MATTER : GERALDTON BUILDING CO PTY LTD (Administrators Appointed) (ACN 008 673 103)

MATTER : GERALDTON BRICKWORKS PTY LTD (Administrators Appointed) (ACN 008 685 836)

MATTER : GBC DIRECT BUILDING SUPPLIES PTY LTD (Administrators Appointed) (ACN 008 043 056)

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

1 OWEN J: These are applications in relation to three companies, namely Geraldton Building Co Pty Ltd, ("GBC") GBC Direct Building Supplies Pty Ltd ("Supplies") and Geraldton Brickworks Pty Ltd ("Brickworks") for orders pursuant to s 439A(6) of the Corporations Law ("the Law"), extending the convening period for the second meeting of creditors.

2 The plaintiffs were appointed as administrators on 20 and 22 November 2000. The convening period under s 439A is 21 days from the date of appointment. Accordingly, the convening period will expire (on my calculations) on 10 December 2000, although the administrators have suggested that it will expire on 7 December 2000.

3 Section 439A requires an application for an extension of time of the convening period to be brought within the convening period. This application is brought within the convening period and is therefore competent.

4 In Allbuild Construction Co Pty Ltd ex parte Featherby [2000] WASC 227, I considered the principles upon which applications of this nature are to proceed. I will not repeat what I said in that case except to emphasise that orders under s 439A(6) are not granted as a matter of course. They should be the exception rather than the rule.

5 Paragraph 507 of the Explanatory Memorandum which accompanied the bill which resulted in Div 6 Pt 5.3A being introduced into the Law reads:

"The Court will be given power to extend these periods although it is not expected that this power would be exercised frequently since it is an important objective of the new provisions for creditors to be fully informed about the company's position as early as possible and to have an opportunity to vote on its future as soon as possible."

It was clearly envisaged that the power to extend the convening period should not be a power that is exercised as of course, because of the need for administrations of this nature 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 information is known. The supporting material should also contain full details of the reasons for the delay in finalising the necessary information and the justification for the particular period of extension which is sought.

6 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 the object of Div 6 of Pt 5.3A of the Law, namely, to maximise the chances of the company continuing in existence or, alternatively, terminating its existence in the most appropriate way.

7 The three companies concerned in this application form a group of companies. The application is supported by the affidavit of Martin Bruce Jones sworn 6 December 2000, which was supplemented by oral evidence given by Garry John Trevor. On 20 November 2000, Mr Jones and Mr Trevor were appointed joint and several administrators of GBC and of Supplies and, on 22 November 2000, they were appointed joint and several administrators of Brickworks.

8 The first meeting of creditors of the companies was held on 27 November 2000 for GBC and Supplies, and on 29 November 2000 for Brickworks. A committee of creditors was appointed on each occasion and no resolution was moved or passed that the plaintiffs be removed as administrators.

9 Since the appointment, the administrators have done a considerable amount of work in relation to the group. That work is detailed in par 15 of the affidavit of Mr Jones and I will not repeat what is there said. Mr Trevor has supplemented that information and his evidence is that the group is probably the largest that is involved in the construction industry in remote areas of this State. It employs over 2,000 people.

10 In the recent past, the group has spent about $1,000,000 on a new information technology system but it appears that the system has not lived up to expectations. The directors believe that that is a contributing factor to the position in which the group now finds itself. The failure of the information technology system has had one particular consequence for the administrators. They have been unable to come to grips, with any confidence, with the work in progress and debtors of the companies. Those two elements are, of course, quite critical to the assessment of the assets and liabilities of the group.

11 Mr Trevor also testifies that the sheer logistics of taking control of construction sites spread throughout the north and mid-west of this State has caused delays. He also says that the administrators have had to confer with persons with whom the group has contracts, many of whom are bureaucratic institutions. It is a notorious fact that dealings with bureaucratic institutions do not always go smoothly and quickly.

12 Mr Jones deposes to the fact that there has been insufficient time, subsequent to the appointments, for the administrators to establish an accurate financial position of the group. In that respect, it is necessary for them to obtain valuations of the assets, establish realisable values of identifiable assets, call for expressions of interest in the business or assets that may be realised, and commence investigations into the company's affairs and the conduct of its directors in order to meet the reporting requirements under the Law.

13 It is also said that there is a national or international firm of considerable substance that has shown interest in acquiring the assets of the group. Mr Trevor has testified that if that occurs it may allow creditors to be paid in full, but the negotiations are complex. It is also to be borne in mind that the Christmas-New Year holiday period is soon to intervene, making the compilation of information even more difficult.

14 The question of an extension of the convening period was the subject of a meeting of the committee of creditors held on 4 December 2000. At that meeting, the committee of creditors resolved to support the administrators' proposal for an application to the court for an extension of the convening period, and that the extension sought should be 45 days. The wishes of the creditors will be a relevant, although not determinative, consideration in matters of this nature. I note that the creditors, at least through their appointed committee, have been consulted and support the application.

15 For all of those reasons, I think that this is a case in which the convening period should be extended. In the context of this legislative scheme, an extension of 45 days is a relatively long period. However, given the time of the year, the size of the administration, and the prospect of an outcome which is very much in the interests of creditors arising from mature and more considered negotiations and investigations, I think an extension of the convening period by 45 days should be granted. For those reasons there will be orders in terms of the originating process in each case.