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[2023] FCA 728
Federal Court of Australia
2023-06-27
Smith J
Original judgment source is linked above.
Background to administration and progress since last extension 8 The background to the administration of the Clough Companies is set out in the previous decisions outlined above, and it is not necessary to repeat it. 9 It is, however, appropriate to record steps that have been undertaken since the last application.
Sale Process in respect of MRPL and RUC 10 In Algeri (No 4) I recorded that the so-called Webuild DOCA had been entered into and completed with respect to the DOCA Companies. While that process was underway, the Administrators continued to assess options with respect to the Non-DOCA Companies, being the second, third, fourth, fifth, sixth, eleventh and twelfth plaintiffs. 11 As to MRPL, the Administrators (together with Houlihan Lokey) had conducted a comprehensive sales process in respect of MRPL and the shares of MRPL's subsidiary, RUC Cementation Mining Contractors Pty Ltd (RUC). On 24 March 2023, MRPL and the Administrators entered into a binding RUC terms sheet with the preferred bidder, M&R Limited. If the conditions precedent to the proposed DOCA had been met, the Administrators had expected that the DOCA would have been implemented by 30 June 2023, at which point MRPL would have exited external administration, with control assumed by M&R Limited. 12 To that end, the Administrators continued to negotiate with M&R Limited. It was also agreed that M&R Limited's nominee, Cementation APAC Pty Ltd (ACN 664 486 186) (CAPAC), would replace M&R Limited as the proponent of the proposed DOCA. 13 However, Mr Algeri explained that in late April 2023 it became apparent that the conditions precedent to the RUC terms sheet were unlikely to be satisfied within the available time. 14 Mr Algeri said that there have been ongoing negotiations with CAPAC and the secured sureties (Liberty Speciality Markets, AAI Limited and Swiss Re International SE) to amend the RUC terms sheet. The proposed amendments address a number of conditions. Negotiations as to the revised terms of the RUC terms sheet are ongoing, and he is of the view, particularly in light of the involvement of the secured sureties, that they will not conclude before the end of 30 June 2023. However, if the revisions to the RUC terms sheet are agreed and the conditions precedent it contemplates are met, the Administrators expect the DOCA will be implemented by 31 August 2023, at which point MRPL will come out of external administration and control will be assumed by M&R Limited. 15 It is the anticipated date of 31 August 2023 that drives this extension application.
Sale Process in respect of the other Non-DOCA Companies 16 In Algeri (No 4) I also recorded the status of negotiations and sale processes relating to the other Non-DOCA companies (at [13]). Mr Algeri reported on the subsequent progress made in relation to these sale processes. He reported that the sale process in respect of Clough UK Limited had completed. The sale process in respect of CH-IV (a wholly owned subsidiary of Clough USA) had also completed. Clough Canada had entered liquidation. In light of this progress Mr Algeri stated that with the exception of MRPL, there is no reason that the Non-DOCA Companies need to remain in voluntary administration, and they will fall into liquidation.
Relevant principles 17 In Algeri (No 2) at [7]-[14] I summarised the principles that apply to an application to extend the time for convening the meeting of creditors under s 439A(6) and s 447A(1) of the Corporations Act. I refer to those principles without repeating them. Section 439A(6) of the Corporations Act provides for only one extension of time. However, as I discussed in Algeri (No 4) at [14], the power under s 447A(1) of the Corporations Act extends to further extending the convening period, even where the Court has already granted earlier extensions. The principles that inform the exercise of the power to extend time to convene a meeting under s 439A also inform the exercise of the power under s 447A(1) to further extend that time. 18 To summarise, in considering this application, the Court is guided by the desirability of reaching an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner, and the need on the part of the Administrators to consider sensible and constructive options directed towards maximising the returns for creditors and other stakeholders.
Application in MRPL's circumstances 19 Unless a further extension is granted, the convening period for the second meeting of creditors of MRPL pursuant to s 439(5) of the Corporations Act (as amended by the orders of this Court dated 21 December 2022, 15 February 2023 and 5 April 2023) will expire at midnight on 30 June 2023. 20 Mr Algeri seeks the extension on behalf of the Administrators in order to agree terms and satisfy conditions precedent for the DOCA relating to MRPL. He states that it would be in the best interests of the creditors to permit this process to continue. Some time is required because of the need for negotiation of complex priority agreements between existing financiers of the RUC business and incoming financiers. If the convening period is not extended and it becomes necessary for the Administrators to hold the second creditors' meeting, the Administrators may have to recommend that the meeting be adjourned, a course that would involve 'not insignificant' wasted expenditure. 21 Mr Algeri stated that the Administrators are of the opinion that notwithstanding the statutory moratorium provided by Part 5.3A of the Corporations Act and its impact on the ability of creditors to enforce their rights, the proposed further extension of the convening period of MRPL will not unduly prejudice MRPL's creditors. He stated that: immediate liquidation would not produce a better outcome for creditors; MRPL does not presently employ staff and employee entitlements have otherwise been satisfied; and MRPL is not an operating company. 22 Further, and importantly, Mr Algeri evinced evidence to the effect that the four most significant creditors of MRPL (the Secured Sureties and M&R Limited, representing essentially the entire value of the proofs of debt) have indicated their support for an adjournment. 23 The Administrators consider that any limited prejudice that may be caused to creditors of MRPL by a further extension of the convening period is greatly outweighed by the benefits to creditors as a whole conferred by the additional time available to complete any sale or other process. 24 The Administrators submitted that their approach in this administration has been to seek shorter extensions of the convening period as required, rather than initially seeking a lengthy extension (for example a period of six months or so). Consistent with the approach where previous extensions were sought (Algeri (No2), Algeri (No 3) and Algeri (No 4)), the Administrators in this application seek a short extension period of some two months. That this is the fourth such application for extension reflects this approach. 25 The Administrators have indicated that they continue to report to creditors and will seek further extensions as they consider are required and justified, facilitating transparency in the administration process while also maintaining a sense of urgency and diligence in the overall task, as demonstrated through the completed sale processes referred to above. 26 Further, the Administrators state that they intend to convene the second meeting of creditors of MRPL as soon as practicable in light of any sale process, such that this meeting may be held earlier than the latest possible time during the extended time for the convening of the meeting as sought by the Administrators, and accordingly seek a Daisytek order.
