Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 3) [2024] FCA 1394

MARKOVIC J: 1 On 20 November 2024 I made the orders sought by the plaintiffs to this proceeding in their interlocutory process filed on 17 November 2024. These are my reasons for making those orders. 2 The first plaintiffs are Samuel Freeman, Justin Walsh and Adam Nikitins in their capacity as joint and several Voluntary Administrators of each of the companies named as second to sixth plaintiffs and the second to sixth plaintiffs are respectively Regional Express Holdings Limited (Administrators Appointed) (Rex Holdings), Air Partners Pty Ltd (Administrators Appointed), Rex Investment Holdings Pty Limited (Administrators Appointed), Regional Express Pty Limited (Administrators Appointed), and Rex Airlines Pty Ltd (Administrators Appointed). I will refer to the second to sixth plaintiffs collectively as the Rex Companies. 3 I granted leave to the Commonwealth of Australia to appear on the application as an interested person pursuant to r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth). 4 In their interlocutory process the plaintiffs sought, and I made, orders: (1) extending the convening period for the Rex Companies to 30 June 2025. This is the second extension sought by the Administrators. On 23 August 2024 the Court made an order, among others, extending the convening period to 25 November 2024: see Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 2) [2024] FCA 968 (Rex (No 2)); (2) limiting the Administrators' personal liability in connection with their entry into a suite of transaction documents between them, the Rex Companies, the Commonwealth and, in some cases, PAGAC Regulus Holdings Pte. Ltd (PAG) (collectively, Commonwealth Finance and Security Agreements); and (3) in the nature of judicial directions that the Administrators would be justified in entering into and performing and causing the Rex Companies to enter into and perform the Commonwealth Finance and Security Agreements. 5 The interlocutory process came before me for hearing on an urgent basis in my capacity as Commercial and Corporations Duty Judge.

Background 6 The background to this application is set out in Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) [2024] FCA 929 (Rex (No 1)) (Yates J) at [6]-[23] and in Rex (No 2) (Cheeseman J) at [7]-[31]. Some of the evidence that was before their Honours was also relied on before me. These reasons should be read with those parts of Rex (No 1) and Rex (No 2). 7 In summary, the Rex Companies operate an airline in the Australian domestic passenger and freight industry, with a focus on servicing regional locations by the operation of flights to and from regional or rural airports throughout Australia (Regional Business). 8 There are other companies in the corporate group of which Rex Holdings is the ultimate holding company (Rex Group) which are not in external administration. 9 The functions of the Rex Companies are broadly: (1) Rex Holdings is listed on the Australian Securities Exchange and is the parent company of the Rex Group; (2) Air Partners is an investment vehicle for other businesses of the Rex Group. It holds 100% of the shares in Rex Flyer Pty Ltd and Pel-Air Aviation Pty Limited and 50% of the shares in National Jet Express Pty Ltd, none of which are in administration; (3) Rex Investment is also an investment vehicle for other businesses of the Rex Group. It holds 100% of the shares in four subsidiaries including Australian Aero Propeller Maintenance Pty Ltd and the Australian Airline Pilot Academy Pty Ltd. Once again, these companies are not in administration; and (4) Regional Express operates the Rex Group's commercial passenger flights. 10 Rex Airlines carried on the business of passenger flights between major metropolitan cities, Sydney, Melbourne and Brisbane, serviced by Boeing 737 aircraft (Metropolitan Routes). That part of the business has now ceased operation. 11 Mr Nikitins, one of the Administrators, gave evidence about the tasks that the Administrators have undertaken since the time of the first order extending the convening period. In summary they are: (1) continuing to trade the Regional Business on a "business as usual" basis which has included: (a) liaising with both State and Commonwealth government bodies in relation to the administrations; (b) liaising with employees and union representatives; (c) continuing employment of certain staff members; (d) considering the books and records of the Rex Companies to identify secured and unsecured creditors' claims; (e) liaising with creditors and various other stakeholders and maintaining a database to record and manage creditor claims; and (f) undertaking further investigations in relation to deed of cross-guarantee between Rex Holdings and some of its subsidiaries; and (2) progressing the process for sale of the Regional Business (Sale Process) including liaising with the investment banking advisers, Houlihan Lokey, entering into binding sale documents for the sale of certain assets of the Rex Group and continuing to market the assets in the Rex Group and to engage with potential buyers, as further described below.

Creditors 12 Apart from employees and certain customers whose flights were cancelled (and who were not able to take up an offer of free alternative travel from Qantas or Virgin), the creditors of the Rex Companies include: (1) PAG, which is a secured creditor and a party to certain finance arrangements with the Rex Companies; (2) Westpac Banking Corporation, which is party to various cash advance facilities with, or guaranteed by, the Rex Companies; (3) other creditors with security interests registered on the Personal Property Securities Register; (4) trade creditors and statutory authorities; and (5) related party creditors. 13 To date, no secured party, including PAG, has enforced its security interest over the assets and undertaking of the Rex Companies.

