Colbran, in the matter of PBS Building Pty Limited (Administrators Appointed) [2023] FCA 276

Solicitor for the Intervener: Thomson Geer Lawyers

ORDERS NSD 270 of 2023 IN THE MATTER OF PBS BUILDING PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 114 854 929 BETWEEN: JONATHON COLBRAN, RICHARD STONE AND MITCHELL HERRETT IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF EACH OF THE SECOND TO SIXTH PLAINTIFFS First Plaintiff

PBS BUILDING PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 114 854 929 Second Plaintiff

PBS BUILDING (NSW) PTY LTD (ADMINISTRATORS APPOINTED) ACN 114 856 487 (and others named in the Schedule) Third Plaintiff

order made by: HALLEY J DATE OF ORDER: 4 APRIL 2023

1. The convening period for the second meetings of the creditors of each of the second to sixth plaintiffs (PBS Companies) required to be held pursuant to s 439A(1) of the Corporations Act 2001 (Cth) (Corporations Act) be extended pursuant to s 439A(6) of the Corporations Act to 11.59 pm on Friday, 30 June 2023.
2. Pursuant to s 447A(1) of the Corporations Act, Pt 5.3A of the Corporations Act is to operate in relation to the PBS Companies such that, notwithstanding s 439A(2) of the Corporations Act, the second meetings of the creditors may be convened before, or within, 5 business days after the end of the convening period as extended in Order 1, provided that Jonathon Colbran, Richard Stone and Mitchell Herrett in their capacity as joint and several administrators of each of the PBS Companies (Administrators) give notice of the meetings to eligible creditors of each of the PBS Companies at least 5 business days before the meetings.
3. Pursuant to s 65-45 and s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act, notwithstanding the operation of Div 65 of the IPS: (a) the Administrators of the PBS Companies are not required to maintain separate administration accounts for each of the PBS Companies; (b) s 65-1(1) of the IPS is to operate in relation to each of the PBS Companies such that the Administrators must pay all money received by them, on behalf of or in relation to any one of the PBS Companies, into one of the administration accounts opened by the Administrators for the PBS Companies, including the account set up in the name of the second plaintiff (PBS Building Administration Account); (c) s 65-15(1) of the IPS is to operate in relation to the PBS Companies such that the Administrators must not pay any money into an administration account for the PBS Companies, including the PBS Building Administration Account, if the moneys are not received by the Administrators on behalf of or in relation to one or more of the PBS Companies; and (d) s 65-25 of the IPS is to operate in relation to the PBS Companies such that the Administrators must not pay any money out of the administration accounts for the PBS Companies, including the PBS Building Administration Account, other than: (i) for the purposes related to the external administration of any one or more of the PBS Companies (including to transfer funds from the PBS Building Administration Account to any other administration accounts for the PBS Companies); (ii) in accordance with the Corporations Act; or (iii) in accordance with any further direction from the Court.
4. The Administrators are to notify creditors of the PBS Companies of these orders in the following manner: (a) by giving notice by email to the creditors that have email addresses recorded in the books and records of the PBS Companies; (b) where the Administrators do not have a valid email address for a creditor, the Administrators are to give notice by post in accordance with the postal addresses recorded in the books and records of the PBS Companies; (c) by publishing a sealed copy of these orders on the creditors' information section of the website maintained by the Administrators' firm, RSM Australia, in respect to the administration of the PBS Companies; and (d) by annexing a sealed copy of these orders to the Administrators' next report to creditors of the PBS Companies.
5. Within 14 days of these orders, the parties provide by email, to the Associate of Halley J, agreed or competing orders for costs.
6. In the event of competing orders, the parties also provide short written submissions and any affidavit evidence in support of their respective positions.
7. The making of costs orders be dealt with on the papers unless either party seeks an oral hearing, in which event that is to be communicated in the email referred to in Order 5.
8. Liberty be granted to any person who can demonstrate sufficient interest to discharge or vary Orders 1 to 3 on 3 days' notice to the plaintiffs and to the Commercial and Corporations Duty Judge for New South Wales.
9. The plaintiffs have liberty to apply on 2 days' notice in relation to any variation of these orders or any other matter generally arising in the administration of the PBS Companies.
10. These orders are to be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 Before me, are two applications by Jonathon Colbran, Richard Stone and Mitchell Herrett in their capacity as joint and several administrators of each of the second to sixth plaintiffs (PBS Companies). The administrators seek orders extending the period by which the administrators must convene the second meetings of the creditors of the PBS Companies (Extension Application) and for orders and directions under the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act), directed at the bank accounts of the PBS Companies (Bank Accounts Application). 2 The Applications by the administrators are supported by an affidavit of Mr Richard Stone sworn on 20 March 2023. 3 The Extension Application is opposed by a creditor, SGCH Portfolio Limited (SGCH). SGCH was granted leave to appear as an intervener at the hearing of the Extension Application and Bank Accounts Application. SGCH alleges that the evidence suggests that there is no realistic prospect of any outcome other than the winding up of the business of the PBS Companies. In the circumstances, SGCH submits that it would be unfairly prejudiced if the Court granted the Extension Application, principally because an extension may deprive SGCH of interim payment protections under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). SGCH relies on an affidavit of Mr Samuel Eisenhauer, the Head of New Homes of SGCH, sworn on 27 March 2023. 4 The Extension Application is not opposed by any other creditor. 5 No creditor of the PBS Companies opposed the Bank Accounts Application.

