Federal Court of Australia

Frisken, in the matter of Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) [2023] FCA 448

ORDERS

THE COURT ORDERS THAT:

1.    The Originating Process be made returnable instanter.

2.    The Originating Process be dismissed.

3.    Costs be reserved pending determination by the Court of Car-Trek Australia Pty Ltd’s oral application for a costs order, which is to be determined on the papers.

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

ORDERS

THE COURT ORDERS THAT:

1.    Car-Trek Australia Pty Ltd be granted leave to file and serve written submissions with respect to costs including in respect of a lump sum costs order (limited to 2 pages) by 5:00pm on 16 May 2023, with such submissions to also be sent by email to the Associate to Cheeseman J.

2.    The plaintiffs be granted leave to file and serve any written submissions in response (limited to 2 pages) by 5:00pm on 18 May 2023, with such submissions to also be sent by email to the Associate to Cheeseman J.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    These reasons concern an application brought by Mr Daniel John Frisken and six related companies of which he is the administrator — Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 128 784 216); Xpress Fuel Australia Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 146 291 081); Press Australia Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 151 214 836); Xpress Group Australia Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 147 059 630); Xpress AG Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 645 093 894); and Press AG Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) (ACN 645 098 764), (together, the Companies). The plaintiffs sought, inter alia, an order under s 439A(6) of the Corporations Act 2001 (Cth) extending the period within which the administrator must convene the second meeting of creditors in respect of each of the Companies by approximately six months. On 11 May 2023, I made orders, inter alia, dismissing the plaintiffs’ application. These are my reasons for doing so.

2    I will comment from a practice and procedure perspective about the circumstances in which the present application came before me as Commercial & Corporations Duty Judge on 10 and 11 May 2023. Before I do so, it is useful to first provide some background in respect of the relevant administrations.

BACKGROUND

3    The administrator relies on his affidavits sworn on 8 May 2023 and 10 May 2023. Mr Frisken is a registered liquidator and has over 15 years of experience in corporate insolvency, including six years as a registered liquidator, and significant experience acting as an administrator in voluntary administrations. In a second affidavit sworn on 10 May 2023, Mr Frisken says he has over 19 years of relevant experience.

4    All the Companies have the same sole director — Mr Mark Bassal. Five of the Companies have the same sole shareholder — Mr Bassal. The sixth company — Xpress Group — is a wholly owned subsidiary of Press Australia, one of the other Companies.

5    Prior to their external administration, the administrator deposed that the Companies conducted three lines of business. First, the ownership and leasing of petrol stations, including real property owned (or leased) by Press Australia (as trustee of the Lassab Trust) and leased (or sub-leased) to lessees. Secondly, wholesaling of petroleum products to petrol station proprietors (including the lessees or sub-lessees of the petrol stations owned or leased by Press Australia), which business was carried out by Xpress Fuel. Thirdly, the transport of petroleum and various agricultural and consumer products (such as milk and molasses), which business was carried out by Xpress Transport. Xpress Group owned plant and equipment of the Companies, including, in particular, trucks and trailers.

6    During the hearing, a former employee of Xpress Fuel submitted that Xpress AG ran three farms and traded sheep and cattle. Counsel for the administrator had indicated that he was unable to shed light on what involvement Xpress AG had in the businesses operated by the Companies.

7    On 4 April 2023, Mr Frisken was appointed as the voluntary administrator of each of the Companies pursuant to a resolution passed by Mr Bassal, pursuant to s 436A of the Act. Mr Frisken’s appointment was precipitated by the appointment of receivers and managers to the assets of the Companies.

8    On 30 March 2023, Mr Barry Kogan and Ms Katherine Sozou of McGrathNicol were appointed by the National Australia Bank (NAB) as Receivers and Managers of the assets and undertaking of the Companies. NAB is the Companies’ largest creditor, claiming to be owed approximately $43,275,373.14 (in total) pursuant to various facilities that it entered into with the Companies. NAB appointed the Receivers based on its contractual rights under securities held by it over the assets of the Companies, including the property held by Press Australia as trustee for the Lassab Trust. The Receivers’ appointment was effected in three stages. The Receivers were initially appointed over the assets and undertaking of Xpress Fuel, on a limited basis, on or about 20 March 2023. Then, on 30 March 2023, the Receivers were appointed in respect of all of the assets and undertakings of all of the Companies except for particular property in Bundaberg, Queensland (owned by Press Australia). Finally, on about 11 April 2023 the Receivers were appointed over the Bundaberg property.

9    The Receivers have not traded the business of any of the Companies since their appointment when they promptly caused the Companies to cease trading and made all employees of the Companies redundant.

