) If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, the Court may only extend the convening period if the Court is satisfied that it would be in the best interests of the creditors if the convening period were extended in accordance with the application. (8) If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, then, making an order about the costs of the application, the Court must have regard to: (a) the fact that the application was made after that period; and (b) any other conduct engaged in by the administrator; and (c) any other relevant matters. 11 The Court has power to extend the convening period on an application made during or after the end of the convening period (s 439A(6)). As the application for an extension of the convening period was made after it ended, the Court may only extend it if it is satisfied that it is in the best interest of creditors to do so (s 439A(7)) and having regard to the fact that the application was made at that time, the conduct of the administrator and any other relevant matters (s 439A(8)). 12 As observed by Black J in In the matter of Foodora Australia Pty Ltd (Administrators Appointed) [2018] NSWSC 1426 at [11], in determining whether to extend time for a second meeting of creditors under s 439A or s 447A of the Corporations Act, the Court must reach an appropriate balance between the expectation that an 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. The case law also recognises the significance of an administrator's view on an application of this kind, particularly where the administrator is dealing with a complex administration. Another relevant factor is the need for information to be provided to creditors at a second meeting in a way that would allow them to exercise the decision at the second meeting as to whether the company should be returned to its directors, a deed of company arrangement should be executed if proposed, or the company should be allowed to pass into voluntary liquidation. As noted by Austin J in Re Riviera Group Ltd (admins apptd) [2009] NSWSC 585; 72 ACSR 352 at [14]-[15], where a substantial issue in any of the accepted categories of reasons justifying an extension is established, the Court tends to grant an extension, and the extension tends to be for the time sought by an administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the Court is satisfied that the administrator's estimate of time has a reasonable basis; there is no longer any predisposition against extension. 13 In this case, the administrators submit that the Company has ceased to conduct business and there are no creditors affected by the moratorium imposed by the administration. 14 The proposed end of the convening period is shortly before the next case management hearing in the FCA proceedings. By that time, the administrators expect to be in a position to have formed the view as to whether the Company has any entitlement to monies paid into Court by QGC and therefore to be in a position to advise creditors of their recommendation. The administrators are not aware of any other avenue of possible return to creditors. There is no evidence concerning whether the administrators have considered whether there are available claims against past or present officers of the Company, and that is a matter which might also be addressed during the extended convening period. 15 The administrators explained their failure to seek an extension of the convening period before it ended on the basis that they had been responding to queries raised by the presiding judge in the FCA proceedings (including in what Court such an application should be made having regard to where families are located). While I am not satisfied with that as an explanation, the proposed extension is only for a period of approximately two months, there is no obvious prejudice to creditors and in my view it is in the best interests of the creditors of the Company that the administrators be in a position to advise them appropriately concerning the prospects of a return to the Company in the FCA proceedings.

Conclusion 16 Accordingly, I made the orders sought by the administrators. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.

Corporations Act 2001(Cth)ss 436A, 439A, 447A, Sch

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