PALANDRI WINES LTD (ADMINISTRATORS APPOINTED) (ACN 084 252 488)

PALANDRI INVESTMENT MANAGEMENT LTD (ADMINISTRATORS APPOINTED) (ACN 091 709 769)

NEIL ROBERT CUSSEN, GARY PETER DORAN AND JOHN LETHBRIDGE GREIG AS ADMINISTRATORS OF PALANDRI LTD (ADMINISTRATORS APPOINTED) (ACN 087 787 415)

PALANDRI WINE PRODUCTION LTD (ADMINISTRATORS APPOINTED) (ACN 085 042 879)

PALANDRI WINES LTD (ADMINISTRATORS APPOINTED) (ACN 084 252 488)

PALANDRI INVESTMENT MANAGEMENT LTD (ADMINISTRATORS APPOINTED) (ACN 091 709 769)

MARGARET RIVER WINE INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) (ACN 112 505 692)

Application to extend the time in which a meeting of creditors may be convened pursuant to the Corporations Act 2001 (Cth), s 439A(6)

Corporations Act 2001 (Cth), s 435A, s 439A(4), s 439A(6)

1 (This judgment was delivered extemporaneously on 20 March 2008 and has been edited from the transcript.)

2 The applicants, who are the administrators of five companies which form part of a group that might loosely be described as the 'Palandri Group', apply for an extension of the period within which the second meeting of creditors must be convened. In particular they seek an extension of that time from 4 April 2008 (which is when the meetings would currently have to be held) until 20 May 2008.

3 The application is brought pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act) which expressly authorises the Court to extend the time within which the second meeting of creditors must be held. The same section specifies the timetable for the convening of meetings of creditors by administrators and it is apparent from the timetable created by ch 5 of the Act, and the Act as a whole, that there is an apparent legislative purpose to require meetings to be convened in a timely fashion in order that information can be given to creditors, who are, of course, vitally interested in the affairs of the companies under administration.

4 Accordingly, I think an application of this kind should be approached from the presumption that a case needs to be made out in order to depart from the timetable provided by the Corporations Act. I take the principles that govern applications of this kind to be those enunciated by EM Heenan J in the case of Re Evans and Tate Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte Jones [2007] WASC 235, and as his Honour points out at [20] - [21], that although a basis for the extension of time needs to be made out by an application for such an extension, there is no need for special grounds to be demonstrated.

5 In approaching an application for an extension of time it is, I think, significant to give consideration to the objects of pt 5.3A of the Act which have been specified by the legislature in s 435A. In that section, Parliament specified that:

The object of the Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.

6 The application is supported by a lengthy affidavit from Mr Gary Peter Doran, who is one of the administrators of the companies. He provides evidence which points to a number of reasons why the applicants submit that the legislative timetable should be varied in the circumstances of this case. The first such reason derives from the complexity of the five managed investment schemes that are associated with the five companies in administration. The affidavit of Mr Doran identifies the fact that the precise nature and role of each of these schemes is not yet known and there is uncertainty about their present status and the inter-relationships between the various schemes and the properties held by the companies within 'the Palandri Group'.

7 A second factor that Mr Doran identifies as being relevant to this application is the uncertainty of the current position of the companies within the group due to a number of factors including the unreliability of the documentary records of the company (and the fact that they do not appear to be up to date) and the limited availability of the employees of the company who might be able to shed light on any questions or issues thrown up by the documentary records such as they are.

8 Mr Doran deposes that in that circumstance he does not presently know in any convincing way who the growers and creditors of the company would be, and therefore who would be invited to the second meeting of creditors. For those reasons Mr Doran deposes that it would not be possible for him to provide the information to a meeting convened within the statutory timeframe and which is required to be provided to such a meeting pursuant to s 439A(4).

9 That section provides that the administrator's written notice of the meeting of creditors must be accompanied by a copy of:

(a) a report by the administrator about the company's business, property, affairs and financial circumstances, and

(b) a statement setting out the administrator's opinion about each of the following matters:

(i) whether it would be in the creditors' interest for the company to execute a deed of company arrangement;

(ii) whether it would be in the creditors' interests for the administration to end;

(iii) whether it would be in the creditors' interests for the company to be wound up;

and also setting out:

(iv) his or her reasons for those opinions; and

(v) such other information known to the administrator as will enable the creditors to make an informed decision about each matter covered by subparagraph (i), (ii) or (iii); and

(c) if a deed of company arrangement is proposed - a statement setting out details of the proposed deed.