Background 6 On 7 March 2023, the administrators were appointed to act as joint and several administrators of the following companies: (a) PBS Building Pty Limited (Administrators Appointed) ACN 114 854 929 (PBS Building); (b) PBS Building (NSW) Pty Ltd (Administrators Appointed) ACN 114 856 487 (PBS NSW); (c) PBS Building (QLD) Pty Ltd (Administrators Appointed) ACN 114 856 674 (PBS QLD); (d) PBS Building (ACT) Pty Ltd (Administrators Appointed) ACN 128 913 968 (PBS ACT); and (e) PBS Management Company Pty Ltd (Administrators Appointed) ACN 114 856 763 (PBS Management). 7 Based on their investigations to date and information provided by the directors, Mr Oldfield and Mr Rayment, the administrators' views as to the business and operations of the PBS Companies can be summarised in the following terms. 8 The PBS Companies comprised the building and construction arm of the broader PBS group of companies, the ultimate holding company of which is PBS Property Group Pty Ltd ACN 099 677 844 (PBS Property). 9 The principal activity of the PBS Companies was the construction of commercial and residential properties in New South Wales, Queensland and the Australian Capital Territory. 10 PBS Building did not trade or carry out construction or building activity, rather it acted as the group treasurer entity for the PBS Companies. 11 Prior to the appointment of the administrators, PBS NSW, PBS QLD and PBS ACT were licensed builders. They entered into each of the building contracts and subcontracts for each of the building projects carried out by the PBS Companies. As at the date of the administrators' appointment, the PBS Companies had 82 building projects, of which 24 were active projects. 12 PBS Management was the primary labour supply, employment and document retention entity for the PBS Companies. It previously employed approximately 180 people to work for the PBS Companies. PBS Management terminated the employment of all of its employees on 6 March 2023, the day before the administrators were appointed. 13 The broader PBS group of companies also has a property development business. The entities that form part of the development arm of the broader PBS group of companies are not in external administration. They are, however, affected by the PBS Companies' administrations given that (a) PBS Property routinely provided parent company guarantees as sureties for PBS NSW, PBS QLD and PBS ACT, (b) entities in the development arm of the broader PBS group of companies, at times, retained the PBS Companies to undertake construction work or provided finance to principals who retained PBS NSW, PBS QLD and PBS ACT to undertake construction work, (c) some of these companies may have received payments from the PBS Companies or provided loans to the PBS Companies, and (d) a number of these companies share common directors with the PBS Companies. 14 Following the appointment of the administrators, proofs of debt have been submitted to us by 451 creditors of the PBS Companies. 15 The aggregate total amount of proofs of debt lodged by principals to building contracts is $22,673,613.06. The aggregate total amount of proofs of debt lodged by related entities in external administration is $40,948,560.86. The majority of these claims were not represented in the PBS Companies' books and records and are based predominantly upon estimated amounts of unliquidated claims that are yet to be confirmed. 16 The administrators' preliminary investigations identified duplicate claims being lodged by creditors who claim to have exposure at this early stage of the administration for the same obligations that other creditors have submitted claims for. For example, a principal may have lodged a proof of debt which included amounts for their potential exposure to subcontractors in circumstances where those subcontractors had also lodged a proof of debt with the administrators.

First meeting of creditors 17 On 9 March 2023, the administrators sent a circular to each of the email addresses held by creditors of the PBS Companies (First Circular). 18 Among other matters, the First Circular advised that the first meetings of the creditors of the PBS Companies would be held concurrently at 2.00 pm on 17 March 2023 and would occur in person at the Hellenic Club of Canberra and virtually via Microsoft Teams. 19 At the first meetings of the creditors, 183 creditors and approximately 20 observers attended. No committee of creditors for any of the PBS Companies was formed because no one was nominated to serve on a committee of creditors. Nor did any creditor put forward an alternative person to act as administrator and no consents to act were put forward prior to or at the meeting.

Notice of the Extension Application and Bank Accounts Application 20 On 17 March 2023, the administrators caused notice of the Bank Accounts Application to be given to creditors of the PBS Companies by raising this Application at the first meetings of creditors. No creditors at the meeting raised any questions nor any objection to this Application or the administrators' bank accounts proposal. 21 On 23 March 2023, the administrators caused notice of the Extension Application to be given to creditors by (a) emailing a circular to all creditors with email addresses known to the administrators (Second Circular), and (b) uploading a copy of Second Circular on electronic portals that have been established for creditors for each of the PBS Companies. 22 As at the date of Mr Stone's affidavit, no creditors, other than SGCH, have written to the administrators or otherwise communicated to the administrators, to express opposition to an extension of the period by which the administrators must convene the second meetings of the creditors of the PBS Companies. 23 On 17 March 2023, the administrators caused notice of the Bank Accounts Application to be given to the Australian Securities and Investments Commission (ASIC). ASIC informed the administrators' solicitors that it did not propose to formally respond to this Application. 24 On 24 March 2023, the administrators' solicitor sent a further email to ASIC enclosing an updated copy of the originating process. As at the date of Mr Stone's affidavit, there has been no response from ASIC.

Relevant principles 25 The Court has the power to extend the convening period for the second meetings of the creditors pursuant to s 439A(6) and s 447A of the Corporations Act. In exercising that power, the Court must have regard to the objects set forth in s 435A of the Corporations Act. The objects seek to maximise the chance of a company under administration, or as much as possible of its business, continuing in existence, or if that is not possible, to achieve a better return for the company's creditors than liquidation. 26 As Beach J relevantly explained in Algeri, in the matter of WBHO Australia Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 234 at [16]: A central question is whether additional time is likely to enhance the return to creditors, particularly unsecured creditors. But the power to extend the time should not be exercised lightly, let alone as a matter of course. But Pt 5.3A should be given a commercial construction and application which reflects the reality of the setting in which both the relevant company under administration and the administrator find themselves. The Court must balance the expectation that administration will be a relatively speedy and summary matter against the consideration that undue speed should not be allowed to prejudice constructive commercial actions directed to maximising the return for creditors. The perspective from which Pt 5.3A should be applied should not be narrow, and its application should not be refracted through the pessimistic lens of an insolvency technician. And in that context, generally there is usually greater upside than downside in granting an extension for a reasonable period, where the reasonableness of the duration of the extension is contextualised by the particular circumstances. 27 In Carter v Global Food Equipment Proprietary Limited [2007] NSWSC 901, White J relevantly stated at [11]: On any application under s 439A(6), the Court's task is to balance the need for the administration of a company to be carried out as efficiently and expeditiously as practicable so as to minimise the effect on those persons who are subject to the moratorium imposed by Part 5.3A, against the need to give the administrators time to present meaningful choices to the creditors at their meeting (see Re Pan Pharmaceuticals [2003] FCA 598 at [41] per Lindgren J; Re New Horizons Pty Limited [2004] NSWSC 253 at [5]). 28 In Australian World-Wide Pty Ltd v Palmer [2014] NSWSC 141 at [8], Brereton J (as his Honour then was), cited White J's statement in Carter with approval and added the following two considerations at [10]: …on the one hand, the expectation established by the legislation that administrations will be carried out relatively swiftly so that creditors can make their own decision at a relatively early point of time; and on the other, objects of Pt 5.3A which may in some cases be better served by allowing the administrators time to see if the business of the company can be continued or a better return secured for creditors than upon an immediate winding up. 29 In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717, Middleton J stated at [66]: 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: Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 (Jacobson J); Re Riviera (Austin J); Silvia, in the matter of Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636 (Lindgren J) ('Re Austcorp'); and In the matter of Kavia Holdings Pty Limited (administrators appointed) (receivers and managers appointed) [2013] NSWSC 737 (Black J). 30 In Mighty River International Ltd v Hughes (2018) 265 CLR 480; [2018] HCA 38 Nettle and Gordon JJ (in dissent, but relevantly, not in this respect) referred to a number of cases, including Re Riviera Group Pty Ltd [2009] NSWSC 585 at [13] (Austin J) and concluded at [73]: … 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. (Citations omitted.) 31 Another important consideration, is the need for administrators to provide creditors with a report and recommendation to enable them to make an informed decision at the second creditors meeting as to whether (a) the company should be returned to its directors, (b) a deed of company arrangement should be executed (if proposed), or (c) the company should be permitted to pass into voluntary liquidation: Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 at [28] (Farrell J); see also In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 (Farrell J) at [13] and the cases cited therein.

