FEDERAL COURT OF AUSTRALIA

Ross, in the matter of Reeltime Media Limited (Administrators Appointed) [2015] FCA 471

IN THE MATTER OF REELTIME MEDIA LIMITED (ADMINISTRATORS APPOINTED) (ACN 085 462 362) AND OTHER COMPANIES LISTED IN THE SCHEDULE

THE COURT ORDERS THAT:

1.    The originating application be returnable and heard instanter.

2.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the period within which the Administrators of the Second to Eighth Plaintiffs must convene meetings of creditors of the Second to Eighth Plaintiffs under s 439A of the Act be extended up to and including 23 June 2015.

3.    Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to have effect in relation to the Second to Eighth Plaintiffs such that the meetings of the creditors of the Second to Eighth Plaintiffs required by s 439A of the Act may be held at any time during , or within 5 business days after the end of, the convening period as extended by order 2, notwithstanding the provisions of s 439A(2) of the Act.

4.    The First Plaintiff have liberty to apply to the Court for any further extensions of the convening period.

5.    The Plaintiffs' costs and expenses of this application are to be treated as costs and expenses in the administration of the Second to Eighth Plaintiffs.

6.    Interested parties, including the Australian Securities and Investments Commission, have 10 business days from the date of these orders to apply to vary or set aside these orders.

7.    The Plaintiffs are to notify interested parties known to the Administrators of the making of these orders, including the Australian Securities and Investments Commission, within 2 business days of the date of these orders.

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

IN THE MATTER OF REELTIME MEDIA LIMITED (ADMINISTRATORS APPOINTED) (ACN 085 462 362) AND OTHER COMPANIES LISTED IN THE SCHEDULE

REASONS FOR JUDGMENT

1    David Anthony Ross and Shanon Dale Thomson, partners of Hall Chadwick, have been appointed joint and several administrators of Reeltime Media Limited and various related entities constituting the RMA Group, being:

(a)    DE Digital Pty Ltd;

(b)    DE Personnel Pty Ltd;

(c)    Ocean Feather Pty Ltd;

(d)    Paricia Pty Ltd;

(e)    Digital Facilities Management Pty Ltd; and

(f)    Zaramamma Pty Ltd.

2    The administrators and the entities in the RMA Group have applied to extend the convening period for the second meetings of creditors under s 439A(6) of the Corporations Act 2001 (Cth) (the Act).

3    The last day of the convening period in accordance with s 439A(5) of the Act is 19 May 2015. The administrators are seeking to extend the convening period until 23 June 2015. The extension sought will apparently afford the administrators sufficient time to:

(a)    review and consider all expressions of interest in relation to a campaign involving the sale of business of the RMA Group or its recapitalisation;

(b)    review various proposals for a deed of company arrangement and any creditors’ trust proposals;

(c)    form an opinion and provide a statement to the creditors about what would be in the best interests of the RMA Group in relation to such proposals, or in the alternative, liquidation; and

(d)    prepare a report to creditors that will convey useful information about the RMA Group’s affairs in order to allow the creditors to make an informed decision among the available alternatives.

4    The principles to be applied in determining whether to grant an extension of the convening period are well established. I have set them out recently and they do not need to be repeated; (see Parbery, in the matter of NewSat Limited (Administrators Appointed) (Receivers and Managers Appointed) [2015] FCA 435 at [58] to [64], and in respect of “Daisytek orders” at [76]).

Background

5    The RMA Group operates in the digital media sector. The Group’s businesses include digital marketing, hosting websites, and website development.

6    The RMA Group includes the following entities:

(a)    Reeltime Media Limited, the listed entity;

(b)    DE Digital Pty Ltd, the trading entity;

(c)    DE Personnel Pty Ltd, the employing entity; and

(d)    Digital Facilities Management Pty Ltd, as the leasing entity.

7    Additional companies within the RMA Group include:

(a)    Ocean Feather Pty Ltd;

(b)    Paricia Pty Ltd; and

(c)    Zaramamma Pty Ltd.

8    The RMA Group’s business is located in Bendigo, Victoria.

9    On 21 April 2015, pursuant to a resolution of the board of directors of each entity in the RMA Group, the administrators were appointed as joint and several administrators of each entity in the RMA Group.

