T-S Capital Partners LLC v Paltar Petroleum Limited

Solicitor for the Plaintiff: Johnson Winter & Slattery

Counsel for the Defendant: J Giles SC with J Williams

Solicitor for the Defendant: Norton Rose Fulbright Australia

ORDERS NSD 1745 of 2018 IN THE MATTER OF PALTAR PETROLEUM LIMITED BETWEEN: T-S CAPITAL PARTNERS, LLC Plaintiff

AND: PALTAR PETROLEUM LIMITED (administrators appointed) Defendant

JUDGE: STEWART J DATE OF ORDER: 3 MAY 2019

1. The citation of the defendant is amended to be: "Paltar Petroleum Limited ACN 149 987 459 (administrators appointed)".
2. Pursuant to rule 39.05(h) of the Federal Court Rules 2011, the orders of this Court on 20 December 2018 are corrected by adding the following order: "11. Pursuant to section 459R(2) of the Corporations Act 2001 (Cth), the time within which the plaintiff's application for winding up of the defendant in insolvency may be determined is extended until 5.00 p.m. on 3 May 2019 or such further time as the Court may order."
3. The defendant's application by interlocutory process filed on 26 April 2019 is dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 Listed before me for final hearing is the plaintiff's claim for the final winding up of the defendant. The plaintiff seeks an order under s 459A in reliance on s 459P(1) of the Corporations Act 2001 (Cth) that the defendant be wound up in insolvency. 2 There are two matters that have to be dealt with before I get to the question of the final relief sought by the plaintiff. First, the plaintiff seeks by way of interlocutory application an order that orders made by the Court on a previous occasion when the matter was listed for final hearing be corrected under the 'slip rule' to extend time under s 459R(2) of the Act because the final hearing is outside the period of six months from when the application to wind up the defendant in insolvency was made as provided for in s 459R(1). 3 Secondly, two weeks prior to the final hearing for the winding up of the defendant, the defendant's directors adopted a resolution under s 436A of the Act appointing administrators to the defendant, i.e. placing the defendant into voluntary administration. The administrators apply before me under s 440A(2) of the Act to adjourn the final hearing for the winding up of the defendant until after the second meeting of creditors on the basis that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. 4 In the alternative, the administrators apply for a short adjournment of the final hearing for winding up for about a week to enable the proponents of a deed of company arrangement (DOCA) to demonstrate that they can make good on the proposal and to enable the administrators to further investigate its merits. That alternative application is made in reliance on s 467(1)(b) of the Act which gives the Court a broad discretion to adjourn the hearing of a winding up application.

Procedural background 5 The current proceeding for the winding up of the defendant was initiated in the NSW Supreme Court by an originating process filed on 12 June 2018 seeking that the defendant be wound up pursuant to s 461(1)(k) of the Act, i.e. that it is just and equitable that the company be wound up. At no stage during the Supreme Court proceeding did the plaintiff make an application to wind up the defendant in insolvency under ss 459A and 459P of the Act. 6 On 3 July 2018, the defendant made an application in the Supreme Court to have the proceeding transferred to this Court. That was on the basis that there was another proceeding already progressing in this Court which was said to be related. On 14 August 2018, Black J made orders for the transfer of the winding up proceeding to this Court. 7 The plaintiff filed its statement of claim in this Court on 12 October 2018. In the statement of claim, the plaintiff for the first time sought an order that the defendant be wound up in insolvency under s 459A of the Act. It was accepted before me, and appears to me to be correct, that 12 October 2018 is accordingly the date on which the "application for [the] company to be wound up in insolvency … [was] made" within the meaning of s 459R(1) of the Act. The consequence is that the six month period within which the application was accordingly required to be "determined" ended on 12 April 2019. 8 On 16 October 2018, the plaintiff filed its lay evidence. On 2 November 2018, being the day by which the defendant was required pursuant to orders made at the first case management hearing to file its evidence, the defendant filed an interlocutory application for summary dismissal of the proceeding on the basis that the plaintiff lacked standing to seek the winding up of the defendant. 9 At a case management hearing before Jagot J on 6 November 2018, orders were made setting a timetable for the hearing of the defendant's interlocutory application for summary dismissal, listing it for 28 November 2018, and providing for the filing and service of evidence on each side. 10 On 19 November 2018, the defendant informed the plaintiff of its intention to withdraw its interlocutory application for summary dismissal. Pursuant thereto, on 28 November 2018 orders were made dismissing the interlocutory application with costs. On that occasion, the plaintiff sought a hearing date for the determination of its relief for the winding up of the defendant. This was resisted by the defendant on the basis that the matter was not yet ready for final hearing. Following some debate, orders were made listing the proceeding for further case management on 20 December 2018 explicitly with a view to listing the matter on that occasion for final hearing. 11 At the case management hearing on 20 December 2018, the plaintiff sought to have the proceeding listed for final hearing at the earliest date available to the Court. An estimate of three days for the hearing was given. The parties were informed by Jagot J, to whom the matter was at that time docketed, that the earliest dates that were available were from 1 to 3 May 2019. Her Honour said that the next available dates thereafter were 17 to 19 June 2019. The defendant adopted the position that the proceeding was being listed prematurely because the entirety of the parties' evidence had not yet been filed and served. 12 No one appears to have been alive to the fact that the six month period provided for in s 459R would expire in the period between the case management hearing and the proposed listing at the beginning of May. Angus Hannam, the solicitor having the day-to-day carriage of the matter at the firm of solicitors retained by the plaintiff, was in court at the case management hearing instructing junior counsel. He explains on affidavit that he instructed junior counsel to accept the hearing dates of 1 to 3 May 2019 which were offered by Jagot J. He says that in doing so he did not realise that this would put the final hearing beyond the six month period. Because of that oversight, he did not instruct junior counsel to bring the necessary application to extend time under s 459R(2). Further, he says that he is informed by junior counsel who appeared that day that he too inadvertently overlooked s 459R. 13 As I have indicated, on 17 April 2019 administrators were appointed. On 24 April 2019, the administrators advised the plaintiff that they were proposing to bring an application for the proceeding to be dismissed under s 459R of the Act on the basis that the plaintiff's proceeding for the winding up of the defendant had not been determined within the requisite period of six months. 14 Mr Hannam says that he did not appreciate the oversight, i.e. failing to seek an extension under s 459R(2) of the Act, until the issue was raised by the administrators on 24 April 2019. Although there had been two case management hearings in the intervening period, on 13 February 2019 and on 3 April 2019, neither he nor junior counsel appreciated the difficulty on those occasions. It would seem that no one else did either. 15 On 29 April 2019, the plaintiff filed an interlocutory application to be heard at the commencement of the final hearing in which it sought the following relief which was not opposed by the administrators: Pursuant to rule 39.05 (e) or further or alternatively rule 39.05 (h) of the Federal Court Rules, 2011, an order that the orders made by Justice Jagot on 20 December 2018 be corrected by adding an order that, subject to further order, the time within which the plaintiff's application for winding up in insolvency may be determined be extended until 5.00 p.m. Friday 3 May 2019 or such further or other time as the Court deems fit.