Present state of the administrations 32 The key tasks that the administrators have been pursuing to date include: (a) negotiating novation and termination arrangements with the principals of the 24 active building projects at the date of the administrators' appointment; (b) collating the list of subcontractors who worked on each project for the PBS Companies and reconciling what retentions and other securities the PBS Companies may hold to secure the subcontractors' obligations under those subcontracts; (c) examining how those subcontracts (and any warranties associated with those subcontracts) can be novated or assigned to the principals or any new builders who will take over the active projects in place of PBS Companies; (d) ensuring those subcontractors may be available to attend to any defective work that has been completed on any of the projects; (e) co-operating with principals who have elected to exercise step in rights under each of their building contracts to get those live projects restarted as quickly as possible by making documents and other information available to those principals on terms that are being negotiated with the administrators; (f) dealing with demands made by principals on various performance bonds, bank guarantees and trust accounts that the PBS Companies have arranged with those principals as security for the PBS Companies' obligations under the. building contracts; (g) reviewing what progress claims and other causes of action may be available to the PBS Companies to make recoveries for creditors and otherwise use as a set­ off against any claims made against the PBS Companies, including payment claims and adjudications potentially available to the PBS Companies under applicable Security of Payments legislation; and (h) entering into discussions with PBS Property and its directors around a potential deed of company arrangement (DOCA) for the PBS Companies. 33 The administrators are of the opinion that it is beneficial for the PBS Companies to remain under administration while the tasks listed at [32] continue to be undertaken, as the administrations (a) provide a series of statutory moratoria that prevent creditors from commencing or continuing proceedings against the PBS Companies, exercising third party property rights and enforcing security interests, (b) provide restrictions upon the exercise of ipso facto termination rights following their appointment (as least with respect to contracts entered into on and after 1 July 2018), (c) potentially allow the PBS Companies to pursue progress claims under security of payment legislation, (d) keeps the option of proposing a possible deed of company arrangement available to PBS Property, the directors or any other interested parties, and (e) prevents creditors from calling on personal guarantees provided by PBS Property and the directors as sureties for the PBS Companies so those sureties can focus both on assisting the administrators to investigate the business, property, affairs and financial circumstances of the PBS Companies and considering a deed of company arrangement for the PBS Companies. 34 At [35] of his affidavit, Mr Stone states: In the absence of an extension of the Convening Period, it is overwhelmingly likely that the Administrators would recommend that the PBS Companies by [sic] wound up (as it is our view that they are likely insolvent and therefore should not be returned to the directors and there is no DOCA proposal that has been put forward (notwithstanding that PBS Property and the directors have flagged an intention of considering such a proposal). The Administrators consider that a winding up at this juncture (if the Second Meetings were required to be held in April 2023) would likely lead to a worse outcome to creditors of the PBS Companies because (amongst other things): (a) it would hamper recovery actions, including by preventing the pursuit of claims under Security of Payment legislation (which is not available to companies in liquidation); and (b) in circumstances where there is a prospect of a DOCA proposal in the future, it would limit the possible avenues for the sale or restructure of the business of the PBS Companies, or the prospect of a greater return to creditors, from any DOCA. 35 As matters currently stand, the administrators are of the view that further investigations are required in order to provide complete reports to creditors on the future of the PBS Companies, including the quantum of the creditors' claims, the possibility of a pooling arrangement, the detail of any deed of arrangement proposal and possible recovery actions available in the event that the PBS Companies were wound up. 36 Based on the administrators' extensive experience, they expect an extension to 30 June 2023 will provide them with sufficient time to progress each of the key tasks summarised at [32]. In turn, this will enable them to identify creditor claims with more precision and prepare a report of their investigations with an informed recommendation on any proposed DOCA.

Potential prejudice to creditors 37 The administrators have given consideration to the persons who may be affected by the Extension Application, given that an extension would mean a continuation of the statutory moratorium which prevents creditors from commencing or continuing proceedings against the PBS Companies, exercising third party property rights and enforcing security interests. 38 Independently of SGCH, the administrators have identified the following creditors who may be prejudiced by the extension. 39 First, a lessor of property, being the lessor of an office in Canberra which served as the head office of the PBS Companies. Mr Stone gives evidence that the administrators are planning to vacate that leased premise "in the next week or so". The PBS Companies have vacated all other properties that they leased prior to the administration and the companies are not indebted to any other owner of real property or person with an interest in real property such as mortgagees. 40 Second, lessors of goods, being creditors with registrations recorded on the Personal Property Securities Register. The administrators are negotiating the return of these leased goods to lessors other than scaffolding or fencing at building sites. The scaffolding and fencing is being maintained by the administrators for security and safety reasons. Where necessary, the administrators have negotiated or are negotiating extensions of those leases with lessors of scaffolding or fencing. 41 Third, creditors with claims against PBS Property, directors or other entities in the broader PBS group of companies under cross-guarantees. This includes Assetinsure Pty Ltd and principals to some (but not all) of the building contracts with the PBS Companies. 42 Most principals are working to re-commence work on the building projects, either independently, under rights the principals have under the building contracts, or by negotiating with the administrators. Of the PBS Companies' 24 active building projects (a) seven principals have issued step-in notices or purported to terminate the building contracts with the PBS Companies, (b) 15 principals are negotiating with the administrators, and (c) two principals have not engaged with the administrators. 43 On 6 March 2023, all employees were terminated and paid out their entitlements. Accordingly, the administrators do not believe any employee is prejudiced by the Extension Application. 44 With the exception of the lessor of the property formerly used as their head office, the PBS Companies are not indebted to any other owners of real property or other persons with interest in land (such as mortgagees of real property). 45 It is the administrators' view that any prejudice caused to creditors is outweighed by the benefits that will be gained by the Extension Application being granted.