10    The claims of the Companies’ other creditors may be as high as approximately $121 million. Those creditors can be grouped into the following main categories: (1) subordinated creditors, to which substantial amounts are owed; (2) creditors who assert that Mr Bassal has given personal guarantees in relation to their debts claimed against the Companies; (3) employee creditors, to whom Xpress AG, Xpress Fuel and Xpress Transport owe debts of around $509,000 (which the administrator understands excludes any redundancy payments or payments in lieu of notice).

11    In addition to creditors, the administrator identifies potential judgment creditors as an additional class of stakeholder, being the litigants in four extant proceedings involving the Companies which were commenced prior to the appointment of the administrator. The litigation presently on foot, which the liquidator deposes to as being of potential relevance to the application, includes: proceedings between the lessees of certain petrol stations (as plaintiffs) and Xpress Fuel, Press Australia, and Xpress Transport (as defendants); and proceedings in various jurisdictions in which Xpress Group, Xpress Fuel, Press Australia, and/or Xpress Transport are the subject of claims in respect of unpaid clean up fees relating to spilled petroleum products, unpaid construction fees, and unpaid monies for works performed on a service centre.

12    The Companies hold substantial assets, comprising over 20 parcels of real property, various trucks, and inventory, plant and equipment. In total, the Companies’ assets are recorded as having a book value of almost $100 million. The veracity of the book value has not been tested or investigated at this time. The majority of the Companies’ assets are presently under the control of the Receivers. There is a dispute between the Receivers and Mr Bassal as to the ownership and location of the Companies’ mobile assets, including motor vehicles. As at 10 May 2023, the Receivers had been unable to take possession of the Companies’ personal property assets save for a limited number of vehicles. I will return to this dispute below.

13    The first meetings of creditors of each of the Companies were held on 18 April 2023. The meetings were held consecutively rather than concurrently, and convened in accordance with s 436E of the Act. A Committee of Inspection was appointed in relation to each of Xpress Fuel, Xpress Group, Press Australia and Xpress Transport. No Committee of Inspection was appointed in relation to the remaining two Companies.

14    The administrator says that at each of the first meetings of creditors, he foreshadowed making an application to extend the convening period. The administrator deposes to the fact that there were no comments, adverse or otherwise, made in respect of the foreshadowed application at any of those meetings. The administrator’s evidence in this respect is somewhat controversial. For the purpose of this application, it is neither necessary nor appropriate to determine that controversy. It suffices to note that it is clear that the administrator had an intention of bringing an application of this type from at least 18 April 2023 and that his principal reason for advancing the application has not changed since that time.

15    On 8 May 2023, the administrator wrote to the members of each of the Committees of Inspection, and notified them that he was in the process of preparing an affidavit in support of the present application, which he anticipated would be lodged with the Court on 9 May 2023 (being the day before the hearing of the application). A copy of the originating process, the administrator’s first affidavit of 8 May 2023 and the exhibits to that affidavit were made available via Dropbox on 9 May 2023, the day before the hearing of the application.

16    The administrator did not communicate that he intended to seek an extension for a period of six months until 9 May 2023, and then it was necessary to have regard to the terms of the originating process attached to the administrator’s communications to ascertain the length of extension being sought.

17    In his second affidavit, sworn 10 May 2023, the administrator deposes to providing notice to a number of interested parties. That affidavit was sent to my Associate shortly before the hearing and emailed to the solicitors for one of the interested parties during the hearing. From the administrator’s second affidavit it is evident that, by email on 9 May 2023, the administrator informed the Australian Securities and Investments Commission (ASIC) and the Receivers of the application, and provided file-sharing links to copies of the originating process, his supporting affidavit of 8 May 2023, and the exhibits to that affidavit. Further, that the administrator also gave notice by email to those creditors of whom he was aware and for whom he had email addresses. The administrator had email contact details for between about 56% to 91% of the known creditors across the Companies. The administrator has sent an email to those creditors informing them of the application, and providing the time and dial-in information for the hearing, and a file-sharing link from which the relevant documents could be accessed.

18    The administrator deposes to having received a response from only one creditor – Petro China International (Australia) Pty Ltd – a representative of which is a member of one of the Committees of Inspection. In an email to a staff member of the administrator, Mr David Wright objected on behalf of Petro China to the extension on the basis that “it does not take the director this long to get refinanced and moreover the chances of him getting refinanced is remote when he has a number of companies in administration”. Mr Wright noted that “[i]t also restricts our [i]nsured from taking action against the director under the personal guarantee provided which is not acceptable”. The administrator deposes to being unaware of the existence of the asserted personal guarantee from Mr Bassal at the time of his first affidavit sworn in these proceedings. However, the administrator remains of the view that the effect of the moratorium on parties with the benefit of the personal guarantees, of which to his knowledge there are seven others, does not outweigh the reasons he has advanced for seeking the extension.