The Sale Process 14 Mr Nikitins provided an update about the competitive process the Administrators are undertaking for the recapitalisation and/or sale of the Regional Business of the Rex Companies. 15 As a result of the Sale Process the Administrators have achieved a sale of: (1) the aeromedical business carried on by Pel-Air Aviation (Pel-Air sale); (2) the shares held by Air Partners in National Jet Express which is a Fly-In-Fly-Out charter business; (3) the land situated at 37 Robey Street, Mascot NSW 2020; and (4) the land situated at 72-76 Robey Street, Mascot NSW 2020, together with the sale of a Boeing 737 flight simulator located at those premises. 16 The Administrators are yet to secure a sale of the Regional Business or the pilot academies. Without any proposal for the sale of the Regional Business and without an extension of the convening period, the Administrators would need to convene the second meetings of each of the Rex Companies by 25 November 2024. Mr Nikitins explained that if that occurred, because the Rex Companies are insolvent and there is no deed of company arrangement proposal, the Administrators would need to recommend to creditors that those companies be wound up. 17 During the Sale Process, the Administrators provided certain interested bidders with a copy of a draft PowerPoint slide deck dated 23 August 2024, titled "Rex 2.0 Discussion Pack" which they had prepared. Among other things, the pack set out a number of initiatives the Administrators had identified as being commercially desirable in order to return the Regional Business to profitability and prepare it for viable go forward trading after the exit of the business from external administration. Mr Nikitins explained that the future (post-restructure) value enhanced version of the Regional Business is described by the Administrators as Rex 2.0. 18 As set out above, despite some interest, the Administrators have to date not received a binding credible proposal for the sale and purchase of the Regional Business. However, based on consistent feedback from bidders in the Sale Process, the Administrators identified a number of key challenges to be resolved for the Regional Business, which in the Administrators' view, need to be addressed in order to finalise and complete a sale. It is not necessary to set them out.

Arrangements with the Commonwealth 19 Since their appointment, the Administrators have had significant and ongoing engagement with the Commonwealth in relation to the administration of the Rex Companies and the ongoing trading of the Regional Business. 20 On 15 August 2024, the Administrators, Rex Holdings and Regional Express entered into a deed of guarantee pursuant to the terms of which the Commonwealth agreed to guarantee the Rex Companies' obligations to passengers who purchase flight tickets after the commencement of the administration. This provides assurance to customers that any entitlement to a refund for money used to purchase those tickets will be guaranteed by the Commonwealth (Commonwealth Guarantee). The Commonwealth Guarantee has been varied on two occasions including so as to extend its term. 21 On about 15 October 2024, the Administrators prepared a PowerPoint slide titled "Rex: The Way Forward Discussion Pack" for discussion purposes with the Commonwealth on the future of the Regional Business. The discussion pack contained a proposal for a financial restructure of the Rex Companies. 22 To maximise the likelihood of the Regional Business being sold as a going concern, the Administrators and the Commonwealth have agreed to implement the proposed financial restructure which, among other things, involves: (1) the Commonwealth funding the continued trade on of the Regional Business under administration; (2) the Administrators undertaking a business improvement process aimed at re-establishing the Regional Business' ability to operate its regional network in a financially sustainable manner (Business Improvement Strategy); and (3) following completion of the Business Improvement Strategy, the Administrators completing on the Sale Process for the sale of the Regional Business. 23 Mr Nikitins explained that the Business Improvement Strategy is intended to maximise the value of the Regional Business and the likelihood of the Administrators completing on the Sale Process. Mr Nikitins provided details of that strategy which is aimed at addressing the key challenges faced by the Regional Business. Given its understandably confidential nature, in light of the ongoing Sale Process, I do not propose to set it out here.

Funding 24 Following their appointment, the Administrators caused the Rex Companies to enter into a loan agreement (PAG Loan Agreement) and a general security deed with PAG, each dated 30 July 2024 (together, PAG Finance Agreements). The PAG Finance Agreements are supplementary to pre-existing secured financing arrangements between the Rex Group and PAG. On 6 August 2024, the Court made orders limiting the Administrators' personal liability for borrowings and associated liabilities under the PAG Finance Agreements: see Rex (No 1). 25 The PAG Finance Agreements provided a source of funding for the continued trading of a significant part of the Regional Business as a going concern while the Administrators have run the Sale Process. However, the Administrators have caused the Rex Companies to draw fully on the finance available under the PAG Finance Agreements and the committed component of the PAG Loan Agreement has reached the facility limit. 26 The Commonwealth has agreed to provide further funding to the Administrators and for that purpose the relevant parties intend to enter into the following documents: (1) a facility agreement dated 11 November 2024, between the Commonwealth, the Rex Companies (as obligors) and the Administrators (Commonwealth Loan Agreement); (2) a general security deed between each of the Rex Companies (as grantors) and the Commonwealth (as secured party); (3) an aircraft mortgage (specific security deed) between certain Rex Companies (as grantors) and the Commonwealth (as secured party); (4) real property mortgages to be entered into between certain Rex Companies (as mortgagors) and the Commonwealth (as mortgagee), together, Commonwealth Security Documents. 27 In addition, on 11 November 2024 PAG as existing lender, the Rex Companies, the Administrators and the Commonwealth entered into a standstill deed. I refer to the Commonwealth Security Documents (as defined above) and the standstill deed collectively as the Commonwealth Finance and Security Agreements. 28 While the terms of the Commonwealth Finance and Security Agreements are confidential, I note that pursuant to the Commonwealth Loan Agreement the Commonwealth has agreed to make a loan facility of $80 million available to the Rex Companies and has agreed that the Administrators' liability under the Commonwealth Finance and Security Agreements will be limited to their right of indemnity out of the Rex Companies' assets. 29 As part of the agreement reached with the Commonwealth in relation to the Commonwealth Finance and Security Agreements, and subject to the Administrators obtaining the orders to extend the convening period, the Commonwealth has also agreed to further extend the term of the Commonwealth Guarantee from 2 December 2024 to 30 June 2025. The purpose of this further extension is to provide customers of the Regional Business with continued confidence to purchase future tickets to take flights offered with Rex Holdings and Regional Express. 30 As explained by Mr Nikitins the Commonwealth agreed to provide funding to the Administrators because it has a strong desire for the business to continue to trade (and, particularly for the Regional Business continue to service customers) and accordingly, for it be sold as a going concern. That was reinforced by evidence relied on before me by the Commonwealth. 31 Mr Nikitins observed that without additional funding and an extension of the convening period, the Administrators considered that a sale of the Regional Business as a going concern would not be possible.

