Stimpson, in the matter of Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) v Eagle Boys Dial-A-Pizza Australia Pty Ltd

MARKOVIC J: 1 This is an application by Mark Robinson, Riad Tayeh and Antony Resnick, in their capacities as joint and several administrators of four companies (Administrators), being Farmaforce Limited (Administrators Appointed), IQX Limited (Administrators Appointed), The IQ Group Global Limited (Administrators Appointed) (IQGG) and IQ3Corp Limited (Administrators Appointed), for orders pursuant to s 439A(6) and s 447A(1) of the Corporations Act 2001 (Cth) extending the convening period in respect of those companies. I will refer in these reasons to the four companies in administration, Farmaforce, IQX, IQGG and IQ3, collectively as the Four Companies. 2 In support of their application the Administrators rely on two affidavits of Mark Julian Robinson sworn respectively on 18 March 2022 and 6 April 2022.

background 3 The background to this application, including the steps taken by the Administrators to date in their ongoing investigations, is set out in Mr Robinson's affidavits. I set out what is intended to be only a summary below. 4 In order to understand the reasons why the application has been made, it is of assistance to understand the nature of the business of each of the Four Companies which Mr Robinson explains as follows, based on his investigations to date: (1) Farmaforce enters into contracts with major pharmaceutical companies to provide salespeople for the purpose of selling contracted pharmaceutical products to doctors and pharmacists in Australia. Farmaforce has been listed on the Australian Securities Exchange (ASX) since 27 October 2015; (2) IQ3Corp is a corporate finance advisory company specialising in providing services to the life science industry. It has been listed on the ASX since 18 May 2015; (3) IQGG is an asset manager of scientific intellectual property which involves finding, funding and developing bioscience discoveries to create medical innovations. It has been listed on the National Stock Exchange (NSX) since 15 December 2011; and (4) IQX is an investment funds management company specialising in the bioscience sector and is a core member of the IQ Group. It has been listed on the NSX since 10 December 2013. Despite these descriptions of the nature of the business of each of the Four Companies, as I understand it and based on other evidence given by Mr Robinson, the principal operating company amongst them is Farmaforce. 5 Mr Robinson gives the following further evidence about the Four Companies and their subsidiaries who, together with the Four Companies, are referred to in these reasons as the IQ Group: (1) entities in the IQ Group are reliant on each other to fund day-to-day operations, with many of them not having substantial cash reserves; (2) there are a large number of intercompany loans, many of them written off or reclassified without any or adequate explanation; (3) loan balances attributable to various entities in the IQ Group are not consistent across the parties involved in the transactions; (4) it appears not to have been uncommon for one of the entities in the IQ Group to pay the employees of another entity in the IQ Group; and (5) there are a number of shared labour agreements or arrangements as between entities in the IQ Group. 6 The Administrators have been provided with various corporate structure charts of the companies in the IQ Group. It is no understatement to describe the structure of the companies within the group as complex. As that structure is understood by the Administrators at present, the Four Companies are the holding companies of approximately 65 Australian subsidiaries and approximately 24 overseas subsidiaries. The Administrators are in the process of investigating the solvency of each of these subsidiaries. The Administrators have identified that the overseas subsidiaries in the IQ Group are registered in various locations including within the United States of America (USA) and the Cayman Islands. 7 The Administrators' investigations to date have also identified that various companies within the IQ Group hold valuable intellectual property, including patents and trademarks in relation to a number of pharmaceutical products. The Administrators have not yet undertaken a full valuation of the intellectual property held by those entities, but have been provided with an estimate. In short, they anticipate that the value of the intellectual property held by those companies in the group is likely to be very significant. 8 Mr Robinson has set out in some detail the steps which have been undertaken to date in advancing the administrations of each of the Four Companies, including the further investigations undertaken by them. It is not necessary for me to set those matters out in detail, save to note the following: (1) the Administrators have undertaken investigations in relation to the financial position of each of the Four Companies, including the identification of creditors. At present, in total, across the Four Companies, there is approximately $57 million owed to creditors; and (2) the Administrators have taken steps to seek expressions of interest seeking to sell the business and/or assets of the Four Companies and an advertisement calling for expressions of interest was published on 18 March 2022 in the Australian Financial Review. To date the Administrators have received seven responses to that advertisement. 9 The Administrators wish to ensure that all avenues for the possible sale, restructure and recapitalisation of the Four Companies have been explored and that they have sufficient time for any sale process or restructure to be formulated and considered by them. That is one of the principal reasons why they have formed the view that there will be a better outcome for creditors if the convening period is extended. 