19    In his second affidavit, the administrator also deposed to further litigation involving the Companies which he had not referred to in his first affidavit, and which I have described broadly above. One of those proceedings involves a claim brought by Car-Trek Australia Pty Ltd trading as ISS First Response against Xpress Fuel in the County Court of Victoria in respect of unpaid clean up fees relating to spilled petroleum products. Counsel for Car-Trek appeared and was granted leave to be heard in opposing the application.

20    At the hearing, the plaintiffs tendered two letters sent by the solicitors for the Receivers to the solicitors for the administrator. The letters were tendered in accordance with a request by the Receivers’ solicitors asking for the correspondence to be placed before the Court.

21    In the first letter dated 27 April 2023, the Receivers’ solicitors said:

…

The Xpress Group Receivership – Stolen assets of the companies

As you know, we act for Barry Kogan and Katherine Sozou as joint and several Receivers and Managers (Receivers) to the companies in the Xpress Group listed in Schedule 1 of this letter (Appointment Entities). We also continue to act for National Australia Bank Limited (NAB), the senior secured lender for the Appointment Entities.

We refer to our earlier letters dated 6, 13 and 19 April 2023 to Marsdens Law Group regarding the identification and recovery of the assets of the Appointment Entities. We have not received any response to our letter dated 19 April 2023.

The Receivers have taken control of and entered into possession of the assets of the Appointment Entities. Accordingly, the Administrator’s functions and powers are subject to the functions and powers of the Receivers pursuant to section 442D of the Corporations Act 2001 (Cth) (Corporations Act).

The purpose of this letter is to inform the Administrator of the status of the asset recovery process, including the Receivers’ interactions with NSW Police, and to provide the Administrator with copies of recent correspondence to Marsdens Law Group and Mr Jamie Brown, an associate of Mr Bassal.

To that end, we enclose copies of the following letters and documents for the Administrator's attention:

(a)     a letter to Marsdens Law Group dated 27 April 2023 enclosing a notice issued to Mr Bassal pursuant to section 430 of the Corporations Act (Section 430 Notice); and

(b)     a letter to Mr Brown dated 27 April 2023.

Asset recovery process

As noted in the enclosed correspondence, the Receivers have reported assets of the Appointment Entities as stolen to the NSW Police.

The Receivers are cooperating with the police’s investigations, and they have lodged a stolen vehicles report at the police’s request. This report lists 80 vehicles (in addition to the truck and trailers stolen from Pickles yard) that are owned by the Appointment Entities, and which have been financed on a secured basis, including non-logistics vehicles such as the RAM cars, the Mercedes, and a Bentley.

The Receivers considered this action was necessary to protect the assets of the Appointment Entities given recent events, which are more fully described in the enclosed letters, and which have previously been notified to the Administrator.

We confirm the NSW Police have seized a truck and trailer, which will be delivered to a Pickles holding yard in due course. Following this seizure, Jaime Brown indicated to the Receivers’ agents that Mr Bassal had arranged for assets to be returned to a yard located in Sydney over the weekend for identification and delivery commencing on 26 April. Unfortunately, following a telephone call on Monday between Mr Bassal and the Receivers’ agent, it no longer appears to be the case that Mr Bassal will deliver up the stolen assets. The Receivers are considering their options including to seek urgent Court relief.

The Receivers are also continuing to assist the inquiries of the NSW Police.

The New Xpress Companies

The Receivers have determined from their investigations that on 28 March 2023 (eight days after the Receivers’ limited appointment to specific assets of Xpress Fuel Australia Pty Ltd and two days before the Receivers’ expanded appointment to the assets and undertaking of the Appointment Entities), the following companies were incorporated:

(a)     Xpress Aust NSW Pty Ltd (ACN 666 849 163);

(b)     Xpress Fuel Services Pty Ltd (ACN 666 848 184); and

(c)     XTS Pty Ltd (ACN 666 849 047),

(together, the New Xpress Companies).

ASIC company extracts disclose that Mr Jamie Brown, Mr Bassal’s associate, is the sole director and company secretary of the New Xpress Companies. Samira Bassal (who we understand in Mark Bassal’s mother) is the sole shareholder of the New Xpress Companies.

The Receivers have also received reports that the New Xpress Companies are using the assets of the Appointment Entities in their operations. This obviously gives rise to concerns regarding ‘illegal phoenix’ activity and potential creditor-defeating dispositions under section 588FDB of the Corporations Act.

Assistance sought from the Administrator

The enclosed correspondence also raises other matters of concern. In this context, we refer to the Administrator’s statutory obligations to protect the interests of the creditors of the Appointment Entities while they are under administration. We would be grateful if the Administrator could provide any information regarding the matters in the enclosed letters to the Receivers.

