in the matter of Austcorp Limited [2009] FCA 636
- Algeri
Source
Original judgment source is linked above.
Catchwords
in the matter of Austcorp Limited [2009] FCA 636
- Algeri
Judgment (3 paragraphs)
[1]
Solicitors:
Johnson Winter & Slattery (Plaintiffs)
File Number(s): 2015/204604
[2]
Judgment - ex tempore
By Originating Process filed by leave on 13 July 2015, the Plaintiffs, Messrs Dickerson, Jahani and Killer as administrators of SDV Longwall Pty Limited (Administrators Appointed) and several other entities ("Companies"), seek orders extending the time to convene meetings of creditors of the Companies under s 439A of the Corporations Act 2001 (Cth) for a period of a little more than three months, up to and including 21 October 2015. The form of order sought is in common form, such that it would permit the administrators to hold a meeting in any time during the period up to, or within three business days after the end of, the convening period as extended by that order. Liberty is also secured to any person, including any creditor of the Companies or the Australian Securities and Investments Commission, who can demonstrate sufficient interest to move to modify or to discharge the relevant orders. In the event, there is evidence that many of those affected, if not all of those affected, have been given notice of this application. It is also contemplated that notice of the orders made will be given to various persons by electronic means, and otherwise posted on the administrators' web site.
The application is supported by a detailed affidavit of Mr Jahani dated 13 July 2015, which summarises the purpose for which the application is made as to bring about an extension of the convening period, to allow the administrators to form a proper opinion on the matters referred to in s 439A(4) of the Corporations Act; enable generation of revenue from several contracts, which is anticipated to improve the return to creditors, and mitigate claims for damages which would otherwise be incurred, thereby avoiding a result that would reduce the return to creditors; and allow for the completion of aspects of the sale of particular assets of the Companies.
Mr Jahani's affidavit provides an outline of the administrators' appointment, and provides an overview of the Companies' position which I need not address. It is significant to note, however, that the SDV Group employed a significant number of employees, at three sites, and a number of those persons continue to be employed, so they have an interest in the outcome of the administration.
Mr Jahani also indicates that the companies are a relatively substantial operation, so far as they have substantial total assets and liabilities, with their liabilities, on his estimate, somewhat exceeding their assets. Mr Jahani also leads evidence of the steps which have been taken by the administrators since their appointment, including dealing with staff and premises, and taking steps to seek to continue profitable contracts of the Companies, which, as I noted above, is anticipated to bring about an improvement in the return to creditors, from the position as it would stand today. Mr Jahani also points out, significantly, that if one project could not be completed, a set of premises occupied by one of the Companies would need to be shut down, the employment of employees at that premises terminated, and there would be additional creditor claims, including a claim for damages by the contracting party, a potential claim by the lessor in respect of the lease and, presumably, claims by the employees whose employment was terminated. That is of significance in two respects. First, the employees plainly have a significant interest in the continuance of their employment and, second, an increase in the number of creditors proving against the Companies' assets is likely to bring about a reduction in the return to creditors.
Mr Jahani sets out the premises occupied by the Companies, which include several premises that are under lease. Plainly, lessors of properties are potentially disadvantaged by an extension of a convening period, where the statutory moratorium continues during that extended period. In the present case, several of those lessors have consented, and others do not appear to have opposed, the extension of the convening period. Mr Jahani notes that the extension of the convening period should improve the likelihood of employees' entitlements being met, to the extent it will allow certain projects to be completed. He also notes that the administrators are not presently in a position to estimate the return from a winding-up, which would be a matter relevant to informing creditors of the position at a second meeting of creditors.
Mr Jahani refers to notice of the application which has been given to the secured creditor of the Companies, which consents to it, to members of the committee of creditors, who also consent to it, to two lessors of premises, who consent to it, and to other lessors, who have not objected to it. Notice of the application has also been given to the Australian Securities and Investments Commission, although it appears it has not yet expressed its view. Of course, its ability to express that view would be preserved by the provision which allows an interested party to bring a further application to the court.
Mr Izzo, who appears for the administrators, has also provided helpful submissions in respect of the application, which review the matters addressed in Mr Jahani's affidavit, and point to the relevant authorities to which I will refer below. Mr Izzo points, rightly, to the advantage of the extension, so far as it would allow the prospect of particular projects being completed, which are expected to be profitable, and to avoid claims by the parties to those projects, or damages if those projects are not completed. Mr Jahani's evidence, supported by detailed calculation, is that there is a significant uplift in the return to creditors in the administration, at least potentially, if the extended period is permitted so as to allow that work to be completed. Mr Izzo rightly points to the fact that, in Re Riviera Group Pty Ltd (2009) 72 ACSR 352 at [13] Austin J recognised that improvement in the return for unsecured creditors was a matter that might support the extension of a convening period. Mr Izzo also points to other advantages of the extension, including the possibility the administrators may be able to promote what is referred to as a "pending works" contract in respect of the Mackay business, maximising the sale proceeds for that business under a contract which they have entered into for its sale. Mr Izzo also points, rightly, to the fact that improvement in the quality of information that may be provided to creditors is a relevant factor supporting an extension. Mr Izzo points to the fact that a three-month extension is sought, and that is not a short extension, but I will refer below to authorities where the Court has been prepared to grant relatively long extensions of a convening period, in a proper case.
Mr Izzo also submits that there does not appear to be a material prejudice by the extension of the convening party, so far as the administrators are continuing to pay rent in respect of particular premises, and has reached an alternative arrangement as to a third set of premises and the continuation of the relevant contract may avoid the need to terminate the employment of some employees. I have referred above to the consultation with creditors in respect to the application. Mr Izzo also points out, as has been recognised in other matters including Re Belmont Sportsmans Club Co-Operative Limited [2015] NSWSC 543 (at [9]), that the administrators' views are a matter to which the Court will give weight in applications of this kind.
I turn now, briefly, to the relevant authorities. The Court's function in dealing with an application of this kind is to reach an appropriate balance between the expectation that an administration will be relatively speedy and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions contributing to maximising the return to creditors: Mann v Abruzzi Sports Club Limited (1994) 12 ACSR 611 at 612. I have referred above to Re Riviera Group Pty Ltd above where Austin J summarised reasons which may support such an extension including several factors which are present here, such as a relatively complex business, the need to execute an early disposal of assets, and in this case the likelihood that an extension of time will extend the return for unsecured creditors. His Honour also pointed to the relevance of the impact of an extension on lessors of property, which I have addressed above. I noted above that there are several cases in which extensions have been granted for reasonably substantial periods, including, for example, Re Silvia; in the matter of Austcorp Limited [2009] FCA 636 and Algeri; Re Colorado Group Ltd [2011] VSC 260.
I am satisfied, for the reasons I have indicated above, that the administrators have established a proper basis for an extension of the convening period, on the basis that it is likely to maximise the prospects of a better return to creditors, and put them in a position to provide better information to creditors, as well as having potential advantages for employees, who may retain employment in that extended period.
An order is sought that the costs and expenses of the originating process be costs in the administration of the Companies. I am satisfied that, where this was a proper application to make, such an order should be made.
Accordingly, I make orders in accordance with the short minutes of order initialled by me and placed in the file.
[3]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 04 September 2015