Reasons for seeking an extension of the convening period 32 The Administrators sought the extension of the convening period for the Rex Companies until 30 June 2025 to provide them with sufficient time in which to: (1) undertake the significant volume of work required as part of the Business Improvement Strategy; (2) enhance the assets of the Rex Companies; (3) engage with interested parties for the sale or restructure of the business to demonstrate to them a clear pathway to an enhanced version of the Regional Business with a particular focus on the profitability of the underlying business; and (4) progress the Sale Process with a view to completing a sale or restructure of the business in the interests of the relevant stakeholders (including creditors, employees, customers and persons with an ongoing commercial relationship with the Rex Companies). 33 The Administrators were of the opinion that it would be in the interests of the Rex Companies' creditors for the convening period for the second meetings to be further extended for the following reasons: (1) the Rex Companies are under insolvent external administration (with the directors having resolved that they were insolvent or likely to become insolvent at some future time), and the Administrators' own investigations suggest that the Rex Companies have a deficiency of assets to meet liabilities. Thus it is not a viable option to recommend to creditors that the administrations end and that any of the Rex Companies be returned to the directors and, because no sale has been achieved for the Regional Business and no DOCA proposal has yet been formulated and submitted to the Administrators, inevitably creditors would resolve that the Rex Companies be wound up; (2) an extension of the convening period together with funding provided by the Commonwealth pursuant to the Commonwealth Loan Agreement will enable the Administrators to undertake the Business Improvement Strategy, which the Administrators consider will resolve (or at least mitigate and address) a number of the concerns held by interested bidders in relation to the Regional Business, bring renewed interest in the Regional Business from bidders on the basis of improved profitability and value enhancement resulting from the proposed business improvements and therefore maximise the chance of offers being made for the Regional Business as a going concern by interested parties and maximise the value of those offers and enable the Administrators to finalise and complete the Sale Process; (3) if successful, the completion of the Sale Process following the Business Improvement Strategy is likely to produce a better price for the sale of the Regional Business than if there were to be no further extension of the convening period and the Rex Companies were to be placed into liquidation; and (4) based on the estimated returns modelled by the Administrators, creditors will receive a better return as a result of a sale of the Regional Business as a going concern following the Business Improvement Strategy as compared with an immediate liquidation. 34 In addition, Mr Nikitins points out that the continued trading of the Regional Business as a going concern during the administration period with a view to its sale (including possibly through the mechanism of a DOCA): (1) maximises the chances of the Regional Business continuing in existence, consistently with the objectives of the administration process; (2) maintains the employment of the current workforce of the Rex Companies (whereas the employment of many if not most of these employees would cease if the Rex Companies were immediately wound up); and (3) aligns with the objectives of the Commonwealth (and others) to have the Regional Business continue to provide flight services to regional and rural communities in Australia.