Consideration 46 I am satisfied that it is appropriate to grant the Extension Application for the following principal reasons. I address the position of SGCH and whether any qualifications need to be made to any orders granting an extension at [52] to [66] below. 47 First, I am satisfied that the administrators are confronted with relatively large and complex administrations and they need further time to pursue the key tasks summarised at [32] in order to assess the financial position of the PBS Companies and provide creditors with sufficient information to make an informed decision at the second creditors meeting. 48 Second, I am satisfied that the pursuit of the matters summarised at [32] above, is likely to provide material benefits to creditors. These benefits include, (a) the continuation of the statutory moratoria on the commencement or continuation of proceedings against the PBS Companies, (b) the pursuit of progress claims under security of payment legislation, at least in New South Wales, (c) allowing more time for negotiating with principals and subcontractors, including the prospect of successfully negotiating the termination or novation of contracts that may reduce or clarify the quantum of creditors' claims against the PBS Companies, and (d) providing the directors of the PBS Companies more time to formulate and advance the foreshadowed DOCA. 49 Third, subject to considering the position of SGCH to which I will return shortly, the extension sought of the convening period for the second creditors' meetings is unlikely to cause any prejudice to creditors or other stakeholders of the PBS Companies. Both creditors and ASIC have been notified of the Extension Application and, with the exception of SGCH, have not expressed any opposition to the Application. 50 Fourth, the extension sought is not unduly lengthy and is proportionate to the complexities of the PBS Companies. Further, the addition of an order permitting the administrators to hold the second creditors' meetings at any time in the extended period, may result in the meeting occurring at an earlier date than 30 June 2023: Re Daisytek Australia Pty Ltd [2003] FCA 575 at [10]-[18] (Lindgren J).

Overview 51 It is next necessary to consider whether the orders sought by the administrators in the Extension Application should be qualified to avoid any unfair prejudice to SGCH by reason of the extension of the period in which claims could be advanced and progressed against the PBS Companies under the provisions of the SOP Act.

The position of SGCH 52 On 2 December 2021, SGCH, as principal, and PBS NSW, as contractor, entered into a construction contract (Construction Contract) for the completion of a residential property development at 17-21 Pennsylvania Road, Riverwood in New South Wales (Riverwood Development). 53 Mr Eisenhauer states in his affidavit that given the status of the completed works at the Riverwood Development as at the end of February 2023, it would take between 8 and 12 weeks to complete the Riverwood Development. 54 On 28 February 2023, SGCH received a progress claim from PBS NSW in the sum of $1,116,793.35 for works alleged to have been performed pursuant to the Construction Contract in the period up to 28 February 2023 (Progress Claim). 55 By a payment schedule dated 14 March 2023, SGCH disputed the whole of the amount claimed in the Progress Claim. 56 On 3 March 2023, PBS Building ceased to perform work on the Riverwood Development. 57 On 6 and 7 March 2023, SGCH issued four show cause notices to PBS NSW in relation to the Construction Contract. 58 On 7 March 2023, SGCH called on the ANZ bank guarantees that had been provided by PBS NSW to secure its obligations under the Construction Contract. 59 On 16 March 2023, PBS NSW issued a show cause notice to SGCH with respect to its call on the ANZ bank guarantees. 60 On 17 March 2023, SGCH issued a further six show cause notices to PBS NW in relation to the Construction Contract. As at the date of Mr Eisenhauer's affidavit, PBS NSW had not responded to any of those show cause notices. 61 Mr Eisenhauer gives evidence that SGCH is now in a position to exercise its rights to (a) take out of PBS NSW's hands the whole of the work remaining to be completed under the Construction Contract and suspend payment, or (b) terminate the Construction Contract (Default Rights). 62 SGCH estimates that the quantum of its expected net claims against PBS NSW is approximately $2,494,405.90, in the event that it exercises its Default Rights, after taking into account the costs of the completion of the work the subject of the Construction Contract and after deducting the amount received from the ANZ bank guarantees. 63 SGCH is concerned that any extension of the convening period for the second creditors meetings will unfairly prejudice its rights to the benefit of any set off of mutual credits, mutual debts or mutual dealings between SGCH and PBS NSW because its rights to recover any funds paid to PBS NSW following its exercise of rights under the SOP Act may be lost, or compromised. 64 SGCH contends that any orders extending the convening period for the second creditors' meetings should only be made on the basis that the PBS Companies will not exercise any rights under the SOP Act that they may have against SGCH as and from 21 April 2023. Alternatively, SGCH contends that the Court, in the exercise of its discretion, should make orders for the payment of the amount of any adverse adjudication determination into a trust account in the manner provided for in Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99. 65 SGCH submitted that any extension of the convening period for the second creditors meeting would cause it unfair prejudice because it would (a) maintain the stay on its ability to exercise its Default Rights by reason of the operation of s 451E of the Corporations Act, (b) preclude it from exercising its rights to exclusive possession of the Riverwood Development by reason of the s 440B of the Corporations Act, and (c) have the effect of converting any interim payment under the SOP Act into a final payment because it would be unable to take advantage of the "pay now, argue later" basis of any interim payment given the likelihood that PBS NSW would be placed in liquidation at the conclusion of the second creditors' meetings. 66 It ultimately emerged in the course of argument that it was common ground that neither s 451E nor s 440B of the Corporations Act would preclude SGCH from exercising its Default Rights. It is therefore, only necessary to consider the SOP Act contentions advanced by SGCH.