The section 459R and slip rule application 16 Section 459R of the Act, relevantly provides as follows: 459R Period within which application must be determined (1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made. (2) The Court may by order extend the period within which an application must be determined, but only if: (a) the Court is satisfied that special circumstances justify the extension; and (b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires. (3) An application is, because of this subsection, dismissed if it is not determined as required by this section. 17 It is apparent that subsection (1) provides a definite period within which a proceeding for a company to be wound up must be "determined", but that subsection (2) gives the Court a discretion to extend that period, provided that the application is made within the period. The effect of subsection (3) is that the application is dismissed when the period expires. The result is that it is too late now for the plaintiff to apply for an extension of the period. It is accordingly constrained to seek the exercise of the Court's power to correct the orders that were made on 20 December 2018 when the matter was listed for final hearing by inserting an order extending the period. 18 The power to make such an order arises from the authority of superior courts at any time to correct an error in an order arising from a slip or accidental omission and may be invoked irrespective of whether the order has been drawn up, passed and entered: L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] [1982] HCA 59; 151 CLR 590 at 594-595 per Mason ACJ and Wilson and Deane JJ. 19 In this Court, that authority is now embodied in rule 39.05 of the Federal Court Rules 2011 (Cth) which relevantly provides as follows: 39.05 Varying or setting aside judgment or order after it has been entered The Court may vary or set aside a judgment or order after it has been entered if: … (e) it does not reflect the intention of the Court; or … (h) there is an error arising in a judgment or order from an accidental slip or omission. 20 The slip rule does not only apply to an accidental slip or omission by the court; the actions of parties as they impact on orders of a court are similarly covered under the slip rule: L Shaddock at 594. 21 The Full Court of this Court in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd [1995] FCA 943; AustLII citation [1995] FCA 1685; 61 FCR 385 considered the interaction between s 459R of the Act and the slip rule which was then contained in Order 35 rule 7(3) of the former Federal Court Rules 1979 (Cth). 22 In rejecting a submission that the slip rule was not available after the end of the six month period, Lockhart J (with whom Black CJ agreed) explained that on the application of the slip rule the later order corrects the earlier order, and speaks from the date of the earlier order, which then operates with full force as corrected; the slip rule operates with retrospective operation, correcting the earlier order (at 391G). 23 Lockhart J (at 392D-E) identified that the time period provided for in s 459R and the requirement that an application for the extension of time be made within that period: reflect the intention of the Parliament that applications to wind up companies … must be dealt with promptly. This evident purpose of the Parliament is not denied at all by the exercise by the court of its power under the slip rule to correct accidental slips when justice requires that this be done. The Court has a discretion which it would be loath to exercise except in clear cases. Prejudice to parties to the litigation, or to third parties, arising from uncertainty caused by a delay in seeking to have the mistake corrected is one obvious matter which must be taken into account by the Court in the exercise of its discretion. But this says nothing about the power of the Court to make an order under the slip rule. 24 Lindgren J also held that the slip rule has application in the context of s 459R (at 405F-406A). 25 The Full Court in Flint v Richard Busutill & Company Pty Ltd [2013] FCAFC 131; 216 FCR 375, per Allsop CJ and Katzmann and Perry JJ, held that the slip rule could be properly invoked in the context of the analogous provision in the Bankruptcy Act 1966 (Cth), viz. s 52. In dealing with the argument that the slip rule cannot operate in such a context because the original decision which is sought to be corrected by operation of the rule is a discretionary one in respect of which the subsequent court cannot conclude how that discretion would have been exercised, their Honours identified the applicable test (at [46]): Second, if the surrounding circumstances are such (as they can be taken to have been in Elyard) that it can be concluded that proper attendance to the matter (had the error not occurred) could only have resulted in the discretion being exercised in one way, it is difficult to see why the rule should not apply in the same way that it would if the discretion had been exercised and there had been a mere failure to record it. As Lockhart J said in Elyard at 392, the purpose of the rule is to avoid injustice. 26 Thus, I have the power under the slip rule to correct the orders of 20 December 2018 by inserting an order to extend time under s 459R. However, to exercise that power I must be satisfied that the issue was not raised as a result of an accidental slip or omission by either the plaintiff's lawyers or the Court. In addition, I must find that had the issue been raised before Jagot J on 20 December 2018 an application under s 459R(2) would have been made on that occasion and the discretion would have been exercised to extend time to the final hearing of the proceeding to wind up the defendant. 27 I accept the evidence of Mr Hannam referred to above that both he and his junior counsel made a mistake in failing to attend to the matter of extending time for the winding up application to be determined under s 459R when setting the matter down for hearing. There is nothing before me to suggest that they had in fact decided to not make such an application, and indeed it would have been highly illogical for them to have done so. 28 I am also satisfied, and it is indeed obvious, that in fixing the matter for hearing on 1 to 3 May 2019, Jagot J was intending that there would still be a winding up application on foot. There would otherwise have been no point at all in listing the matter for those dates. See Polygram Pty Ltd v CEL Entertainment Pty Ltd [1998] FCA 779; 157 ALR 156 at 159 ln 20 per Emmett J for an example of the same reasoning. 29 It seems to me clear that if the effect of s 459R(1) and (3) had been raised on 20 December 2018, one of two things would have occurred. Either the final hearing would have been listed for a date such that it could be determined prior to the expiry of the six month period on 12 April 2019, or, if the hearing was listed outside the six month period, an application to extend time under s 459R(2) would have been made and the discretion would have been exercised to extend time until at least the conclusion of the final hearing. 30 In the event, Jagot J explained to the parties that there was no time available to the Court prior to the dates that were ultimately listed which were outside the six month period. In those circumstances, it follows that had the issue been raised before her Honour, Jagot J would inevitably have extended time to at least the conclusion of the final hearing. There does not appear to be any credible basis upon which it might be contended that had the issue been raised an earlier date would have been found for the hearing. That is not only because of what Jagot J said about available dates (see [11] above), but also because, as I deal with below, there were special circumstances justifying granting an extension of time. 31 The special circumstances justifying the extension of time include the following. First, as explained, there was no date available within the six month period for the Court to hear and determine the matter. Secondly, at least some of the delay in bringing the matter to final hearing, which is what caused part of the six month period to pass, arose because of the defendant's application for summary dismissal of the matter which it subsequently abandoned. Thirdly, at the case management hearings on 28 November 2018 and 20 December 2018, the defendant resisted the matter being listed for final hearing. Thus, it was substantially the conduct of the defendant that caused the matter to be listed only after the six month period had expired. 32 In the circumstances, I am satisfied that this is a proper case in which I should invoke rule 39.05 to extend the time by which the plaintiff's winding up application is to be determined. This will avoid the "futile and nonsensical" result (see Elyard at 396C) if the orders that were made on 20 December 2018 were not corrected by adding an order extending time until 5.00pm on 3 May 2019 or such further time as the Court may order. 33 The error in this case did not have the effect that the orders that were made do not "reflect the intention of the Court" within the meaning of paragraph (e) of rule 39.05 because the Court never considered whether it was required to extend the time under s 459R; because of the slip or omission the Court simply had no consciousness of, let alone intention on, the matter. Rule 39.05(e) is accordingly not applicable. The error does however arise from "an accidental slip or omission" within the meaning of paragraph (h) of the rule, which is thus the provision under which I make the correction. 34 As the need for the application to extend time and the invocation of the slip arose from delay in the final hearing being listed caused by the defendant and the oversight of the plaintiff with regard to the six month period, I consider it most appropriate to make no order for costs on the slip rule application. Indeed, the plaintiff did not seek costs.

