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Judgment - ex tempore

1. By Originating Process dated 29 October 2015, Mr Goyal, and others, in their capacity as joint and several administrators of Renex Holdings (Dandenong) 1 Pty Limited (admins apptd) and several other companies identified in the schedule to the Originating Process, seek orders for the extension of convening periods set out in s439A under the Corporations Act 2001 (Cth) and other relief, including an order in common form, that Part 5.3A of the Act is to operate such that meetings of creditors may be held at any time during, or within five business days after, the end of the convening periods as extended. They also seek certain orders in respect of notification of the orders which may be made to creditors.
2. The application is supported by a detailed affidavit of Mr Goyal, which refers to the nature of the companies' business, and the circumstances of the administrators' appointment. The companies operate an integrated waste treatment and resource recovery facility treating contaminated soil and industrial waste which it appears, from advertisement for sale of the business that is in evidence, is both a unique and a very substantial and expensive asset. The land on which the facility is situated is owned by one of the companies in administration, and other companies undertake particular aspects of activities within the companies' operations. The liabilities of the companies, noted by the administrators, are substantial. One of the companies employs, and is continuing to employ, a number of employees. The large part of the companies' liabilities are owed to secured lenders, including both a super senior lender, and junior ranking note holders, and then there are a significantly larger number of ordinary trade creditors with debts in smaller amounts. The Australian Taxation Office has also lodged a substantial claim with the administrators, as has the Environment Protection Authority of Victoria, but its claim appears to be in the nature of a contingent claim, which may not arise unless the companies are placed in liquidation and unable to deal with contaminated soil contained on the property.
3. Mr Goyal's evidence is that the administrators continue to operate the companies' business, and are presently being funded on a monthly basis by the super senior creditor, and have continued to employ employees in respect of that business. Mr Goyal, appropriately, sets out at length the work that has been undertaken in the administration to date. He also refers to discussions which are taking place concerning a possible recapitalisation of the companies, involving their secured creditors, and an alternative of a sale process. He notes that the first meeting of creditors took place on 21 October 2015, and the administrators there foreshadowed the possibility of an extension of the intervening period, albeit for a longer period than the extension that has ultimately been sought.
4. Mr Goyal sets out various matters which he considers support an extension of the convening period, which had also been addressed by Ms Morgan in her submissions in respect of the application. In particular, Mr Goyal expresses the view that it was in the creditors' interests that the companies continue to trade, so as to either implement the proposed implementation or sell the companies' businesses and assets as a going concern, and either course of action is likely to result in an increased return to the creditors. He notes that an extension of the convening period will allow the companies to retain the benefit of the statutory moratorium until the completion of the proposed recapitalisation, which may be a matter of significance so far as action by any single secured creditor might have the capacity to disrupt any proposed recapitalisation or sale of the business.
5. That matter is of less significance so far as the lessor of the property is concerned, since it is a company within the group and itself in administration. Mr Goyal notes that an extension of the convening period will allow the flexibility for the proposed recapitalisation to include a potential deed of company arrangement, and it seems to me that it is reasonable to assume that the preparation of such a document would involve a degree of complexity, within a business of substantial scale. Mr Goyal also points out, importantly, that an extension of the convening periods will enable the administrators to provide a considered opinion to creditors at the second meeting of creditors, and, in one sense, it is obvious that the administrators would be better placed to do so, where they would not be able to inform the creditors of the likely prospects of a recapitalisation or sale process, until those prospects had been adequately explored.
6. Mr Goyal expresses the view that an extension of the convening period until 29 February 2016 would be required for that purpose. That contemplates that a sale might well be achieved by mid-December 2015, but recognises that the intervening holiday period is likely to delay completion of that process, and is not a substantial period in respect of a complex administration. Mr Goyal also notes the absence of disadvantage to affected parties, so far as employees would continue to retain their present employment, and do not presently require access to the fair entitlements' guarantee scheme because there are sufficient funds to meet their entitlements. Mr Goyal notes that the super senior creditor supports the application, and that other creditors have been given notice of the application, albeit of relatively short notice given its urgency. Properly, the Australian Securities and Investments Commission has also been informed of the application, and neither it nor other creditors have appeared to oppose the application. Other creditors' rights would in any event be preserved, so far as a usual order is sought, allowing an interested party to intervene to vary the orders.