SOP Act provisions 67 It is convenient to commence with a summary of the object and other relevant provisions of the SOP Act. 68 The object of the SOP Act is to ensure that persons who carry out work under a construction contract are entitled to receive and are able to recover progress payments for the work that they have undertaken: s 3(1) of the SOP Act. A person is granted a statutory entitlement to progress payments for work undertaken regardless of whether the relevant construction contract provides for progress payments: s 3(2) of the SOP Act. The procedure for recovering a progress payment under the SOP Act is set out at s 3(3). In summary, it provides for the (a) making of a payment claim, (b) provision of a payment schedule, (c) referral of any disputed claim to an adjudicator for determination, and (d) payment of the progress payment so determined. 69 As Sackville AJA explained in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 at [72] (Leeming, Payne and White JJA and Emmett AJA agreeing): The High Court has on two occasions quoted the explanation of the original design of the Security of Payment Act given by the responsible Minister when introducing amending legislation in 2002: "The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid." The Minister went on to say that cash flow was the "lifeblood of the construction industry" and that the Government was: "determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act." (Footnotes omitted.) 70 Part 3 Div 2 of the SOP Act relevantly provides for "Adjudication of disputes". Section 17(1) outlines the circumstances in which a claimant may apply for an adjudication of a payment claim. These circumstances include (a) if the amount in the payment schedule is less than the amount of the payment claim (b) if the respondent fails to pay the whole or part of the scheduled amount by the payment date and (c) if the respondent fails to provide a payment schedule pursuant to its obligations under Div 1. An adjudicator is to then determine the amount of the progress payment (if any), the date on which the adjudicated amount is payable and the rate of interest on the adjudicated amount: s 22(1). An adjudicated amount is due on a "relevant date" that is either five business days after the determination is served on the respondent or at a later date determined by the adjudicated: s 23(1). The consequences of a respondent not paying the adjudicated amount are set out in s 24. 71 Section 24(1) of the SOP Act relevantly provides that a claimant may request an adjudication certificate from the relevant adjudicating authority and serve a notice on the respondent of their intention to suspend carrying out construction work. Section 25(1) provides that a claimant may file an adjudication certificate as a judgment for a debt in any court of competent jurisdiction. If a respondent seeks to have a judgment under s 25(1) set aside, the respondent is not entitled to bring any cross-claim, raise any defence or challenge the adjudicator's determination and must pay as security, the unpaid portion of the adjudicated amount pending the final determination of those proceedings: s 24(4). Section 32(1) preserves any right that a party to a construction contract may have under Pt 2 or generally in respect of the contract. Section 32(3) provides that in any proceeding in relation to any matter arising under a construction contract, the court or tribunal must allow for any amount paid to a party to the contract in any order it makes and may make orders as it considers appropriate, for the restitution of any amounts paid. 72 The decision of the Supreme Court of New South Wales in Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico [2004] NSWSC 344 was the first occasion on which a Court considered whether a stay of the execution of orders or judgments arising from the filing of an adjudication certificate should be granted, in circumstances where any moneys paid would be irrecoverable because of the claimant's insolvency or liquidation. 73 The plaintiff in Grosvenor Constructions obtained an adjudication certificate under the SOP Act in an amount of $486,324.77 and filed it as judgment debt pursuant to s 25 of the SOP Act. The defendants sought a stay of the execution of the judgment debt on the basis that the company had been placed under external administration. In a report to creditors the administrator had advised that there was a deficit of $4,263,210 and identified a return to creditors of 11 cents in the dollar. 74 After referring to the practice of the Court to grant stays of judgment pending the determination of an appeal where there is a risk that the plaintiff may be unable to repay the money if the appeal were to succeed, Einstein J stated: 31 Similarly, there is no reason why, in appropriate cases, a stay cannot be ordered in circumstances such as the present. Clearly the analogy with appeals is not a perfect one. Whilst payments under the Act are interim, it nonetheless is the policy of the Act that successful claimants be paid. For that reason, there is a sound reason for making stays less readily available in relation to debts arising under the Act, in contrast to the position in relation to appeals arising from curial proceedings. For example, in cases such as the present, the Court might require more than a "real risk that [the respondent] will suffer prejudice or damage, if a stay is not granted" (Kalifair Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737, at 741-742 [18] (emphasis added)). 32 However I accept that in a case such as the present, where there is a certainty that the defendants' rights will be otherwise rendered nugatory, and that it will suffer irreparable prejudice, the proper and principled exercise of the Courts discretion is to grant a stay. … 35 In the present case, if no stay is granted, an interim arrangement would be in practice converted into a final order. The effect of not granting a stay would be that the defendants' rights to recoup the adjudicated amount in the "appeal" pursuant to s 32 of the Act would be rendered nugatory, and the defendants would thus suffer irreparable prejudice. 75 In Veolia Water Solutions v Kruger Engineering (No 3) [2007] NSWSC 459, the plaintiff sought a permanent stay of a judgment in respect of a determination pursuant to s 25(1) of the SOP Act obtained against it by a company subject to a DOCA. The plaintiff contended before McDougall J, that the judgment should be stayed because any success it might otherwise achieve on its cross-claim would be rendered nugatory. McDougall J generally adopted the statements of principle by Einstein J in Grosvenor Constructions but relevantly stated at [39]: However, in any particular case, the application of those principles, and the balancing of the various considerations, will require careful attention. For example, each case will require close analysis of the extent or certainty of the risk of prejudice or damage, if a stay is not granted… 76 The following two factors of particular significance to the exercise of the discretion to grant a stay were identified by McDougall J at [72]: (1) On the one hand, the policy of the Security of Payment Act, that successful applicants be paid promptly (recognised by Einstein J in Grosvenor at para [31]); and (2) On the other, the likelihood of irreparable prejudice, where that prejudice would flow from the refusal of the stay because cross-claims would be rendered worthless (recognised by Einstein J in Grosvenor at para [32]). 77 Justice McDougall then stated that in assessing whether the refusal of a stay would cause irreparable prejudice it was necessary for the Court to look closely at the strength of the cross-claim to determine whether there was a real risk of prejudice if the stay were not granted (at [73]-[74]). 78 The availability of a stay with respect to the registration of judgments under the SOP Act was also referred to by Sackville AJA in Seymour Whyte in which he stated (Leeming, Payne and White JJA and Emmett AJA agreeing): 253 The authorities have recognised that s 25(4) of the Security of Payment Act, which applies in proceedings commenced by a respondent to set aside a judgment based on an adjudication determination, does not prevent a respondent seeking other relief such as a stay of the judgment pending a decision on a proof of debt or a cross-claim. They have also recognised that there is nothing in the Security of Payment Act to prevent a set-off available under s 553C(1) operating to satisfy a judgment obtained by a claimant under Pt 3 of the Security of Payment Act, where the claimant is in liquidation. 254 In the light of these principles, it has generally been accepted that a respondent which can establish that it has a seriously arguable claim arising out of the construction contract may be able to obtain a stay of execution of a judgment obtained under Pt 3 of the Security of Payment Act or equivalent relief (such as an order requiring a claimant to provide security). Such relief ordinarily may be granted only if: "the failure to do so would have the practical effect of making permanent that which … the legislature intended [by the Security of Payment Act] to be only interim." (Footnotes omitted.) 79 Section 32B of the SOP Act is in the following terms: 32B Application of Part to a claimant in liquidation (1) A corporation in liquidation cannot serve a payment claim on a person under this Part or take action under this Part to enforce a payment claim (including by making an application for adjudication of the claim) or an adjudication determination. (2) If a corporation in liquidation has made an adjudication application that is not finally determined immediately before the day on which it commenced to be in liquidation, the application is taken to have been withdrawn on that day. 80 In the Second Reading Speech of the Building and Construction Industry Security of Payment Amendment Bill 2018 (NSW) (SOP Act Amendment Bill), the purpose of the introduction of s 32B in the SOP Act was explained in the following terms: The bill will insert section 32B to prevent the Act applying to a claimant corporation in liquidation. This reform will ensure that the Act operates consistently with the object of promoting cash flow. The prime objective of the Act is to keep cash flowing in the contracting chain by enforcing timely payment. On this basis, the Act operates on a "pay-now-argue-later" basis, enabling claimants to obtain payment on an interim basis but preserving a respondent's final rights. If a claimant in liquidation were able to access the Act, any payment a respondent would be required to make to the claimant would not be interim as intended. This is because the respondent would not be able to sue for recovery as the payment would enter the general pool for distribution to the claimant's creditors.

