CONSIDERATION
17 The present status of the administration of the Companies is explained in the detailed evidence relied on by the administrators.
18 On a consolidated basis (and subject to adjudication) the Companies have:
(1) approximately $32.8 million in liabilities, comprised of
(i) approximately $1.6 million in outstanding priority employee entitlements owed to 151 employees;
(ii) approximately $20.7 million owed to 106 unsecured creditors;
(iii) approximately $1.6 million owed to secured creditors; and
(2) approximately $10.1 million in related party debts; and
(3) $3.26 million in current assets (excluding related party receivables).
19 The Companies' financier, Australia and New Zealand Banking Group Limited (ANZ), discharged its general security on or about 30 March 2023, and the Companies do not have any secured creditors with a security interest registered in respect of all present and after-acquired property.
20 The Companies remaining secured creditors derive their respective interests from various asset finance arrangements. The administrators have identified 128 interests registered on the Personal Property Securities Register (PPSR) against certain assets owned by the Companies, relating to 156 motor vehicles and 227 items of plant and equipment. The administrators' investigation in relation to these interests is ongoing and is anticipated to take up to three more weeks to complete.
21 The books and records of the Companies indicate there are approximately 106 creditors of the Companies. To date, the Administrators have received informal proofs of debt from 23 ordinary unsecured creditors, together claiming a total of $20.7 million (excluding intercompany loans), which have not yet been adjudicated. The administrators anticipate that further proofs of debt will be submitted.
22 Based on the administrators' investigations to date, the six largest creditors of the Companies (subject to adjudication) are:
(1) The Deputy Commissioner of Taxation, which claims to be owed approximately $9.6 million by the Companies;
(2) The State Revenue Office of Victoria, which claims to be owed approximately $7.5 million by the Companies, on a consolidated basis;
(3) Tradelink Pty Ltd, which claims to be owed approximately $980,911 by Plumbfirst and Comfyfirst, collectively;
(4) Australian Air Conditioning Distributors Pty Limited, which claims to be owed approximately $852,078 by Firstaction;
(5) Metal Manufacturers Pty Ltd, which claims to be owed approximately $372,772 by the Companies; and
(6) ANZ, which claims to be owed approximately $121,035 by Firstaction.
23 The Companies also have significant levels of intercompany debt, each company being a debtor and / or creditor to one or other of the Companies.
24 As at the date of the administrators' appointment, the Companies had 151 employees with total outstanding employee entitlements of approximately $1.6 million, comprising rostered days off, annual leave, leave loading and long service leave. There were no outstanding or unpaid wages as at the appointment date. Nine employees of Plumbfirst and two employees of Elecfirst were made redundant after the appointment date. The administrators are presently in the process of confirming the outstanding entitlements owed to these employees as well as whether there are sufficient circulating asset proceeds of Plumbfirst and Elecfirst to meet the priority claims of those employees.
25 As at the date of the administrators' appointment, the Companies leased four trading premises located in Victoria and South Australia. The leases in respect of the premises remain on foot, and the administrators have continued to pay rent and other outgoings in the ordinary course. If the convening period is extended, the administrators intend to pay rent and other outgoings for the duration of the administration.
26 Against that background, the administrators seek an extension of the convening period from 11 May 2023 to 10 August 2023. I am satisfied that it appropriate to exercise the power to grant the extension of the convening period for the following reasons.
27 First, the extension sought is for approximately three months. The desirability of granting the extension in the present circumstances has been explained in the affidavit of Mr Walker, who, as mentioned, is a registered liquidator and has over 20 years of experience in corporate solvency and restructuring.
28 Mr Walker deposes to the fact that both he and his fellow administrator are of the view that it is in the interests of creditors and the Companies for the convening period to be extended. The administrators' reasons for reaching that opinion have been explained in Mr Walker's affidavit. In short, they include:
(1) That as a result of varying degrees of financial interconnectivity and intermingling across the Companies, particularly with respect to the Companies' assets and liabilities, additional investigation, including obtaining advice as to equitable interests that certain Companies may have, is required.
(2) That the administrators are continuing to operate Plumbfirst, Elecfirst, Comfyfirst and Bblautofirst as going concerns which is time consuming. It involves in excess of two-hundred transactions daily and receipts of up to $1 million per week, as well as frequent communication with counterparties.
