FEDERAL COURT OF AUSTRALIA

AE&E Australia Pty Limited (Administrators Appointed), in the matter of AE&E Australia Pty Limited (Administrators Appointed) [2010] FCA 1494

IN THE MATTER OF AE&E AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED)

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act) the period during which the plaintiffs are to convene the second meeting of creditors in the voluntary administration of AE&E Australia Pty Limited (administrators appointed) (the Company) be extended so that it ends on25 February 2011.

2.    Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate in relation to the Company so that the plaintiffs may convene the second meeting to be held at any time during or within 5 business days of the end of the convening period as extended by paragraph 1 above.

3.    Leave be reserved to any person claiming to be interested, including any creditor of the Company, to make any application as they may be advised to vary these orders upon 48 hours’ notice to the plaintiffs.

4.    The plaintiffs notify the creditors of the Company and the Australian Securities and Investments Commission of these orders by circular notice to be issued within 48 hours.

5.    These orders may be entered forthwith.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE MATTER OF AE&E AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED)

REASONS FOR JUDGMENT

1    The plaintiffs (the Administrators) are the administrators of AE&E Australia Pty Limited (the Company). The Administrators were appointed on 25 November 2010, pursuant to a resolution of the sole director of the Company, under s 436A of the Corporations Act 2001 (Cth) (the Corporations Act). The Company is a subsidiary of AE&E Group GmbH (AE&E Group), an Austrian corporation which itself is a subsidiary of A-TEC Industries AG (A-TEC), also an Austrian entity.

2    A-TEC entered into a court appointed insolvency in Austria in October 2010. AE&E Group went into insolvency in Austria on 24 November 2010. As a consequence, AE&E Group is no longer able to support the Company financially.

3    On 29 November 2010, the Administrators convened the first meeting of creditors of the Company, which was held on 7 December 2010. On that basis, the second meeting of creditors would be required to be convened by 4 January 2011. The Administrators, however, consider that it is desirable to extend the period for convening the second meeting of creditors. It is necessary to say something more about the Company in order to explain the reason for the Administrators’ concern.

4    The AE&E Group comprises numerous entities situated throughout the world. Its business consists of the provision of systems for thermal power generation and environmental technologies. The Company was established in 2005. The Company’s assets presently consist, principally, of the Worsley Project, which involves the construction of a multi cogeneration project power plant located at Worsley, Western Australia, for a sum in excess of $600 million. The contract for the Worsley Project is under subcontract. The project is approximately 70 to 75 per cent complete, although it is significantly behind schedule. Major cost overruns have been incurred to date.

5    The Company’s other assets include a contract to construct a power station for Sino Iron Pty Limited (Sino Iron) in the Pilbara Region of Western Australia. That contract was terminated by Sino Iron on 18 October 2010, on the basis of alleged breach by the Company. At that time, that project was approximately 96 per cent complete. The Company claims that Sino Iron owes in excess of $100 million in respect of the project. The Company’s assets also include other, less significant works in progress, plant and equipment, intellectual property and technology.

6    The Company has approximately 160 employees directly employed at Worsley. Of those, 110 are blue collar workers and approximately 50 are office workers and engineers. In addition, there are some 240 subcontractors engaged by the Company on the Worsley Project. There are approximately 4500 employees employed on the entire Worsley site.

7    The Company has no secured creditors. The Administrators have, so far, received proofs of debt for approximately $300 million. The principal and major creditor of the Company is a syndicate of bankers. At the first meeting of creditors, a creditors’ committee was appointed. The committee met on 14 December 2010.

8    Given the size of the Company’s undertaking, the Administrators have not had a sufficient opportunity, to date, to undertake adequate, basic investigation into the affairs of the Company. The Administrators do not consider that they would be able to discharge their duties, for the purposes of the second meeting of creditors, by 4 January 2011. They consider that a more complete and thorough investigation would be necessary to enable them to form a considered opinion as to what recommendation they should make to the creditors at the second meeting. They consider that they require at least two months investigation, given other matters that require urgent attention in relation to the affairs of the Company.

9    At the first meeting of the committee of creditors, the Administrators proposed that, if an extension of the convening period were ordered, members of the Administrators’ staff would be allocated to commence the process of reviewing and clarifying the claims of former employees. In this way the majority of General Employee Entitlements and Redundancy Scheme (GEERS) claims could be processed with the Department of Education, Employment, and Workplace Relations as soon as possible after the Company went into liquidation, if that is the result of the second meeting of creditors. The preparation of such claims would normally be undertaken by a liquidator but, in order to assist former employees, the Administrators propose to undertake that work, so that there would be no delay in processing the claims once the Company went into liquidation.

10    At the meeting of the committee of creditors, one of the creditors indicated a concern that trade insurance claims could not be made until the Company is in fact in liquidation. The Administrators have undertaken to that creditor that they would adjudicate on any claim that the creditor makes as soon as possible, in order to expedite claim with the trade insurers. The Administrators consider that, if the claim is admitted as a debt in the administration, the insurer may well be prepared to process it and make a payment, notwithstanding that the Company has not yet gone into liquidation.

11    The Administrators are unfunded and, presently, are being funded by the principal contractors in relation to the Worsley Project. That arrangement has been made by the Administrators in their capacity as administrators and would not necessarily continue following liquidation of the Company. Similarly, the Administrators have made other arrangements with suppliers and subcontractors. Those arrangements may well not continue after liquidation or would require variation. In the event of liquidation, employees may cease work on the Worsley Project, since there could be no guarantee that the position of employees would be protected by the arrangement that the Administrators presently have with the principal contractor.

12    If work on the Worsley Project were to cease, the whole site is likely to shut down, with very serious ramifications for all of the other employees engaged on the site. The Administrators have also exercised rights, under s 443B of the Corporations Act, concerning leases and other hire purchase agreements in relation to the Worsley Project and the Company’s premises at North Ryde. If the Company were liquidated, those rights would no longer be available and the assets would no longer be protected.

13    The Administrators expect that the total unsecured claims against the Company will be in the order of $1.5 billion. The books and records of the Company are voluminous, and the conduct of the administration requires the Administrators’ staff to focus on that part of the Company’s business that may be viable, rather than investigation of past transactions. The Administrators consider that, by focusing on parts of the Company’s existing business, such as the Worsley Project, they may be able to achieve a better outcome for creditors than they would if they committed their full resources to the preparation of the second report to creditors that would be necessary for the second meeting.

14    In all of the circumstances, I am satisfied that it is appropriate to extend the convening period. The Administrators first suggested that the convening period be extended to 31 March 2011. In the light of the concerns that have been expressed by some creditors and in the interests of the employees who may be able to make a GEERS claim on the Commonwealth, I consider that it is appropriate to extend the time until the end of February 2011, on the basis that, at that stage, it may well be that the Court would be persuaded to extend the convening time further.

Associate:

Dated:    17 January 2010