Effect of proposed extension on creditors and employees 35 The Administrators were of the view that the proposed extension of the convening period will not unduly prejudice the creditors of the Rex Companies, notwithstanding the continuation of the statutory moratorium provided by Pt 5.3A of the Corporations Act. 36 Mr Nikitins says in relation to unsecured creditors: (1) the Regional Business is either the only or the most important customer of many small to medium sized businesses which exist to support its operations. For example, ground handling agents in certain regional communities and engineering and maintenance service providers who rely on work from the Regional Business. The sale of the Regional Business as a going concern basis will maximise the prospects of ongoing trade creditor relationships being preserved going forward. If there were to be an immediate liquidation of the Rex Companies, it would bring an end to the trading relationships with these counterparties; (2) the Administrators are continuing to cause the Rex Companies to pay the landlords in relation to the various ongoing lease arrangements; and (3) there are presently in excess of 80,000 bookings by customers on flights, which would need to be cancelled if no further extension of the convening period was granted and the Rex Companies were wound up at the second meetings. 37 The Administrators were also of the view that the proposed extension of the convening period will not prejudice employees and, indeed, will be in their interests. Putting to one side Rex Airlines employees, as to whom see below, Mr Nikitins explained that: (1) the Administrators are continuing to cause the Rex Companies to pay the continuing employees of the Rex Companies in accordance with their employment terms given the continued trading of the business of the Rex Companies. The Administrators are confident that they will have sufficient cash on hand (including from the funding available from the Commonwealth) to continue to trade the business until the end of the proposed extension to the convening period; (2) there are currently 936 employees continuing to be employed by the Rex Companies. If there is a sale or recapitalisation of the Regional Business and assets of the Rex Companies, it is likely that the employment of as many remaining employees as possible will be preserved. This would provide continuity of employment for those employees and avoid the Rex Companies being liable to pay those employees their entitlements (and accordingly, reduce the creditor pool); and (3) if the convening periods were not extended and a liquidator appointed to the Rex Companies at the second meetings to be held by no later than early December 2024, only a small number of employees (less than 10%) would be required to support a controlled closure of the Regional Business and the remaining employees would lose their jobs (which would be particularly unfortunate given the lead up to the Christmas and New Year holiday period). 38 For those creditors (or potential creditors) of the Rex Companies who are employees, customers and trade and other suppliers, the ongoing operation of the Regional Business will see these parties continue to have employment, or otherwise continue to trade with, the Rex Companies. In the case of an immediate liquidation of the Rex Companies, it may take the Administrators a significant period of time (possibly longer than 12 months) to wind down the business and undertake forced asset sales across the group prior to making a distribution to creditors, if any. Mr Nikitins explained that this is in circumstances where the Regional Business operates the world's largest fleet of SAAB 340 aircraft, there is unlikely to be a market or interested counterparty for SAAB 340 aircraft in Australia and accordingly, any asset sales would be to overseas buyers.

Jet Midwest 39 One of the creditors of the Rex Companies is Jet Midwest, Inc. On 18 July 2024 Jet Midwest commenced a proceeding in the Supreme Court of New South Wales (Jet Midwest Proceeding) claiming that Rex Holdings is in possession of certain of its property, being four SAAB 340B aircraft or the component engines and parts of those aircraft, that was the subject of a contract entered into in late 2019. Jet Midwest alleges that Rex Holdings had taken possession of the aircraft without paying the purchase price owing to Jet Midwest in accordance with the contract. 40 On 6 September 2024 Jet Midwest filed a notice of motion in the Jet Midwest Proceeding seeking, among other things, leave to proceed with its claim pursuant to s 440D of the Corporations Act in circumstances where the proceeding was otherwise stayed by the statutory moratorium. On 25 October 2024, the Supreme Court made orders refusing Jet Midwest leave to proceed with its claim: see Jet Midwest, Inc. v Regional Express Holdings Limited trading as Regional Express Airlines (Administrators Appointed) [2024] NSWSC 1343. 41 The Administrators are investigating what property of Jet Midwest (Jet Midwest Property) is in the Rex Companies' possession. According to Mr Nikitins, this investigation has been extensive and the Administrators consider that it will be completed well in advance of any future sale of the Regional Business. The Administrators continue to keep Jet Midwest informed of the progress of the investigation into the Jet Midwest Property. In the event of a sale transaction with respect to the Regional Business, the Administrators intend to seek orders under s 442C(2) of the Corporations Act in relation to any Jet Midwest Property that has not already been made available for collection by Jet Midwest. 42 Mr Nikitins notes that the Administrators appreciate that any such order will only be made by the Court in circumstances where Jet Midwest was being adequately compensated for the sale of any Jet Midwest Property and, if an extension of the convening period is granted until 30 June 2025, Jet Midwest will not receive compensation from the sale of the Jet Midwest Property until after the Administrators have completed the Business Improvement Strategy and undertaken a successful sale of the business. However, Mr Nikitins also says that, in the event of an immediate liquidation of the Rex Companies, it is possible it may take an even longer period of time for the Administrators to make available for collection by Jet Midwest any Jet Midwest Property (that has not already been made available for collection by reason of it being installed on aircraft). This is because it may take the Administrators a significant period of time (possibly longer than 12 months) to wind down the business and undertake forced asset sales across the Rex Group. 43 If an extension of the convening period is granted but the Rex Companies ultimately end up in liquidation, Jet Midwest may be successful in seeking orders for delivery up of the Jet Midwest Property. Notwithstanding this, Mr Nikitins is of the opinion that the prospect of a sale of the Regional Business as a going concern, subject to the Administrators obtaining orders pursuant to s 442C of the Corporations Act in relation to any sale of the Jet Midwest Property, and the potential greater return to creditors of the Rex Companies as a whole, as well as all continuing employees of the Regional Business, far outweighs any prejudice or delay which Jet Midwest may suffer if that scenario were to eventuate. 44 Finally, I note in this regard that Jet Midwest was given notice of the Administrators' application to extend the convening period. However, there was no appearance on its behalf at the hearing.