10 Mr Doran deposes that given the uncertainty surrounding the affairs of the company, the most he could achieve, if a meeting were convened on 4 April 2008, would be to recommend to the creditors of that meeting that the meeting be further adjourned until he had gathered the information necessary for him to prepare a report in compliance with s 439A(4) of the Act.

11 Mr Doran points out in his affidavit that the cost involved in convening a meeting of creditors for that very limited purpose would be substantial as meetings would have to be convened in each of Sydney, Melbourne, Brisbane and Perth, and notice of the meetings would have to be given to about 2,500 people who Mr Doran has identified as potential creditors. Those costs would strain the limited cash reserves of the companies in administration and place those reserves under further strain.

12 Another significant factor in the application identified by Mr Doran is that an offer to purchase some of the assets of the companies within administration has been received. The offer is at an early stage and the implications of the offer require significant investigation and consideration by Mr Doran, in part because of the complexities of the structures involving the managed investment schemes to which I have already referred.

13 As a result of that offer Mr Doran deposes that he needs more time to investigate both the offer and the steps that would be required if and when the offer was to be presented to creditors and, in particular, advice given to creditors about whether the offer is capable of acceptance having regard to the complexities of the corporate structure to which I have referred. That is another one of the reasons why, on the current state of information available to Mr Doran, he would be unable to make any recommendation to creditors at a meeting convened within the statutory time frame.

14 It is, I think, also relevant to my consideration of this application to note that a first meeting of creditors has been held and some limited information was provided to the creditors at that meeting.

15 Another significant fact which Mr Doran identifies as having impeded the activities of the administrators since their appointment in late February is that their appointment coincided with a very intensive period of activity in relation to the companies under administration as a consequence of the ripening of the grapes that are grown by some one or more of those companies.

16 A lot of the time of the administrators since their appointment has been occupied with taking the steps necessary to procure the harvesting of those grapes lest their value diminish on the vine unharvested. A number of applications to this Court have been required to enable that harvesting to occur.

17 Another factor that I think is relevant to this application is that, on the information available to me, there does not appear to be any significant prejudice flowing to any identifiable creditor other than the inevitable prejudice that flows from a delay in the provision of information to creditors generally, but it is, I think, significant in that regard that the orders proposed would grant liberty to apply to any person who has an interest in these matters. Therefore it would be open to any such person to come forward and identify the prejudice which they say they suffer and invite the Court to reconsider the extension of time which is sought.

18 On the information available from Mr Doran, if the offer that has been received can be negotiated to a point where it is capable of acceptance and it can be seen that there is a path through the complexities of the corporate structure to which I have referred, Mr Doran apprehends that the outcome may be more favourable to creditors than if there is a winding up of the company in insolvency.

19 So the extension of time sought is, I think, consistent with the legislative objectives that have been identified in s 435A of the Act. Mr Doran deposes that he needs a period of about two months from now in order to gather the information which he believes will be required before he can provide the report to creditors (which is such a central part of the meeting which the legislature requires to be convened).

20 It is, of course, difficult for Mr Doran to identify with precision just how much time he will need in order to achieve that objective and so orders are sought: firstly, enabling Mr Doran to convene the meetings earlier than the period for which an extension is sought, if he gets to the point where he believes that is the appropriate course; and secondly, enabling Mr Doran to make another application to the Court for a further extension of time in which to convene the meetings.

21 Of course any such application would have to be considered on its merits and on the basis of the information available. However, it seems to me that making provision for both of those alternatives is sensible in the circumstances in which these companies find themselves. That would therefore mean that the extension which is currently sought is an extension of between 6 and 7 weeks of the time within which the meeting would be held, although it is a period of about 2 months from today.

22 It seems to me that when I have regard to all of those factors in combination, and when I particularly take account of the statutory objective which has been identified in s 435A of the Act, this is an appropriate case in which to grant the extension sought on the terms which I have indicated.