Federal Court of Australia

Algeri, in the matter of WBHO Australia Pty Ltd (Administrators Appointed) [2022] FCA 169

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs have leave to amend their originating process in the form of the proposed amended originating process dated 1 March 2022.

2.    WBHO Australia Pty Ltd (administrators appointed) (ACN 095 983 681) be joined as the nineteenth plaintiff to the proceeding.

3.    Pursuant to sections 443B(8) and 447A(1) of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate in relation to each of the second to nineteenth plaintiffs (the companies) as if:

(a)    the personal liability of the first plaintiffs (the administrators) under sections 443A(1)(c) and 443B(2) of the Act begins on 24 March 2022, such that the administrators are not personally liable for any liability with respect to any property leased, used or occupied by any of the companies (including amounts payable pursuant to any leases entered into by any of the companies), from any lessors, in the period from 23 February 2022 to 23 March 2022 inclusive; and

(b)    the words “within five business days after the beginning of the administration” in section 443B(3) of the Act instead read ‘by 23 March 2022’.

4.    Pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations)(IPS), the requirement of section 75-25(a) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) for the inclusion, with the notice of meeting dated 24 February 2022 and issued to creditors pursuant to section 75-225 of the IPR (notice of first meeting) in respect of the first meeting of creditors of the companies to be held at 12:00pm AEDT on 4 March 2022 (first meeting), of a form for use in appointing a proxy, was satisfied by the administrators providing a link to the Halo Platform (as defined in the affidavit of David Michael Orr sworn 28 February 2022) (Halo Platform) and informing creditors that electronic proxy forms were available on the Halo Platform in the notice of first meeting.

5.    Pursuant to section 447A(1) of the Act that section 436E is to operate in relation to each of the companies as if the words “at least 5 business days before the meeting” in section 436E(3) instead read “by 5:00pm on 2 March 2022”.

6.    Pursuant to section 90-15 of the IPS, the Halo Platform satisfies the requirements of section 75-75(1) of the IPR.

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

(a)    creditors (including persons or entities claiming to be creditors) of each of the companies, in the following manner:

(i)    where the creditor is a registered user on the Halo Platform, by publishing a notice on the Halo Platform;

(ii)    where the creditor is not a registered user on the Halo Platform but the administrators have an email address for the creditor, by notifying each such creditor, via email, of the making of the orders and providing a link to a website where the creditor may download the orders and the amended originating process; and

(iii)    by placing scanned, sealed copies of the amended originating process (as may be amended) and the orders on the website maintained by the administrators at https://www2.deloitte.com/au/en/pages/finance/articl es/wbho-australia-pty-ltd.html; and

(b)    the Australian Securities and Investments Commission.

8.    Any person who can demonstrate a sufficient interest has liberty to apply to vary or discharge any orders made pursuant to paragraphs 1 to 3 above, on three (3) business days’ written notice to the administrators and the Court.

9.    The administrators have liberty to apply on one (1) business days’ notice to the Court in relation to any variation or discharge of the Court’s orders.

10.    The plaintiffs’ costs of and incidental to this application be costs in the administration of each of the companies, jointly and severally.

11.    The Court’s orders be entered forthwith.

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

REASONS FOR JUDGMENT

BEACH J:

1    The present application has been brought by Salvatore Algeri, Jason Tracy, Matthew Donnelly and David Orr in their capacity as joint and several administrators of WBHO Australia Pty Ltd (administrators appointed) and 17 other companies in the Probuild group. The business operations of the Probuild companies involve project management, building and infrastructure construction services across Australia.

2    WBHO Australia is a wholly owned subsidiary of Wilson Bayly Holmes-Ovcon Limited (WBHO), a South African-based construction firm. The remainder of the Probuild companies are wholly or majority owned subsidiaries of WBHO Australia.

3    The appointment of the administrators followed on from WBHO’s decision to withdraw financial support from the Australian subsidiaries, which took effect from 22 February 2022. In evidence is a two page document headed “Decision to Discontinue Financial Assistance to WBHO Australia Pty Ltd” purportedly explaining this withdrawal, issued from Johannesburg by the board of WBHO. On its face it is not short on self-justification. I need not linger on its content for present purposes.

4    By this application, the administrators seek orders pursuant to s 447A(1) of the Corporations Act 2001 (Cth), alternatively s 443B(8), to extend the period during which the administrators are not personally liable under ss 443A(1)(c) and 443B(2) for rent and any other payments due under leases to 23 March 2022 inclusive. Absent relief being granted, the period for the giving of notice by the administrators under s 443B to avoid incurring personal liability will expire on 2 March 2022. Further orders are sought relating to the provision of a proxy form for the first meeting of creditors over the Halo Platform and the giving of notice of the first meeting. The first meeting of creditors has been convened to take place on 4 March 2022 at 12:00pm.

5    The administrators were appointed on 23 February 2022. As at that date, the Probuild companies had approximately 19 major construction and development projects underway in Victoria, New South Wales, Queensland and Western Australia. The administrators are continuing to trade on the businesses of those companies.