10    On 23 April 2015, the administrators issued a report to the creditors of the RMA Group.

11    On 1 May 2015, the administrators held the first meeting of the creditors of the RMA Group.

12    The RMA Group, based upon the current investigations made by the administrators, has the following creditors in value:

13    From the administrators’ enquiries to date, it would appear that the RMA Group does not have any secured creditors.

(a)    Winding up Application

14    On 31 March 2015, the Australian Securities and Investments Commission (ASIC) filed an application in the Supreme Court of New South Wales seeking to wind up various entities in the RMA Group on the just and equitable ground, being:

(a)    Reeltime Media Limited;

(b)    DE Digital Pty Ltd;

(c)    DE Personnel Pty Ltd;

(d)    Ocean Feather Pty Ltd;

(e)    Paricia Pty Ltd; and

(f)    Zaramamma Pty Ltd.

15    The winding up application was returnable in the Supreme Court of New South Wales on 4 May 2015.

16    On 28 April 2015, the administrators instructed Evans Ellis Lawyers to send a letter to ASIC requesting an adjournment of the first return date of that application in order to afford the administrators sufficient time to obtain copies of relevant but voluminous material.

17    On 4 May 2015 at the first return date of the winding up application, orders were made dealing essentially with the filing of evidence relevant to that application.

18    The hearing of the winding up application was further adjourned until 27 July 2015. I must say that whether that winding up application proceeds or ought be stayed is a matter that the administrators will no doubt consider in due course (see for example ss 440A, 440D and 447A). But it seems to me from the material currently placed before me that the winding up application may in some sense appear to be a distraction from the administrators’ statutory responsibilities and their discharge and the steps that the administrators need to take under Pt 5.3A.

19    It is apparent that notification of the present application made by the administrators has been given to ASIC. I was handed a letter this morning that ASIC had sent to Evans Ellis Lawyers dated 13 May 2015 in response to that notice. That letter complains of inadequate notice and purports to make certain factual corrections to the affidavit of David Ross that has been placed before me. In all the circumstances and given the urgency of this matter, I consider that ASIC has had sufficient notice of the administrators’ present application. As to the other matters purporting to set out factual corrections to the affidavit of David Ross, I do not need to trouble myself further. Those corrections are irrelevant to the principal facts that I need to consider dealing with this extension application.

(b)    Continued Trading of the Business

20    Since the date of appointment, the administrators have continued to trade the business of the RMA Group.

21    A major benefit of extending the convening period will be to allow the administrators to continue to trade the Group’s business and to either sell the business as a going concern or to recapitalise the Group’s structure.

22    It is important for the recapitalisation process that the status quo of the Group’s activities and principal undertaking be maintained, as, of course, this is a requirement of the ASX listing rules.

23    On various dates in April and May 2015, Hall Chadwick placed an advertisement in the Australian Financial Review advertising the opportunity to purchase or recapitalise the RMA Group.

24    Expressions of interest for parties interested in purchasing or recapitalising the RMA Group originally remained open until 5 May 2015.

25    The campaign generated a substantial amount of interest such that the administrators decided to extend the closing date for the campaign to 4.00 pm on 14 May 2015.

26    The last day of the convening period in accordance with s 439A(5) of the Act is 19 May 2015. The last day of the convening period is only two business days after the close of the campaign. It is readily apparent that it will take more than two business days for the administrators to deal with the various offers for the recapitalisation and provide a recommendation to creditors. After the close of the campaign, the administrators will need to:

(a)    thoroughly assess each submission and determine which of the interested parties the administrators should enter into negotiations with for the recapitalisation; the interested parties are likely to want to undertake their own due diligence and enter into negotiations with the administrators about price and other matters; and

(b)    ensure that value in the business is retained so that it can be sold as a going concern.

27    The administrators have to date received in relation to the campaign expressions of interest in the sale of the business or the restructuring from approximately 88 interested parties, 57 of whom have executed deeds of confidentiality in relation to the campaign.

28    The administrators and their staff have spent considerable time dealing with interested parties, providing additional financial information and the like.