Rex Airlines 45 Prior to the appointment of the Administrators, Rex Airlines was primarily responsible for operating the domestic trunk route services. It also held the leases for the Boeing 737 aircraft used by the Rex Group and employed staff required to operate the domestic metropolitan trunk route service that operated flights between Sydney, Melbourne and Brisbane. 46 As set out above, following their appointment, the Administrators caused Rex Airlines to cease its business operations (as they were loss making). The only material assets identified as belonging to Rex Airlines are a 737 engine, rotables, tooling and spare parts (RAL Assets). The RAL Assets are subject to the security held by PAG and the Administrators consider these assets to have a value of approximately $17.7 million. In contrast, the Administrators are aware of creditor claims against Rex Airlines in excess of $270 million, including amounts owed by Rex Airlines to PAG as a guarantor under the PAG Finance Agreements. 47 In those circumstances, Mr Nikitins explains that the Administrators consider it almost inevitable that creditors will resolve to wind up Rex Airlines at the second meeting of creditors of Rex Airlines. Notwithstanding that the Administrators sought an extension of the convening period for Rex Airlines because: (1) if an extension of the convening period for Rex Airlines is not obtained, the consequences for other Rex Companies in the group that are not under external administration could be material. Relevantly, many of the companies in the Rex Group, including Rex Airlines, are party to a Deed of Cross Guarantee which imposes liability on those other companies for Rex Airline's debts if and when Rex Airlines is wound up. Accordingly, if Rex Airlines went into liquidation prior to the completion of the Pel-Air sale, the Administrators consider this would put the sale at risk of not completing because the companies that comprise and operate the Pel-Air business are parties to the Deed of Cross Guarantee. This will impact the recoveries available to creditors across the broader Rex Group; (2) the Rex Group continues to rely on certain premises leased by Rex Airlines which are used in the ongoing operations of the Regional Business, including but not limited to, offices, warehouses and workshops located at several major airports which remain critical to operations of the Regional Business. The Administrators are continuing to make payments under the lease arrangements. The protections afforded to a company in administration by s 440B of the Corporations Act will assist the Administrators in maximising the amounts realised from the RAL Assets; and (3) Rex Airlines is presently a party to a number of merchant agreements, which are both for its and other companies in the Rex Group's benefit. The Administrators are presently working towards having these contracts novated to Rex Holdings, a process which is not expected to be completed prior to the second meeting of Rex Airlines unless the convening period is extended. 48 Mr Nikitins says that, in circumstances where the extension of the convening period for Rex Airlines has been sought for these limited reasons, the Administrators intend to convene the second meeting of Rex Airlines at the first opportunity following the novation of the relevant Rex Airlines contracts and completion of the Pel-Air sale.

Employees of Rex Airlines 49 The Administrators terminated the employment of 344 Rex Airlines employees shortly after their appointment (RAL Employees). This was because they ceased operating that part of the business operations of the Rex Group. The employee entitlements owing to these employees are estimated to total about $11.1 million. 50 On 22 October 2024 the Administrators wrote to the Department of Employment and Workplace Relations to request that the Minister for Employment and Workforce Relations make a declaration pursuant to s 49(1) of the Fair Entitlements Guarantee Act 2012 (Cth) (FEG Act) in respect of Rex Airlines. The basis for this request is to avoid RAL Employees needing to wait until Rex Airlines is in liquidation to access their entitlements, in circumstances where the Administrators are seeking an extension of the convening period for Rex Airlines. 51 On 8 November 2024, the Minister made the declaration requested by the Administrators. The declaration was registered on 12 November 2024. Accordingly, no prejudice will be suffered by employee creditors of Rex Airlines as a consequence of an extension of the convening period to 30 June 2025. Those employees will have access to the scheme under the FEG Act (FEG Scheme) for payment of their entitlements (up to the maximum amount permitted by the FEG Scheme).

