Federal Court of Australia

Albarran (Administrator), in the matter of John Wayland Pty Ltd (Administrators Appointed) [2022] FCA 1119

ORDERS

THE COURT ORDERS THAT:

1.    Upon the applicants’ undertaking, by their solicitor, to pay the appropriate filing fee, the applicants be granted leave to file in Court the Originating Application dated 14 September 2022, together with the affidavit of Kathleen Elizabeth Vouris sworn on 14 September 2022.

2.    The time for the hearing of the application be abridged and the Originating Application be returnable instanter.

3.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period within which the first applicant must convene a meeting of the creditors of John Wayland Pty Ltd (Company) as fixed by s 439A(5) of the Act be extended by 60 days (Extension Order).

4.    Pursuant to s 447A of the Act, the meeting of the Company required under 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 3 above, notwithstanding the provisions of s 439A(2) of the Act.

5.    The applicants are to serve notice of these orders, a copy of the affidavit of Ms Kathleen Elizabeth Vouris sworn on 14 September 2022 and a copy of the submissions of the applicants’ counsel, Mr D Parish, dated 14 September 2022, in support of the making of these orders, on all known creditors of the Company by 4.00 pm on Friday, 16 September 2022.

6.    In the event that a director, creditor, or contributory of the Company makes any request to the applicants that the matter be re-listed for the purpose of varying or amending the Extension Order, the applicants are to take steps forthwith to re-list the matter before the Commercial & Corporations Duty Judge.

7.    Leave be granted to the applicants, any director, creditor, contributory of the Company or any other person with a sufficient interest to apply on three days’ notice to vary or amend the Extension Order.

8.    The costs of this application be paid out of the administration of the Company.

9.    These orders be entered forthwith.

THE COURT NOTES THAT:

10.    Following publication of the reasons for judgment, the applicants will provide a copy of those reasons to all known creditors of the Company as soon as reasonably practicable.

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

EX TEMPORE REASONS FOR JUDGMENT

(Revised from transcript)

HALLEY J:

Introduction

1    This is an application pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) that the period within which the Administrators of John Wayland Proprietary Limited (Administrators Appointed) (Company) must convene a meeting of the creditors of the Company, as fixed by s 439A(5) of the Act, be extended by 60 days.

2    The administrators, being the first applicant, Richard Albarran and Kathleen Vouris in their capacity as joint and several administrators of the Company (Administrators), also seek an order pursuant to s 447A of the Act that the meeting of the Company required under s 439A of the Act may be held at any time during or within five business days after the end of the convening period, notwithstanding the provisions of s 439A(2) of the Act.

3    The Court has the power to extend the convening period and further order that the meeting may take place within the extended period as the Administrators see fit, pursuant to ss 439A(6) and 447A(1) of the Act respectively.

4    In summary, the Administrators seek the extension of the convening period for two reasons. First, they have not been able to obtain information that they regard as necessary to form a concluded view on certain matters as required by r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) and s 438A of the Act. Second, they are of the preliminary opinion that a deed of company administration (DOCA) would be in the best interests of the Company and its creditors, but that they require further time to negotiate and conclude possible terms that can then be set out in the second report to creditors.

5    The Administrators rely on the affidavit of Kathleen Elizabeth Vouris, sworn on 14 September 2022, and two exhibits to that affidavit, Exhibits KV-1 and KV-2.

Legal Principles

6    Section 439A(7) of the Act stipulates that the Court may only grant an extension if it is satisfied that it is in the best interests of the creditors that the convening period be extended. In exercising its discretion to extend the convening period, the Court must reach an appropriate balance between an expectation that the administration will be relatively speedy and summary in nature, and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising the return for creditors: Strawbridge, in the matter of Virgin Australia Holdings Ltd (Administrators appointed) (No 2) [2020] FCA 717 (Strawbridge) at [64].

7    In Caddy, in the matter of Khaled El-Sheikh Pty Ltd (Administrators Appointed) [2022] FCA 703 (Caddy) at [17], Anderson J summarised the principles and authorities governing an application for an extension of convening periods, and, in that paragraph, referred to the explanation of those principles by Middleton J in Strawbridge, including at [66] of that case, in which his Honour explained:

An extension of the administration period to facilitate either (or both) of: (a) the sale of the business of the company as a going concern, so as to maximise the value of the company’s assets; or (b) the progression and assessment of a DOCA proposal that may provide a better return to creditors than a winding up, are well-recognised examples of situations where the Court has extended the convening period.

8    Further, Anderson J stated at [18]-[19]:

To discharge their function properly, Administrators should have sufficient time to investigate the affairs of the company under administration and provide considered and informed opinions to the creditors as to the company’s future. As was observed in In the matter of Gunns Plantations Limited (Administrators Appointed) (Receivers and Managers Appointed) [2012] VSC 513, [23]:

It has been recognised...that the interests of creditors can be prejudiced not only by delay but also by the convening of premature meetings where the administrator has been unable to obtain information for the preparation of the report and statements required by s 439A(4) in the form on which creditors can make an informed decision.

9    In order to discharge their functions properly, it has been said that Administrators should be given sufficient time to investigate the affairs of the Company and provide considered and informed opinions to the creditors as to the Company’s future: In the matter of Gunns Plantations Limited (Administrators Appointed) (Receivers and Managers Appointed) (ACN 091 232 209) [2012] VSC 513 at [23].

10    It has also been stated that, provided an evidentiary case for an extension of convening periods is properly prepared and there is no evidence of material prejudice to those affected by the moratorium proposed by administration, and the estimate of time has a reasonable basis, the Courts have tended to grant the extensions sought: In the matter of Riviera Group Pty Ltd (admins apptd)(recrs & mgrs apptd) [2009] NSWSC 585 at [14] (Austin J).