Introduction to the adjournment application 35 On 26 April 2019, the administrators of the defendant on behalf of the defendant filed an interlocutory process seeking, relevantly, the following orders which were opposed by the plaintiff: 2 …, an order that the Plaintiff's application to wind up the [defendant] be adjourned until 4 June 2019, pursuant to section 440A(2) of the Act. 3 In the alternative, an order that the Court exercise its discretion to adjourn the winding-up application pursuant to section 467(1) of the Act. 36 The adjournment under s 440A(2) was sought to 4 June 2019 or thereafter on the basis that the second meeting of creditors must take place by no later than 3 June 2019 (unless time is extended by the Court). It was explained to me on behalf of the administrators that only two realistic outcomes of the second meeting of creditors can be expected, namely acceptance of a DOCA by the creditors, or the winding up of the company. The evidence of the administrators was that it is not foreseen that there is any reasonable prospect that the creditors might at their second meeting return the company to the directors. 37 It was further explained that the alternative adjournment, being that under s 467(1), would be for a short period of time, say a week or two, in order for the current proponents of a DOCA to shore up their proposal by demonstrating that they are likely to be able to deliver on it. It was said that such a short adjournment would also enable the administrators to further investigate the merits of the DOCA proposal. 38 It was accepted by the administrators that in the event that I refuse the application for an adjournment it is inevitable that the company would be wound up in the principal case.

