Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd

SHARIFF J: 1 On 12 September 2023, the First Plaintiff was appointed as the administrator of the Second Plaintiff (the Company) by resolution of the directors of the Company. 2 The Company was incorporated on 20 June 2016. Its business involves the production and sale of wine, the operation of a restaurant, and the holding of events and functions at its premises. 3 Following the appointment of the First Plaintiff as administrator, the first meeting of the Company's creditors was held on 21 September 2023. At that meeting, the creditors affirmed the appointment of the First Plaintiff as administrator, and there were no nominations for an alternative administrator and the creditors decided not to form a committee of inspection. 4 The second meeting of the Company's creditors is scheduled to occur on 12 October 2023 at 10:00 am. By operation of s 439A of the Corporations Act 2001 (Cth) (the Act), the second meeting must occur by this time, unless the time for the convening of that meeting is extended by an order of the Court. By an Originating Application filed on 6 October 2023, the First Plaintiff seeks such an order and other ancillary orders pursuant to s 439A(6) or s 447A of the Act. The First Plaintiff seeks that time be extended for a period of six months ending at midnight on 11 April 2014. 5 For the reasons that follow, I am satisfied that the time for convening the second meeting of the Company's creditors should be extended, but not for a period of six months. Instead, I am satisfied that the convening period be extended until midnight on Wednesday, 31 January 2024, being a period of approximately three and a half months. Mr W.D.B Buckland, who appeared as Counsel for the First Plaintiff at the hearing before me on 9 October 2023, indicated that he had instructions to accept that this period (which I raised during the hearing) was suitable to the First Plaintiff. 6 The applicable principles are well established: Mighty River International v Hughes [2018] HCA 38; (2018) 265 CLR 480 at 511 [72]-[73] per Nettle and Gordon JJ. The function of the Court on an application for an extension under s 439A(6) of the Act is to: … strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders: Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] per Barrett J. 7 In exercising the discretion as to whether to extend the time for the convening of the second meeting of creditors, the authorities establish that various factors may be relevant: see Re Riviera Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585; 72 ACSR 352 at [13]; Stimpson, in the matter of Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) v Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) [2016] FCA 935 at [8]-[10]; Algeri, in the matter WBHO Australia Pty Ltd (Administrator Appointed) (No 2) [2022] FCA 234 at [15] - [17]. These factors include: (1) the size and scope of the business: Lombe, in the matter of Babcock & Brown Ltd (Administrators Appointed) [2009] FCA 349; Worrell, in the matter of Storm Financial Ltd (Receivers and Managers Appointed) [2009] FCA 70; ABC Learning Centres Ltd, in the matter of ABC Learning Centres Ltd; application by Walker (No 5) [2008] FCA 1947; (2) complex corporate group structure and intercompany loans: Lombe, in the matter of Babcock & Brown Ltd (Administrators Appointed) [2009] FCA 349; Re Octaviar Limited (Administrators Appointed) (Receivers and Managers Appointed (ACN 107 863 436) [2008] QSC 272; LED Builders Pty Ltd (Administrators Appointed), in the matter of LED Builders Pty Ltd (Administrators Appointed) and Ors [2008] NSWSC 633; Hall, in the matter of Australian Capital Reserve Limited (Administrators Appointed) [2007] FCA 1328; (3) lack of access to corporate financial records: Sims, in the matter of Destra Corporation Ltd [2008] FCA 2002; Fincorp Group Holdings Pty Ltd & Ors [2007] NSWSC 363; (4) the time needed to execute an orderly process of disposal of assets: Carter, in the matter of SFM Australasia Pty Ltd (Administrators Appointed) ACN 105 317 333 (No 2) [2009] FCA 419; ABC Learning Centres Ltd, in the matter of ABC Learning Centres Ltd; an application by Walker (No 7) [2009] FCA 454; (5) the time needed for thorough assessment of a proposal for a deed of company arrangement: Silvia, in the matter of Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636; (6) where the extension will allow sale of the business as a going concern: Lombe re Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, in the matter of Kleins Franchising Pty Ltd (Administrators Appointed) (ACN 007 348 236) [2008] FCA 721; Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619, in the matter of Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619 [2006] FCA 1423; (7) more generally, that additional time is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd (No 2) [2009] FCA 190; Fitzgerald, in the matter of Primebroker Securities Limited (Administrator Appointed) (Receivers and Managers Appointed) [2008] FCA 1247; Ex parte Vouris; in the matter of Marrickville Bowling & Recreation Club Ltd (under Administration) [2008] FCA 622. 