10 Mr Robinson opines that an extension will allow the business and/or assets of the Four Companies to be sold as a going concern or restructured. Mr Robinson also states that in his opinion, determining the appropriate sale and restructuring process is likely to take some time because of the complexity of the group structure and the way in which the intellectual property assets are held, that is, those assets are held by subsidiaries within the IQ Group and not by the Four Companies. Mr Robinson considers that, as a result, the sale process may necessarily involve a restructure or amalgamation, including a potential Chapter 11 process in the USA, and recognition of that insolvency process in Australia which will be time consuming. 11 Based on his experience, Mr Robinson believes that a person interested in a purchase or restructure of the Four Companies is likely to reduce their valuation of them if they cannot discount the possibility of claims against or debts owing by various companies within the IQ Group, and in particular, the shareholders of those companies holding the intellectual property. 12 Mr Robinson is also of the opinion that it is in the interest of the employees of Farmaforce and any of the IQ Group companies who are retained throughout the voluntary administration process for the extension of the convening period to be granted. They will have the benefit of continued employment and will continue to be paid in the ordinary course during that extended period. In addition if certain of the Four Companies' business and assets are sold as a going concern or restructured, including through a deed of company arrangement, there is likely to be a significant benefit to those employees who are transferred to the purchaser as they may retain their employment. Mr Robinson also believes that, because of their expertise and experience in the business, the retention of such employees by any purchaser may be a very important factor for a potential purchaser to take into account. 13 Mr Robinson opines that an extension of the convening period to facilitate the sale or restructure of the business and/or assets of the Four Companies may result in increased realisations for ordinary unsecured creditors and that their position will be significantly improved if a sale or restructure process is allowed to run its full course. 14 The Administrators have formed the view that an extension of the convening periods of the Four Companies by 90 days is appropriate. Mr Robinson has set out the reasons why that is so. They include because the Administrators need to undertake a number of time consuming tasks in order to understand both the value of the Four Companies and in particular, the intellectual property, and to consider alternative proposals put for the acquisition of their assets and/or their businesses and the structure by which that may be achieved, among other things. 15 Mr Robinson gives evidence that notice of this application has been given to creditors on two occasions: first, at the first meeting of creditors held on 22 March 2022 when it was signalled that it was likely that this application would be brought, and the basis for it. There was no objection raised by any creditor at that time; and secondly, by written notice sent to creditors on 1 April 2022 seeking any objections to the application by 4 pm on 5 April 2022. Again, no objections were received by the Administrators prior to this time.

Legal principles 16 The principles to be applied on an application to extend the convening period are well settled. In Re Riviera Group Pty Ltd (admins apptd) (recrs & mgrs apptd) [2009] 72 ACSR 352; NSWSC 585 at [13]-[18] Austin J relevantly said: [13] The reasons given for an extension in subsequent cases can be grouped into the following broad categories: • the size and scope of the business: Re Lombe; Babcock & Brown Ltd (admins apptd) [2009] FCA 349 (Re Lombe); Re Worrell; Storm Financial Ltd (recs and mgrs apptd) (2009) 69 ACSR 584 ; [2009] FCA 70 (Re Worrell); Re ABC Learning Centres Ltd; Application by Walker (No 5) [2008] FCA 1947; • substantial offshore activities: Re Lehman Bros Australia Ltd [2008] NSWSC 1132; • large number of employees with complex entitlements: Re S & D International Pty Ltd (in liq); Malhotra v Tiwari [2005] VSC 496; Re Ansett Australia Ltd and Korda; sub nom Ansett Australia Ltd (No 3) (FCR) (2002) 115 FCR 409; 40 ACSR 433; [2002] FCA 90; • complex corporate group structure and intercompany loans: Re Lombe; Re Octaviar Ltd (admins apptd) (recs and mgrs apptd) (ACN 107 863 436) [2008] QSC 272; Re LED Builders Pty Ltd (admin apptd) [2008] NSWSC 633; Hall; Re Australian Capital Reserve Ltd (admins apptd) [2007] FCA 1328; • complex transactions entered into by the company (for example securities lending or derivatives transactions): In Re Lift Capital Partners Pty Ltd (admin apptd) [2008] NSWSC 446 (Re Lift Capital); • complex prospects of recovery proceedings: Re Worrell; Coal Developments (German Creek) Pty Ltd v Cmr of Taxation (2007) 241 ALR 667; [2007] FCA 1324; • lack of access to corporate financial records: Re Sims; Destra Corp Ltd [2008] FCA 2002; Re Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192 ; [2007] NSWSC 363; • the time needed to execute an orderly process of disposal of assets: Re Carter, SFM Australasia Pty Ltd (admin apptd) (ACN 105 317 333) (No 2) [2009] FCA 419; Re ABC Learning Centres Ltd; Application by Walker (No 7) (2009) 71 ACSR 560; [2009] FCA 454; • the time needed for thorough assessment of a proposal for a deed of company arrangement: Silvia, Re Austcorp Group Ltd (admin apptd) [2009] FCA 636; • where the extension will allow sale of the business as a going concern: Re Lombe; Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, Re Kleins Franchising Pty Ltd (admin apptd) [2008] FCA 721; Re Uni-Aire Security Pty Ltd (admin apptd) [2006] FCA 1423; • more generally, that additional time is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No Pty Ltd (No 2) [2009] FCA 190; Re Fitzgerald; Primebroker Securities Ltd (admin apptd) (recs and mgrs apptd) [2008] FCA 1247; Re Vouris; Marrickville Bowling and Recreation Club Ltd [2008] FCA 622 . [14] The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator's estimate