The applicable principles under s 440A(2) and s 467(1)

Section 440A(2) 39 Section 440A(2) of the Act relevantly provides as follows: 440A Winding up company … (2) The Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. 40 As the text of s 440A(2) makes plain, if I am satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up, I must adjourn the hearing of the application for an order to wind up the company. The critical enquiry to which I am directed is accordingly as to the interests of the company's creditors in the two competing scenarios, being continuation under administration or winding up. 41 Significantly for present purposes, it is the interests of the creditors qua creditors with which the court is concerned: Deputy Commissioner of Taxation v Alternative Business Solutions (Aust) Pty Ltd (administrators appointed) [2006] FCA 400; 24 ACLC 435 per Lindgren J at [9]. 42 The only appellate level authority to which I was referred which deals with the nature of the relevant test is Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456, a judgment of McPherson JA (with Davies and Pincus JJA concurring) for the Queensland Court of Appeal. His Honour held at 457 that "one would expect that there would have to be some persuasive evidence to enable it to be seen that there were assets which, if realised under one form of administration rather than the other, would produce a larger dividend, or at least an accelerated dividend for the creditors". 43 That observation has been picked up and approved in many first instance judgments across various superior courts. One such instance is by Brereton J in In the Matter of Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296 at [4]. At [6], his Honour observed that what is required by the section "is satisfaction that it is in the interests of the company's creditors for the company to continue under administration, rather than be wound-up, as distinct from satisfaction that it may be so". His Honour went on to say that that reinforces the view that a "substantial degree of persuasion" that administration rather than liquidation is in the interests of the company's creditors is required to invoke the section. 44 At [15] his Honour said that: it cannot go without observation that when a manifestly insolvent company appoints voluntary administrators following resistance to a creditor's statutory demand and the initiating of winding-up proceedings, the court approaches with a degree of scepticism whether the appointment is not an attempt as a last resort to avoid the consequences of liquidation. … the circumstances that an application under s 440A follows an application to set aside a creditor's statutory demand, and the initiation of winding-up proceedings before administrators were appointed, places it in a class where that scepticism is attracted. 45 Black J in Weriton Finance Pty Ltd v PNR Pty Ltd (in administration) [2012] NSWSC 1402; 92 ACSR 88 at [16] expressed the matter thus: Generally, an adjournment under s 440A(2) of the Corporations Act requires that the court is satisfied that it is in the creditors' interests to continue the administration in all the circumstances, and this requires that there be sufficient possibility, as distinct from mere optimistic speculation, that creditors' interests will be accommodated to a greater degree in an administration than in a winding up. 46 His Honour adopted (at [20]) what had been stated in this Court by Greenwood J in Sunstate Orchards Pty Ltd v Citrus Queensland Pty Ltd [2009] FCA 452 at [28]. Referring to the hope that creditors might have to get more by way of payment of the debts from administration rather than liquidation, Greenwood J stated as follows: The hope must however be a real and not remote possibility, unclouded by cascading contingencies all of which must fall in before an asset might become available to the creditors as a group. 47 In David Lambourne Yacht Rigging & Consultancy Pty Ltd v Perry Catamarans Pty Ltd (receivers and managers appointed) [2006] FCA 887; 58 ACSR 155, Greenwood J at [8]-[9] adopted, amongst others, the following formulations relevant to the test: there would have to be "some persuasive evidence" of the benefit to creditors on administration; "there must be a sufficient possibility, as distinct from mere optimistic speculation" that the adjournment would be in the interests of creditors; there must be "a real prospect of benefit" from the adjournment. 48 I adopt the principles and guidance with regard to the applicable test as identified above.

Section 467(1) 49 Section 467(1) provides as follows: 467 Court's powers on hearing application (1) Subject to subsection (2) and section 467A, on hearing a winding up application the Court may: (a) dismiss the application with or without costs, even if a ground has been proved on which the Court may order the company to be wound up on the application; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim or other order that it thinks fit. 50 There may be some uncertainty with regard to the exact reach of the discretion conveyed by s 467(1)(b) to adjourn an application for winding up, and in particular its relationship to the discretion that the court in any event has to control its own process and its relationship to the requirement to adjourn an application for winding up in certain circumstances under s 440A as dealt with above. 51 Section 467(1)(a) clearly enough grants to the court the discretion to dismiss an application for winding up even if a ground has been proved on which the court may order the company to be wound up. It has been held that the court may, in the exercise of its discretion, adjourn the application when it is credibly asserted that the company has good prospects of recovery in order to allow time to elapse "for the aspirations of the company or its directors to be realised": Crema (Vic) Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd [2006] VSC 338; 58 ACSR 631 at [168] per Dodds-Streeton J in the Supreme Court of Victoria citing Re Presha Engineering (Aust) Pty Ltd (1983) 1 ACLC 675 at 677 per Murphy J also in the Supreme Court of Victoria. The administrators do not put the case on this basis, i.e. that the company has good prospects of recovery. 52 In Fire & All Risks Insurance Co Ltd v Southern Cross Exploration NL (No 3) (1986) 4 ACLC 447, Hodgson J in the Supreme Court of New South Wales granted an adjournment in circumstances where the company had substantial assets, the adjournment sought was short and particular problems which had contributed to its inability to pay its debts may have been due to the activities of another company and its controller. Equally, in the present case the administrators do not put their case on the basis that there is a realistic prospect that the company will be able to pay its debts after the adjournment. 53 Whilst s 440A(1) requires the court to adjourn a winding up application if it is satisfied that it is in the interests of creditors for the administration to continue rather than for the company to be wound up, it says nothing about the power that the court has to adjourn a winding up application as an exercise of discretion even if it is not satisfied that it is in the interests of creditors for the administration to continue rather than for the company to be wound up. It is the latter circumstance that presents itself in this case. That is to say, if I do not grant the longer adjournment because of an absence of satisfaction such as would require that adjournment under s 440A(1), can I nevertheless grant a short adjournment - not on the basis that it is in the better interests of creditors for the administration to continue but rather to enable further investigation to be done in order for a better assessment of those interests to be made on a later occasion? 54 The answer to that question is 'yes'. I agree with the reasoning of Perram J in Deputy Commissioner of Taxation v Polcarp Pty Ltd [2011] FCA 1142 at [4] in that regard. See also Deputy Commissioner of Taxation v Fyna Constructions (Hire & Sales) Pty Ltd (administrators appointed) [2019] FCA 578 per Griffiths J at [21]. 55 It seems to me that the discretion to adjourn winding up proceedings under s 467(1)(b) of the Act cannot be broader than the general discretion that the court in any event has as an incident of its inherent power to control its process. That discretion must be exercised judicially taking into account any relevant considerations including the interests of justice and fairness to the parties. It would also take into account the interests of creditors. 56 I therefore propose to decide the alternative application for a short adjournment on that broad basis.