8 In the present case, the Company's operations and corporate structure are not complex. At the hearing before me, Counsel for the First Plaintiff accepted that this was the case. However, it does appear to me that further time would serve the interests of creditors given the following matters. 9 First, in the time since he was appointed on 12 September 2023, the First Plaintiff has taken reasonable steps to make an assessment of the Company's affairs as best he has been able to do. This has included an urgent assessment of the viability of the Company and its liquidity. The First Plaintiff's assessment has not yet concluded as there are a number of matters that, in his opinion, require consideration and in respect of which, he is awaiting information to be provided. 10 Second, some of the matters about which the First Plaintiff is awaiting further information include assessments by industry experts as to the valuation of the Company's assets and an evaluation of the rent being paid by the Company. This includes a valuation of the Company's largest asset being its inventory of wine. The First Plaintiff expects to receive this material over the course of the next week. 11 Third, the First Plaintiff has engaged a business broker to call for expressions of interest from prospective purchasers to acquire the Company's business or parts of it. The expressions of interest close on 18 October 2023. 12 Fourth, each of the Company's two directors have indicated to the First Plaintiff that they propose to submit two alternative Deeds of Company Arrangement (DOCA), but the First Plaintiff has not yet received these proposals and anticipates doing so by 12 October 2023. Upon receipt of those proposals, the First Plaintiff will need to review them and provide his opinion on which proposal he supports, if any, as well as comparing them to any expressions of interest that are received for the purchase of the business or part of it. 13 Fifth, the First Plaintiff's assessment of the Company's affairs have been affected by the appointment of a receiver by two of the Company's creditors. The receiver was appointed by these creditors on 21 September 2023. It is expected that the receiver will be removed in the coming week as the directors of the Company intend to discharge the debt owed to those creditors. 14 By reason of these matters, the First Plaintiff has not been able to complete a report to creditors in advance of the second meeting. In the circumstances, I am satisfied that the time for convening the second meeting of creditors should be extended, but not for a period of six months. 15 On the evidentiary material that I have received, the Company's affairs are not complex. The First Plaintiff will receive much of the information that he needs over the course of the next few weeks. To the extent that the First Plaintiff is awaiting alternative DOCA proposals from the Company's directors, a line does need to be drawn so that such proposals are put to the First Plaintiff, and ultimately to creditors, in a timely way. I do accept that the First Plaintiff may need to assess any such DOCA proposals including as against any expressions of interest to purchase the Company's business or parts of it, but at this stage it is not certain that such proposals or expressions of interest will come to pass. 16 Taking all of these matters into account, I consider that a period until midnight on 31 January 2024 provides ample time for the First Plaintiff to be in a position to finalise his investigations and provide a report to creditors. As noted above, Counsel for the First Plaintiff confirmed that the First Plaintiff considered this to be a suitable timeframe. I am satisfied that granting an extension until this time promotes the interests of creditors whose returns may be maximised but does not cause undue delay. 17 The First Plaintiff has written to creditors informing them of his intention to make this application to the Court. No creditors responded to the First Plaintiff. Given the application was only filed late last week and has been heard by me on an urgent basis, I will make an order granting any person who can demonstrate a sufficient interest, liberty to apply to seek to vary or dissolve the orders I have made. 18 The First Plaintiff also made an application that a draft document that was annexed to his Affidavit be treated as confidential and be the subject of non-publication and suppression orders. However, at the hearing of this application, Counsel for the First Plaintiff did not seek to rely upon or tender the relevant document, and did not read the paragraphs of the First Plaintiff's Affidavit which would otherwise have disclosed its contents. In those circumstances, I will direct the First Plaintiff to file with the Court an amended Affidavit with those paragraphs redacted and excluding the relevant annexure containing the draft document. Given this material was not read into the record or tendered, the earlier form of the Affidavit that was filed with the Court will be restricted from public access unless the Court otherwise orders. 19 I will also make an order that the First Plaintiff's costs of and incidental to this application be costs in the administration of the Company. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff.

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