6    The administrators remain in possession of at least seven properties the subject of real property leases. In addition, they are identifying and reviewing all leasing and financing arrangements across the Probuild companies, including in respect of the 921 registrations against the companies on the Personal Properties and Securities Register.

7    As at the date of the administrators’ appointment, the Probuild companies had annual revenue in excess of $1.4 billion and 768 employees located throughout Australia.

8    The administrators have undertaken significant work to identify and manage the Probuild companies’ leasing and financing arrangements. However, significant further work is required to be undertaken by the administrators before a determination can be made as to whether a notice under s 443B(3) should be issued in respect of each relevant lease and financing agreement.

9    The administrators do not yet know what parts of the Probuild companies’ business will be the subject of a sale and/or recapitalisation transaction, and therefore which of the companies’ existing leases will be required for that purpose, and the extent of the financial liabilities they would be incurring in relation to leased equipment.

10    I should address one other matter before turning to the relevant statutory provisions. On 24 February 2022, the administrators issued an initial circular to creditors which annexed a notice of meeting for the first meeting of creditors. The notice of first meeting includes a link to the Halo Platform. Rather than including a hard copy proxy form in the Notice of First Meeting, the notice relevantly states:

Electronic proxy forms will also be available to creditors in the Deloitte Halo platform. Creditors will be notified via email when that occurs.

…

Creditors may attend virtually and vote in person electronically, by proxy or attorney. The appointment of a proxy must be in the approved form. A special proxy can be lodged confirming approval or rejection of each resolution. Proxy forms must be lodged through the Halo platform not later than 12.00PM (AEDT) on Friday, 4 March 2022.

11    The administrators intend to use the Halo Platform in the conduct of the Probuild companies’ administration, including for the conduct of the creditors’ meetings. The Halo Platform is a proprietary digital claims management platform, developed by Deloitte and which had been adapted and adopted for use in the external administration of the Virgin Airlines group of companies in July 2020.

12    Now the present application is brought under ss 439A, 443B, 447A of the Act and s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS).

13    Section 447A contains general powers with respect to the modification of provisions of Part 5.3A as they are to operate with respect to particular companies.

14    Sections 443A and 443B impose personal liability on administrators for a company’s debts. Section 443A(1)(c) imposes personal liability on administrators for debts incurred in the performance or exercise of the administrator’s functions or powers in respect of property leased, used or occupied. Section 443B(2) provides that administrators are liable for rent and other amounts payable under lease agreements made prior to the commencement of the administration if the company continues to use, occupy or be in possession of the property as lessee during the course of the administration. This personal liability commences five days after the administration commences unless a notice is given to the owner or lessor by the administrator under s 443B(3) within that five day period stating that the company does not propose to exercise rights in relation to the property. Section 443B(8) provides that s 433B(2) “does not apply in so far as a court, by order, excuses the administration from liability, but an order does not affect a liability of the company”.

Extension of s 443B(3) notice period

15    The administrators have sought an order pursuant to s 447A(1) or s 443B(8), to modify the operation of ss 443A(1)(c) and 443B(2) to limit their personal liability under leases of real and personal property, such that they have no liability until 24 March 2022. I am prepared to grant such an order.

16    It is well established that s 447A confers power on the Court to make orders limiting the administrators’ liability. Section 447A has broad application where to make orders would serve the objects of Part 5.3A.

17    Further, in terms of the Court’s discretion under s 443B(8), that discretion is wide, but it must be exercised judicially and having regard to the impact on creditors (see Wells Fargo Trust Co, National Association (as trustee) v VB Leaseco Pty Ltd (administrators appointed) [2020] FCA 1269 at [169] per Middleton J).

18    The principles governing the Court’s power to extend the notice period under s 443B(3) were conveniently summarised by Markovic J in Re Strawbridge ((in their capacity as joint and several administrators of CBCH Group Pty Ltd (administrators appointed)) (No 2) [2020] FCA 472, where her Honour observed at [39]:

Section 447A(1) of the Act also gives the Court ample power to alter the operation of s 443B(2) and (3) of the Act: see Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 at [6]. Alternatively, s 443B(8) gives the Court an additional power to alter the operation of s 443B(2) and (3): see Silvia v FEA Carbon Pty Ltd (admins apptd) (recs and mgrs apptd) (2010) 185 FCR 301; [2010] FCA 515 (Silvia v FEA) at [13]. The usual rationale behind the extension of the five business day period in s 443B(2) and (3) or the exercise of the power in s 443B(8) is because the administrator has had insufficient time to conduct the necessary investigations to decide whether he or she thinks it best to retain or give up possession of leased property…

19    It is quite clear that in the present case the administrators have not had sufficient time to conduct the necessary investigations required to form a decision as to whether it is best to retain or give up possession of leased property. Furthermore, it seems well apparent that the extension sought by the administrators is in the interests of the Probuild companies’ creditors and is consistent with the objectives of Part 5.3A.

20    Mr Hamish Austin QC for the administrators pointed out, which I accept, that there are four main reasons why the extension is in the interests of the Probuild companies’ creditors as a whole.

21    First, it will enable the administrators to better identify the exact location of the assets and to identify which assets are necessary to preserve and enhance the value of the companies’ operations.

