FEDERAL COURT OF AUSTRALIA

Hill, in the matter of Flow Systems Pty Ltd (Administrators Appointed) [2019] FCA 27

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act (Cth), the period in which the first plaintiffs must convene the meeting of the creditors under s 439A(1) of Flow Systems Pty Limited (Administrator Appointed) (ACN 136 272 298) and each of the entities listed in the schedule (the Companies) be extended up to and including 29 March 2019.

2.    Pursuant to s 447A(l) of the Act, notwithstanding s 439A(2), Pt 5.3A of the Act is to operate such that the meetings of creditors required by s 439A(1) may be held at any time during, or within five business days after the end of, the convening period as extended by order 1 above.

3.    The first plaintiffs inform known creditors (including the persons claiming to be creditors) of the Companies of the orders made by:

(a)    causing a notice to be published on the Australian Securities and Investments Commission (ASIC) published notices website at https://insolvencynotices.asic.gov.au by no later than 18 January 2019;

(b)    means of a circular posted on the website maintained by the first plaintiffs at https://www.pwc.com.au/business-restructuring/insolvency-cases/flow-systems­pty-ltd.html by no later than 18 January 2019;

(c)    sending such notice electronically to the email addresses of the creditors for whom the first plaintiffs have an email address by no later than 18 January 2019; and

(d)    sending by no later than 21 January 2019 such notice to the postal address or facsimile number, or otherwise as provided for by the Act or the Insolvency Practice Rules (Corporations) 2016 (Cth), to any creditors in respect of whom the first plaintiffs do not have an email address.

4.    In respect of those creditors for whom the first plaintiffs presently have no email address, postal address or facsimile number, the first plaintiffs take reasonable steps to seek to identify a means of contact, and to inform those creditors of the orders made.

5.    Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate such that the requirement pursuant to ss 75-225(1) and 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) (Notice) on the first plaintiffs to issue notices of meetings under s 439A(1) will be validly given to creditors of the second to seventeenth plaintiffs by, not less than five business days prior to the date of the proposed meeting:

(a)    where the first plaintiffs have an email address for a creditor, sending the Notice by email to each such creditor;

(b)    where the first plaintiffs do not have an email address for a creditor but have a postal address for the creditor, sending the Notice by posting a copy of it to the postal address for each such creditor;

(c)    where the first plaintiffs do not have an email address for a creditor or a postal address, sending or communicating the Notice to the creditor in any other way provided for by the Act or the IPR;

(d)    causing the Notice to be published on the ASIC published notices website at https://insolvencynotices.asic.gov.au; and

(e)    publishing the Notice on the website maintained by the first plaintiffs at https://www.pwc.com.au/business-restructuring/insolvency-cases/flow-systems-pty-ltd.html.

6.    The first plaintiffs inform ASIC of the orders made by means of a circular forwarded by post, facsimile or email (as appropriate) by no later than 18 January 2019.

7.    Liberty be granted to:

(a)    the first plaintiffs to apply to the Court for any further extensions or variation of the convening period under order 1 above at any time before that period expires; and

(b)    ASIC or any creditor who can demonstrate sufficient interest to make an application to vary or discharge these orders upon three business days’ notice being given to the first plaintiffs.

8.    The costs of this application be costs in the administrations of each of the Companies.

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

REASONS FOR JUDGMENT

(Revised from Transcript)

THAWLEY J:

1    The first plaintiffs were appointed joint and several voluntary administrators of the second to seventeenth plaintiffs (together, the Flow Systems Group) on 20 December 2018 under s 436A of the Corporations Act 2001 (Cth). By reason of s 439A(5)(a) of the Act, the convening period for the second meeting of creditors of each of the companies comprising the Flow Systems Group (the Companies) under s 439A(1) expires on 29 January 2019. Under s 439A(2), unless an extension is granted, the meeting of creditors is to be held within five business days before, or within five business days after, 29 January 2019.

2    The first plaintiffs seek an extension until 29 March 2019 of the period to convene the second meeting of creditors of each of the Companies. The Court has power to grant the extension under s 439A(6) of the Act. The first plaintiffs seek certain other relief, which is dealt with below.