of time has a reasonable basis. [15] It is difficult to discern, especially in the most recent cases, any substantial remnant of the predisposition against extension. It is true that in Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, Barrett J adverted to "an expectation reflected in the case law that an administration should proceed very quickly and should not be unduly prolonged, particularly in view of the moratorium situation it involves", and he said "it is intended to produce a reasonably speedy fate for the company, one way or another: at [8] . But his Honour continued (at [10]): [10] The function of the Court on an application such as this is, as I see it, to strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders. [16] This "balancing test" has been applied frequently in later cases: for example Re Georges, Midas Australia Pty Ltd (admin apptd) [2009] FCA 38; Re Hayes; Estate Property Group Ltd [2007] FCA 935. If the approach is to "balance" the expectation of speedy administration against the risk of prejudice, there cannot be any predisposition in favour of speedy administration, for that would skew the balancing process. Rather, the cases suggest that where the administrator proves a substantial ground in any of the categories that I have set out, and there is no specific evidence of prejudice, an extension commensurate with the administrator's task will be granted, notwithstanding that the explanatory memorandum suggested that extensions would not be granted frequently. [17] It seems to me the degree of complexity of the administration is the key to understanding the court's current approach. ... [18] Where there is evidence of complexity of these kinds, it seems to me there is no place for a predisposition against extension. However, an important principle from the older cases remains good law: the applicant for an extension must adduce evidence establishing grounds, adequate to enable the court to carry out the balancing exercise about which the modern cases speak. The administrator is expected to explain with some particularity the problems that make the extension necessary: see Re Levi (1996) 19 ACSR 521; Allbuild Construction, above. Additionally, where there is a particular person or group who might be prejudiced by the extension that has been sought or the accompanying moratorium, evidence should be adduced about their position. Indeed, one can envisage cases where particular creditors who will be prejudiced by the extension should be notified of or joined as respondents to the application. The longer the extension that is sought, the more important it is for the court to be given a clear and complete explanation of the state of the administration, the grounds for the extension and any potential prejudice that would flow from granting it. 17 In Stimpson, in the matter of Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) v Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) [2016] FCA 935 at [6]-[11] Edelman J considered the countervailing circumstances identified in Riviera Group where his Honour relevantly said: 6 There is no express restriction upon the discretion to grant the extension of time. Prior to 31 December 2007 the convening period could only be extended by an application made during but not after the convening period: see Corporations Amendment (Insolvency) Act 2007 (Cth). 7 Although there is no express guidance upon the exercise of discretion, Lindgren J explained in Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 [18(a)] that an underlying objective is the need for speed of administration and the need 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: see also Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611, 612 (Young J); Re Geraldton Building Co Pty Ltd (Administrators Appointed); ex parte Trevor [2000] WASC 320 [5] (Owen J). This is a reason why the explanatory memorandum of the Corporate Law Reform Bill 1992 (Cth), at [507], expected that the power to extend the period would be exercised infrequently. This does not mean that there is any predisposition or presumption against an extension based upon speedy administration: Lord; in the matter of Tallwood Nominees Pty Ltd (Administrators Appointed) [2011] FCA 1118 [11] (Jacobson J). Rather, the need for an efficient and summary procedure is a factor to take into account; others being the desire not to "prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders": Re Diamond Press Australia Pty Limited [2001] NSWSC 313 [10] (Barrett J); see also Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77, 85 [42] (Lindgren J); Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 [5] (Austin J). 8 Although the discretion is unconstrained by any express statutory criteria, it should also be exercised judicially. This includes a requirement for consistency with other decisions. An important matter to be considered is the obligation upon an administrator to produce a report and an opinion for creditors setting out the matters in s 439A(4) together with the notice convening the meeting under s 439A(3). If the s 439A(5) convening period is not reasonably sufficient for the preparation of this report and the formation of this opinion then this will be a powerful factor supporting the grant of an extension. 9 In In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs apptd) [2009] NSWSC 585 [13], Austin J described a number of categories, by way of examples, where Courts had previously granted extensions. ... 10 The countervailing factors in the assessment of any of these matters include the inefficiency caused by delay and the consequence that while the voluntary administration continues, secured creditors, lessors and others cannot enforce their remedies: Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 [9] (Jacobson J). As I have said, another countervailing consideration will be where the Administrators can reasonably prepare and provide their report and statements to accompany the notice to creditors, including setting out their opinions as required by s 439A(4)(b) of the Corporations Act, to provide adequate advice to the creditors as required five days before the meeting: Pan Pharmaceuticals 84-85 [41] (Lindgren J); Re ABC Learning Centres Ltd (application by Walker) (No 7) [2009] FCA 454; (2009) 71 ACSR 560, 566 [28] (Emmett J). 