Federal Court of Australia

Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733

File number:

NSD 447 of 2022

Judgment of:

YATES J

Date of judgment:

15 June 2022

Catchwords:

CORPORATIONS application under s 447A(1) of the Corporations Act 2001 (Cth) to modify operation of Pt 5.3A in relation to administration of company application granted

Legislation:

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 25(1), 32B(1), 32B(2)

Corporations Act 2001 (Cth) ss 439A, 439A(1), 447A, 447A(1), Pt 5.3A

Insolvency Practice Rules (Corporations) 2016 (Cth) ss 75-140(1)(b), 75-140(3)

Cases cited:

Diamond Press Australia Pty Ltd [2001] NSWSC 313

Georges, in the matter of Vical N.S.W Pty Ltd (Administrators Appointed) [2018] FCA 1974

In the matter of Belmont Sportsman’s Club Co-Operative Ltd (Administrators Appointed) [2015] NSWSC 543

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

22

Date of hearing:

15 June 2022

Solicitor for the Plaintiffs:

Mr M Lalji of Chamberlains Law Firm

ORDERS

NSD 447 of 2022

IN THE MATTER OF MEGACRANE HOLDINGS PTY LTD (ADMINISTRATOR APPOINTED) ACN 608 697 007

LIAM THOMAS BAILEY AS ADMINISTRATOR OF MEGACRANE HOLDINGS PTY LTD (ADMINISTRATOR APPOINTED) ACN 608 697 007

First Plaintiff

MEGACRANE HOLDINGS PTY LTD (ADMINISTRATOR APPOINTED) ACN 608 697 007

Second Plaintiff

order made by:

YATES J

DATE OF ORDER:

15 JUNE 2022

THE COURT ORDERS THAT:

1.    Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate in relation to the administration of Megacrane Holdings Pty Ltd (Administrator Appointed) ACN 608 697 007 (Company) as if:

(a)    s 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) omitted the words “that is more than 45 business days after the first day on which the original meeting was held” and included instead of the omitted words the words “later than 30 November 2022”;

(b)    that Part allowed adjournment of the meeting convened under s 439A of the Act in relation to the Company to a day not later than 30 November 2022, despite the operation of s 75-140(3) of the Insolvency Practice Rules; and

(c)    the requirement to hold a meeting of creditors of the Company within the convening period specified in s 439A(2) of the Act is satisfied by holding the adjourned meeting no later than 30 November 2022,

and provided that the requirements of s 75-140 of the Insolvency Practice Rules are otherwise complied with in respect of such meeting.

2.    The first plaintiff is to give notice of these orders to all known creditors of the Company and to the Australian Securities and Investments Commission by no later than 5.00 pm on 16 May 2022.

3.    Liberty to apply be granted to any person affected by these orders, including any creditors of the Company, to vary or set aside the orders on 48 hours’ notice to the plaintiffs and to the Court.

4.    The costs and expenses of this application be costs in the administration of the Company.

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

REASONS FOR JUDGMENT

YATES J:

1    The first plaintiff, Liam Thomas Bailey, is the administrator of the second plaintiff, Megacrane Holdings Pty Ltd (administrator appointed) (the company). On 15 June 2022, Mr Bailey applied for an order under s 447A(1) of the Corporations Act 2001 (Cth) (the Act) that the operation of Pt 5.3A of the Act be modified in relation to the administration of the company. I made that order. These are my reasons.

2    On 9 March 2022, Mr Bailey was appointed as administrator of the company and of a related company, Hyrise Holdings Pty Ltd (administrator appointed).

3    The company operates within a corporate group providing crane and labour hire services to development sites across Sydney and throughout New South Wales from its base at 100 Badgerys Creek Road, Bringelly. The company has functioned as the servicing entity of the group and has entered into contracts with developers.

4    A first meeting of creditors of the company was held on 21 March 2022. The second meeting of creditors was convened to be held on 14 April 2022. The second meeting was adjourned to facilitate the company’s collection of debts that could be claimed under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA).

5    Mr Bailey informed creditors that the adjourned meeting would be held on 22 June 2022. However, in his affidavit made on 14 June 2022 (which was read on the application), Mr Bailey stated that if the relief he was seeking was granted, he would hold the meeting at a later date (75-140(1)(b) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR(C)), for the following reasons.

6    On the date of his appointment, the company had hired cranes to developers at a number of active development sites. However, due to uncertainty that the company was complying with all relevant laws and regulations in relation to the provision of labour to those sites, Mr Bailey elected to continue to maintain the hire of the cranes on a “dry-hire” basis—that is, without the provision of labour.

7    The company, through Mr Bailey, made a number of claims under the SOPA which have been adjudicated. As a result, the company recovered a number of debts owing to it. However, three claims which the company has made remain to be adjudicated. Two claims (totalling $118,251.39) were made against Quasar Constructions (Commercial) Pty Ltd (Quasar) in respect of sites at Rozelle and Chatswood. One claim (for $258,976.19) was made against Piety Constructions Pty Ltd (Piety) in respect of a site at Hurstville. Each claim has been disputed. In his affidavit, Mr Bailey provided reasons why, in his view, each claim should be adjudicated in favour of the company.

8    On 10 June 2022, the company issued further payment claims totalling $29,652.86 against Quasar under the SOPA for the hire of cranes at the Rozelle and Chatswood sites for the period 1 May 2022 to 31 May 2022. If the administration of the company continues, a further claim for hire will be made against Quasar.