Second extension of the convening period 52 As set out above, the Administrators seek an order further extending the convening period for the administrations of each of the Rex Companies to 30 June 2025 and an associated order permitting the second meetings to be convened at any point during that period. 53 The principles to be applied in considering whether to extend a convening period were summarised by the plaintiffs in their written submissions. 54 It is well settled that s 477A of the Corporations Act empowers the Court to extend the convening period for the second meeting of creditors so that Pt 5.3A of the Corporations Act is to operate in relation to the companies under administration such that the convening period is extended up to and including the dates specified: see Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182 at [12]-[13]; Hutton, in the matter of Triple MMM Holdings Pty Ltd (Administrators Appointed) [2023] FCA 124 at [32]; Sparks, in the matter of IG Energy Holdings (Australia) Pty Ltd (No 3) [2023] FCA 1002 at [23]-[28]. 55 The principles that apply when considering a further extension of the convening period are the same as those that apply for any extension of that period: see Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 4) [2020] FCA 671 at [25]; Virgin (No 7) at [14]; MMM Holdings at [33]. Those principles were summarised in Rex (No 2) at [33]-[40]. It is not necessary to set them out. However, in the circumstances of the application that was before me, as the plaintiffs submit, the following further matters identified by Halley J in Strawbridge, in the matter of Sara Lee Holdings Pty Ltd (administrators appointed) [2023] FCA 1408 at [16] may be added: (a) the categories of cases in which an extension may be granted include, where the size and scope of the business in administration is substantial, where the extension will allow a sale of the business as a going concern, and more generally, where additional time is likely to enhance the return for unsecured creditors: Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited (Administrator Appointed) [2019] FCA 11 at [3]-[8] (Thawley J); In the matter of Kavia Holdings Pty Limited (administrators appointed) (receivers and managers appointed) [2013] NSWSC 737 at [15] (Black J); Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18] (Lindgren J); Metha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 at [20] (Jacobson J); (b) an extension of the administration period to facilitate either or both the sale of the business of the company as a going concern, or the progression and assessment of a deed of company arrangement (DOCA) proposal, to provide a better return to creditors than a winding up, are well-recognised examples of situations where the court has extended the convening period; In the matter of Belmont Sportsmans Club Co-Operative Limited (Administrators Appointed) [2015] NSWSC 543 at [9] (Black J); In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs apptd) [2009] NSWSC 585 at [13] (Austin J); and (c) the administrators' own opinion as to the need for an extension will be given weight in applications for extensions of the convening period for the second meeting of creditors: Bumbak (Administrator), in the matter of Duro Felguera Australia Pty Limited (Administrators Appointed) [2020] FCA 422 at [32] (Gleeson J); Jahani, in the matter of Northern Energy Corporation Ltd (Administrators Appointed) (No 2) [2019] FCA 382 at [67] (Farrell J); Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) v Madden (No 4) (2012) ACSR 255; [2012] FCA 1491 at [26] (Logan J). 56 The plaintiffs sought an extension of the convening period until 30 June 2025, that is a period of seven months. For the following reasons I was satisfied that such an order should be made. 57 First, based on the evidence before me, it was apparent it is presently unlikely that the Administrators will be able to sell the Regional Business. Thus the only viable option for creditors, in the absence of granting the extension sought, was a winding of the Rex Companies. 58 Secondly, the purpose of seeking the extension of the convening period was to maintain the viability of the Regional Business and to facilitate the sale of as much as possible of the business of the Rex Companies as a going concern. Based on the evidence before me that objective, if achieved, will maximise the value of the Rex Companies' assets which, in turn, is in the interests of employees, creditors and other stakeholders. As the Administrators pointed out, the extension of the convening period will permit the Administrators, with the benefit of the funding to be provided by the Commonwealth, to undertake the Business Improvement Strategy which they anticipate will address some of the concerns expressed by potential purchasers of the Regional Business, lead to new or renewed interests in the Regional Business from potential purchasers and thus maximise the chance of offers being made for the Regional Business as a going concern. 59 This is in line with the objectives of Pt 5.3A of the Corporations Act as it maximises the prospect of the Rex Companies, or as much as possible of their business, continuing in existence: see Algeri, in the matter of WBHO Australia Pty Ltd (Administrators appointed) (No 2) [2022] FCA 234 at [16]. 60 Thirdly, based on modelling undertaken by the Administrators under different scenarios, including an immediate liquidation compared to a sale or restructure of the business of the Rex Companies following the extension of the convening period, it is apparent that: (1) a sale following the Business Improvement Strategy is likely to produce a better price for the Regional Business than if there was no further extension of the convening period and the Rex Companies were placed into liquidation; and (2) creditors are likely to receive a better return as a result of a sale of the Regional Business as a going concern following the Business Improvement Strategy as compared with an immediate liquidation. 61 Fourthly, an extension of the convening period will be of benefit to current employees. In the event that the extension was not granted the likely outcome would be that the Rex Companies would go into immediate liquidation and it would follow that most of the employees would be terminated thus increasing the creditor pool and leaving people without work just prior to the end of year holiday season. If on the other hand, the Sale Process is successful it is possible, if not likely, that much of the workforce will be retained. Employees whose employment has been terminated since the appointment of the Administrators will either have their entitlements paid out by Rex Holdings very shortly, likely within the coming days, or in the case of former employees of Rex Airlines, by the Commonwealth pursuant to the FEG Scheme. 62 Fifthly, an extension of the convening period maximises the prospect of preserving ongoing trade creditor relationships, as trading will continue, and benefits those customers with future flight bookings. Their flights do not now need to be cancelled. Further, no member of the Committee of Inspection for the Rex Companies objected to the proposed extension and no creditor appeared at the hearing of the application. 63 Lastly, the only creditor who might potentially have been prejudiced by the extension of the convening period is Jet Midwest, given the history set out at [39]-[43] above. The Administrators accept that they cannot sell any of Jet Midwest's property without its consent or leave of the Court and that an extension of the convening period will delay timing of when Jet Midwest will receive compensation for the sale of its property. That said if the convening period was not extended, Jet Midwest may be faced with an even longer delay in receiving the return of its property. In any event, Jet Midwest was given notice of the application and did not appear to oppose it and I was satisfied that any prejudice it may suffer was outweighed by the potential benefits to all other stakeholders in granting the extension sought. 64 I was also satisfied that the period of the extension, being seven months, was appropriate. While of itself it may be considered a relatively long period, when considered in the context of the Business Improvement Strategy and Sale Process, and the benefits those undertakings might achieve for creditors, it is not unduly lengthy.