The case for an adjournment: background 57 I will now return to some of the background circumstances relevant to my consideration of the administrators' adjournment application. 58 The plaintiff is a limited liability company based in California, USA. It is a contributory of the defendant within the meaning of ss 459P(1)(c) and 462(2)(c) of the Act, and it claims to be a creditor of the defendant. It holds approximately 7 million shares in the defendant which comprise approximately 5% of the issued share capital of the defendant. 59 It was not disputed before me that the plaintiff is a creditor of the defendant by way of an assignment of a debt previously owed to Sigma Cubed Inc, although on the pleadings in the winding up application it is not admitted that that debt is due and payable. The plaintiff's claim is said to be in the sum of $3,706,838. 60 The defendant is an unlisted public company engaged in the business of acquiring and exploring for unconventional oil and gas projects in the Northern Territory. 61 The plaintiff tendered an expert report of a Chartered Accountant, Said Jahani of Grant Thornton, dated 7 February 2019. On the basis of limited material available to him at that time, Mr Jahani concluded that the defendant was insolvent from at least 9 August 2017 and has remained insolvent since that date. 62 The plaintiff tendered a supplementary report by Mr Jahani dated 29 April 2019. That report was prepared on the basis of a fuller set of information, in particular the defendant's MYOB management information system file prepared to April 2019. Having regard to the additional material, Mr Jahani confirmed his previous conclusion that the defendant was and remained insolvent from at least 9 August 2017. 63 The plaintiff tendered Payables Reconciliation Summaries from September 2016 through to April 2019 from the defendant's financial records. Those showed that the defendant's total current indebtedness to have steadily risen across that 32 month period from approximately $6.8 million in September 2016 to $9.8 million in April 2019. They also show that of the total current indebtedness each month, in all but five months 90% or more of the indebtedness was more than 90 days overdue. In the five months when less than 90% of the indebtedness was more than 90 days overdue, on each occasion 88% or more of the indebtedness was more than 90 days overdue. Moreover, the proportion of the indebtedness more than 90 days overdue was 95% or in the 16 months. 64 It is apparent from an analysis of the list of creditors that many of the debts were overdue across the total period under consideration. That included, by way of example, a debt in the sum of $11,550 owed to Andrew Quigley & Co, former solicitors for the company. Other evidence showed that that relatively insignificant debt had been outstanding since approximately 30 June 2013. 65 In the circumstances, there is at this stage at least a strong prima facie case that the defendant is insolvent and should be wound up - it is apparently not able to pay its debts as and when they become due and payable: s 95A of the Act. 66 The administrators relied on the affidavit of one of them, Ryan Eagle. The other administrator is Peter Gothard. Mr Eagle's evidence includes the following. 67 A first meeting of creditors was held on 30 April 2019. The total value of the debts of creditors in attendance at the meeting was $16,143,388, whereas the defendant's records indicate total creditors in the amount of $20,350,719. 68 Mr Eagle explained that in his opinion it is in the interests of the defendant's creditors for the defendant to continue under administration rather than be wound up on account of the following three considerations. First, "there is potential" for a DOCA to be proposed which "appears to have a realistic prospect" of maximising the chances of the defendant continuing in existence and delivering a better return for creditors and members than would result from an immediate winding up of the defendant. Secondly, it would be beneficial for the general body of creditors to have the opportunity for the administrators to investigate the affairs of the defendant, including to explore the proposed DOCA terms and outcomes and potential outcomes in a liquidation scenario and provide creditors with a second report to enable them to make an informed decision about what is in their best interests. Thirdly, the plaintiff will not "as creditor" suffer any prejudice in allowing the administration of the defendant to continue. 69 I will deal with each of these considerations in turn.