29    The extended campaign has generated further interested parties and will continue to do so until 14 May 2015.

30    Further, in potentially recapitalising the RMA Group, prior to providing any recommendations to the creditors the administrators will need sufficient time to:

(a)    review and consider all offers; and

(b)    negotiate with interested parties and ultimately consider the form of any one or more deeds of company arrangement that may be proposed.

31    Further, the administrators may need to consider any proposal for what has been described in the affidavit material as a creditors’ trust. Undoubtedly, these matters are complex and involve detailed and no doubt extended communications with numerous interested parties. The administrators require further time in which to deal with these matters. Further, in the interim they need to continue to trade the business in a manner that maximises the chance of a recapitalisation or sale.

(c)    Purchase of Design Experts Business

32    On or about 19 May 2014, Reeltime Media Ltd entered into an agreement with Mr Timothy Gentle and Ms Kylie Gentle for the acquisition of DE Personnel Pty Ltd and Design Experts Pty Ltd by the purchase of shares.

33    The terms of the relevant share purchase agreement were that Reeltime Media Ltd would:

(a)    acquire all the issued capital in DE Personnel Pty Ltd; and

(b)    purchase all of the businesses owned and operated by Design Experts Pty Ltd.

34    On 13 April 2015, Design Experts Pty Ltd was placed in liquidation, and Mr Bruce Mulvaney was appointed as liquidator.

35    There have been various ongoing issues between that liquidator and the administrators concerning this acquisition and steps that the liquidator has been threatening to take that may be detrimental to the assets or may detrimentally affect the relevant businesses.

36    I do not need to descend into the detail of those communications. Suffice it to say that as a result of various threatened action by the liquidator and the need for the administrators to devote time and attention to such matters, such activities have impaired the administrators’ ability to complete their requisite tasks within the required statutory time-frame.

Conclusion

37    In my view, an extension of the convening period for the meetings of creditors of each entity in the RMA Group until 23 June 2015 is readily justified. I say this for a number of reasons.

38    First, the administrators need more time to prepare a meaningful report to creditors. In order for the administrators to do this, the administrators must:

(a)    review, consider, and compare all of the offers received from interested parties in respect of the campaign described earlier;

(b)    review, consider and compare the various DOCA proposals provided to the administrators;

(c)    review, consider and compare the creditors’ trust proposals that may be put forward to the administrators; and

(d)    form an educated and informed view as to what proposal or alternative would most likely provide the maximum return to creditors.

39    Second, and relatedly, the administrators need more time to preserve the opportunity for creditors to approve the sale of business, which would otherwise be lost if the extension was not granted.

40    Third, the administrators confidently believe that there is a strong chance for the recapitalisation of the RMA Group’s structure, but that this cannot be appropriately reviewed prior to 19 May 2015. The administrators’ position is that a further period of 25 business days is required to complete their investigations and deal with the various issues previously described. In my view, that is both a necessary and reasonable timeframe.

41    Fourth, if the RMA Group’s structure is successfully recapitalised, it is more likely to maximise the returns available to all classes of creditors than an immediate liquidation. The potential for such a recapitalisation will be facilitated by the extension.

42    Fifth, the third, seventh, eighth, ninth, tenth and final factors set out in Parbery at [63] are clearly applicable in the present case.

43    Finally, there is no opposition to the present application by any creditor, ASIC or any other interested party. As I have said earlier, ASIC has had notice. No doubt it would have liked more time to consider the matter, but on any view its letter dated 13 May 2015 was not in substance opposition to the present application.

44    I will make orders in the terms sought.

Associate:

Dated:    14 May 2015

Schedule

Second Plaintiff:    Reeltime Media Limited (Administrators Appointed) (ACN 085 462 362)

Third Plaintiff:    DE Digital Pty Ltd (Administrators Appointed) (ACN 602 136 425)

Fourth Plaintiff:    DE Personnel Pty Ltd (Administrators Appointed) (ACN 164 644 282)

Fifth Plaintiff:    Digital Facilities Management Pty Ltd (Administrators Appointed) (ACN 166 954 365)

Sixth Plaintiff:    Ocean Feather Pty Ltd (Administrators Appointed) (ACN 111 136 237)

Seventh Plaintiff:    Paricia Pty Ltd (Administrators Appointed) (ACN 166 837 743)

Eighth Plaintiff:    Zaramamma Pty Ltd (ACN 167 083 892)