FEDERAL COURT OF AUSTRALIA

Goyal, in the matter of Tree Minders Pty Ltd (Administrators Appointed) [2017] FCA 725

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (the Act), the period within which the Administrators must convene the second meeting of creditors as fixed by section 439A(5) of the Act be extended up to and including 22 September 2017.

2.    Pursuant to section 447A(1) of the Act, the second meeting of creditors required by section 439A of the Act may be held at any time during or within 5 business days after the end of the convening period pursuant to Order 1 above, in spite of the provisions of section 439A(2) of the Act.

3.    Any person with an interest in the application, including any creditor of the Company, may make an application to vary or discharge any of these orders upon 48 hours’ written notice to the Applicants.

4.    By 5:00pm on 13 June 2017, the Applicants are to cause notice of any Orders made pursuant to this Application by mail to ASIC and to all other creditors for whom the Applicants have only a mailing address by circular notice.

5.    The costs and expenses of this Application be costs and expenses of the external administration of Tree Minders Pty Ltd.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    This is an application by Mr Goyal and Mr Webster (the Administrators) under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) (the Act) in their capacity as the joint and several administrators of Tree Minders Pty Ltd (the Company), seeking an extension of the period for the convening of the second meeting of creditors of the Company from 22 June 2017 to, and including, 22 September 2017. The Administrators were appointed to the Company on 18 May 2017 and the first meeting of creditors was held on 29 May 2017. At that meeting, the creditors did not vote to appoint alternate administrators nor did they vote to appoint a committee of creditors.

2    On 9 June 2017, I heard the application, which was supported by an affidavit of Mr Goyal. After hearing from counsel for the Administrators, I made the orders sought. These are my reasons for making those orders.

SUBMISSIONS AND EVIDENCE

3    The Company supplies labour hire services to the almond industry and is based in Robinvale, Victoria. It is one of the largest labour hire companies in the region. It is primarily engaged in the planting, maintaining and harvesting of almond trees for the almond industry. It is estimated that the Company services over half of Australia’s 31,000 hectares of almond plantations.

4    The Company has about 30 employees. It also engages a labour hire company, MADEC, which provides a further 350 staff to clients of the Company on a seasonal basis.

5    Since their appointment, the Administrators have:

(1)    liaised with the Company’s directors to confirm the appointment and implement controls for the trading of the Company during administration;

(2)    attended the Company’s premises to secure control of the assets and arranged the necessary insurances to preserve those assets;

(3)    secured the Company’s books and records and conducted a preliminary assessment of the information provided to them;

(4)    attended to statutory notifications and lodgements;

(5)    prepared and sent employee and creditor packs advising of their appointment;

(6)    frozen all bank accounts and requested the transfer of balances to the Administrator’s accounts;

(7)    liaised with customers, suppliers and stakeholders to ensure continuity of supply and support; and

(8)    convened, prepared and held the first meeting of creditors.

6    The Deputy Commissioner of Taxation (DCT) served on the Company a statutory demand dated 6 March 2017 demanding payment of $2,316,724.27, comprising an unpaid running account balance, unpaid superannuation guarantee charges, interest and penalties.

7    The statutory demand was not complied with, and an application for the winding up of the Company was commenced by the DCT on 24 April 2017.

8    The Administrators sought and obtained an adjournment of the winding up application to 20 June 2017. That proceeding (VID410/2017) was also before me for mention on 9 June 2017. I ordered that the further hearing of that application be adjourned to 25 September 2017. I also gave the DCT liberty to apply in the meantime.