Background

11    The Administrators were appointed on 19 August 2022 by way of a resolution of the Company’s sole director. The next business day was 22 August 2022. The 20-day convening period therefore ends on 16 September 2022.

12    Between 23 August 2022 and 30 August 2022, the Administrators received proofs of debt in an aggregate amount of $3,405,773.95. On the information currently available to the Administrators, it appears to them that the only material assets of the Company are two properties with a combined value of approximately $2 million to $2.2 million (Properties).

13    On 29 August 2022, the Administrators received approximately 750 pages of pleadings and evidence in proceedings before the Supreme Court of NSW and the Family Court of Australia involving the Company, its director, the director’s ex-wife and his two sons.

14    On 31 August 2022, the Administrators convened the first meeting of creditors of the Company. The last day to issue the second report to creditors is 15 September 2022 (being five business days before the last day a meeting may be held): r 75-225 IPR.

Reasons for Extension

15    Pursuant to r 75-225(3)(a) of the IPR, the Administrators are required to report on the Company’s business, property, affairs and financial circumstances, and to arrive at a reasoned opinion that they must set out in the second report to creditors as to whether it is in the creditors’ best interests to execute a DOCA in the administration or wind the Company up: r 75-225(3)(b)(i)-(iv) of the IPR. This obligation is mirrored in s 438A of the Act.

16    The Administrators are also required in their second report to creditors to provide any other information known to them that would enable the creditors to make an informed decision about each of those matters, as well as whether there is any transaction that may be voidable in respect of which money may be recoverable by a liquidator (r 75-225(3)(b)(vi) of the IPR), and, if a DOCA is proposed, the details of it (r 75-225(3)(b)(vii) of the IPR).

17    The Administrators have formed a preliminary view that it would be in the best interests of the Company to enter into a DOCA but are unable to determine whether it ought to be included in their second report to creditors without the following:

(a)    a strategy to sell the properties and who is entitled to their proceeds;

(b)    further inquiries into who may propose a DOCA and negotiations as to possible terms;

(c)    allied with that consideration, a more comprehensive review of the Supreme Court and Family Court documents with which they have been provided;

(d)    determining possible claims against third parties; and

(e)    determining whether it is in the best interests of the Company, its creditors and shareholders to be active participants in the Supreme Court proceedings.

18    The Administrators submit that they are not in a position to come to a conclusion or prepare a report within the convening period for these reasons:

(a)    the time it has taken to gather the necessary information to decide on whether or not to market the properties for sale;

(b)    the complexity and volume of the Court documents relevant to consideration of claims of and against the parties to the Supreme Court and Family Court litigation has not allowed the Administrators to come to a conclusion as to the effect of, and whether to take an active role in the subpoenaed court proceedings within the convening period; and

(c)    the Administrators have not received a proposal from creditors about a DOCA, but the Administrators have formed the view that the further period of time would allow negotiations with the parties to the other litigation to reach a settlement of that litigation and their claims against the Company.

Consideration

19    I am satisfied that, consistent with the relevant principles outlined above, an extension of time for the convening of a second meeting of creditors is appropriate. It is clear from the evidence before me today that the primary assets from which the creditors will be able to be paid are the Properties, and it is in the interests of all creditors for the Administrators to determine properly if, when, and how those assets can be realised.

20    I am therefore satisfied that the Administrators would be assisted by being given sufficient time to investigate the affairs of the Company and provide considered and informed opinions to the creditors as to the Company’s future.

21    I am satisfied that a relatively short further period of 60 days would provide the Administrators with sufficient time to come to a view on the matters required by r 75-225 of the IPR and to negotiate the terms of a possible DOCA, which would ultimately be of more benefit to the creditors than any likely prejudice caused by a further 60-day statutory moratorium.

22    Having said that, I am mindful that creditors have not been notified of this application. I accept the explanation provided by Mr Parish of counsel, who appears for the Administrators, that given the relatively late decision to apply for an extension of the convening period, creditors would not have been given sufficient time to be able to form a concluded view before this application necessarily had to be dealt with today, given that this is the last day on which the Administrators would otherwise have been required to issue the second report to creditors.

23    The Administrators have proposed that any potential prejudice to creditors can be addressed by expressly providing for leave to be granted to any creditor, contributory or other person with a sufficient interest, to apply on three days’ notice to vary or amend any order made extending the time for the convening of the second meeting of the creditors of the Company. While I accept that this addresses the issue in part, as a practical matter I have also raised, and the Administrators have agreed, that in the event that a director, creditor, or contributory of the Company makes any request to the Administrators that the matter be relisted for the purposes of varying or amending the order extending time for the convening of the second meeting, the Administrators will take steps forthwith to re-list the matter before the New South Wales Commercial and Corporations Duty Judge.

24    The addition of an order to that effect will avoid potential unnecessary expense on the part of creditors in the event that they are concerned that their position is prejudiced and in circumstances where they may not be as familiar with the Court process as the Administrators and the steps that would be involved in raising a concern about the extension of the period within which the second meeting of creditors is to take place.

25    In all the circumstances, I accept that the evidence weighs in favour of an extension of the convening period under s 439A(6) of the Act within which the second meeting of creditors is to take place and an order under s 447A of the Act that the meeting may be held at any time during or within five business days of the extended convening period.

Disposition

26    For the reasons I have outlined above, the convening period for the second meeting of creditors is to be extended and an order is to be made pursuant to s 447A that the meeting of the Company required under s 439A of the Act may be held at any time during or within five business days after the end of the convening period, notwithstanding the provisions of s 439A(2) of the Act.

Associate:

Dated:    20 September 2022