MATTER : PORT KENNEDY RESORTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 061 115 348)

BETWEEN : KIMBERLEY ANDREW STRICKLAND AND CHRISTOPHER MICHAEL WILLIAMSON AS ADMINISTRATORS OF PORT KENNEDY RESORTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 061 115 348)

Corporations - Voluntary administration - Application for extension of convening period - Principle to be applied - Need for detailed information in support

Mann v Abruzzi Sports Club Ltd (1994) 12 ACLC 137

Re ATG Developments Pty Ltd (1994) 12 ACLC 333

Re LOCM Pty Ltd (1997) 15 ACLC 1,576

1 OWEN J: This is an application under s 439A(6) of the Corporations Law for an order extending the convening period in relation to the second meeting of creditors of Port Kennedy Resorts Pty Ltd. On 9 November 2000 a Mr Peter Crowe was appointed as the administrator of the company. On 20 November 2000 Mr Crowe effectively resigned and, by an order made that day by Master Sanderson, the plaintiffs were appointed as voluntary administrators of the company.

2 The applicants have therefore been in office for only nine days. Nonetheless, the convening period as defined in s 439A(5), within which the second meeting of creditors is to be called, commenced on 9 November 2000. It is a period of 21 days beginning on 9 November 2000 and will therefore expire today. The Court has power to extend the convening period pursuant to s 439A(6), provided that the application for an extension of time is made within the period.

3 This application is made within time as the convening period does not expire until the end of today. The principles upon which these applications proceed were the subject of consideration by me in Re Allbuild Construction Co Pty Ltd; Ex parte Featherby & Anor [2000] WASC 227. I will not repeat what I said in that case except to emphasise that orders under s 439A(6) are not granted as of course. They should be the exception rather than the rule. The power to extend the convening period is a power that is not exercised frequently because of the need for these types of administrations to proceed speedily. Accordingly, an application for an extension of time needs to be supported by detailed information about the affairs of the company, so far as that is known, and the reasons for the delay in finalising the necessary information. The affidavit material should also explain why a particular period of extension has been sought.

4 On the other hand, it is also to be noted that the discretion whether or not to extend the time is to be exercised bearing in mind the spirit and object of Div 6 of Pt 5.3A of the Corporations Law; namely, to maximise the chances of the company continuing in existence or, alternatively, terminating its existence in the most appropriate way.

5 In this case the affairs of the company are complex. The main asset of the company is a resort development project of significant scale. In fact, the scale is so significant that it is the subject of a special act of Parliament. The project has been beset by difficulties for many months and a myriad of litigation has been commenced in this Court, and I think elsewhere, in relation to the project and its many facets.

6 When Mr Crowe was appointed on 9 November 2000, objection was taken to his capacity to act and the validity of his appointment. Proceedings were commenced to remove him. It can therefore be inferred that in the period between 9 November 2000 and 20 November 2000, when those proceedings were resolved, that the attention of the administrator may have been distracted to some extent from the investigation of the affairs of the company and the preparation of a recommendation to creditors.

7 The present plaintiffs have been in office for only eight or nine days. During that time they have become aware of a substantial dispute which exists between the company and its main creditor Pac-Asia Holdings Pte Ltd ("Pac-Asia"). Pac-Asia claims that it is owed $8.7 million by the company although the directors of the company claim that Pac-Asia is only owed $4.6 million. There is also a dispute as to the validity of a charge held by Pac-Asia over the assets of the company.

8 That is a significant dispute. It will have an effect on the future of the company and on the ultimate dividend which is to be payable to unsecured creditors. The major asset of the company is, as I have indicated, a resort development project. In the affidavit of Kimberley Andrew Strickland, sworn 28 November 2000 in support of this application, reference is made to the fact that the applicants have already received an informal offer to acquire the project.

9 The directors of Pac-Asia have indicated that they may submit an offer to purchase, and there is a third party who has expressed interest. Mr Strickland deposes to the fact that he and his co-administrator are faced with the prospect of having to decide between three competing offers and will need to assess the merits of each offer in order to maximise the return to creditors. Another factor is that under the terms of the special act of Parliament, ministerial consent will be required to the sale of the project. In light of a pending State election, this consent may take longer to obtain than would otherwise be the case.

10 The issues are also complicated by the fact that on 27 July 2000 an injunction was granted in favour of Pac-Asia and other parties, which restrains the company from dealing with any of its assets without giving appropriate notice to those parties. It is within contemplation, therefore, that the sale of the project may be subject to further litigation.

11 The administrators, on the information available to them, believe that they will not be able to formulate a recommendation of the future of the company until such time as the feasibility of selling the major asset has been considered. They seek an extension of 90 days in which to convene the second meeting of creditors. That is a very long time, bearing in mind the statutory prescription that these types of administration need to be finalised quickly. Nonetheless, there are unusual circumstances at work in this instance. I have dealt with most of them. They are:

1. The present plaintiffs have been in office for only eight or nine days;

2. The previous administrator was locked in litigation as to the validity of his appointment;

3. It will be necessary to consider multiple offers for the purchase of the company's assets;

4. Any sale of assets has to be approved by the Minister;

5. Further litigation in relation to the assets of the company could not be ruled out; and

6. There is soon to intervene the Christmas New Year holiday period.

12 In all of those circumstances, and notwithstanding that 90 days is a very long time indeed in the context of this division of the Corporations Law, I think that the proper exercise for discretion lies in favour of its grant. I am also mindful of the fact that there is a conflict of authority as to whether an applicant can gain from the Court more than one extension of the convening period: see, for example, Watson v Uniframes Ltd [1994] FCA 880; (1995) 13 ACLC 609 and, contra, Re Western National Earthmoving Corporation Pty Ltd (1997) 15 ACLC 1,665. In the light of the conflict, the bald statement I made in Allbuild Construction, at [15], to the effect that the Court can only grant one extension may need to be reconsidered. It would be inappropriate, I think, to put the parties at risk if I were to grant a short-term extension on the basis that a further extension could be granted.

13 I also have it in mind that this application has been made ex parte so that any party affected by it may have a remedy if there are factors of which I am not aware but which impact on the length of the period of the extension. For those reasons, there will be an order that the time provided for in s 439(5) of the Corporations Law for the plaintiffs to convene a meeting of creditors of Port Kennedy Resorts Pty Ltd (Administrators Appointed) be extended to 26 February 2001.