Limitation of the Administrators' liability 65 The Administrators also sought, and I made, an order limiting their liability under the Commonwealth Finance and Security Agreements.

Statutory framework and legal principles 66 Section 443A of the Corporations Act relevantly provides: (1) The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for: … (d) the repayment of money borrowed; or (e) interest in respect of money borrowed; or (f) borrowing costs. (2) Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator's rights against the company or anyone else. 67 Notwithstanding s 443A, s 443D of the Corporations Act gives the administrator of a company a right of indemnity. It provides: The administrator of a company under administration is entitled to be indemnified out of the company's property (other than any PPSA retention of title property subject to a PPSA security interest that is perfected within the meaning of the Personal Property Securities Act 2009) for: (a) debts for which the administrator is liable under Subdivision A or a remittance provision as defined in subsection 443BA(2); and (aa) any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the administrator in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator; and (b) the remuneration to which he or she is entitled under Division 60 of Schedule 2 (external administrator's remuneration). 68 Subject to s 556 of the Corporations Act, s 443E of the Corporations Act gives the right indemnity in s 443D priority as set out therein, and s 443F gives the administrator a lien over the company's property to secure the right of indemnity under s 443D. 69 As to the power to make the order sought, in Rex (No 1) Yates J said at [81]: It is not in doubt that the power under s 447A of the Corporations Act extends to making orders limiting an administrator's personal liability under s 443A(1) of the Corporations Act, particularly in relation to funding arrangements to facilitate trading in the administration period. Such orders are commonplace: Re Mentha (in their capacities as joint and several administrators of the Griffin Coal Mining Company Pty Ltd) (administrators appointed) [2010] FCA 1469; 82 ACSR 142 at [29] - [31]; Re Nexus Energy Ltd [2014] NSWSC 1041 at [14]; Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 at [90]; Hill, in the matter of Ovato Limited (administrators appointed) [2022] FCA 903 at [14]; Lord, in the matter of Invigor Group Limited (administrators appointed) [2022] FCA 1064 at [24]; Kelly (administrator), in the matter of Lutum Holdings Pty Ltd (administrators appointed) [2024] FCA 554 at [42]-[43]. 70 As Derrington J explained in Park, in the matter of IG Power (Callide) Ltd (Administrators Appointed) (No 2) [2024] FCA 1244 at [15]: It is now well established that s 447A of the Corporations Act empowers the Court in appropriate cases to modify the operation of Pt 5.3A of the Corporations Act so as to exclude or limit an administrator's personal liability for any debts incurred: see IG Power (Callide) [20]. The foundation for the making of such an order is that administrators should not be expected to incur substantial personal liabilities or, at least, the risk of them, in the undertaking of work for the ultimate benefit of creditors: Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) [2022] FCA 1506 [47] (Murray & Roberts); In the matter of Renex Holdings (Dandenong) 1 Pty Ltd (administrators appointed) [2015] NSWSC 2003 [13]; Preston, in the matter of Hughes Drilling Limited (Administrators Appointed) [2016] FCA 1175 [18]. The making of such orders allows an administrator to continue the commercial operations of the company in question, uninfluenced by possible concerns of personal liability. This necessarily allows them to focus on the best outcome for the company's creditors: Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 [29]. 71 In relation to orders limiting the liability of administrators in the context of funding obtained by the company under administration to facilitate trading of the company's business during the administration period, in Hill, in the matter of Ovato Limited (Administrators Appointed) [2022] FCA 903 Stewart J relevantly observed at [14]: In order to avoid the consequence of s 443A, when a company in administration borrows funds from a third party financier to help fund the company's ongoing trade during administration, administrators commonly seek orders limiting their personal liability.

Consideration 72 As set out above I was satisfied that the orders sought by the Administrators limiting their liability with respect to the obligations under the Commonwealth Finance and Security Agreements should be made. That was for the reasons which follow. 73 As the Administrators submitted, they have reasonably formed the view that the ongoing trade of the Regional Business, with a view to the implementation of the Business Improvement Strategy and the re-enlivening of the Sale Process, is in the best interests of creditors. For that purpose they will be causing the Rex Companies to incur substantial indebtedness under the Commonwealth Finance and Security Agreements. I accepted that the Administrators should not be expected to incur (or risk incurring) substantial personal liabilities in undertaking work for the ultimate benefit of creditors and other stakeholders of the companies under administration. 74 The only entity could be prejudiced by the limitation of the Administrators' personal liability is the Commonwealth and it agreed to the limitation of liability sought by the Administrators and appeared on the application as an interested person and supported it. Relatedly, the orders limiting the Administrators' liability will not prejudice any of the unsecured creditors of the Rex Companies. They have no real interest in a limitation of the Administrators' personal liability for indebtedness of this kind: Rex (No 2) at [65]. Despite that, the interests of creditors are preserved by reason of the order made permitting creditors to apply to vary or discharge the order: Rex (No 2) at [67].