We otherwise understand that the Administrator is currently in contact with Mr Bassal regarding a potential restructure, refinance or recapitalisation of the Appointment Entities (including by way of Deed of Company Arrangement). To the extent the Administrator is in contact with Mr Bassal (or Mr Brown, Mr Bassal's associate), could Mr Frisken please reiterate to Mr Bassal that:

(a)     Mr Bassal’s powers as a director of the companies comprising the Xpress Group have been suspended and he is not entitled to dispose of or deal with any property of the Xpress Group without the prior consent of the Receivers;

(b)     NAB has not released or discharged its security, which continues to attach to the assets of the Appointment Entities. NAB has not consented to any asset disposals or sales, including to any of the ‘Pearl’ companies or to the New Xpress Companies;

(c)     Part 5.8 (Offences) of the Corporations Act imposes serious consequences upon the officers of a company under external administration who do not comply with their statutory obligations. In particular, it is a contravention of section 590 for an officer to fail to deliver the property of the relevant company to a receiver;

(d)     continuing non-compliance with the Receivers’ reasonable requests in relation to the assets, and interference with the asset recovery process, may result in both criminal and civil contraventions, and legal action being taken against Mr Bassal personally.

…

22    In the second letter dated 10 May 2023, the Receivers’ solicitors said:

…

Xpress Group of Companies – Convening Period Extension Application – Originating Process and Affidavit of Daniel Frisken sworn 8 May 2023 (Frisken Affidavit)

We refer to the application for an extension of the convening period in the administration of the Plaintiffs (save for the First Plaintiff) (Companies) which we understand is listed for hearing in the Federal Court on 10 May 2023 at 2.15pm (Administrator’s Application).

As you know, we act for Barry Kogan and Katherine Sozou as joint and several Receivers and Managers (Receivers) of the Companies.

As a preliminary matter, we consider it appropriate to note that in your letter dated 5 May 2023 you indicated that your office would provide us with a copy of the application ‘at least 24 hours prior to filing with the Court.’ We were not ultimately afforded that notice and therefore the Receivers have had little time to consider the Administrators’ Application. In the time available, we make the following observations and indicate the Receivers’ position in relation to the Administrator's Application.

Observations

We make the following observations in relation to Administrator’s Application and the Frisken Affidavit:

•    We understand from the matters detailed in the Frisken Affidavit that the Administrator considers that, among other things, the unknown timing of the Receivers’ realisation of the Companies' assets is relevant to extending the convening period, in so far as those realisations impact ‘the adoption by creditors of any DOCA proposal’ (paragraph 31 of the Frisken Affidavit).

•    Given the business has been wound down and based on the information in the Frisken Affidavit, any DOCA proposal seems highly speculative and for this reason, it is not clear whether:

•    the timing of the Receivers' realisation of assets is in fact likely to be relevant in the context of the Companies’ administrations; and

•    the proposed extension of the convening period is likely to benefit to creditors.

•    Nevertheless, not all correspondence between our respective firms regarding the Receivers’ realisation of assets has been exhibited to the Frisken Affidavit. While paragraph 29 of the Frisken Affidavit refers to our 4 May 2023 letter, the enclosed letters dated 27 and 28 April 2023 are not exhibited. Our 27 April 2023 letter in particular provides greater context and detail of why the Receivers are not presently in a position to indicate how long they expect to realise the assets, where we advised of the events which have restricted the Receivers' ability to realise significant assets of the Companies.

•    The Receivers are unable to comment on the accuracy of the Administrator's estimate of two to three months to prepare ‘the assets of the Companies for sale’ (paragraph 30 of the Frisken Affidavit) in circumstances where, among other things, the Receivers have been unable to take possession of the Companies’ personal property assets (save for a limited number of vehicles), including due to interference.

Receivers’ position

Notwithstanding the above observations, the Receivers do not intend to oppose the Administrator’s Application in circumstances where the Receivers remain appointed to the Companies’ assets.

Accordingly, the Receivers do not intend to appear at today’s hearing and will immediately notify you if that position changes.

If the Court queries the Receivers’ position, we consider it appropriate that you hand up a copy of this letter and our letter dated 27 April 2023.

…

23    The information as to police involvement, alleged obstruction, alleged theft and potential phoenix activity described in these letters was not disclosed in detail, or at all, in the administrator’s affidavits. The best that can be said is that the administrator alluded to an ongoing dispute between the Receivers and Mr Bassal in relation to the ownership of at least a portion of the assets (primarily motor vehicles), and difficulties faced by the Receivers in locating and securing those assets.

URGENT APPLICATION BEFORE DUTY JUDGE

24    The application was brought before me as Commercial & Corporations Duty Judge on an urgent basis on 10 May 2023. As mentioned, the administrator gave written notice of the application, including that the extension was being sought for a period of six months, to those stakeholders for whom he had email addresses on about 9 May 2023. The application was heard as a matter of urgency because, in the absence of an extension, the time to convene the second meeting of creditors for each of the Companies would otherwise expire on 11 May 2023.