Principles

3    I recently summarised the relevant principles in Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited (2019) FCA 11 at [3]-[8]. I repeat those paragraphs here for convenience:

3.    The purpose of the power to grant an extension is to enable the Court to allow further time where to do so is appropriate to advance the purposes of the administration. Extensions should generally be brief, although substantial extensions may be appropriate in complex cases. Extensions are not to be granted where doing so undermines the statutory object of a quick and summary consideration of the alternatives or if to do so has the effect of creating an administration of a different nature to that contemplated by the Act.

4.    The Court balances the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure that the administration is not concluded without consideration of sensible and constructive options that may provide better returns for creditors and any return to shareholders, or to enable the company to return to trading in the interests of creditors and shareholders: Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] (Barrett J); Re Dimidium Group Pty Ltd [2010] NSWSC 1086 at [15] (Barrett J); Mighty River International Limited v Hughes; Mighty River International Limited v Mineral Resources Limited [2018] HCA 38; 92 ALJR 822 at [73] (Nettle and Gordon JJ); Jones, in the matter of Eastern Goldfields Limited (Administrators Appointed) [2018] FCA 2081 at [3] (Colvin J).

5.    In Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18], Lindgren J summarised relevant considerations in the following way:

The overlapping considerations affecting the exercise of the discretion whether to extend the convening period may be summarised as follows:

(a)     the Court should recognise the objective of speed of administration that was associated with the introduction of Part 5.3A by the Corporate Law Reform Act 1992 (Cth) as from 23 June 1993. The Court should also recognise the objectives stated in para 507 of the explanatory memorandum associated with the Bill for that Act, that it was expected that the power to extend the period would be exercised infrequently since it is an important objective of Part 5.3A that creditors be fully informed about the company’s position as early as possible and have an opportunity to vote on its future as soon as possible: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 (Young J) at 612; Re Geraldton Building Co Pty Ltd (Administrators Appointed); ex parte Trevor [2000] WASC 320 (Owen J) at [5];

(b)     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: Re Diamond Press Australia Pty Limited [2001] NSWSC 313 (Barrett J) at [10]; Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77 (Lindgren J) (Pan Pharmaceuticals) at [42]; Re New Horizons Corporation; ex parte De Vries [2004] NSWSC 253 (Austin J) at [5];

(c)     the prospects of a better outcome for creditors through a longer period of administration may outweigh the general expectation of a prompt resolution of the administration: Re Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192 (Barrett J) (Fincorp) at [18];

(d)     a particular consideration against the too ready grant of an extension is the fact that while the voluntary administration continues there is an embargo or moratorium on the enforcement of remedies by secured creditors, lessors and others: Fincorp 62 ACSR 192 at [4]; Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 (Jacobson J) at [9];

(e)     the application is to be assessed by reference to whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and, in particular, to arrive at the opinion referred to in s 439A(4), in order to inform creditors adequately so that they will be in a position to decide whether to terminate the administration, execute a deed of company arrangement or place the company in liquidation: Pan Pharmaceuticals [2003] FCA 598; (2003) 46 ACSR 77 at [41]; ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No.7) [2009] FCA 454 (Emmett J) (ABC Learning Centres) at [28];

(f)     it is often desirable that any extension be accompanied by an order under s 447A, permitting the meeting to be held at any time during the convening period as extended: see the order made in Re Daisytek Australia Pty Ltd [2003] FCA 575; (2003) 45 ACSR 446 (Daisytek) at [10]–[18].

6.    In Re Riviera Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585 at [13], Austin J identified the following categories of cases in which an extension had been granted:

•    the size and scope of the business: Lombe, Re Babcock & Brown Ltd (Administrators Appointed) [2009] FCA 349; Worrell; Re Storm Financial Ltd (Receivers and Managers Appointed) [2009] FCA 70; ABC Learning Centres Ltd, in the matter of ABC Learning Centres Ltd; application by Walker (No 5) [2008] FCA 1947;

•    substantial offshore activities: Lehman Bros Australia Ltd [2008] NSWSC 1132;

•    large number of employees with complex entitlements: Re S & D International Pty Ltd (in liq); Malhotra v Tiwari [2005] VSC 496; Re Ansett Australia & Ors (All Admin Appointed) and Korda and Anor (As Administrators) [2002] FCA 90;

