MST Investment Corporation Limited (Liquidators Appointed), in the matter of... [2011] FCA 711 | Case summary

The plaintiffs have leave to file in Court their originating process and the affidavit of Paul Gerard Weston sworn on 17 June 2011.
The originating process is returnable instanter.
Pursuant to section 439A(6) of the Corporations Act, 2001 (Cth) ("the Act"), the period for the first and second plaintiffs ("the Administrators") to convene a meeting of the creditors of each of the third, fourth, fifth, sixth and seventh plaintiffs ("the Companies") under section 439A of that Act, is extended up to and including 8 September 2011.
Pursuant to section 447A (1) of the Act, Part 5.3A of the Act is to operate in relation to each of the Companies as if the meeting of the creditors of each of the Companies required by section 439A of the Act, may be held at any time during, or within 5 business days after the end of, the convening period as extended by Order 3 above, notwithstanding the provisions of section 439A(2) of the Act.
The Administrators have liberty to apply to the Court for any further extension of the convening period referred to in order 3 above, at any time prior to 8 September 2011.

REASONS FOR JUDGMENT 1 This application is made under ss 447A and 439A(6) of the Corporations Act 2001 (Cth) whereby the administrators of the plaintiff companies seek to extend the convening period for the second meeting of creditors of those companies so as to end on 8 September 2011 rather than 21 June 2011. Under the proposed extension the administrators would be obliged to convene the meeting no later than 15 September 2011; s 439A(2). 2 The plaintiff companies are part of a group of companies known as the MST Investments Group which carries on a property development business involving the purchase of land, demolition of structures on that land and the construction of large buildings of units. The third plaintiff, MST Investment Corporation Limited (Administrators appointed) is the ultimate holding company of the fourth, fifth, sixth and seventh plaintiffs. 3 Evidence as to the history and present circumstances of the plaintiff companies is to be found in the affidavit of Paul Gerard Weston, sworn on 17 June 2011. Mr Weston is an official liquidator and one of the administrators of the third, fourth, fifth, sixth and seventh plaintiffs in this proceeding. In his affidavit Mr Weston describes the corporate structure and business operations of the MST Investment Group. The group is primarily involved in property development and has projects in Sydney in the suburbs of Chatswood and Camperdown as well as, among others, a proposed development in Queensland in the Whitsunday area. 4 Mr Weston explained the steps that needed to be taken to realise the benefit of the property developments of the fourth (Chatswood) and fifth plaintiffs (Camperdown) and direct the resulting funds to the registered mortgagee, Perpetual Nominees Limited (Perpetual). Perpetual is the custodian of trusts for which Australian Unity Funds Management Limited is the responsible entity. Ultimately, according to Mr Weston the funds in both cases, were advanced under facilities with Australian Unity Limited and the proceeds of sale, after deduction of costs and expenses, will be paid to it. 5 The seventh plaintiff (Whitsunday) is the current registered proprietor of land at Cannonvale in Queensland (Whitsunday land). The land is subject to mortgages to Valad Commercial Management Limited (Valad) and Industry Funds Management (Nominees 2) Pty Ltd. The latter mortgage (Members Equity mortgage) secures funds advanced by the Members Equity Bank. The Valad mortgage has been postponed to that of the Members Equity mortgage. 6 The provision of funds sufficient for development of the Whitsunday land to be completed is subject to various preconditions as to the commencement of works and the number of pre-sales that must be achieved. Mr Weston states: The Administrators have been provided with evidence that the directors of MST View Whitsunday are presently engaged in negotiations with potential financiers to fund the costs associated with completing the Whitsundays Project. The Administrators have also been provided with detailed forecast information concerning the Whitsundays Project and a proposal as to how the sales, civil works and construction may be financed. This proposal is subject to the success of negotiations with all parties involved, particularly the current secured creditors, Members Equity Bank and Valad. 7 Clearly time is required for the negotiations to which Mr Weston refers to come to fruition. Mr Weston's affidavit contains a cogent analysis of the financial situation of the company and the creditors as presently understood by the Administrators. Mr Weston states that the directors of each of the plaintiff companies "wish to propound deeds of company arrangement for each of the Companies" which will enable the surplus funds realised from the sale of the remaining units in each development to be made available to the creditors of the MST Group. For this to be achieved it is necessary for the convening period to be extended. 8 In an application such as this there is, of course, no contradictor and so the evidence must be judged in terms of its internal coherence taking into account the experience of, in this case, Mr Weston. I see no reason to doubt any of the facts or arguments that are made in the affidavit. 9 Mr Stack, who appeared for the plaintiffs, drew my attention, in particular, to the decision of Austin J in the matter of Riviera Group Pty Limited (receivers and managers appointed) (2009) 72 ACSR 352 in which his Honour considered an application for an extension of a convening period and, at [13] of his reasons set out the considerations relevant to the granting of such an extension. 10 In this case, they include, in particular, the size and scope of the business, the complex corporate group structure and intercompany loans. The fact that complex transactions have been entered into by the company, all of which lead to the conclusion that there is a need for additional time to make a thorough assessment of a proposal for a deed of company arrangement and that that additional time is likely to enhance the return for unsecured creditors. 11 On the face of it, the requested extension is very long, however, the evidence that has been advanced today on behalf of the applicant indicates that the affairs of the companies to which administrators have been appointed are complex. They will require considerable time to be brought to a stage where the assets of the companies can be developed and realised in an orderly fashion and to the benefit of companies' creditors. 12 If the convening period is not extended then the likelihood would seem to be that the companies would be placed in liquidation and that ultimately the value realised on assets would be significantly less than would be the case if realisation followed the plan proposed by the administrators. 13 The principles identified by Austin J were applied by Jagot J in Smith, in the matter of Claycon Pty Ltd (Administrator Appointed) [2011] FCA 652, where her Honour made orders which are very similar to the orders sought in this case. With respect, I also adopt his Honour's approach and, on that basis I am satisfied that the orders sought by the plaintiffs should be made. 14 I will order that the period for convening the meeting of the creditors, as sought by the plaintiffs be extended up to and including 8 September 2011 and make the other orders sought by the plaintiff in this application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

MST Investment Corporation Limited (Liquidators Appointed), in the matter of MST Investment Corporation Limited [2011] FCA 711

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