25    The administrator had formed the intention of bringing an application such as this at least as early as 18 April 2023, when he communicated that intention at the first meetings of creditors of the Companies, or at least at one of those meetings. Yet, the first time the application was foreshadowed to the Court was on 9 May 2023, with written submissions being provided late on that day and further materials being provided shortly prior to the hearing, and further evidence emerging at the hearing.

26    No explanation was offered in the administrator’s evidence as to why the application was not brought forward earlier nor why in the circumstances known stakeholders were not given appropriate notice earlier. That is particularly problematic in circumstances where an attempt to give notice was made so late that the only likely effective means of notification was by email and the administrator was not in a position to email creditors for whom or which he did not have an email address. Creditors who could not be notified by email were simply not notified at all. There is nothing in the administrator’s evidence that is so recent as to suggest that the application could not have been brought forward in a more orderly way. Counsel for the plaintiffs somewhat gingerly submitted that at least part of the plaintiffs’ delay should properly be regarded as lying at the feet of the Receivers, relying on the correspondence between the administrator’s solicitors and the Receivers’ solicitors which was belatedly provided to the Court and is extracted above. I do not accept that. On the evidence before me, I am not satisfied that the administrator was not in a position to bring the present application at an earlier time after taking reasonable steps to inform interested parties of the application. Clearly, in some cases the evidence will justify an administrator bringing an eleventh hour application. This is not such a case.

27    In the circumstances of this matter, the approach taken by the administrator was unsatisfactory. It was not consistent with facilitating the overarching purpose of conducting proceedings in this Court. This application should not have been left to the last minute. Taking that approach adversely impacted interested parties being afforded a meaningful opportunity to engage on the application. As it was, even with the late notice, several interested parties sought to be heard, either in person or by requesting the administrator to draw to the Court’s attention communications in which they stated their position. The fact that some interested parties sought to be heard does not give me confidence that they received a fair opportunity to oppose the application. By way of example, counsel for Car-Trek, who made submissions that were of considerable assistance to the Court, was briefed in the hour or so before the matter was called on for hearing, and was not in a position to have read and considered the administrator’s first affidavit and the lengthy exhibit thereto, let alone the further affidavit and documentary tenders made during the hearing. To bring the application so late and on such short notice unnecessarily and unfairly undermines the opportunity afforded to stakeholders to seek to oppose the application when they choose to do so. It deprives the Court of the benefit of a properly prepared and instructed contradictor when approaching the balancing task it is required to undertake on an application such as this.

28    The problem created by the plaintiffs’ approach was not cured by the fact that the orders sought by the administrator included the grant of leave for interested parties to apply on notice after the event. While such an order may serve a protective purpose in respect of interested parties of which an administrator is not reasonably aware or for whom an administrator cannot reasonably ascertain contact details, it should not be used instead of taking reasonable steps to give adequate notice in advance of the application where it is reasonably practicable to do so. To do that, in my view, is to put the cart before the horse. The approach taken by the administrator in this case should be avoided in future applications of this type unless it is demonstrated to be unavoidable.

29    I now turn to consider the substance of the application.

APPLICABLE PRINCIPLES

30    Section 439A of the Act relevantly provides:

(1)    The administrator of a company under administration must convene a meeting of the company’s creditors within the convening period as fixed by subsection (5) or extended under subsection (6).

Note:    For body corporate representatives’ powers at a meeting of the company’s creditors, see section 250D.     

(2)    The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.

(5)    The convening period is:

(a)    if the day after the administration begins is in December, or is less than 25 business days before Good Friday the period of 25 business days beginning on:

(i)    that day; or

(ii)    if that day is not a business day–the next business day; or

(b)    otherwise–the period of 20 business days beginning on:

(i)    the day after the administration begins; or

(ii)    if that day is not a business day–the next business day.

(6)    The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.

(7)     If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, the Court may only extend the convening period if the Court is satisfied that it would be in the best interests of the creditors if the convening period were extended in accordance with the application.

(8)     If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, then, in making an order about the costs of the application, the Court must have regard to:

(a)     the fact that the application was made after that period; and

(b)     any other conduct engaged in by the administrator; and

(c)     any other relevant matters.

31    Section 439C of the Act provides that, at a meeting convened under s 439A, the creditors may resolve that the company execute a deed of company arrangement (DOCA), that the administration should end, or that the company be wound up.