9    On 10 June 2022, the company also issued a payment claim under the SOPA against Hansen Investment Group Australia Pty Ltd (HIGA) for the hire of a crane at a site in Darlinghurst for the amount of $15,101.44. If the administration continues, a further claim for hire will be made against HIGA.

10    In his affidavit, Mr Bailey gave general evidence of the likely timeframes for the adjudication of payment claims made under the SOPA.

11    If an adjudication under the SOPA is successful, and the adjudicated amount is not paid, a claimant can obtain an adjudication certificate which can be filed as a judgment for a debt in a court of competent jurisdiction. The judgment debt can be enforced as such: s 25(1) of the SOPA.

12    Notably, a corporation in liquidation cannot serve a payment claim on a person under the SOPA or take action to enforce a payment claim (including by making an application for adjudication of the claim) or an adjudication determination: s 32B(1). If a corporation in liquidation has made an adjudication application that is not finally determined immediately before the day on which it commenced to be in liquidation, the application is taken to have been withdrawn on that day: s 32B(2) of the SOPA.

13    In his affidavit, Mr Bailey said that, based on his experience, it is more difficult to recover debts owing to a company under administration or in liquidation without the benefit of the SOPA processes. This is because, in his experience in recovering debts in the building industry, debtors opportunistically raise meritless defences or counterclaims in an effort to delay or avoid payment, knowing that the company in administration or liquidation has limited financial resources.

14    At the present time, the payment claims and adjudication process under the SOPA has facilitated the recovery of debts owing to the company in the amount of $88,317.87. In his affidavit, Mr Bailey expressed his expectations that this process will assist in recovering the debts owed to the company by Piety, Quasar, and HIGA, without the undue delay caused by meritless defences or counterclaims. In his opinion, there is likely to be a greater return to creditors if the process continues.

15    Under s 75-140(3) of the IPR(C), a meeting convened under s 439A of the Act must not be adjourned to a day that is more than 45 business days after the first day on which the original meeting was held. Because, in the present case, the second meeting of creditors has already been convened and adjourned for the maximum period of 45 days permitted under this section, Mr Bailey’s application was for an order under s 447A of the Act that Pt 5.3A of the Act operate to permit a longer adjournment. The modification he sought was to accommodate an adjournment of the second meeting of creditors that could be held no later than 30 November 2022.

16    This accommodation was permitted by recourse to s 447A of the Act.

17    In Georges, in the matter of Vical N.S.W Pty Ltd (Administrators Appointed) [2018] FCA 1974, I said (at [25] – [28]):

25    Section 447A provides that the Court may make such orders as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. The extension that is sought is specifically with respect to the period referred to in r 75-140(3) of the Rules which, of course, is not found in Pt 5.3A of the Act. Nevertheless, I am satisfied that I have the power to make the orders that are sought.

26    A similar question arose in Re Porter & Anor as joint administrators of Priceright Construction Pty Ltd (Admin Apptd) (2006) 57 ASCR 206; NSWSC 324. The question in that case was whether s 447A of the Act could be invoked to provide that Pt 5.3A of the Act was to operate in respect of a particular company on the basis that reg 5.6.18(2) of the Corporations Regulations 2001 (Cth) did not apply. Barrett J reasoned that such an order could be made in reliance on s 447A because, even though the time limit was one prescribed by the particular regulation, the orders sought were still about how Pt 5.3A of the Act was to operate in relation to the company concerned. See also In the matters of Keystone Group Holdings Pty Ltd (Receivers & Managers Appointed) (Administrators Appointed) and Others [2017] NSWSC 454, especially at [14]-[15].

27    The same reasoning applies in the present case. Although r 75-140(3) mandates that the period of adjournment in respect of a meeting convened under s 439A of the Act must not be more than 45 business days after the first day on which the original meeting was held, an order invoking the facility provided by s 447A of the Act, and which has the effect of modifying the stipulated maximum period, is still an order about how Pt 5.3 is to operate, particularly in relation to a meeting that is required to be held under s 439A of the Act.

28    Further, making thes orders that are now sought will be consistent with the object of Pt 5.3 of the Act, and Sch 2 to the Act (Insolvency Practice Schedule (Corporations)) to the extent that it relates to Pt 5.3A, which is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence or, 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.

18    On 10 June 2022, Mr Bailey informed the company’s creditors that he intended to make the present application. In a circular addressed to the creditors he requested that, by midday on 15 June 2022, any creditor who objected to him proceeding with the application give notice of that objection. I was informed by the solicitor for the plaintiffs, Mr Lalji, that he had been instructed that no creditors of the company notified Mr Bailey of any objection.

19    Mr Bailey contended that if an extension of time for holding the second meeting was granted, it would allow further payment claims to be issued under the SOPA and further adjudications to be made, if required. The extended time would also allow steps to be taken to file adjudication certificates and, if necessary, to bring enforcement proceedings on the judgments obtained.

20    The considerations which informed the present application are the same as those that inform an application to extend the convening period under s 439A(1) of the Act. In essence, an appropriate balance must be struck between the expectation that an administration will be a relatively speedy and summary matter, and recognition that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return to creditors and any return to shareholders: Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10].

21    I was mindful of the fact that due recognition should be given to Mr Bailey’s commercial assessment that an extended adjournment period would allow the administration to continue and to produce, in all likelihood, a greater return to creditors: In the matter of Belmont Sportsman’s Club Co-Operative Ltd (Administrators Appointed) [2015] NSWSC 543 at [7].

22    On the evidence before me, I was satisfied that the relief sought by Mr Bailey was warranted and should be granted in all the circumstances.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

Associate:

Dated:    24 June 2022