Krejci v National Buildplan Group Pty Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 739 of 2013

IN THE MATTER OF NATIONAL BUILDPLAN GROUP PTY LIMITED (ADMINISTRATORS APPOINTED) BETWEEN: PETER PAUL KREJCI AND MARTIN JOHN GREEN EACH IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF NATIONAL BUILDPLAN GROUP PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 091 716 504

AND: NATIONAL BUILDPLAN GROUP PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 091 716 504

JUDGE: FARRELL J DATE: 3 MAY 2013 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The originating process in these proceedings seeks orders under s 439A(6) and s 447A(1) of the Corporations Act 2001 (Cth) (the Act) extending the period for convening the second meeting of the defendant, National Buildplan Group Pty Limited (Administrators Appointed) (Company), to 5 June 2013. The plaintiffs are the joint and several administrators of the Company who were appointed on 8 April 2013, and the convening period ends on 6 May 2013 unless extended. 2 Mr Krejci, one of the joint and several administrators, swore an affidavit in support of the originating process on 2 May 2013 and that affidavit was read in these proceedings. The first meeting of creditors was held on 18 April 2013 and the minutes of that meeting are exhibited to Mr Krejci's affidavit. A committee of creditors was appointed at the meeting, comprising 10 members including a representative of the employees of the Company. The creditor's committee and the solicitors for the secured creditor, Australia and New Zealand Banking Group Limited (ANZ) were notified of this application on 1 May 2013. 3 Counsel for plaintiff advised the Court that the solicitors for ANZ have indicated that it has no objection to the proposed extension of the convening period. One of the members of the committee of creditors, Mr Moran of Ashmore Plumbing Pty Limited, has indicated that he objects to the extension of the convening period on the basis that he considers that the creditors should meet on 14 May 2013 as previously indicated. His reasons are that over a month has passed since the administrators were appointed and he feels that the creditors need to have an update. I will deal with that objection later.

Relevant principles 4 The relevant principles for applications under s 439A(6) of the Act are well settled. The Court must balance the interests of creditors in a speedy administration and the need to allow sufficient time for the administrators to carry out their functions and to maximise the benefit to creditors through proper administration in accordance with the purposes of Part 5.3A of the Act as set out in s 435A. For the administrators to perform their tasks they need sufficient time to investigate the company's affairs and to provide sensible information in their report to creditors to enable creditors to make a choice among the alternatives of executing a deed of company arrangement, ending the administration or winding up the company: see Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]; In the matter of Pan Pharmaceuticals Limited [2003] FCA 598 at [41]; and Hayes, in the matter of Estate Property Group Limited (Administrators Appointed) [2007] FCA 935 at [1]. 5 In Re Riviera Group Pty Ltd (admins appted) (recs and mgrs appted) (2009) 72 ACSR 352 at [13], Austin J set out the various groupings of reasons for which courts have thought it appropriate to extend time and I have had regard to those principles in forming the views that I have.