32    The applicable principles are well-established. They were summarised by Markovic J in Crawford, in the matter of North Queensland Heavy Haulage Services Pty Ltd (Administrators Appointed) [2017] FCA 635 as follows:

18.    In exercising the jurisdiction to extend time under s 439A(6) the Court must have regard to the objects of Pt 5.3A of the Act as set out in s 435A. Those objects are to maximise the chances of the company or as much as possible of its business continuing in existence or, if that is not possible, to result in a better return for the companies' creditors and members than would result from an immediate winding-up of the company.

19.     The approach taken by the Court in applications of this type is well settled. The power to extend the time for convening the second meeting is one that should not be exercised as of course. Rather, the Court must strike an appropriate balance between the expectation that administration will be a relatively speedy matter 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 (see In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 (Harrisons Pharmacy) (per Farrell J) at [11] and the authorities referred to therein).

20.     Other relevant factors, particularly in the circumstances of this case, are:

(1)    whether 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: see Fincorp Group Holdings Pty Ltd (2007) 62 ACSR 192; [2007] NSWSC 363 (Fincorp) at [18];

(2)    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, a factor which may militate against the too ready grant of an extension: see Fincorp at [4]; and

(3)    whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and to arrive at the opinion required by s 439A(4), in order to inform creditors adequately so that they, in turn, will be in a position to decide whether to terminate the administration, execute a DOCA or place the company in liquidation: see Re Pan Pharmaceuticals Ltd (admins apptd) (ACN 091 032 914) (McGrath and Honey as joint liquidators) (2003) 46 ACSR 77; [2003] FCA 598 at [41]).

33    The Court’s task to which Markovic J refers at [19] has been described as reaching an appropriate balance between an expectation that the administration will be relatively speedy and summary and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10].

34    In Carter v Global Food Equipment Proprietary Limited [2007] NSWSC 901; 25 ACLC 1173, White J (as his Honour then was) explained (at [11]):

On any application under s 439A(6), the Court's task is to balance the need for the administration of a company to be carried out as efficiently and expeditiously as practicable so as to minimise the effect on those persons who are subject to the moratorium imposed by Part 5.3A, against the need to give the administrators time to present meaningful choices to the creditors at their meeting…

35    To those observations, Brereton J (as his Honour then was) added two further considerations based on the authorities. First, the expectation established by the legislation that administrations will be carried out relatively swiftly so that creditors can make their own decision at a relatively early point of time. Secondly, that the objects of Pt 5.3A may in some cases be better served by allowing the administrators time to see if the business of the company can be continued or a better return secured for creditors than upon an immediate winding up: Australian World-Wide Pty Limited v Palmer [2014] NSWSC 141 at [10]. There is no presumption either in favour of or against extending the convening period. Any such presumption would skew the balancing exercise. In Re Riviera Group [2009] NSWSC 585; 72 ACSR 352, Austin J said (at [16]):

…If the approach is to “balance” the expectation of speedy administration against the risk of prejudice, there cannot be any predisposition in favour of speedy administration, for that would skew the balancing process. Rather, the cases suggest that where the administrator proves a substantial ground in any of the categories that I have set out, and there is no specific evidence of prejudice, an extension commensurate with the administrator’s task will be granted, notwithstanding that the explanatory memorandum suggested that extensions would not be granted frequently.

36    The applicable principles were restated, comprehensively, in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; 144 ACSR 347 by Middleton J in the following terms:

[65]     The approach to be adopted was recently set out by Thawley J in Farnsworth v About Life Pty Limited (Administrator Appointed), in the matter of About Life Pty Limited [2019] FCA 11 at [3]-[8], where his Honour endorsed the comments of Austin J in In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs. apptd) [2009] NSWSC 585 (‘Re Riviera’) at [13] as to the categories of cases in which an extension is granted including, relevantly:

(1)     where the size and scope of the business in administration is substantial (citing Lombe, in the matter of Babcock & Brown Limited (Administrators Appointed) [2009] FCA 349; Worrell; In the matter of Storm Financial Ltd (Receivers and Managers Appointed) (Administrators Appointed) [2009] FCA 70; and ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No 5) [2008] FCA 1947);

(2)     where the extension will allow sale of the business as a going concern, citing 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; and

(3)     more generally, where 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 & Recreation Club Ltd (under Administration) [2008] FCA 622.

[66]     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: Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 (Jacobson J); Re Riviera (Austin J); Silvia, in the matter of Austcorp Group Ltd (Administrators Appointed) [2009] FCA 636 (Lindgren J) (‘Re Austcorp’); and In the matter of Kavia Holdings Pty Limited (administrators appointed) (receivers and managers appointed) [2013] NSWSC 737 (Black J).

