Hancock, in the matter of St Hilliers Construction Pty Limited (administrators appointed) [2012] FCA 602

REASONS FOR JUDGMENT 1 This is an application under s 439A(6) of the Corporations Act 2001 (Cth) to extend the period for convening the second meeting of creditors of St Hilliers Construction Pty Limited (the company). The effect of the order which is sought is that the convening period commence on 16 May 2012 and end on 8 August 2012. 2 The administrators were appointed on 15 March 2012. The first meeting of creditors was held on 17 May 2012, and if the time for convening the meeting were not extended, the second meeting of creditors would be required to be convened no later than 13 June 2012. 3 Prior to the date when it entered voluntary administration, the company carried on the business of a large construction company. It provided project management and design and construction services to deliver civil infrastructure projects of a very substantial nature. At the time when the administrators were appointed the company had 17 unfinished building projects in New South Wales, the Australian Capital Territory, Victoria, and Queensland. The projects included a major contract for the construction of a prison in Ararat, Victoria. 4 The subsidiary of the company which conducted the Ararat project was placed into liquidation on 15 May 2012, and it was the collapse of that project which resulted in the appointment of the administrators to the company earlier this year. As a result of the appointment of administrators, five of the 17 projects were terminated by the other party to the contract, but importantly, 12 of the projects remain on foot. These projects are apparently in various states of progress at the present time. 5 The company has very substantial creditors in the order of $117 million. The creditors include 219 employees with claims totalling in excess of $4 million; there are also 1,119 unsecured creditors with claims of nearly $87 million; and a proof of debt has been lodged by a contingent creditor in an amount in excess of $15 million. 6 The 12 projects which remain on foot are estimated to have a value of approximately $217 million. The administrators are of the view that they will be able to enter into negotiations for the sale of the company's business as a going concern, and that it is in the interest of the creditors as a whole for the convening period to be extended in order for that process to take place. 7 The administrators hold the view that if an extension of the convening period is not granted and the second meeting of creditors is held on the due date, it is likely that at that meeting the company will be placed into liquidation. The effect of this would be that the contracts that are presently on foot would be terminated, leaving little or no prospect of a sale of the business, and no prospect of the proposal of a deed of company arrangement. 8 No deed of company arrangement is presently proposed, but the administrators are of the view that if they are able to successfully negotiate with prospective investors or purchasers, such a deed would be a real possibility. The administrators need time to investigate the contracts which are on foot to be able to obtain a more accurate assessment of the value of the projects, and determine the possible sale price to be negotiated with prospective purchasers. This process is not likely to be an easy or quick one, and as I have said, it could not be done if the company were placed into liquidation because it is likely the contracts would be terminated. 9 At the first meeting of creditors, a committee of creditors was appointed. The committee initially comprised seven creditors but one member resigned, leaving six creditors. Notice of the present application has been given to the six members of the committee; four have indicated their support, one has indicated that it neither consents nor opposes the extension, the other member of the committee has not yet replied. The net effect of this is that a majority of the committee supports the proposed extension and there is no opposition to it. There are no secured creditors of the company and this is therefore not a case in which the view of secured creditors needs to be taken into account. 10 The only possible prejudice occasioned by the extension is one which arises from the termination of the five contracts which I have referred to. As a result of that, 97 employees who were working on those projects were terminated. The extension of the convening period will delay the employees' entitlements to make a claim on GEERS. However, I am satisfied, for the reasons set out in the affidavit filed by Mr Hancock in support of the application and what was said to me this afternoon by Mr Aldridge, that it is appropriate to balance that prejudice against the interests of the other employees and the creditors. The balance, in my opinion, weighs in favour of the interests of those other persons. 11 The principles which apply to applications of this type are now well settled. They were set out in detail by McKerracher J in Mentha, in the Matter of Griffin Coal Mining Company Pty Limited (administrator appointed) (ACN 008 667 285) [2010] FCA 30 at [15] to [22]. Yates J also summarised the principles fairly recently in Taylor, in the matter of Healthzone Limited (Receivers and Managers Appointed) (Administrators Appointed) [2011] FCA 1455 at [26] to [27]. 12 It seems to me that, consistent with the guiding principle that was stated in an earlier authority, which is that of Barrett J in Diamond Press Australia Pty Limited [2001] NSWSC 313 at [10], that the appropriate balance to strike between the expectation of a relatively speedy administration and the requirement that undue speed should not prejudice sensible and constructive actions towards maximising the return to creditors weighs in favour of the extension which is sought. 13 The extension of the convening period of eight weeks is within the range which is commonly granted in applications of this type. It is justified on the evidence set out in Mr Hancock's affidavit. 14 For these reasons, I will make orders in accordance with the draft order handed to me by Mr Aldridge, subject only to the amendments which were discussed with him during this afternoon's application. Order 2 provides for a confidentiality order under s 50 of the Federal Court of Australia Act 2011 (Cth). The order is of a limited nature, and I am satisfied that it is appropriate to make an order. If it were not made, the content of those paragraphs could prejudice the ability of the administrators to advance the negotiations with prospective purchasers. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.