7. The authorities as to the circumstances in which the Court may make orders under s 439A of the Corporations Act and s 447A of the Act in respect of the extension of a convening period are well-established. In making such orders, the Court must reach an appropriate balance between the expectation that an administration will be relatively speedy and summary and countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]. In Re Riviera Group Pty Limited (admins apptd) (recs & mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352, Austin J identified matters which may support such an extension, in a passage which has frequently been cited subsequently, as including the size and scope of the company's business, which appears here to be substantial; the existence of complex corporate group structures and intercompany loans; the time needed to execute an orderly process of disposal of assets, which is a matter relevant so far as the administrators are here exploring a recapitalisation or sale process; the fact that an extension of time is likely to enhance the return for unsecured creditors, a matter to which Mr Goyal refers; and the impact of any extension upon a person who whose claim is affected by the statutory moratoriums under Part 5.3A of the Act, which is a matter to which I have referred above.
8. Ms Morgan refers, in her submissions for the administrators, to the administrator's view that it is in the creditors' best interests that the companies continue to trade, so as to implement the proposed recapitalisation or sale of the business as a going certain; to the administrator's reference to the benefit of the moratorium for such a recapitalisation and to the benefit of allowing time for any deed of company arrangement to emerge; and to the advantage of better reporting to creditors, once the options to deal with the business have fully emerged. Ms Morgan also refers, which is a matter of considerable significance for those affected, to the prospect that either a successful recapitalisation or the sale of a business as a going concern would maximise the prospects of employees retaining their employment, and that is a matter which may properly be taken into account in an application of this kind; Re ABC Learning Centres (admins apptd) (recs & mgrs apptd) [2008] FCA 994; (2009) 73 ACSR 478 at [12]. Ms Morgan also points out to the advantage of an extension of the convening period, over an adjournment of the second meeting of creditors, where it allows greater certainty for the parties affected by the administration and where, in any event, the evidence suggests that a 45-day adjournment of the second meeting of creditors may not be sufficient to progress the recapitalisation or sale process, and, if that time was not sufficient, then a further application to the Court would likely be required in any event. Ms Morgan also points out the absence of significant prejudice to other creditors, and other interested persons, a matter which I have noted above.
9. I should add that the case law has frequently recognised the significance of an administrator's view in an application of this kind, particularly where the administrator is dealing with a complex administration, and I should, and do, give weight to the considered judgment of the administrator as to these matters: Owen; Re RiverCity Motorway Pty Ltd (admins apptd) (recs & mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 at [46].
10. I am satisfied, for the reasons set out in Mr Goyal's affidavit and in Ms Morgan's submissions, that that is a proper matter in which to extend the convening period, and that the extension sought is not excessive, given the complexity of the business and the steps which are proposed to be taken in that extended period.
11. The administrators seek an order permitting notice of these orders to be given to creditors by electronic means, by email and a notice on the administrators' website. The case law has, in recent years, recognised the utility of an electronic means of notification, as a manner of reducing costs in administration, to the benefit of creditors and contributors, and allowing notice to be given more promptly than if notices had to be printed and posted. I am satisfied, consistent with the principles in Re Mothercare Australia Pty Ltd (admins apptd) [2013] NSWSC 263 at [8] and subsequent cases that have referred to it, that such an order should be made. I am also satisfied that this is a proper case to order that the costs of the application be costs of the administration of each of the companies in administration, on a pro rata basis, so far as the application is brought to promote the proper interests of the administration.
12. Accordingly, I make orders in accordance with the short minutes of order, initialled by me and placed in the file.