9    In his affidavit in support of the application for an extension of the period for the convening of the second meeting of creditors of the Company, Mr Goyal deposes that there are strong arguments in favour of the Company’s rehabilitation, including the following:

(1)    the Company plays a vital role in Australia’s $1 billion almond industry, providing essential services to the industry, such as planting, pruning and harvesting of almond trees;

(2)    the Company is a significant employer in the town of Robinvale and it appears to have taken due care to ensure that all workers are paid according to award rates, that foreign workers have the necessary work permits and that workplace safety is maintained at all times;

(3)    there is an expectation of a strong return to creditors;

(4)    the Company does not currently have sufficient cash at bank to pay all creditors at the present time, and until its Australian Taxation Office (ATO) debt is clarified (presently it is based largely on estimates), the Administrators cannot form a concluded view as to the solvency or otherwise of the Company;

(5)    the Company has a reasonably strong asset base of $3.14 million (and liabilities of $3.08 million);

(6)    all of the major suppliers and customers with whom the Administrators have communicated support the Company;

(7)    the business of the Company appears to be viable and sustainable;

(8)    the Company’s turnover is approximately $10 million per annum and the annual net profit is approximately $0.5 million per annum; and

(9)    problems with the Company’s financial systems and records appear to have contributed to the Company’s current predicament, but are capable of being resolved.

10    Mr Goyal also deposed that the directors have informed him that a deed of company arrangement (DOCA) proposal is likely to be put to the Administrators of the Company.

11    While there are currently limited details available, it is Mr Goyal’s view that there is likely to be a significant return to creditors under the proposed DOCA, and that the return is likely to be greater than the return to creditors and members in a winding up, both in terms of quantum and timing. He cautions, however, that until the ATO debt is quantified, it is not possible to provide a definitive recommendation to the creditors.

12    Mr Goyal further deposed that, in his opinion, it is in the interests of the creditors of the Company to:

(1)    extend the time for holding the second meeting of creditors (which was required to be held no later than 22 June 2017) in order to quantify the debt owed to the ATO and provide a detailed comparison of the likely return to creditors pursuant to a winding up as compared to the voluntary administration; and

(2)    consider the DOCA proposal and the Administrators’ recommendation as to whether the proposal should be accepted or rejected in the report given under s 439A of the Act.

13    Mr Goyal also deposed that before the Administrators can assess a plan for the rehabilitation of the Company it is necessary for them to undertake additional work to reconstruct the accounts to ensure that recommendations and decisions regarding the future of the Company are based on reliable financial information. That process will have multiple benefits, including enabling:

(1)    the Administrators to confirm the past profitability of the Company in order to complete the Administrators’ investigation and report to creditors;

(2)    the assessment of the future viability of the company to inform the Administrators’ recommendation on the directors’ DOCA proposal;

(3)    the directors to prepare and submit lodgements to determine the actual quantum of the debt owed to the DCT;

(4)    the directors to estimate the amount of working capital that is required to restore and maintain solvency of the business moving forward; and

(5)    the directors to enter into discussions with the DCT regarding the penalties component of the tax assessment and the DOCA proposal.

14    For those reasons the Administrators require something in the order of two to three months to complete their investigations into the Company’s financial position and bring the accounts up to date.

CONSIDERATION

15    In exercising the power to extend the convening period under s 439A(6) of the Act the function of the Court is to: “…strike an appropriate balance between the legislature’s expectation that the administration will be a relatively swift and summary procedure, and 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”: see Silvia, Re Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636; citing Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]; Re Pan Pharmaceuticals Ltd [2003] FCA 598; 46 ACSR 77 at [42] per Lindgren J; and Re New Horizons Corporation; Ex parte De Vries [2004] NSWSC 253 at [5] per Austin J. See also Dixon, Re G. G. Engineering (Aust) Pty Ltd (Administrators Appointed) [2017] FCA 365 at [6] per Davies J, citing with approval Re Riviera Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585; 72 ACSR 352 at [15] and Parbery, Re NewSat Limited (Administrators Appointed) (Receivers and Managers Appointed) [2015] FCA 435 at [59].

16    In my view, the extension sought by the Administrators strikes the appropriate balance in the circumstances. Relevantly:

(1)    the reasons given by Mr Goyal for requiring an extension are consistent with the object and purpose of Pt 5.3A of the Act, as set out in s 435A of the Act;

(2)    an extension will enable the Administrators to complete the tasks referred to at [1312] above; and

(3)    the three month extension was not opposed by the Company’s major creditors (including, in particular, the DCT).

17    For those reasons, on 9 June 2017, I made the orders sought by the Administrators.

Associate:

Dated:    26 June 2017