•    complex corporate group structure and intercompany loans: Lombe, Re Babcock & Brown Ltd (Administrators Appointed) [2009] FCA 349; Re Octaviar Limited (Administrators Appointed) (Receivers and Managers Appointed (ACN 107 863 436) [2008] QSC 272; In the matter of LED Builders Pty Ltd (Administrators Appointed); LED Builders Pty Ltd (Administrators Appointed) and Ors [2008] NSWSC 633; Hall, in the matter of Australian Capital Reserve Limited (Administrators Appointed) [2007] FCA 1328;

•    complex transactions entered into by the company (e.g. securities lending or derivatives transactions): In the matter of Lift Capital Partners Ltd (Administrators Appointed) [2008] NSWSC 446;

•    complex prospects of recovery proceedings: Worrel, Re Storm Financial Ltd (Receivers and Managers Appointed) [2009] FCA 70; Deputy Commissioner of Taxation v Wellnora Pty Limited [2007] FCA 1324 ;

•    lack of access to corporate financial records: Sims, in the matter of Destra Corporation Ltd [2008] FCA 2002; Fincorp Group Holdings Pty Ltd & Ors [2007] NSWSC 363;

•    the time needed to execute an orderly process of disposal of assets: Carter, in the matter of SFM Australasia Pty Ltd (Administrators Appointed) ACN 105 317 333 (No 2) [2009] FCA 419; ABC Learning Centres Ltd, in the matter of ABC Learning Centres Ltd; application by Walker (No 7) [2009] FCA 454;

•    the time needed for thorough assessment of a proposal for a deed of company arrangement: Silvia, in the matter of Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636;

•    where the extension will allow sale of the business as a going concern: Lombe Re Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, in the matter of Kleins Franchising Pty Ltd (Administrators Appointed) (ACN 007 348 236) [2008] FCA 721; Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619, in the matter of Uni-Aire Security Pty Ltd (Administrators Appointed) ACN 085 430 619 [2006] FCA 1423;

•    more generally, that additional time is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd (No 2) [2009] FCA 190; Fitzgerald, in the matter of Primebroker Securities Limited (Administrator Appointed) (Receivers and Managers Appointed) [2008] FCA 1247; Ex parte Vouris; in the matter of Marrickville Bowling and Recreation Club Ltd (under Administration) [2008] FCA 622.

7.    These are not exhaustive and serve merely as examples. Whether an extension is appropriate turns on the particular circumstances of the case.

8.    In Mighty River at [73], Nettle and Gordon JJ (in dissent, but not relevantly in this respect) referred to a number of cases including Re Riviera and observed:

… Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator's estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators ...

4    It should also be observed that the object of Pt 5.3A of the Act has been set out in s 435A, which provides:

The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)      maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)      if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

Note:          Schedule 2 contains additional rules about companies under external administration.

5     Section 438A of the Act provides:

438A  Administrator to investigate affairs and consider possible courses of action

As soon as practicable after the administration of a company begins, the administrator must:

(a)      investigate the company’s business, property, affairs and financial circumstances; and

 (b)      form an opinion about each of the following matters:

(i)      whether it would be in the interests of the company’s creditors for the company to execute a deed of company arrangement;

(ii)      whether it would be in the creditors’ interests for the administration to end;

(iii)      whether it would be in the creditors’ interests for the company to be wound up.

6    The administrator is required to form the opinions under s 438A(b) and to communicate those opinions in a notice given to creditors in accordance with r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (formerly s 439A(4) of the Act).

7    The extent to which an administrator has been able to form an opinion about these matters in the time available is relevant to the question whether an extension should be granted. So too is: (a) the extent to which further enquiries or actions may be relevant to, or influence, the opinions which must be formed; and (b) the utility of those opinions in the absence of further enquiries or actions.

Summary Background

8    The second plaintiff, Flow Systems Pty Ltd (Administrators Appointed), is the parent of each of the fourth to seventeenth plaintiffs. The third plaintiff is Flow Systems Constructors Pty Ltd (Administrators Appointed). EAWH Pty Ltd (formerly Brookfield Water Holdings Pty Ltd) indirectly owns a majority of the shares in Flow Systems and Flow Systems Contractors.

9    As mentioned, the first plaintiffs were appointed joint and several voluntary administrators of the Companies on 20 December 2018.

10    On 17 January 2019, the plaintiffs filed an urgent application under ss 439A(6) and 447A of the Act, and s 90-15 of Sch 2 to the Act, being the Insolvency Practice Schedule (Corporations) (IPSC).