[67]     In Mighty River International Ltd v Hughes (as deed administrators of Mesa Minerals Ltd) (2018) 359 ALR 181 at 201-202, [73], Nettle and Gordon JJ (in dissent, but not relevantly in this respect) referred to a number of cases including Re Riviera and concluded:

… 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. …

[68]     Finally, the administrator’s own opinion as to the need for an extension will be given weight in an application of this kind: Owen and Others in their capacity as joint and several administrators of Rivercity Motorway Pty Ltd (ACN 116 665 304) (admins apptd) (recs and mgrs. Apptd)) v Madden (No 4) (2012) 92 ACSR 255 at [26] (Logan J); In the matter of Belmont Sportsmans Club Co-Operative Limited (Administrators Appointed) [2015] NSWSC 543 at [9] (Black J); Jahani, in the matter of Northern Energy Corporation Ltd (Administrators Appointed) (No 2) [2019] FCA 382 at [67] (Farrell J); Bumbak (Administrator), in the matter of Duro Felguera Australia Pty Limited (Administrators Appointed) [2020] FCA 422 at [32] (Gleeson J).

37    Another relevant factor for the Court to consider is the need for information to be provided to creditors in a way that would allow them to exercise their decision at the second meeting in as informed a manner as possible: Re Foodora Australia Pty Ltd (Administrators Appointed) [2018] NSWSC 1426 at [11]; Albarran, in the matter of BCJWY Aboriginal Society Limited [2019] FCA 491 at [12]; Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) (No 2) [2020] FCA 618 at [31(2)].

38    In the present application, the administrator also seeks an order under s 447A of the Act, permitting the meeting to be held at any time during the convening period as extended. Such an approach is desirable having regard to the competing considerations engaged when an application is made to extend the convening period: Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18].

CONSIDERATION

39    Based on the evidence, as it belatedly emerged, the present status of the administration of the Companies is somewhat complicated.

40    The businesses operated by the Companies have ceased trading and the employees have been made redundant. Receivers have been appointed and should be in control of the property of the Companies but are facing difficulties in getting the property in. The Receivers are in dispute with Mr Bassal, the key person for all of the Companies. The Receivers allege that significant personal property of the Companies has been stolen. They have reported the alleged theft to the police and are contemplating taking urgent action in court. They also raise concerns about potential phoenix activity involving an associate of Mr Bassal acting through recently incorporated companies, some of whom bear similar names to some of the Companies, and for which the sole shareholder is said to be Ms Samia Bassal, Mr Bassal’s mother. In addition, the Receivers raise concerns about potential creditor-defeating dispositions under s 588FDB of the Act. In light of these circumstances, the Receivers cannot give an indicative estimate of the timing of when they are likely to realise the assets of the Companies.

41    The Companies were placed in voluntary administration after the Receivers were appointed. On the evidence, the Companies have assets which appear to have a substantial book value. The Companies have many creditors in addition to NAB, including subordinated secured creditors such as Tokio Marine & Nichido Fire Insurance Co. Ltd, Lombard Insurance Company Limited, Pearl Investment (Aust) Pty Ltd and DIB Group Pty Ltd to whom substantial amounts are owed. The administrator is also investigating the validity of certain asserted security interests over some of the Companies’ assets.

42    The reports as to company activities and property (or ROCAPs) in relation to each of the Companies received by the administrator from Mr Bassal appear on their face to be inadequate in a number of respects, but particularly in relation to information as to the assets of the Companies.

43    The administrator submits that until the receivership of the Companies is completed or at least substantially advanced, the value of any remaining assets available to the Companies in the administrations of the Companies is unlikely to be clearly ascertained. The administrator says that he is therefore uncertain about the likely return to creditors at this time. He says that until there is greater clarity as to the likely or possible outcome(s) of the receivership, it is unlikely that any potential DOCA can be proposed and reviewed to be put forward for consideration by creditors. For these reasons, the administrator seeks to have the time for convening the second meetings of creditors of the respective Companies extended by a period of six months.

44    The administrator’s view is that an extension of the convening period, for a period of six months, is in the best interests of the creditors of the Company, for the following reasons (as written):

a.     It allows the external administration process to be conducted in a thorough and orderly fashion;

b.     It will permit the receivership to develop and a clearer position will likely emerge as to the approach to be adopted by NAB and the Receivers including as to the assets realised and the price realised for the assets;

c.     It allows sufficient time for the director of the Companies, or a third party, to propound a DOCA which gives the businesses the best chance or survival in some form, facilitates the maximum preservation of value, and maximises the return to unsecured creditors. For the purposes of clarity, I do not presently say that any DOCA will do those things, but, based on the information available to me presently, it is conceivable that such an outcome could result from a DOCA if time is given for one to be proposed; and

d.     The additional time will permit the further investigations that are required in order properly to provide a complete report to creditors on the future of the Companies.