The potential DOCA 70 Mr Eagle says that he invited the directors of the defendant and the plaintiff to make any DOCA proposals, and that he intends to invite such proposals from the general body of creditors and the general public in due course. Save for the one proposal that he has received, he has not identified any others that might reasonably be expected to be received. 71 The defendant's directors and certain creditors of the defendant associated with those directors (referred to as the "related creditors") and Beetaloo Partners LLC, a corporation incorporated in Wyoming, USA, provided a DOCA proposal to the administrators. The proposal is dated 30 April 2019, i.e. the day before the matter came before me, and was subsequently updated with a revised proposal of the same date, which was tendered. 72 Mr Giles SC, who appeared with Ms Williams for the administrators, rightly accepted on behalf of the administrators that the proposal in its current form is not adequate. In particular, he said that there is uncertainty in performance risk about it. Mr Giles accepted that elements of the DOCA proposal are "more than speculative", but he submitted that since it has been proposed, it is in the interests of creditors to at least consider it. 73 Mr Eagle's evidence is that the related creditors, who are proponents of the DOCA proposal, have debt claims of approximately $9,779,454. They propose a debt for equity swap such that they would not prove in the DOCA and would not receive a dividend to creditors, but would receive additional shares in the defendant. The result is that the remaining claims would be approximately $11 million. Those would have to be met, to the greatest extent possible, from the proposed DOCA fund. In assessing whether it will be in the interests of creditors for the company to continue in administration rather than to be wound up, a central consideration is the extent to which the non-related creditors will be paid their $11 million from the DOCA fund compared with what they might be paid in insolvency. 74 Under the proposal, the DOCA fund would be constituted from the following assets, each of which I will consider in turn - using the numbering from clause 2 of the DOCA proposal. (i) 500,000 ordinary shares in Fortem Resources Inc owned by the defendant: 75 The proposed DOCA offers 500,000 ordinary shares in Fortem Resources Inc owned by the defendant to be included in the DOCA fund. A few days before the hearing those shares were trading on the Toronto Stock Exchange Venture at C$2.35, being approximately $2.48. Mr Eagle said that he understands that Fortem is a thinly traded stock and documentary evidence was tendered supporting that view. Mr Eagle accepted that a sale of a significant volume of that stock would likely be at a discount, although at this stage he is unable to say to what extent such a discount might be. 76 Whilst Mr Giles said that the shares may be worth approximately $1 million, in truth that is a guess at this stage. There is simply insufficient evidence to say how much the shares are worth. But even if they are taken to have a value of $1 million taken with the other realistically realisable proposed assets for the DOCA fund, the fund is still likely to fall well short of $11 million. (ii) 900 million ordinary shares in Nation Energy Inc owned by the defendant: 77 The proposed DOCA offers 900 million ordinary shares in Nation Energy Inc owned by the defendant to be included in the DOCA fund. That constitutes approximately 86% of the share capital of Nation. Mr Eagle states that those shares are currently trading at approximately US$0.04 per share, giving a nominal value of approximately US$36,000,000. 78 Mr Assaf SC, who appeared with Mr Simpkins for the plaintiff, tendered a letter dated 11 March 2019 from the Secretary of State of the State of Wyoming which certifies that Nation was administratively dissolved on that day for failure to deliver its 2019 annual reports or pay the annual licence tax to the Secretary of State. Moreover, there is expert financial analysis in evidence that shows the stock to be illiquid and that Nation Energy is itself in financial difficulty. 79 On that basis, Mr Giles accepted that the shares in Nation may be worthless. They can be disregarded for present purposes as there is no persuasive evidence of their value. (iii) 1,500,000 Fortem shares securities loan 80 Mr Eagle gave evidence that the administrators have been provided with a securities loan executed on 18 April 2019 in respect of 1.5 million Fortem shares. The terms of the securities loan would permit the administrators to apply the shares at their discretion in various ways including: (a) as collateral for any financial accommodation provided to the defendant or the administrators; (b) to be realised and applied to repay or otherwise satisfy any financial accommodation provided to the defendant or the administrators; (c) to be realised and applied to fund the administrators' costs or any DOCA fund agreed to by the funder; or (d) to be returned to the funder. 81 The funder was initially identified as Beetaloo, but that was subsequently corrected. It is apparently MAB Resources Holdings LLC. The securities loan deed that was tendered has been executed by MAB but not by the administrators. It is dated 30 April 2019. 82 Given the uncertainty in the value of Fortem shares, particularly if such a large tranche of shares, being three times the size of the tranche dealt with above, were traded at once, there is much uncertainty as to the value or utility that might be attached to the securities loan. The administrators did not contend otherwise. The uncertainty is not made any better by the confusion as to whether it is Beetaloo or MAB which makes the offer and the insufficiency of evidence of their capacity to perform. (iv) and (v) $100,000 indemnity plus further $900,000 indemnity 83 On 29 April 2019, the administrators were provided with a funding deed executed by Beetaloo for an amount of $100,000, which is to be increased by $900,000 as soon as possible and in any event in not more than 30 days. Mr Eagle said that the first tranche of $100,000 has been paid into his solicitor's trust account. There is an indicative letter of offer dated 30 April 2019 indicating a proposal by RA Diversified Investments Trust to lend the balance of $900,000 to one of the DOCA proponents, who would then presumably make it available to the administrators. There is still evident uncertainty in that arrangement. (vi) $5 million proposed equity capital raising 84 The DOCA proponents propose to seek to raise $5 million from an equity capital raising plan designed to exploit the potential value of the defendant's rights in petroleum exploration permits and its rights under a Joint Venture Operating Agreement (JVOA) with Sweetpea Petroleum Pty Ltd and some Earning Agreements. 85 The defendant holds exploration permits for petroleum extraction projects in the Northern Territory issued by the Northern Territory Government under the Petroleum Act 1984 (NT). The defendant owns some of the exploration permits outright, but some of them it owns jointly with Sweetpea under the JVOA. 86 Mr Eagle says that he has not yet had the opportunity since his appointment to commission a valuation of the exploration permits and that it would take some weeks to complete such a valuation. He does however point to some other evidence which suggests that the permits subject to the JVOA with Sweetpea were valued in July 2017 at over $770 million and that the combined value of the other exploration permits was $30 million. 87 I will return to the exploration permits and the JVOA, but in the meantime insofar as the proposal to raise equity is concerned, the administrators tendered a letter dated 12 March 2019 from New Margin Ventures in Shanghai, China, to the managing director of Beetaloo which constitutes an offer to provide a funding facility to Beetaloo to invest in the defendant. The administrators also tendered a term sheet dated 27 March 2019 between Beetaloo and the defendant by which the former would subscribe to shares in the latter. 88 The offer from New Margin Ventures is conditional upon a due diligence which Mr Eagle said would likely require the winding up proceeding and the disputes regarding the Earning Agreements referred to further below being resolved. Further, the term sheet is subject to a number of conditions precedent including that the winding up proceeding is dismissed, that the Court declares that the defendant is solvent, or that the winding up proceeding is stayed or otherwise concluded in favour of the defendant. Further, there are additional conditions precedent including one requiring due diligence of a number of the exploration permits and of the defendant. 89 All of this points to considerable uncertainty with regard to whether the planned raising of $5 million is realistic, particularly having regard to the amount of time that has passed since the proposal appears to have been mooted and the present. (vii) $450,000 GST refund 90 The defendant is apparently due a refund on GST in the amount of approximately $450,000. It is proposed that this amount be included in the DOCA fund. This is the most certain aspect of the proposal, but unfortunately the sum available is not particularly significant relative to the debts to be paid from the fund.