Consideration 27 I accept the Administrators' submissions that it is appropriate that there be a further extension of the convening period with respect to MRPL. 28 The purpose for the requested extension is defined and, to my mind, clearly in the interests of the creditors. The course taken to date by the Administrators demonstrates the overall administration is proceeding as expeditiously as the complexities and scale of the activities of the Clough Companies have reasonably allowed. There has been transparency with respect to the reasons for extensions in all of the applications to this Court. The extensions have facilitated the pursuit of options directed towards maximising the returns for creditors and other stakeholders. This application is no exception. Accordingly, the orders sought further the objects of Part 5.3A of the Corporations Act, and are appropriate. 29 I also take into account that by his affidavit, Mr Mackenzie deposes to communications with third parties providing them with notice of this application. Those third parties include the Australian and Securities Investment Commission, HSBC, the Australian Taxation Office, the Commonwealth Department of Employment and Workplace Relations, and the Clough committee of inspection members who remain creditors of MRPL and the Non-DOCA companies. Information about the application was also uploaded to the Halo platform (discussed in prevision reasons). There were no appearances at the hearing and there was no communication of any opposition to the orders.
Ancillary orders 30 It is appropriate to now remove the seventh, eighth, ninth, tenth and thirteenth plaintiffs from these proceedings as requested. 31 The ancillary orders sought are largely administrative in nature and are also appropriate. 32 The proposed orders accommodate any person who can demonstrate a sufficient interest to approach the Court by way of liberty to apply.
Orders 33 For these reasons I made orders as sought at the conclusion of the hearing on 27 June 2023. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.
SCHEDULE OF PARTIES WAD 256 of 2022 Plaintiffs Fourth Plaintiff: CLOUGH OPERATIONS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 109 444 279) Fifth Plaintiff: CLOUGH OVERSEAS PTY LTD ADMINISTRATORS APPOINTED) (ACN 067 272 182) Sixth Plaintiff: CLOUGH SEAM GAS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 139 610 656) Seventh Plaintiff: CLOUGH ENGINEERING & INTEGRATED SOLUTIONS (CEIS) PTY LTD (ADMINISTRATORS APPOINTED) (ACN 097 480 736) Eighth Plaintiff: E20 PTY LTD (ADMINISTRATORS APPOINTED) (ACN 125 234 924) Ninth Plaintiff: SHARP RESOURCES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 166 613 127) Tenth Plaintiff: CLOUGH PROJECTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 109 444 831) Eleventh Plaintiff: CLOUGH ENGINEERING PTY LTD (ADMINISTRATORS APPOINTED) (ACN 009 093 869) Twelfth Plaintiff: CLOUGH PROJECTS INTERNATIONAL PTY LTD (ADMINISTRATORS APPOINTED) (ACN 109 444 902) Thirteenth Plaintiff: CLOUGH PROJECTS AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (ACN 109 444 215)
BANKS-SMITH J: 1 This is a fourth application for an extension of the statutory convening period for the second meeting of creditors relating to the administration of the Clough Companies. The previous extensions have facilitated the purposes for which they were sought, so that this application is limited to one company in the group, being the second plaintiff, Murray & Roberts Pty Ltd (Administrators Appointed) (MRPL). 2 It is not necessary to refer in any detail to the previous extension applications. It suffices to say that on 21 December 2022 I made orders extending the convening period for the second meeting of creditors of each of the so-called Clough Companies from 12 January 2023 to midnight on 17 February 2023: Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 1563 (Algeri (No 2)). 3 On 15 February 2023 I made orders further extending the convening period for a sub-group of those companies which includes MRPL, referred to as the Non-DOCA Companies, from 17 February 2023 to midnight on 6 April 2023: Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 3) [2023] FCA 98 (Algeri (No 3)). 4 On 5 April 2023 I made orders further extending the convening period for the Non-DOCA Companies from 6 April 2023 to midnight on 30 June 2023: Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 4) [2023] FCA 313 (Algeri (No 4)). 5 The Administrators seek the further extension of the convening period with respect to MRPL to midnight on 31 August 2023. 6 Separately, the Administrators seek orders removing the seventh, eighth, ninth, tenth and thirteenth plaintiffs (the DOCA Companies), from these proceedings. 7 The application is supported by an affidavit of one of the Administrators, Salvatore Algeri, and by an affidavit of Patrick Mackenzie, a solicitor at King & Wood Mallesons. The previous affidavits provided by David Orr on behalf of the Administrators are also relied upon.