11 As for the duration of any extension, the longer the extension that is sought the more difficult it may be to justify. Nevertheless, there will sometimes be circumstances in which a lengthy period is necessary. Where the sale process is relatively complex it is not unusual for an extension of up to three months to be granted: Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 [26] (Jacobson J). In exceptional cases, circumstances might justify a longer, even significantly longer period. For instance, in Re ABC Learning Centres Emmett J granted an extension of 10 months in most unusual circumstances which included assets which required a significant period of marketing to achieve maximum value (564 [20]). (Emphasis in original). 18 Most recently, the balancing exercise to be undertaken was considered in Algeri in the matter of WBHO Australia Pty Limited (Administrators Appointed) (No 2) [2022] FCA 234 at [16] where Beach J said: As I observed in Parbery, in the matter of NewSat Limited (Administrators Appointed) (Receivers and Managers Appointed) [2015] FCA 435 and in Secatore, in the matter of In-Fusion Management Pty Ltd (Administrators Appointed) [2016] FCA 1072, the Court has power to extend the convening period under ss 439A(6) and 447A, but in exercising this power the Court must have regard to the objects set out in s 435A, which seek to maximise the chance of the particular company under administration or as much as possible of its business continuing in existence, or if that is not possible, to achieve a better return for the company's creditors than would result from an immediate liquidation. A central question is whether additional time is likely to enhance the return to creditors, particularly unsecured creditors. But the power to extend the time should not be exercised lightly, let alone as a matter of course. But Pt 5.3A should be given a commercial construction and application which reflects the reality of the setting in which both the relevant company under administration and the administrator find themselves. The Court must balance the expectation that administration will be a relatively speedy and summary matter against the consideration that undue speed should not be allowed to prejudice constructive commercial actions directed to maximising the return for creditors. The perspective from which Pt 5.3A should be applied should not be narrow, and its application should not be refracted through the pessimistic lens of an insolvency technician. And in that context, generally there is usually greater upside than downside in granting an extension for a reasonable period, where the reasonableness of the duration of the extension is contextualised by the particular circumstances.

consideration 19 Having regard to the evidence before me, I am satisfied that this is an appropriate case in which the convening period should be extended for each of the Four Companies. I have reached that conclusion having regard to the following factors: (1) the size and scope of the business as is evident from Mr Robinson's evidence before me. The Four Companies are the ultimate holding companies of numerous other companies: approximately 65 Australian subsidiaries and 24 overseas subsidiaries and the Administrators are still in the process of investigating their solvency; (2) there is, based on the evidence before me, substantial offshore activity; (3) the evidence demonstrates that there is a very complex corporate group structure and interdependence of the companies between one another including the presence of intercompany loans; (4) there will clearly be extended time needed to execute an orderly process of disposal of assets. This is particularly so in circumstances where intermediate companies in the IQ Group, as opposed to the Four Companies, own valuable intellectual property rights which will be critical to any sale and in order to achieve an orderly sale of the businesses of the companies and/or their assets; (5) similarly, significant time will be needed for a thorough assessment of a proposal for a deed of company arrangement or other process required for a sale of the Four Companies' assets/businesses; (6) there is also evidence before me that an extension of time will more likely allow for the sale of the businesses as a going concern. It is clear from Mr Robinson's evidence that it is important that Farmaforce continue to trade in order to maximise return to creditors including by retention of its current employees; and (7) for all the reasons given above, the additional time is generally likely to enhance the return for unsecured creditors. 20 There is, to adopt the words of Austin J in Riviera Group, therefore, a substantial issue in respect of a number of the categories his Honour identified. In those circumstances there is, as his Honour observed, "no place for a predisposition against extension" on the part of courts. 21 In my opinion, an extension is clearly in the best interests of creditors, particularly as there is no practical possibility of the Administrators being in a position to address the matters required by s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) if an extension is not granted. On the other hand, there is no evidence of any likely prejudice to anyone if the extension is granted. 22 Finally, Mr Robinson has given evidence as to the length of the extension sought. I am satisfied that, given the complexity of the corporate group in which the Four Companies sit at the top, the nature of the assets and the process to be undertaken to achieve the best possible return in relation to them for the benefit of the creditors, a period of 90 days is appropriate.

conclusion 23 For those reasons I will make the orders sought by the Administrators. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.