Conclusion on the DOCA proposal 91 In my judgement there is too much uncertainty in the DOCA proposal. That is both with regard to whether it can be performed by those who propose it, and also with regard to its details. I am simply not in a position to be satisfied that it might reasonably materialise and produce a better result for creditors. Moreover, the administrators have not pointed to anything significant that is likely to change in the next week or so which might give greater certainty and might therefore give me greater satisfaction.

Opportunity to investigate 92 It will be recalled that the second reason given by Mr Eagle for holding the view that it is in the interests of the creditors for the company to continue in administration rather than be wound up is that it would be beneficial for the general body of creditors to have the opportunity for the administrators to investigate the affairs of the defendant, including to explore the proposed DOCA terms and outcomes and potential outcomes in the liquidation scenario and provide creditors with a second report to enable them to make an informed decision about what is in their best interests. 93 I have already dealt with the DOCA and its uncertainty. It must also be observed that the proponents of the DOCA have had a very long time to come up with a solution to the defendant's liquidity difficulties. Even leaving aside the time before then, the winding up application has been listed for final hearing since before Christmas. They have however left it until only two weeks before the final hearing to put the defendant into administration and have only thereafter made a DOCA proposal. On the authorities I have referred to, that is a reason for some scepticism with regard to the value to creditors in the administration continuing.

Prejudice/benefit to the plaintiff 94 It will be recalled that the third reason given by Mr Eagle for holding the view that it is in the interests of the creditors for the company to continue in administration rather than be wound up is that, so he asserts, the plaintiff will not suffer any prejudice if the administration of the defendant continues. 95 This does not seem to me to be a relevant consideration under s 440A(2). It is the interests of the creditors as a whole that I am concerned with, and not prejudice to the plaintiff in isolation. 96 However, insofar as a short adjournment as an exercise of my broader discretion is concerned, prejudice to the plaintiff is a relevant consideration. 97 On this point, the administrators assert contradictory positions. On the one hand, they say that the plaintiff as "a creditor or contributory" will not suffer any prejudice if the company continues in administration, but they also say that in the event that the company is wound up the plaintiff may receive a windfall not as creditor but as purchaser of 100% of the capital stock in Sweetpea. They raise that as a consideration in favour of administration and against winding up. The contention is that under the terms of the JVOA, winding up of the defendant will have the result that the defendant's interests in the jointly owned exploration permits will be lost in favour of Sweetpea. It is said that the plaintiff is uniquely placed to benefit from the defendant's winding up because the plaintiff now effectively owns the assets of Sweetpea, including its interest in the JVOA exploration permits. 98 I have already identified that under s 440A(2) I am concerned with the interests of the creditors qua creditors, and not with their interests in other capacities which may arise from commercial relationships that they have with other parties who in turn have relationships with the defendant. It is therefore not relevant to my consideration that the plaintiff may in some other capacity benefit from the winding up of the defendant. As an aside, I should emphasise that I make no finding on whether the plaintiff will actually benefit in that other capacity in the event that the defendant is wound up; not only is there considerable uncertainty and speculation on the limited evidence before me with regard to the effect of the winding up on what will occur with the exploration permits under the JVOA, but I do not need to make any such findings because, as I have explained, they are not relevant to my consideration. 99 If the administrators' contentions with regard to the plaintiff's unique interests in the winding up of the defendant are good, then the plaintiff will suffer prejudice in the event that I adjourn the winding up hearing. As I have said, this may be prejudice that is relevant to my consideration of the alternative application for a short adjournment. However, I prefer to decide that application on a different basis without taking into account any prejudice that there may be to the plaintiff aside from the fact that it has pursued the proceedings for the winding up of the defendant over a long period of time, it has had the dates for a final hearing set for many months, and in the absence of adequate reasons for an adjournment of the final hearing it is entitled to have its case heard. This prejudice weighs against the possible and somewhat speculative benefits of an adjournment for which the administrators contended.

The consequences of winding up 100 In addition to the three reasons given by Mr Eagle for preferring the continued administration of the defendant that I have dealt with above, the administrators adduced evidence with regard to the likely outcome for creditors of a winding up of the defendant. On the basis of that evidence they submitted that the creditors of the defendant may be better off in administration rather than in liquidation. I now turn to consider that evidence.

