REASONS FOR JUDGMENT
1 This is an application under s 439A(6) of the Corporations Act 2001 (Cth) ("the Act") to extend the convening period within which the plaintiffs must convene a second meeting of creditors of Tallwood Nominees Pty Ltd (Administrators Appointed) ("Tallwood") and MacSea Nominees Pty Ltd (Administrators Appointed) ("MacSea") (together "the Companies"). Both of those companies are in voluntary administration.
2 The plaintiffs, Messrs Lord, Robinson and Herbert, were appointed administrators of the companies on 4 August 2011 ("the Administrators"). The effect of s 439A(5) of the Act is that the Administrators would be required to convene the second meeting of creditors of the company by 1 September 2011. The administrators seek an order under s 439A(6) extending the convening period for a period of up to three months, until 1 December 2011.
3 The companies are special purpose vehicles which are a joint venture for the development of land in an area known as Port Geographe in East Busselton, Western Australia ("the Project"). Busselton is situated at the southern tip of Western Australia and is not far from the Margaret River. The Project involves a phased development of land whereby land was to be subdivided and developed to include a boat harbour, marina, village centre and a residential canal estate. These buildings were to form phase 1 of the Project. Phase 2 of the Project was to be a dry land subdivision and conservation area. I have in evidence before me a number of plans and photographs of the site which are contained in Annexure 13 of a principal affidavit of Mr Brett Stephen Lord, sworn 29 August 2011.
4 The Project was initially undertaken by Tallwood and its history dates back to 1991. However there have been a number of delays in carrying out the project. As a result of various transport, waterway and planning issues involved in the project, the Companies have entered into contractual arrangements with the Shire of Busselton and the Minister for Transport of the Western Australian State Government. The works in respect of phase 2 of the Project were stalled in 2000. However, the Administrators do not yet know all of the reasons why the Project was stalled some 11 years ago.
5 In 2004, the Project was resuscitated when MacSea was introduced as a joint venture partner of Tallwood. Since 2007, a number of issues have arisen to further stall the Project. The issues have intersected with funding issues to create a significant degree of complexity in the administration.
6 It appears that, since 2007, the Minister for Transport has refused to release certificates of title to the new subdivision and this has prevented settlement of the remainder of the pre-sales that were undertaken for stages 1 to 6 of the Project. There was litigation taken as a result of the Minister's decision, and the matter has been before the Administrative Appeals Tribunal on four occasions. The Minister's decision was overturned on each occasion by the Tribunal. The matter was remitted to the Minister. The Minister's reasons for refusing to release the certificates of title are said to be based upon breaches by the Companies of the development deed in respect of a number of significant matters, in particular, the water quality in the canals, seaweed accumulation, arrears of council rates, and arrears of land tax.
7 Mr Lord's affidavit describes the steps that have been taken and which are still being taken to address the issues of water quality and seaweed accumulation. Both the Shire of Busselton and the Minister for Transport have indicated a willingness to provide funding to resolve these issues, subject to the resolution of other issues relating to the Project.
8 The principles which have been applied by the courts in relation to the exercise of the power to extend the convening period were usefully summarised last year in a decision of McKerracher J in Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (Administrators Appointed) (ACN 008 667 285) [2010] FCA 30 at [15]ff ("Mentha"). Many of the principles are drawn from a decision of Austin J in Re Riviera Group Pty Ltd (2009) 72 ACSR 352 ("Re Riviera Group"), in which his Honour set out in some detail the factors to be taken into account in such an application as they have been stated in the many authorities which have dealt with this provision. I do not think it is necessary, on the present application, to repeat or analyse the principles which are collected by McKerracher J in Mentha.
9 What seems to me to be important is that the guiding principle is that which was stated by Barrett J in Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] ("Re Diamond Press"). Barrett J observed that in exercising the jurisdiction to make orders extending the convening period, the Court should have regard to and balance the interests of creditors in a speedy administration and the need to allow sufficient time to administrators to carry out their functions properly so as to maximise the benefit to creditors through a proper and full administration.
10 In particular, it is necessary for the administrators to have sufficient time to investigate the affairs of the companies under administration, and to provide sensible information and advice to the creditors: This was noted by Gyles J in Hayes, in the matter of Estate Property Group Limited (Administrators Appointed) [2007] FCA 935 at [1]. As was observed by Austin J in Re Riviera Group at [15]ff, the recent authorities indicate that the approach which was initially thought to govern such extensions, namely that the Courts ought to lean against granting an extension, is no longer a part of the discretion. What is required is the striking of the appropriate balance, to which Barrett J referred in Re Diamond Press.
11 Accordingly, there cannot be any predisposition in favour of a speedy administration, because that would skew the balancing process: see Re Riviera Group at [16]. What is required by the authorities is that the administrators must prove a substantial ground for the exercise of the court's jurisdiction to grant the extension.