11    The application was supported by an affidavit of Mr Philip Carter, one of the joint and several administrators appointed on 20 December 2018. Mr Carter gave evidence that, in the limited time available since his appointment, it had not been possible to investigate the affairs of the Flow Systems Group in a comprehensive manner. He indicated that the directors of the Companies have not yet provided to the administrators a report on company activities and property (ROCAP) for any of the Companies. He indicated that the administrators have granted an extension of time to the directors of the Companies until 24 January 2019 for the delivery of the ROCAPs. He also indicated that he anticipated the directors may request a further short extension should the Court accede to the relief presently sought to extend the convening period under s 439A(6).

12    The Flow Systems Group operates as a water utility and energy solutions provider in Australia, with the object of delivering sustainable water delivery systems. Group cash flow for the year ended 31 December 2017 was almost $39 million.

13    The administrator has summarised the Flow Systems Group assets as follows:

(1)    plant, property and equipment valued as at July 2018 at $56 million;

(2)    other assets, including receivables, land at Kurri Kurri, New South Wales, vehicles and other plant and equipment, and cash, in the amount of approximately $27 million; and

(3)    10 service contracts with major construction companies providing water utility and energy services to property development projects in New South Wales.

14    The operating revenue generated from the Flow Systems Group’s energy and water divisions was approximately $7.5 million in the financial year ended 31 December 2017.

15    Flow Systems has 30 employees.

16    Mr Carter summarised the Flow Systems Group’s creditor profile as at December 2018 in the following way:

(1)    an amount of approximately $40 million is owed to Brookfield Infrastructure Group (Australia) Pty Ltd (security trustee) in its capacity as trustee of the Water Factory Company Security Trust under certain financing arrangements. The security trustee is the principal secured creditor of Flow Systems;

(2)    other secured creditors and other contractors with retention of title arrangements, and lessors as listed in the Exhibit to Mr Carter’s affidavit;

(3)    approximately 165 trade creditors are owed a total of approximately $6.5 million;

(4)    accrued employee entitlements of approximately $580,000; and

(5)    a potential debt to the Commonwealth, payable to the Commissioner of Taxation, relating to a superannuation guarantee charge. In this respect, Mr Carter does not know what amount is owing.

17    Since February 2013, the Flow Systems Group has been funded in a variety of ways, including by security holders under an incorporated joint venture agreement, two subscription agreements and through the issue of convertible notes.

18    On 20 December 2018, a forbearance arrangement – which had previously been granted by Brookfield to Flow Systems on 27 April 2018 in respect of certain events of default under the transaction documents which funded Flow Systems – was withdrawn by Brookfield. Immediately after, the board of directors of Flow Systems resolved that it was insolvent or likely to become insolvent at some future time due to the withdrawal of forbearance arrangements in respect of the transaction documents. The board of directors accordingly resolved to appoint the voluntary administrators pursuant to s 436A of the Act.

19    Since their appointment, the administrators have formed the view that it would be advantageous to creditors if the Flow Systems Group could continue to trade as a going concern throughout the course of the voluntary administration, with a view to the sale of the business, or as much of the business as possible, and/or recapitalisation of the assets.

20    In order for the business to continue to trade, the administrators formed the view that further funding was immediately needed. As a consequence, on 24 December 2018 the administrators caused each company in the Flow Systems Group to enter a facility agreement supported by a general security deed with Brookfield. This provided an additional $5 million of funding.

21    On 30 December 2018, the administrators filed an application for urgent relief in this Court in proceeding NSD 2415 of 2018, seeking various orders limiting their liability to the assets of the second to seventeenth plaintiffs. That application was heard on 31 December 2018 and orders were granted on that day with reasons to be provided. The orders made included:

4.     Pursuant to section 447A(1) of the Corporations Act, and further or alternatively section 90-15 liabilities of the First Plaintiffs incurred under the Facility Agreement, including monies borrowed, interest incurred in respect of monies borrowed and borrowing costs, are in the nature of debts incurred by the First Plaintiffs in the performance and exercise of their functions as joint and several administrators of each of the Second to Seventeenth Plaintiffs.