Realisation of the value of the exploration permits 101 Mr Eagle explains that at this stage of his investigations it appears to him that there is "significant uncertainty" as to whether there would be any realisation of the value of the exploration permits for the benefit of creditors in the event that the defendant is wound up in insolvency. He says that it appears to him that there is a "real risk and significant uncertainty" as to whether the defendant would lose its right, title or interest in the permits that it owns outright and those that it shares with Sweetpea, if the defendant is wound up. 102 I have given consideration to the basis upon which it is contended that the defendant may lose its interest in the exploration permits in the event of a winding up. It appears that that is a possibility, but it is also the case that it may be that the defendant is already in that predicament as a consequence of it having been put into administration. There is a lot of uncertainty on the present state of the evidence as to these possible outcomes. I am simply not in a position to conclude at this stage that the value of the exploration permits will not be lost under administration but will be lost under liquidation. In that regard, I note that Mr Eagle states that there is "significant uncertainty" as to whether the value of the permits will be lost. I concur with that view. 103 In any event, the case for the value of the JVOA exploration permits being lost under the terms of the JVOA is stronger than the case for the value of the exploration permits that are wholly owned by the defendant being lost. The latter case, as I understand it, turns on the determination of the relevant Minister as to whether on account of the defendant being in administration (or having been in administration), the defendant is an "appropriate person" under legislation in the Northern Territory that has not yet come into force. The uncertainties in all of that are manifest. 104 Of course, if the value of the wholly owned exploration permits is not lost to the defendant in liquidation, on the administrators' best current evidence of the value of those permits, $30 million will be available in the liquidation. That is amply sufficient to pay the defendant's debts.

Claims against Sweetpea 105 Mr Eagle gives evidence that in August 2018, Sweetpea commenced proceedings against the defendant in the Supreme Court of New South Wales seeking certain declarations and an injunction with regard to the JVOA. In November 2018, the defendant filed a cross summons and cross-claim against Sweetpea seeking, amongst other things, payment of the sum of $69,735,604. 106 It was submitted for the administrators that if the defendant is wound up, there is a real risk that the liquidators will not proceed with that litigation including for lack of funds. In contrast, the capital raising under the DOCA proposal is premised on the preservation of the defendant's rights and interests in the exploration permits and the JVOA, including its rights in the proceedings against Sweetpea. 107 The difficulty with this is, first, that Mr Eagle says that he does not have a view, and is uncertain, about the defendant's prospects in those proceedings. Secondly, it is entirely speculative whether the liquidators would or would not be funded to pursue the claim. Presumably, the better the merits of the claim the greater the prospect of funding for the litigation. This factor is therefore neutral.

Earnings Agreements 108 Mr Eagle says that he has been informed by the directors of the defendant that the defendant is party to six Earning Agreements with Nation Energy (Australia) Pty Ltd (Nation Australia). He says that the Earning Agreements appear to provide a mechanism for the defendant to raise funds through both cash and share considerations from Nation Australia. In return, Nation Australia is given the right to earn interests in any production licences that may be granted to the defendant covering certain areas referred to in the JVOA. 109 Mr Eagle goes on to say that he has not been able to form a concluded view of the defendant's entitlements under the Earning Agreements, and that those are in any event the subject of other litigation in this Court (in proceeding NSD 2078/2017). He also says that the defendant may have rights to be paid funds slightly in excess of $2 million which can be pursued under the Earning Agreements by the defendant but not by a liquidator because it may be that the defendant will lose its benefits under the Earning Agreements in the event that it is wound up. 110 Once again, this is all highly speculative and uncertain.

Claims against the directors 111 As I have indicated, there is at least prima facie evidence that the defendant has been insolvent over a considerable period of time. It has continued to incur debts in that time. That raises the possibility of liquidators of the defendant, if it is wound up, pursuing claims against the directors under s 588G of the Act. The plaintiff points to this possibility as a consideration in favour of the creditors' interests in liquidation as opposed to administration. 112 Whilst there is something to be said for this consideration, it is also speculative and uncertain at this stage. Accordingly, I do not give it much weight.

Conclusion 113 From what I have set out above, I cannot be satisfied that it is in the creditors' best interests for the administration to be allowed to continue and the winding up application adjourned, rather than allowing the company to be wound up. I have given consideration to the fact that the defendant is now in the hands of experienced and reputable administrators who have control of it and its affairs, and that it is not presently trading with the result that it is not continuing to incur significant debts to the disadvantage of creditors. But as against that, if the company is to be wound up, an order to that effect will be made almost immediately. These factors are therefore not particularly compelling or weighty in the exercise I am engaged in - they are essentially neutral in comparing the two possible scenarios. 114 With regard to me not being satisfied that the administration should continue, the state of the evidence is not such as to be "persuasive" to enable it to be seen that there are assets which, if realised under one form of administration rather than the other, would produce a larger dividend, or at least an accelerated dividend for the creditors (Creevey at 457). Equally, there is no "substantial degree of persuasion" on the requisite point (Offshore & Ocean at [6]). 115 I do not have before me evidence giving rise to "sufficient possibility, as distinct from mere optimistic speculation" that the creditors' interests are better served in administration (Weriton at [16]). The administrators' hope is more "remote possibility" than "real", and it is certainly not "unclouded by cascading contingencies all of which must fall in" before the hope is realised (Sunstate Orchards at [28]). 116 In the circumstances, i.e. that I am not satisfied as required, I am not compelled by s 440A(2) to adjourn the winding up application. 117 With reference to the alternative application for a short adjournment, as I have indicated, I am not persuaded that anything much is likely to change in a short period of time and, in any event, the proponents of the DOCA have had plenty of time to get themselves organised. 118 The defendant's interlocutory application filed on 26 April 2019 accordingly falls to be dismissed. There does not appear to me to be any reason why the costs should not follow the result. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.