45    The administrator refers to a potential DOCA proposal from Mr Bassal of which he has been aware from at least 18 April 2023 (the first meetings of creditors). In broad terms, the administrator refers to his understanding that it is Mr Bassal’s desire and intention to propose a DOCA in order for the businesses to be re-established and continue to operate (in effect to resurrect the operations of the Companies). The administrator says that the proposed DOCA would aim to facilitate the sale of a number of real properties owned by the Companies to an interested buyer, raise funds secured over the remaining assets of the Companies, and to use the realised and borrowed funds to pay the debt due to NAB in full, secured fuel supplier creditors in full, employee creditors in full and pay the balance, pari passu, to remaining creditors. The administrator says that Mr Bassal’s proposal remains “qualified, uncertain and commercially sensitive in nature”.

46    The administrator also acknowledges the obvious proposition that the extent to which any such DOCA proposal is viable is likely to depend on the position of NAB and the Receivers. The information as to what form a DOCA proposed by Mr Bassal may take is highly generalised and is not supported by documentary evidence. In circumstances where the idea has been around since at least 18 April 2023, there is no evidence before me that suggests that there have been even preliminary discussions between Mr Bassal, or his representatives, and the Receivers. Based on the Receivers’ solicitors’ correspondence, I infer that it is unlikely that there have been such communications.

47    The administrator says that he has recently been informed that Mr Bassal is presently undergoing medical treatment for acute mental health difficulties. That evidence is given on information and belief and is not supported by a medical report from a treating doctor. The administrator says due to Mr Bassal’s ongoing medical treatment, he and his staff have not been able to progress certain lines of enquiry with Mr Bassal in the “few days immediately prior to” 8 May 2023, being the date of his first affidavit. That does not address the absence of supporting evidence in relation to meaningful steps being taken to frame a proposal that may be capable of being progressed.

48    In addition to the possibility of a potential DOCA being developed and proposed by Mr Bassal, the administrator also refers to the theoretical possibility that a potential DOCA proposal may be developed separately to anything that Mr Bassal may propose. For example, the administrator is of the view that an extension of the convening period for six months would allow sufficient time for, in addition to Mr Bassal, a third party to propound a DOCA which provides the Companies’ businesses with the best chance of survival in some form, facilitates the maximum preservation of value, and maximises the return to unsecured creditors. The plaintiffs submit that even after the process of realisation of the various assets the subject of the securities in favour of NAB, it may be at that point there is a possible DOCA proposal which seeks to utilise whatever assets of the Companies that remain. Alternatively, the plaintiffs submit that even if there were to be no assets remaining after the process of realisation, there may be some form of DOCA proposal which eventuates that may provide a better outcome for unsecured creditors than through a liquidation. The administrator’s view is that until there is some clarity in respect of the outcome of the receivership, there cannot be an expectation for a DOCA proposal to come to fruition.

49    An extension of six months is a significant extension. It is the administrator’s best estimate of a period which may be long enough so that the Receivers will have identified, prepared for sale, marketed, and completed the sale of the assets of the Companies (including the real properties).

50    The Receivers have not provided an estimate of the time within which they expect to be able to complete the realisation of the secured assets. They say they are unable to comment on the administrator’s estimate in the circumstances they have described, including due to interference. The Receivers remain appointed to the Companies’ assets. They did not seek to appear to oppose the application. They did however cause the administrator to make their views known to the Court, namely that it is unclear that the proposed extension would be of benefit to creditors in circumstances where the businesses have been wound down and the DOCA proposal seems highly speculative. I agree.

51    Having regard to matters I have identified above, and taking into account the statutory objectives of voluntary administrations and the serious balancing act that is required, I am not satisfied that the plaintiffs have established a proper evidentiary basis for the grant of an extension. I am also not satisfied that so far as it was practicable to do so, all known relevant stakeholders have been notified of this application.

52    In reaching my conclusion, I have taken into account the administrator’s views as to the desirability of the extension being granted. However, I have concluded that the prospect of a DOCA proposal emerging in the whole of the relevant context is so highly speculative that it does not outweigh the prejudice to creditors impacted by the statutory moratorium. The creditors impacted include the Companies’ former employees who may be delayed in being able to access the Fair Entitlements Guarantee scheme in a liquidation, should that prove necessary. I am not satisfied that to extend the convening period, whether for six months, or a shorter period, is realistically likely to result in the administrator being in a better position to present a meaningful choice to creditors that may enhance any return to creditors at the second meeting of creditors. The plaintiffs’ reliance on authorities where extensions in the vicinity of six months have been granted where receivers had been appointed to the properties of the companies in administration was misplaced, having regard to the disparate facts underpinning this application.

CONCLUSION

53    Accordingly, for these reasons, I dismissed the plaintiffs’ application. The parties are to provide short submissions on costs which I will determine on the papers.

Associate:

Dated:    12 May 2023

SCHEDULE OF PARTIES