Entry into the agreements 75 The third category of relief sought by the Administrators was an order that they are justified in entering into and performing, and causing the Rex Companies to enter into and perform, the Commonwealth Finance and Security Agreements. Once again, I was satisfied that such an order could be made. 76 In Re RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859 in relation to the entitlement of administrators to seek directions when causing companies under administration to borrow money in order to continue to trade the business with a view to the sale of those companies as a going concern Black J said at [14]: The Administrators also seek a direction under s 90-15 of the Insolvency Practice Schedule (Corporations) that they are justified in procuring the relevant Companies, being some but not all of the Companies, to borrow loan funds not exceeding the specified amount from CBA. I recognise that that decision has a commercial character, at least in substantial part, but it also seems to me that it involves a balancing of complex interests, where there are advantages and disadvantages to that course, as recognised in Mr Preston's affidavit evidence. The Court has been prepared to give directions of this kind, where the decision is a complex one, and where it has to be made, as here, under circumstances of time pressure, in respect of a very large corporate group, and by balancing different interests. The Court's preparedness to grant such a direction in those circumstances reflects the intrinsic unfairness of leaving a voluntary administrator to be at risk of liability, in respect of a complex decision of that kind, where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies. I am satisfied that such a direction may properly be made in these circumstances, where Mr Preston's affidavit identifies the relevant considerations in detail and indicates that the Administrators have had regard to the balancing of those considerations in forming the view they have formed. 77 In Sparks, in the matter of IG Energy Holdings (Australia) Pty Ltd [2023] FCA 538; (2023) 168 ACSR 104, Halley J said at [22]-[24]: 22 Nevertheless, a Court's preparedness to issue a judicial direction will depend on the circumstances of each request by the liquidators or administrators. Courts have previously issued such a direction where a decision, substantially commercial in character, is complex, made under time pressure and involved the balancing of competing interests in respect of a large corporate group: Re RCR Tomlinson Ltd (admins apptd) [2018] NSWSC 1859 at [14] (RCR) (Black J). This reflects the "intrinsic unfairness" of exposing an administrator to risk of personal liability where the decision is complex and "where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies": RCR at [14]. 23 In the course of the hearing on 25 May 2023, I asked senior counsel for the plaintiffs whether he was aware of any recent authorities in which a Court had declined to issue a direction under s 90-15(1) of the IPS on the basis that the request for such advice related solely to a commercial decision. The plaintiffs advised in their supplementary written submission, that their legal representatives had conducted a review of "126 cases delivered since the commencement of s 90-15" and that they were not aware of any authority "in which an insolvency practitioner's application for directions has been refused solely because it related to a commercial decision". 24 The function of such a direction is not to determine rights and liabilities arising out of a particular transaction. It is to provide liquidators and administrators, having made a full and fair disclosure of all relevant facts to the Court, with "protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision of undertaking the conduct": Ansett at [44] (Goldberg J); see also Re Union Standard at [7] (Stewart J). 78 In the circumstances of this case and for the reasons submitted by the Administrators, I was satisfied that the judicial advice sought by the Administrators should be given. That is because: (1) to do so advances the objects of Pt 5.3A of the Corporations Act. This is because the arrangements with the Commonwealth enhance the chances of preserving and achieving a sale of the Regional Business, while the Rex Companies continue to trade in the interim. That course will be beneficial for employees and likely result in a better return for the creditors than if the companies were to be wound up immediately; (2) the provision of the direction sought is a condition precedent to the Commonwealth Finance and Security Agreements. Thus, the orders were necessary to access the relevant funding which I was satisfied was ultimately to the benefit of creditors and other stakeholders and would further the objectives of Pt 5.3A of the Corporations Act; (3) having closely considered the matter and the alternatives, the Administrators have expressed their opinion that entering into the Commonwealth Finance and Security Agreements is justified and in the interest of creditors of the Rex Companies; and (4) it is appropriate in the circumstances that the Court should relieve the Administrators of the unfairness of leaving them at risk of liability with respect to a complex decision to enter into the Commonwealth Finance and Security Agreements and borrow funds to recapitalise the Rex Companies in circumstances where the entry into of those agreements and the incurring of liability under them gives rise to questions of reasonableness because of the need for immediate funding to provide capital investment in the assets of the Rex Companies and improve the chances of a sale of the Regional Business, the quantum to be advanced and the complex considerations involved in entering into those arrangements (including the impact of the return to creditors) in the context of a very large corporate group.

Conclusion 79 For those reason I made the orders sought by the plaintiffs in their interlocutory process. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.

SCHEDULE OF PARTIES NSD 1050 of 2024 Plaintiffs Third Plaintiff: AIR PARTNERS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 065 221 356) Fourth Plaintiff: REX INVESTMENT HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 101 317 677) Fifth Plaintiff: REGIONAL EXPRESS PTY LTD (ADMINISTRATORS APPOINTED (ACN 101 325 642) Sixth Plaintiff: REX AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) (ACN 642 400 048)