12 In Re Riviera Group at [13], Austin J set out a lengthy list of cases in which extensions have been granted. Importantly, a factor which guides the exercise of the discretion is the degree of complexity of the administration. Austin J said at [17] that this is the key to understanding the court's current approach to such applications. In the present case the administration involves complex issues related to the funding of the Project, the legal rights of the parties being governed by a number of complex commercial contracts, and complex planning and engineering issues.
13 A full understanding of all of the issues requires an investigation of the Project over at least the last 10 years, and perhaps as far back as 1991, in order to properly advise the creditors as to their best interests and as to the possibility of obtaining the maximum benefit from the administration. The Administrators will need to conduct negotiations with the secured creditor of the Project, which is the St George Bank Limited, the Shire of Busselton, and the Minister. The latter negotiations will be needed in order to determine potential government and private funding and the resolution of planning, water quality and seaweed accumulation issues.
14 At the present time, the Administrators are not in a position to properly advise the creditors on the potential for entering into a deed of company arrangement or, indeed, for the best options to maximise the return to creditors. Extensive further discussions will therefore need to be conducted, not only with the entities or persons mentioned above, but with all of the key stakeholders in the project before the Administrators can be in a position to properly assess the best options available to the creditors. The extension of the convening period sought in the present application is for three months. In my opinion, the matters referred in Mr Lord's affidavit are sufficient to satisfy me that this is an appropriate period.
15 It is not unusual for extensions to be granted in the order of two and a half to three months. There are a large number of authorities which support this proposition. In Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 at [26] ("Hans Continental"), I observed that the authorities indicate that an extension of two and a half to three months is not unusual where there was a relatively complex sale process. There are a large number of authorities which support that proposition. They are collected in the helpful written submissions provided by counsel. I do not need to refer to all of the authorities. It is sufficient to say that in Hans Continental, I granted an extension of three months, but there are other examples of extensions for up to six months: see, for example, Re ABC Learning Centres (No 7) (2009) 71 ACSR 560.
16 In my opinion, having regard to the complexities of the issues involved and the need for extensive negotiations which are likely to be tripartite negotiations with the local and state government and the secured creditor, three months is a reasonable period of time for an extension of the convening period.
17 I have taken into account in the exercise of my discretion as an important factor the support given by all key stakeholders in the project to the extension of three months which is sought by the administrators. St George Bank also supports that extension of time.
18 It is also important to bear in mind that the companies are not trading companies and do not have any employees. The value of the Project is the sole asset of the companies. The Administrators do not expect to incur any further debts during the course of the voluntary administration, of the kind which will ordinarily be incurred by trading the business during the period of administration. It follows from what I have said that there will not be any prejudice to the usual classes of creditors, such as continuing employees and creditors providing services during the course of the administration.
19 Upon the basis of the information known to the Administrators at the present time, St George Bank would be likely to be the only creditor to obtain the value of the assets of the companies if the Companies were to enter liquidation. The only possibility for the unsecured creditors to obtain any return would depend upon the ability of the administrators to sell the assets of the project, or to put in place a Deed of Company Arrangement. The evidence indicates that the only possible entity to be prejudiced by an extension of time is St George Bank. Importantly, that entity supports the extension of time and this is therefore another matter which I take into account in the exercise of my discretion.
20 In summary, it seems to me that there is no commercial risk of any significance nor any detriment to third parties, creditors or potential creditors occasioned by granting the extension which is sought. Moreover, the Project is of significant public interest in particular to the Shire of Busselton and the Administrators seek sufficient time to give appropriate consideration to the restructure of the project and its future continuation if that should prove to be in the best interests of creditors.
21 The Administrators seek confidentiality orders under s 50 of the Federal Court of Australia Act 1976 (Cth) in respect of certain parts of the affidavit of Mr Lord of 29 August 2011. It is clear enough that I have power to make such an order if I am satisfied that it would be inimical to the orderly conduct of commerce and detrimental to the commercial interests involved in the administration to make the information public. The material in Mr Lord's affidavit in respect of which protection is sought deals mainly with monetary amounts and some information which I am satisfied to be sufficiently commercially sensitive as to make it public may have a potential adverse affect on the value of the assets of the companies. The orders for confidentiality will therefore have the effect of protecting the value of the assets of the Companies and prevent potential purchasers obtaining commercial advantage which they may seek to use to the disadvantage of the company in future negotiations.
22 The order which I propose to make is that the affidavit of Mr Lord sworn 29 August 2011 be placed in a sealed envelope and that no part of the affidavit be inspected without the leave of the court. The order is in the terms made in the matter of Haslam v Money for Living (Aust) Pty Ltd (Administrators Appointed) (ACN 107 611 218) [2007] FCA 897. The order will not prevent interested members of the public from having access to the evidence on which I propose to make the orders for an extension because a redacted copy of the affidavit of 29 August 2011 will be placed on the court file for inspection.
23 For these reasons I will make orders in terms of the draft orders handed to me by counsel.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.