22    Second, it will maximise the prospect of preserving the businesses of the companies with a view to facilitating a restructure of the business and/or sale as a going concern, which is in the creditors’ best interests, including those of the lessor creditors as it also increases the prospect that there will remain a counterparty in place with respect to existing leases.

23    Third, the administrators are also negotiating with head contractors to facilitate the finalisation of projects, and it would cause considerable expense if a s 443B notice were given and then new arrangements had to be entered into for the use of assets required to finalise those projects.

24    Fourth, if an extension is not granted, the administrators would need to immediately consider issuing s 443B notices to avoid incurring liabilities the quantum of which are, for the most part, not yet known to them and be obliged to issue a number of s 443B notices today, stating that the companies do not intend to exercise rights in relation to property used, occupied or in the possession of the companies, in the event that an extension is not granted. This would be detrimental to creditors, in addition to the companies and other stakeholders, and would immediately disrupt any prospective sale or restructuring strategy.

25    It is also worth observing that courts have granted extensions of the time period under s 443B(3) which have been equal to or greater than the 21 day period sought by the administrators in the present case. In Re Carson [2012] FCA 626, the administrators of the Hastie group of companies, which operated a diverse engineering business across Australia, were granted an extension of 15 business days. In Strawbridge, in the matter of CBCH Group Pty Ltd (administrators appointed) (No 2) [2020] FCA 472 and Strawbridge, in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 3) [2020] FCA 555, the administrators of the fashion retailer Collette were granted an extension of two weeks and a further three weeks respectively. In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (2020) 144 ACSR 310 and then in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) (2020) 144 ACSR 347, the administrators of the Virgin Airlines group were granted an extension of four weeks and a further three weeks in respect of aircraft and other aviation equipment.

26    For the foregoing reasons, this morning I granted the extension orders.

Meeting related orders

27    The administrators also seek orders pursuant to s 90-15 of the IPS that the Halo Platform satisfies the requirements of s 75-75(1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) and that the requirement of s 75-25(a) of the IPR would be satisfied by providing creditors with a link to the Halo Platform and informing them that electronic proxy forms would be made available in the platform. They also seek an order under s 447A(1) effectively extending time for the giving of the notice of the first meeting until 5:00pm on 2 March 2022 in light of the emergence of a significant number of creditors previously unknown to the administrators.

28    It is appropriate to make such orders.

29    Section 75-25(a) of the IPR provides that a person convening a meeting must include, with the notice of meeting, a form for use in appointing a proxy.

30    Section 75-75(1) of the IPR provides:

Virtual meeting technology may be used in holding a meeting, provided the technology gives all persons entitled to attend the meeting a reasonable opportunity to participate without being physically present in the same place.

31    Section 90-15(1) of the IPS provides that the Court may make such orders as it thinks fit in relation to the external administration of the company. Section 90-15(3) provides that orders under s 90-15(1) may include an order determining any question arising in the external administration of the company. I should note that the Court’s supervisory powers under s 90- 15 are broader than its powers under the previous provision, being s 479(3).

32    Let me say something about the Halo Platform. It is apparent from the evidence before me that the platform is an efficient and effective means of managing a large scale administration involving multiple companies and creditors. In the circumstances, it is appropriate that the orders sought by the administrators be made. I note that the use of the Halo Platform was specifically endorsed by Middleton J in Strawbridge, Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182 at [34] to [41]; I rely upon his technical assessment and acceptance as to suitability for the present analogous context.

33    Another issue concerns the proxy forms. On 24 February 2022, the administrators issued the initial circular to creditors which annexed a notice of first meeting. The notice of first meeting included a link to the Halo Platform and stated that “[e]lectronic proxy forms will also be available to creditors in the ... Halo Platform” and that proxy forms must be lodged through the platform by 12:00pm on 4 March 2022. Notably, the provision of proxy forms in respect of the second meeting of creditors via the Halo Platform in the administration of the Virgin Airlines Group was also approved by Middleton J in Strawbridge, Virgin Australia Holdings Ltd (administrators appointed) (No 7).

34    Let me say something about the extension of the time for the giving of the notice of first meeting. In this regard s 436E(3) requires that:

The administrator must convene the meeting by:

(a)    giving written notice of the meeting to as many of the company's creditors as reasonably practicable; and

(b)    causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

35    The notice of first meeting was given on 24 February 2022, “at least 5 business days before the meeting” to those creditors known to the administrators by that date. But in the interim, it has become apparent that a significant number of persons have either become creditors of the companies, by amounts becoming due and payable to them, or otherwise made their status as creditors known to the administrators. Those persons were apparently unaware of the first meeting and had not received the initial circular to creditors containing the notice of first meeting. The administrators have now provided each of those persons with the notice of first meeting, although outside the time allowed by s 436E(3). The administrators propose to provide the documents to any further persons of whom they become aware until 5:00pm on 2 March 2022. It is appropriate for me to make orders to regularise that course.

36    For the foregoing reasons I made the meeting related orders this morning.

Associate:

Dated:    2 March 2022

SCHEDULE OF PARTIES