(3) Further investigations are required to confirm the liability position of Plumbfirst NSW, which ceased trading in January 2023, so the administrators can form a view as to whether Plumbfirst NSW should be included in the EOI campaign;
(4) Notwithstanding that the EOI campaign has been indicatively timetabled in such a way as to facilitate the second creditors' meeting being held as early as 2 June 2023 it is the administrators' considered opinion based on their experience that EOI campaign is likely to take longer to complete than the indicative timetable provides and is likely to be extended. Accordingly, at this time the administrators are not confident about whether a sale or DOCA can be achieved, and if so by what time. For this reason, the administrators seek an extension of time which they believe will accommodate their present uncertainty as to timing;
(5) That the value of services businesses, including those conducted by the Companies, are typically maximised when the business is permitted to continue to operate as a going concern. If the extension of the convening period is not granted, it is likely that the Companies will be placed into liquidation at the second meeting of the creditors of the Companies and, as best the administrators can assess it, the likely return to creditors will be significantly lower in a liquidation scenario;
29 The administrators estimate they will require an additional four to six weeks to finalise their investigation into the Companies - including with respect to voidable transactions, insolvent trading claims, proofs of debt received from creditors, and PPSR interests - for the purpose of preparing a fulsome report and associated recommendation to creditors in accordance with s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth).
30 Mr Walker deposes to the fact that key stakeholders of the Companies have been notified of the application and are broadly supportive, or at worst, having been notified have not sought to intervene or raise objection.
31 First, the Committees of Inspection of Plumbfirst, Elecfirst and Comfyfirst met on 5 May 2023, at which time the administrators communicated their intention to, and rationale for, seeking an extension of the convening period. The attending members of each of the Committees unanimously supported the administrators making the extension application.
32 Secondly, a circular resolution dated 2 May 2023 was distributed to all creditors of Plumbfirst, Elecfirst and Comfyfirst and as at the hearing, the administrators had not been made aware of any objection to the making of the application or of an intention by any creditor or other interested person to intervene in the application.
33 Meetings have been held with the employees of the Companies on 2 May 2023 (in Adelaide), on 3 May 2023 (in Melbourne) and on 4 May 2023 (in the Companies' head office in the outer suburbs of Melbourne). At each meeting, the administrators informed the employees of the present application. No objections were raised in respect of the application at any meeting.
34 As at the date of the administrators' appointment, Firstaction leased four trading premises - three in Victoria and one in South Australia. Each of these leases remains on foot and the administrators have continued to pay rent and other outgoings. As mentioned above, the administrators intend to do so for the duration of the administration. The lessors have been given notice of this application, and the administrators have spoken with each of the lessors' representatives. Each lessor has indicated their support for the application.
35 If the Court declines to grant the extension it is likely that the Companies will be placed into liquidation at the second creditors' meetings. The wages and other entitlements of the remaining employees which have accrued since the administrators were appointed are presently being paid by the administrators. Mr Walker considers that the prospects of the maximum number of employees retaining their roles is enhanced if the business continues as a going concern and if a sale or DOCA can be achieved. Mr Walker's preliminary view, based on his experience in similar scenarios, is that the Companies and their creditors will be worse off if the Companies are placed into liquidation. Mr Walker considers it likely that the Companies' creditors would receive a significantly lower aggregate return in a liquidation scenario as compared to a potential sale or DOCA.
36 The administrators are not aware of any prejudice which may be suffered by any creditor by reason of the Court granting the extension sought. No person appeared at the hearing to oppose the application. The orders proposed by the administrator provide for notice to be given of the orders to creditors of each of the Companies and for liberty to be granted to person who can demonstrate a sufficient interest to apply to the Court to re-list the matter.
37 Although the administrators seek a three-month extension, the administrators also seek orders permitting the convening of the second meetings of creditors at any time prior to 10 August 2023. Mr Walker's evidence is, and his counsel submitted that, the administrators propose to hold the meetings as soon as reasonably practicable.
38 I recognise that granting an extension of the convening period is a departure from the general requirement that administrations should be of relatively short duration and the sale of companies or their businesses or corporate rearrangements can and should occur with expedition: In the matter of Oventus Medical Limited (Administrators Appointed) [2022] FCA 840 at [32]. However, for the reasons I have given, I am satisfied that the extension sought in the context of the administration of these Companies has been adequately explained by the administrators, is appropriately confined having regard to the purpose of the extension and is in the best interests of creditors and the Companies.
39 The administrators have also sought ancillary orders as to the form in which notice is to be given to creditors which are practical and which will facilitate the timely provision of notice. Accordingly, I made ancillary orders as sought.
40 The administrators sought, and are entitled to, an order that their costs of this application be their costs in the administration.