5.    Pursuant to section 447A of the Corporations Act, and further or alternatively section 90-15 of the IPSC, and notwithstanding the preceding order, Part 5.3A of the Corporations Act is to operate in respect of each of the Second to Seventeenth Plaintiffs as if section 443A(1) of the Corporations Act provides that, if the property of the Second to Seventeenth Plaintiffs (where relevant) is insufficient to satisfy the debts and liabilities incurred by the First Plaintiffs under the Facility Agreement for which the right of indemnity exists under section 443D of the Corporations Act, the First Plaintiffs will not be personally liable to repay such debts and liabilities to the extent of that insufficiency.

6.    Pursuant to section 447A of the Corporations Act, and further or alternatively section 90-15 of the IPSC, Part 5.3A of the Corporations Act is to operate as if the personal liability of each of the First Plaintiffs under section 443A of the Corporations Act excludes any liability for:

(a)     any loans or advances from the Second Plaintiff to any of the Third to Seventeenth Plaintiffs; and

(b)     any loans, advances or other debts between two or more of the Second to Seventeenth Plaintiffs.

22    I interpolate at this point that considerations which are relevant to the grant of relief under s 447A overlap with considerations which are relevant for the grant of relief under s 439A(6), both provisions being found in Pt 5.3A, which has the objects set out by s 435A, as recorded earlier.

23    I will mention further aspects of the facts next when addressing whether relief should be granted.

Consideration

24    On the evidence adduced on this application, the administrators have acted without delay and have taken appropriate steps including the securing of interim funding, referred to earlier. A detailed summary was provided of the steps which had been, and were being, taken in what is a comparatively large administration with significant complexities.

25    Mr Carter indicated that he had formed the view that there were advantages in the Flow Systems Group continuing to trade as a going concern with a view to allowing the administrators to explore a sale and/or recapitalisation of the Flow Systems Group’s assets and businesses. He anticipated that the activities which would need to be undertaken between the date of the swearing of his affidavit and the conclusion of the administration included:

(1)    continuing performance of the 10 service contracts referred to earlier;

(2)    continuing other operational aspects of the business;

(3)    undertaking valuations of the Flow Systems Group’s assets and businesses so as to facilitate a potential sale of the whole or a part of the business as a going concern;

(4)    running a sale and recapitalisation campaign for the Flow Systems Group’s assets and businesses; and

(5)    assessing any purchase or recapitalisation offers or deed of company arrangement (DOCA) proposals received.

26    Mr Carter indicated that he sought the extension for the following reasons:

(a)     In my view, and as can be seen from the financial information for the consolidated Flow Systems Group, the real value of the business of the Flow Systems Group is in its Service Contracts. If the Flow Systems Group is unable to trade on and be sold as a going concern, it is far more likely than not that all creditors will be worse off than if a Sale can occur;

(b)     The Administrators therefore wish to fully explore the Sale of the whole, or any part, of the business of the Flow Systems Group as a going concern. The large and complex business structures referred to at paragraphs 15 to 38 above would likely add to the time it would take before any Sale could be completed in my experience;

(c)     Due to the number of Service Contracts and counterparties of the Flow Systems Group, there are a large number of stakeholders who need to be involved in any Sale to make it successful and produce the best possible return to creditors;

(d)     Once any agreement(s) for Sale have been entered into, it may take a further period of time for any arrangements to complete, particularly given the existence of licences and other agreements that may need to be transferred or novated to a purchaser (or purchasers). These factors will further add to the time required to complete any Sale and the complexity of the process;

(e)     In respect of the Sale, the Administrators’ have requested binding bids to be submitted to them by 4 February 2019. Given the nature of the business, I would consider that a further period of up to eight weeks would need to be taken into account for consideration and acceptance of any final offer, the preparation of contracts for Sale and settlement periods under various Sale arrangements. The above time would also be used to take account of contingencies and complications which often arise in sale and recapitalisation processes in my experience;

(f)     As part of the sale of the businesses and/or assets of the Flow Systems Group by the Administrators, I consider that there is a likely prospect that a DOCA will be proposed by one or more parties — either as part of or separate to any binding bid. If such a proposal is made, further time would be required for such a proposal to be developed, negotiated and considered by the Administrators and put to creditors of the Flow Systems Group. Given the size and complexity of the businesses, it is likely that a period of time, of up to three weeks, will be required to allow for any DOCA to be finalised and (if necessary) integrated into the Sale process; and

