Federal Court of Australia

Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) (No 2) [2021] FCA 548

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 37AF(1)(b) of the Federal Court of Australia Act 1976 (Cth) and on the ground that the order is necessary to prevent prejudice to the proper administration of justice the following documents shall be marked “confidential” on the electronic court file and are not to be published or accessed, except pursuant to an order of the Court or the written agreement of the plaintiffs until 5pm on Monday, 12 July 2021.

(a)    paragraph 27 and Tab 4 of exhibit CCH-1 to the affidavit of Christopher Clarke Hill sworn on 24 February 2021;

(b)    Exhibit CCH-2 to the affidavit of Christopher Clarke Hill sworn 24 February 2021;

(c)    Exhibit CCH-3 to the affidavit of Christopher Clarke Hill sworn 25 February 2021.

2.    Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act), Pt 5.3A of the Act is to operate in relation to the second plaintiff (the Company) such that:

(a)    s 439A(1) also provided that the meeting of creditors required by that section may be convened and held within the convening period (including within the convening period as extended pursuant to s 447A(1)); and

(b)    the convening period for the meeting of creditors required to be held pursuant to s 439A(1) be extended up to and including 5 July 2021.

3.    Pursuant to s 447A(1) of the Act, that Part 5.3A of the Act is to operate in relation to the Company such that the meeting of creditors of the Company, required by s 439A(1) of that Act, be held during the period as extended by Order 2 above, and the period of five (5) business days thereafter, notwithstanding the provisions of s 439A(2) of the Act.

4.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company such that notice of the second meeting of the creditors of the Company will be validly given to creditors of the Company by:

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

(b)    sending a hyperlink to the notices published on the ASIC published notices website by email to the email address of each creditor at such email address as is recorded in the books and records of the Company;

(c)    where an email address is not recorded in the books and records of the Company but a postal address is recorded, sending the notice by posting it to the postal address of each creditor as is recorded in the books and records of the Company; and

(d)    where the first plaintiffs (administrators) do not have an email or postal address by publishing the notice on the website maintained by the administrators.

5.    The administrators take all reasonable steps to cause notice of these orders to be given, within two (2) business days’ of making these orders to:

(a)    the creditors (including persons claiming to be creditors) of the Company in the following manner:

(i)    where the administrators have an email address for a creditor, by notifying each such creditor, via email, of the making of the orders;

(ii)    where the administrators do not have an email address for a creditor, but have a postal address for that creditor by notifying each such creditor, by post, of the making of the orders; and

(iii)    where the administrators do not have an email or postal address by publishing the notice on the website maintained by the administrators.

(b)    ASIC, by its street address or email address.

6.    Liberty to apply be granted to any person, including any creditor of the Company or ASIC, who can demonstrate sufficient interest to vary orders 1, 2 or 3 on the giving of two (2) business days’ notice to the plaintiffs, and to the Court.

7.    The administrators’ costs and expenses of and incidental to the originating process are to be treated as costs in the administration of the Company.

8.    Leave be granted to the plaintiffs to file and rely on the amended interlocutory process dated 19 May 2021.

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

REASONS FOR JUDGMENT

YATES J:

1    By an amended interlocutory process dated 19 May 2021, the first plaintiffs, who are the joint and several voluntary administrators of the second plaintiff, Autocare Services Pty Ltd (administrators appointed) (the Company), seek an extension of the convening period within which to convene the meeting of the Company’s creditors required by s 439A(1) of the Corporations Act 2001 (Cth) (the Act).

2    On 26 February 2021, the Court made orders, pursuant to s 439A(6) of the Act, extending the convening period up to and including 24 May 2021: Hill, in the matter of Autocare Services Pty Ltd (administrators appointed) [2021] FCA 167 (Autocare (No 1)). This, therefore, is the second occasion on which an extension of the convening period has been sought. Section 439A(6) does not authorise such an extension: In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 984; 54ACSR 383 at [1]. It is accepted, however, that such an extension can be granted, if appropriate to do so, in reliance on the power contained in s 447A(1) of the Act, which permits the Court to alter what would otherwise be the operation of Pt 5.3A of the Act (which deals with administrations) in relation to a particular company: Lombe Re; Australian Discount Retail Pty Ltd [2009] NSWSC 110 at [32]; Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (Administrators Appointed) (No 2) [2010] FCA 499 at [35] – [36]; Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (Administrators Appointed) (No 3) [2010] FCA 1087 at [41] – [42].