Submissions 81 SGCH advanced the following principal submissions in support of its contention that the convening period for the second creditors' meetings should not be extended unless the unfairly prejudicial impact of that extension on it was addressed. 82 First, SGCH submitted that given [35] of Mr Stone's affidavit, it was plainly the case that if the extension were not granted, each of the PBS Companies would proceed to liquidation. SGCH submitted that the key tasks being undertaken by the administrators show that their focus is on novation or termination of the PBS Companies' arrangements, rather than preserving the businesses with a view to brokering a sale. SGCH also placed emphasis on [17(g)] and [44] of Mr Stone's affidavit in which he gives evidence that on 6 March 2023, all employees of the PBS Companies were terminated. 83 SGCH submitted that if the PBS Companies were to proceed to liquidation, SGCH would obtain the benefit of s 32B of the SOP Act and it would be able to rely on the set off of mutual liabilities under insolvency laws. This was described as the status quo. In contrast, it submitted if the extension were granted, then it would be deprived of the benefit of s 32B of the SOP Act. It submitted that it would be unfairly prejudiced, given that the pursuit of claims under the SOP Act was advanced by the administrators as a principal justification for the extension, because (a) it would have to respond to those claims under the SOP Act, and (b) if it were ultimately the subject of an adverse adjudication determination but was otherwise successful in pursuing its Default Rights, it would be unable to rely on the set off of mutual liabilities under insolvency laws. SGCH described this as the counterfactual. 84 Second, SGCH submitted that the relevant question was whether the Court should exercise its discretion to extend the convening period without addressing the unfair prejudice that would necessarily flow to it. Nevertheless, it submitted that in exercising that discretion, this Court should have regard to the evident State legislative purpose in introducing s 32B into the SOP Act, as reflected in the extract from the second reading speech for the SOP Act Amendment Bill set forth above at [80]. It observed the concern expressed by the legislature that in a liquidation, any payment a respondent made under the SOP Act to a claimant would not be an interim measure as intended but rather a final measure, because "the respondent would not be able to sue for recovery as the payment would enter the general pool for distribution to the claimant's creditors". It placed particular emphasis on the following sentence: The prime objective of the Act is to keep cash flowing in the contracting chain by enforcing timely payments. 85 It submitted that here, as in a liquidation, the "contracting chain" was effectively broken because the PBS companies no longer operated as going concerns, had liabilities in excess of $60 million and in the absence of any extension of the convening period, would be wound up. 86 Third, SGCH submitted that the unfair prejudice it would suffer as a result of a grant of the Extension Application, should be addressed now by this Court, as in effect, the insolvency court. It submitted that the issue should not be "kicked down" the road by requiring it to seek a stay of any judgment debt that might subsequently have been obtained against it from the District Court of New South Wales, which it described as a non-insolvency court. 87 SGCH submitted that requiring it to seek a stay of any judgment debt obtained against it pursuant to an adjudication certificate under the SOP Act was, in effect, reversing the onus of proof. It submitted that it would bear the onus of persuading the Court that a stay of the judgment debt should be granted. In contrast, the administrators presently bear the onus of persuading the Court that the extensions should be granted notwithstanding the alleged unfair prejudice that it has identified. 88 In response, the administrators submitted that (a) SGCH had not identified any present prejudice because its concerns were only hypothetical and contingent, (b) the future fate of the PBS Companies had not yet been determined, (c) any prejudice that might arise could be addressed by an application for a stay of any judgment debt in accordance with well-established principles and authority, and (d) no legislative intent could be found that the liquidation exclusion in s 32B of the SOP Act should extend to companies in administration and such a construction was plainly inconsistent with the text of the SOP Act.