(g)     In relation to all of the Flow Systems Group companies, given the stage of the administrations and their complexity, the Administrators have been unable to provide any meaningful recommendation or proposal to creditors as required under section 75-225(3) of the IPR as to the future of the Flow Systems Group companies. As referred to in paragraph 10 above, the directors of the Flow Systems Group companies have not yet provided a ROCAP for any of the Flow Systems Group companies. Further, the Administrators intend to continue with their investigations into the Flow Systems Group’s affairs including for the purpose of identifying the cause of the financial collapse and establishing whether any funds may be available to be recovered or claims pursued. Any such funds would be available for distribution to the creditors. Actions that could be pursued include recovery of voidable transactions, bringing proceedings against directors in respect of insolvent trading, and seeking compensation for breaches or contraventions by officers, directors or other parties will need to be considered. In addition to requiring time to present any Sale or DOCA proposals to creditors, we will need further time to investigate the likelihood of any recoveries for the purposes of their report to creditors pursuant to section 75-225 of the IPR. Given the size and relative complexity of the Flow Systems Group companies’ affairs, I would consider that a period of up to two months is necessary to allow the Administrators to properly undertake this task.

27    Mr Carter expressed the opinion that the creditors would be better off if a sale and/or recapitalisation of the assets and business could be achieved. Further, given the size and complexity of the affairs of the Companies, further time was needed in order to form the opinions which are required to be formed under section 438A(b) or to form appropriately considered opinions under that paragraph.

28    Several of the factors referred to in Re Riviera Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2009] NSWSC 585 (set out at [3] above) are present in the circumstances just described. There are 16 corporations operating as a corporate group within a corporate structure with some complexity and involving inter-company loans and other funding arrangements, which also contain their own complexities. The business in which the Flow Systems Group is engaged involves a number of licensing and regulatory compliance requirements described in the evidence of Mr Carter. The administrators are marketing the business and assets of the Flow Systems Group as a going concern to encourage a sale and/or recapitalisation of the business, which is seen by the administrators to be the best likely result for creditors.

29    The interim funding arrangements which have been reached have the effect that, should creditors continue to provide services, they are likely to be paid, at least while there is sufficient funding in place.

30    The circumstances above also reveal that there is a lack of information available. For example, the directors of the Companies have apparently been unable to provide the administrators with ROCAPs.

31    If the convening period is not extended, the administrators will be unable to provide any meaningful report to creditors of the company, perhaps beyond recommending that the Companies enter liquidation. That does not appear to be desirable on the present evidence, given the steps which are currently being taken and which are anticipated to be taken in order to seek to achieve a sale or recapitalisation on a going concern basis of the business and/or assets.

32    The circumstances outlined above clearly weigh in favour of granting the extension sought, and granting an extension best achieves the objects identified in s 435A of the Act.

33    It is relevant to consider the wishes of, and any specific opposition from, creditors. The first creditors’ meeting was held on 4 January 2019. At that meeting, Mr Carter advised creditors that it was the intention of the administrators to seek an extension of the convening period. No objection was received.

34    A committee of inspection has been formed, and the administrators caused notification to be given to the members of the committee of inspection on 14 January 2019 of the intention of the administrators to approach the Court for the relief presently being sought. As at the time of hearing, no objection had been raised or notified.

35    The administrators have not identified any other material creditors since the first creditors’ meeting.

36    The evidence also indicates that the Australian Securities and Investment Commission was notified of the present application and apparently indicated that it did not wish to be served with copies of the originating process or supporting affidavit.

37    In my view, it would not be in the interests of creditors to convene the second meeting until the administrators have had further time in which to pursue the steps they are currently pursuing to seek to achieve a sale and/or recapitalisation, or to obtain further information with a view to forming and notifying the creditors of the opinions required to be formed under s 438A(b). I am satisfied that there should be an extension of the convening period.

38    In addition to extending the convening period until 29 March 2019, I will grant the plaintiffs liberty to apply to the Court for further extensions or variation of the convening period at any time before the extended period expires.

39    The administrator also seeks an order under s 447A(1) that the meetings may be convened at any time during or within five business days after the end of the extended convening period. Such an order is appropriate and readily made, and I make that order: Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18(f)]; Jones, in the matter of Eastern Goldfields Limited (Administrators Appointed) [2018] FCA 2081 at [17].

40    The costs of the application should be costs in the administrations of the Companies.

Associate:

Dated:    21 January 2019

SCHEDULE OF PARTIES