3    The present application is supported by an affidavit made by one of the administrators, Mr Hill, on 19 May 2021.

4    The background to, and circumstances of, the administration are comprehensively summarised in Auctocare (No 1), which also states the relevant principles to be applied when considering whether a convening period should be extended, whether the extension is sought under s 439A(6) of the Act or in reliance on s 447A(1). I will not repeat the matters there set out.

5    The administrators have continued to trade the Company as a going concern in order to undertake a sale and/or recapitalisation process by way of deed of company arrangement (DOCA) to maximise the amounts available to creditors, while at the same time undertaking investigations into the Company’s affairs. The administrators have undertaken an operational restructure of the Company.

6    As at 24 February 2021, the Company leased 23 sites from 20 different landlords comprising a mixture of on-wharf and off-wharf premises, ranging from 425 m² to 201,000 m² of office space. The total vehicle storage capacity of the Company’s property portfolio is 60,000 cars at one time.

7    Since their appointment, the administrators have terminated leases at five sites. Otherwise, they have been renegotiating lease terms with existing landlords to reduce the Company’s total monthly rental liability. In broad terms, the Company’s total monthly rental liability, following negotiated reductions and exits with respect to 16 of the 18 go-forward leases from 1 June 2021 will be approximately 50% of the pre-appointment amount for those leases (excluding outgoings). The administrators have paid all post-appointment lease liabilities to the landlords.

8    The essential reason advanced for the further extension of the convening period is that the administrators wish to finalise negotiations with two remaining landlords for rental reductions in respect of leased sites that are considered to be critical locations for the future conduct of the Company’s business. LINX Cargo Care Group Pty Ltd (LINX), which is the Company’s parent company and senior secured creditor, has informed the administrators that it maintains an ongoing intention to bring forward a DOCA proposal with respect to the Company continuing its business as a going concern. However, it has indicated that it will not be in a position to finalise its proposal until the Company’s revised property portfolio is settled and there is certainty with respect to the Company’s ongoing lease liabilities and operational locations. I note that the administrators have been in discussions with LINX about the likely structure of such a proposal.

9    The further extension sought is to (and including) 5 July 2021—a period of six weeks. Mr Hill has expressed the administrators’ confidence that, within this further period, agreements can be negotiated with the two landlords or, if not, that alternative premises can be identified and leased with terms that will enable the Company to relocate its operations to those premises in an orderly manner within the administration period. In the meantime, discussion can continue with LINX with respect to a DOCA proposal.

10    Mr Hill has informed the Court that if the further extension is not granted, the administrators will be forced to convene the meeting of creditors with a recommendation that the Company be placed in liquidation.

11    The Company’s creditors have been notified of the present application, although I observe that the notice was only given on 19 May 2021. Even so, no creditor has come forward to oppose the application and LINX is supportive of it.

12    Mr Hill has expressed the opinion that enabling the Company to continue to trade while the administrators conclude their negotiations with the two landlords, and LINX in respect of a DOCA proposal, will provide the most value to creditors (and, therefore, be in their best interests) because:

(a)    the ability to maintain “business as usual” is paramount to maintaining the support of customers, which will greatly preserve the value of the Company;

(b)    it will provide more certainty to customers, suppliers and employees as the administrators will not be forced into a fire-sale or unfavourable agreements that, ultimately, would be detrimental to the creditors and unsustainable for the Company in the long-term; and

(c)    the only alternative available to the Company would be a liquidation, which the administrators believe would result in the unsecured creditors receiving no return, a loss of all employment, and a below par return for LINX in its capacity as the senior secured creditor.

13    I am satisfied that the convening period should be further extended, as sought by the administrators. I am satisfied that, by doing so, it is unlikely that substantial prejudice will be caused to the creditors. The administrators will continue to be personally liable for rent accrued and services engaged on behalf of the Company. All employee entitlements will be met by the administrators. Wages will be paid in the ordinary course and superannuation contributions will be funded. The administrators will continue to meet all approved supplier expenses incurred by the Company for the period since their appointment. Further, the administrators have not identified any recoveries available to a liquidator of the Company that would be adversely affected by the extension.

14    As an additional matter, the administrators seek an extension of orders made under s 37AF of the Federal Court of Australia Act 1976 (Cth) on 26 February 2021 in respect of certain evidence that has been placed before the Court. The reasons for originally making those orders are set out in Autocare (No 1). The extension that is sought is limited to the period that is one week after the expiration of the further extended convening period. I am satisfied that this limited extension is necessary to prevent prejudice to the proper administration of justice.

15    Orders will be made accordingly.

Associate:

Dated:    21 May 2021