Consideration 89 On balance, I have concluded that the orders to give effect to the Extension Application should not be qualified in the manner sought by SGCH for the following principal reasons. 90 First, I am satisfied that the alleged unfair prejudice identified by SGCH at this stage, is not sufficient to outweigh the prejudice to other creditors, if the administrators are precluded from pursuing claims against SGCH under the SOP Act during the extended period for the convening of the second creditors' meetings. 91 It is by no means certain that each of the PBS Companies, including PBS NSW, will proceed to liquidation at the conclusion of the extended period in which the second creditors' meetings will be held. The need to undertake further enquiries and analysis to determine the true financial position of the PBS Companies was a principal basis for the Extension Application. Mr Stone's affidavit at [35] is directed to the position if the Court were not minded to grant the extension as is plain from its opening words, "In the absence of an extension". It does not establish that liquidation of the PBS Companies is inevitable or very likely. Nor does the present focus by the administrators on pursuing the novation of contracts and the termination of all employees immediately prior to their appointment necessarily lead to a conclusion that each of the PBS Companies, including PBS NSW, is inevitably or very likely to be insolvent. 92 The complexity of the financial arrangements between the PBS Companies makes it problematic at this stage to make any definitive assessment of the financial position of PBS NSW and the possibility of the emergence of a DOCA cannot be entirely discounted given the administrators' preliminary discussions with PBS Property and its directors concerning a potential DOCA for the PBS Companies. 93 There is also an insufficient evidentiary foundation for the Court to make any definitive assessment of the value of the Default Rights that are claimed by SGCH to generate net claims of $2,492,405.90 against PBS NSW and that could potentially be relied upon to offset any judgment debt obtained by PBS NSW against SGCH, if PBS NSW was wound up prior to the entry of any judgment against it pursuant to an adjudication certificate under the SOP Act. 94 Further, the administrators are entitled to rely upon the provisions of the SOP Act while a company remains in administration. Any immediate prejudice to a principal under a construction contract that might arise because of steps taken under the provisions of the SOP Act by an incorporated contractor, while it is under administration, is a necessary incidental consequence of those provisions. Any amelioration at this stage of any specific prejudice to SGCH that might arise, if it were not able to rely on the set off provisions if PBS NSW was wound up, would give rise to a commensurate prejudice to the creditors of PBS NSW, as their returns would be proportionally reduced by the extent of any set off. 95 Second, I do not accept that any legislative intention can be discerned that the stated legislative purpose in introducing s 32B into the SOP Act could extend to a situation in which a company is under administration. The carve out of the operation of the SOP Act is expressly limited to companies in liquidation and does not encompass companies under external administration or that are subject to a DOCA. 96 The stated prime objective of keeping cash flowing in the contracting chain by enforcing timely payments cannot be construed as supporting any construction of the SOP Act that limits or qualifies its operation more generally to companies under external administration or that are the subject of a DOCA. Further, any weight that might be given to that prime objective in exercising a discretion to extend convening periods for the second creditors' meetings must necessarily have regard to the text and operation of the SOP Act. The text of s 32B makes clear that the legislature has chosen the liquidation of a corporation as the relevant event for excluding a person from taking any action under the SOP Act to enforce a payment claim, not the appointment of external administrators or entry into a DOCA. 97 As Ball J stated in Kennedy Civil at [34]: In Saeed (and Wik) the Court was concerned with ascertaining the legislative intention for the purpose of construing the statute. But it is plain that the principle applies to the ascertainment of legislative intention more generally to the extent that legislative intention is relevant. It is also plain from the terms of s 32B of the SOP Act that the purpose of the section is to deny the benefits of the legislation to companies in liquidation, not more generally. The fact that the report that led to the amendments which included s 32B and the Second Reading Speech suggested that the policy of the SOP Act "is to maintain cash flow while a construction company remains solvent" (to quote from the report at 118) is irrelevant and cannot be reconciled with the provisions of the statute itself. 98 Further, in response to a submission by the respondent that the DOCA before the Court in that case should be characterised as an attempt to avoid the operation of s 32B of the SOP Act, given liquidation was inevitable, Ball J stated at [35]: As to Richard Crookes's second point, it is difficult to see how it could be said that the DOCA was designed to avoid the operation of the SOP Act. It would be more accurate to say that it was designed to take advantage of the limited operation of s 32B. The evident purpose of s 32B is to prevent a situation from arising where an interim payment made under the Act becomes permanent because, on liquidation, the payment is no longer available to be returned to the payer if the payer is successful in its claim under the construction contract. But the DOCA in this case specifically preserves Richard Crookes's rights to recover the amount it pays under the construction contract. On the other hand, if Richard Crookes is correct, it will be entitled to avoid the operation of the SOP Act, and the obligation to make interim payments, simply because it refused to pay amounts that the Act obliges it to pay. If any party has sought to avoid its obligations under the Act, it is Richard Crookes. 99 Even less persuasive, would be any contention that the Extension Application should be characterised as an attempt to avoid the operation of s 32B of the SOP Act. The pursuit of claims under the SOP Act was identified by the administrators as an additional benefit of an extension of the convening periods not the only or the principal reason for the Extension Application. 100 Third, I am satisfied that any unfair prejudice to SGCH in the event that a judgment debt under the SOP Act is obtained by PBS NSW against SGCH prior to a winding up of PBS NSW, can be appropriately addressed by SGCH seeking a stay of execution of the judgment. This is consistent with well-established authority. The Court in which the judgment debt was obtained would then be best placed to assess the extent of the actual prejudice to SGCH if a stay were not granted, rather than potential prejudice to SGCH. As matters currently stand, PBS NSW and the other PBS Companies remain under administration and no concluded position has been reached as to their solvency or the prospect of a DOCA. 101 Further, the legislative intention underlying the payment of progress claims under the SOP Act is not relevantly in question. I do not accept that there is any unfair prejudice in requiring SGCH (as a judgment debtor under the SOP Act) to bear the onus of having to persuade a Court, in the event of a liquidation of PBS NSW (as the judgment creditor under the SOP Act), that a stay should be granted pending the determination of any claims arising in connection with the Default Rights.

Bank accounts of the PBS Companies 102 As a result of their investigations to date, the administrators have concluded that the financial dealings of the PBS Companies prior to the commencement of the administrations can relevantly be summarised in the following terms. 103 First, there were a number of intercompany loans amongst the PBS Companies and also between the PBS Companies and other entities in the broader PBS group of companies (Intercompany Loans). The Intercompany Loans were recorded and tracked by journal entries and running ledgers in the companies' accounting software. 104 Second, the PBS Companies operated 13 bank accounts. The most significant account was held in the name of PBS Building (Treasury Account). It was used and operated as a global account to collect all revenue and pay all the expenses of the PBS Companies and at least some of the revenue and expenses of the broader PBS Property Group. PBS Building essentially operated as a treasury entity of the PBS Companies, with all their revenue being paid into the Treasury Account and all their expenses being paid out of the Treasury Account. The Treasury Account held a very large balance of money and there were a significant number of transactions in and out of that account compared to the other bank accounts of the PBS Companies. When money was paid into or out of a bank account, that credit or debit was recorded in the ledger for the relevant bank account (principally, the Treasury Account) as well as the relevant Intercompany Loan ledgers. 105 Given the role of PBS Building as a treasury entity for the other PBS Companies, the administrators have concluded that the funds previously in the Treasury Account, in substance, represented funds of the other PBS Companies. They submit that the position is that the funds in the Treasury Account are either held on trust for, and beneficially by, one or more of the other PBS Companies or, alternatively, one or more of the other PBS Companies are net creditors of PBS Building. In either case, the administrators have concluded that there has been a comingling of cash receipts and payments belonging to some or all of the PBS Companies and that it is possible it extends to other companies in the broader PBS group. 106 The funds in the Treasury Account were paid into the trust account of the administrators' firm immediately prior to their appointment. 107 The administrators are of the opinion, which in my view is well justified, that the financial affairs of the PBS Companies are inherently bound up together. Therefore, without further investigation, it would be improper for the administrators to treat the funds in the account of PBS Building as credit only of that company. 108 The administrators are also of the view that further investigations are required but the cost of these investigations may approach $100,000 and may be redundant in the event of a pooling of assets of the PBS Companies (either under a DOCA or in liquidations). The administrators therefore, do not propose to carry out those investigations at the present time. They consider that ultimately, these investigations may only be necessary if and when it is necessary to pay a dividend to creditors.