Should the convening period be extended? 6 Against those principles, I note that the Company had, at the time it went into administration, 132 ongoing contracts including: 29 construction contracts in which construction had commenced and which were at different stages of completion; 50 contracts in defect liability periods; 47 contracts in which construction had not commenced but the Company had been engaged and had undertaken preliminary design work; and six contracts which were finished according to the Company's records but in fact after investigation may still have outstanding issues. 7 There were, at the time the Company went into administration, 180 staff who operated from offices in Armidale, Tamworth, Port Macquarie, North Sydney, Brisbane, Coolum and Perth. Accordingly, notwithstanding evidence that the employees have now reduced in number to 25, there is a degree of complexity attached to this administration because of the nature of the business of the Company, the number of contracts which it has and the locations in which it operates. Mr Krejci also gave evidence that ANZ holds a circulating security interest over the assets of the Company to secure various facilities. Further, the Company's creditors fall into three distinct categories: the ANZ's claims as secured creditor of up to $9 million, unsecured creditors with potential claims of approximately $18 million at the date of appointment, and employee creditors whose claims approach $3 million. 8 ANZ has claims of up to $9 million, approximately $7 million of which is in respect of bank guarantees issued by way of performance bonds to secure the Company's obligations under construction contracts. At the date of the administrators' appointment, ANZ had retained $9,185,974 pursuant to an asserted right to retain all cash deposited with it by the Company under a banker's right to consolidate accounts. Part of the administrators' task is to negotiate to obtain the return of as many of the bank guarantees as possible. This will reduce the Company's liability to ANZ and advances the possibility of the release of funds held by ANZ. This would be to the advantage of the interests of unsecured creditors. 9 As at the date of this hearing, the administrators are in negotiations with a joint venturer, Watpac Limited, and a contractor, Health Infrastructure, in relation to the Port Macquarie Main Hospital, which would have the benefit of obtaining the return of a substantial bank guarantee in the order of $880,000. 10 In addition, the administrators have indicated that the sole director of the Company is attempting to raise funds to contribute to a deed of company arrangement which would require the refinancing of some of his personal assets. It may have the benefit of enabling the Company to retain some of the current employees. The deed of company arrangement remains in negotiation. 11 The administrators have also said that they are in the process of attempting to novate some of the construction contracts of the Company to third parties. That would enable projects to be finished in an orderly manner and help to secure payments to subcontractors of amounts owed for works completed. It could increase the possibility of a better return to creditors by reducing the amount of damages claimed by the principals. 12 I am satisfied on the basis of paragraph 17 of Mr Krejci's affidavit that the administrators have to date been diligent in their efforts to familiarise themselves with the business and affairs of the Company and to negotiate with the various stakeholders. 13 Mr Krejci has deposed to the fact that the administrators are of the opinion that the interests of the creditors of the Company will be best served by continuing the administration of the Company for the proposed 30 day period. This will facilitate negotiations to finalise a deed of company arrangement. It will allow a further three weeks after 14 May (when creditors anticipated the second creditors' meeting would be held) so that the administrators can clarify their recommendations with respect to the Company's future, with a better idea of the estimated recoveries on the contracts under negotiation. 14 Taking these matters into account, I consider that notwithstanding the objection raised by Mr Moran, an extension would not result in undue prejudice to the creditors of the Company, and that the order extending the convening period to 5 June 2013 should be granted. I note that the third order that the administrators have requested pursuant to s 447A(1) has the effect that if it becomes possible to hold the second creditors' meeting before 5 June 2013, the administrators are able to do so. At paragraph 24 of Mr Krejci's affidavit, he deposed that if negotiations regarding construction contracts and the deed of company arrangement proposal can be obtained before mid-May 2013, the administrators will seek to convene the meeting of creditors immediately. 15 In considering the draft orders which are proposed by the administrators, I will make the following orders: 1. The Originating Process is returnable instanter. 2. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period for the second meeting of the creditors of National Buildplan Group Pty Limited (Administrators Appointed) ACN 091 716 504 (the Company) be extended to 5 June 2013. 3. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company so that, notwithstanding s 439A(2) of the Act, the meeting of the creditors of the Company under s 439A of the Act may be convened at any time before, or within five (5) business days after, the end of the convening period as extended by the immediately preceding order, provided that the Plaintiffs give notice of the meetings in accordance with s 439A(3) of the Act at least five (5) business days before the meeting. 4. The Plaintiffs give notice of these orders to the Company's creditors by means of: (a) A circular to be posted to the Company's creditors by ordinary post or email sent no later than 7 May 2013; and (b) By placing a copy of the Orders on the website maintained by the firm BRI Ferrier NSW Pty Ltd by no later than 7 May 2013. 5. Any creditor of the Company, or other interested person, have liberty to apply to vary these orders upon providing at least 48 hours written notice to the Plaintiff's solicitors. 6. The Plaintiffs' costs of and incidental to this Application be costs in the Administration of the Company to be paid out of the assets of the Company. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.