Relevant legislative provisions 109 It is also necessary to address the practical question of how the administrators should now deal with the funds of the PBS Companies by reference to the applicable provisions of the IPS. This includes both the transfer of pre-appointment funds and the payment and receipt of post-appointment monies. 110 Division 65 of the IPS addresses bank accounts required to be operated in an external administration. By way of summary, (a) s 65-5(1) of the IPS requires an external administrator of a company to pay all money received by the external administrator on behalf of, or in relation to, the company into an administration account (as defined by s 60-10) for the company within five business days after receipt, (b) s 65-15 requires an external administrator not to pay other monies into an administration account, and (c) s 65-25 prohibits an external administrator from paying money out of an administration account other than for purposes related to the external administration of that company (or otherwise in accordance with the Corporations Act or an order of the Court). 111 Section 65-45 of the IPS provides a power to make orders modifying the arrangements with respect to the operation of bank accounts of companies in external administration: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144 at [91]-[94] (Markovic J). The administrators have standing to seek such modifying orders under s 65-45 of the IPS: Re Grocon Pty Ltd (Administrators Appointed) (No 1) [2020] VSC 833 at [20] (Gardiner AsJ). 112 As in those cases, the administrators seek orders relieving them of the need to adhere to certain of the strict requirements contained in Div 65 of the IPS.

Administrators' proposed course of action 113 The administrators seek the following specific orders in the Bank Accounts Application: 3. An order pursuant to sections 65-45 and 90-15 of the IPSC that, notwithstanding the operation of Division 65 of the IPSC: (a) the Administrators of the PBS Companies are not required to maintain separate administration accounts for each of the PBS Companies; (b) section 65-1(1) of the IPSC is to operate in relation to each of the PBS Companies such that the Administrators must pay all money received by them, on behalf of or in relation to any one of the PBS Companies, into one of the administration accounts opened by the Administrators for the PBS Companies, including PBS Building Administration Account (as defined in the affidavit of Richard Stone sworn on 23 March 2023) (PBS Building Administration Account); (c) section 65-15(1) of the IPSC is to operate in relation to the PBS Companies such that the Administrators must not pay any money into an administration account for the PBS Companies (including the PBS Building Administration Account) if the moneys are not received by the Administrators on behalf of or in relation to one or more of the PBS Companies; (d) section 65-25 of the IPSC is to operate in relation to the PBS Companies such that the Administrators must not pay any money out of the administration accounts for the PBS Companies (including the PBS Group Administration Account) other than: (i) for the purposes related to the external administration of any one or more of the PBS Companies (including to transfer funds from the PBS Building Administration Account to any other administration accounts for the PBS Companies); (ii) in accordance with the Act; or (iii) in accordance with any further direction from the Court. 114 The orders sought are designed to avoid the need to segregate, and treat separately, the funds of the PBS Companies which would provide the administrators with sufficient flexibility to operate the bank accounts and use funds of the PBS Companies. 115 The administrators propose to operate bank accounts of the PBS Companies while they are under administration, in the following manner. 116 First, the administrators will transfer into an administration account set up in the name of PBS Building (PBS Building Administration Account), the balance of funds previously transferred into their trust account on their appointment together with funds previously transferred out of that trust account to other accounts set up by the administrators for each of the PBS Companies (Administration Accounts). 117 Second, the administrators will use the PBS Building Administration Account to fund the administration of each of the PBS Companies if the other PBS Companies do not have sufficient funds in their respective Administration Accounts. All transactions in the PBS Building Administration Account will be recorded in the financial accounts of the PBS Companies so that a reconciliation can occur at any time. The administrators will use a double entry system under which a general ledger of the PBS Building Administration Account will be kept along with sub-ledgers to the general ledger for each PBS Company. 118 Third, they will only use the Administration Accounts in the names of PBS NSW, PBS QLD, PBS ACT and PBS Management for collections and expenses specifically referrable to those companies. 119 Fourth, the administrators will leave the funds currently in four project specific trust/retention accounts for the purpose of securing retention payments held under subcontracts pursuant to security of payment legislation and the Queensland Building and Construction Commission Act 1991 (Qld). 120 Fifth, the administrators will leave the funds currently in quarantined bank accounts until they can form a final view as to how to deal with those funds and then engage with any principals who may have an interest in those accounts. The funds are being held pursuant to security arrangements in which agreed bonus payments were paid by principals to PBS Companies, if practical completion was achieved on time, and otherwise forfeited if that did not occur.

Consideration 121 I am satisfied that it is appropriate to make the orders sought in the Bank Accounts Application. 122 First, it reflects the arrangements prior to the administrators' appointment, where PBS Building was the treasury entity for the PBS Companies and none of the other PBS Companies had any funds available in bank accounts immediately prior to the administrations. 123 Second, it would be a difficult, time consuming, expensive, and potentially unnecessary exercise to segregate the funds in circumstances where the PBS Companies' funds were previously inter-mingled and the assets could be pooled as part of the external administration. 124 Third, maintaining most of the funds in and through the PBS Building Administration Account, other than where a recovery is specifically referable to one particular company, will streamline the administrations and create efficiencies. 125 Fourth, the administrators will make appropriate double-entry accounting entries to record transactions in the PBS Building Administration Account in the financial accounts of the PBS Companies so that a reconciliation can occur at any time. 126 Fifth, the proposed course will ensure that funds of the PBS Companies will only be used for purposes related to the administration of those companies. The proposed arrangements will ensure that any monies previously held in the Treasury Account (and which will be transferred into the PBS Building Administration Account) will not be used for any purpose extraneous to the PBS Companies.

Disposition 127 For the foregoing reasons the orders sought in the Extension Application and the Bank Accounts Application are to be made. 128 At the conclusion of the hearing, SGCH asked to be heard on the question of costs after the delivery of judgment. The parties will be given an opportunity to make submissions as to appropriate orders for costs if a consent position cannot otherwise be reached. I certify that the preceding one hundred and twenty-eight (128) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.

SCHEDULE OF PARTIES NSD 270 of 2023 Plaintiffs Fourth Plaintiff: PBS BUILDING (QLD) PTY LTD (ADMINISTRATORS APPOINTED) ACN 114 856 674 Fifth Plaintiff: PBS BUILDING (ACT) PTY LTD (ADMINISTRATORS APPOINTED) ACN 128 913 968 Sixth Plaintiff: PBS MANAGEMENT COMPANY PTY LTD (ADMINISTRATORS APPOINTED) ACN 114 856 763