Federal Court of Australia

Resnick, in the matter of Toplace Pty Ltd (administrators appointed) [2023] FCA 1086

ORDERS

THE COURT ORDERS THAT:

1.    The originating process filed on 31 July 2023 be returnable at 11:00am on 1 August 2023.

Extension of convening period

2.    Pursuant to section 439A(6) of the Corporations Act 2001 (Cth), the convening period defined in section 439A(5)(b) of the Corporations Act in respect to each of the second to fifty-eighth plaintiffs (together, the Toplace Companies) be extended to 2 February 2024.

3.    Pursuant to section 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to each of the Toplace Companies such that, notwithstanding section 439A(2) of the Corporations Act, the second meeting of the creditors of each of the Toplace Companies required under section 439A of the Corporations Act may be convened at any time before, or within, five (5) business days after, the end of the convening period as extended by paragraph 2 above (provided that the first plaintiffs give notice of the meetings to eligible creditors of each of the Toplace Companies (including the persons claiming to be creditors of the Toplace Companies) at least five (5) business days before the meeting).

Single administration account

4.    Pursuant to ss 65–45 and 90–15 of the Insolvency Practice Schedule (Corporations) being Schedule 2 to the Corporations Act (IPSC), the first plaintiffs (in their capacity as administrators of each of the Toplace Companies) are not required to maintain a separate administration account in relation to each of the Toplace Companies (as otherwise required by the operation of Division 65 of the IPS).

Information to Creditors

5.    Pursuant to section 447A(1) of the Corporations Act, and section 90-15 of the IPSC, section 70-1(2)(a) of the Insolvency Practice Rules (Corporations) 2016 (IPR) is to operate in relation to each of the Toplace Companies as if:

(a)    the words “5 business days after receiving the request” be read as “10 business days after receiving the request”; and

(b)    the first plaintiffs may provide the information, report or document requested by a creditor by publishing that information, report or document on the website maintained by the first plaintiffs at https://dvtgroup.com.au/dvt-have-been-appointed-administrators-of-toplace-pty-ltd/, and by referring the creditor to that website.

Service and Notices

6.    The first plaintiffs, within seven (7) business days of the making these orders, are to take all reasonable steps to give notice of the orders to the Toplace Companies’ creditors (including the persons claiming to be creditors), by means of a circular:

(a)    to be sent by email transmission to creditors for whom the first plaintiffs have a current email address; or

(b)    to be sent by ordinary post to creditors for whom the first plaintiffs have only a postal address.

7.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate such that the requirement on the first plaintiffs to issue notices under ss 75-225(1) and 75-15 of the IPR be modified such that notice of the second meeting will be validly given to any creditors by, not less than five (5) business days prior to the date of the proposed meeting:

(a)    giving such notice electronically by email sent to the email address of any creditor (including persons claiming to be creditors) of the Toplace Companies for whom or which the first plaintiffs hold an email address;

(b)    sending such notice to the postal address or facsimile number, or otherwise as provided for by the Act or the IPR, to any creditors not being a creditor referred to in sub-paragraph (a); and

(c)    causing such notice to be published in the Insolvency Notices website located at: https://insolvencynotices.asic.gov.au/.

Other orders

8.    The following parties have liberty to apply on giving all other interested parties not less than three (3) business days’ notice:

(a)    any person who can demonstrate sufficient interest (including any creditor of the Toplace Companies) for the purpose of modifying or discharging any orders made pursuant to paragraphs 2 and 3 above; and

(b)    the first plaintiffs, for the purpose of seeking any further extension of the convening period.

9.    The first plaintiffs have liberty to apply on one (1) business day’s written notice to the Court in relation to any variation of these orders or any other matter generally arising in the administrations of each of the Toplace Companies.

10.    The plaintiffs’ costs of this application be costs in the administration of the Toplace Companies, jointly and severally.

11.    These orders be entered forthwith.

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

REASONS FOR JUDGMENT

GOODMAN J

A.    Introduction

1    The second plaintiff, Toplace Pty Ltd (administrators appointed), was incorporated on 18 March 2009.

2    On 7 July 2023, Mr Antony Resnick and Ms Suellen McCallum (together the first plaintiff) were appointed as joint and several administrators to Toplace, by a resolution passed by Mr Jean Nassif, the sole director of Toplace.

3    On 14 July 2023, the administrators were appointed as administrators to the third to fifty-eighth plaintiffs (Other VA Companies), each of which is related to Toplace. I will refer to Toplace and the third to fifty-eighth plaintiffs collectively as the Toplace Companies. There are other entities in the Toplace group of companies, some of which are also in voluntary administration (with different administrators appointed). Receivers have also been appointed with respect to assets of some companies in the Toplace group.

4    On 19 July 2023, the first meeting of Toplace’s creditors was held. On 26 July 2023, a concurrent first meeting of the Other VA Companies’ creditors was held.

5    On 31 July 2023, the administrators, by interlocutory process filed on that day, sought orders pursuant to s 439A of the Corporations Act 2001 (Cth) extending the convening periods for the second meetings of the Toplace Companies’ creditors, together with various ancillary orders. On 1 August 2023, I heard the interlocutory application and made the orders sought by the administrators. My reasons for doing so are set out below.

B.    Background

6    The evidence on the application comprised affidavits of Mr Resnick sworn 28 and 31 July 2023 (together with exhibits thereto). The salient aspects of Mr Resnick’s evidence are as follows.

Toplace group prior to the appointment of the administrators

7    The investigations undertaken to date by the administrators do not yet reveal the full picture for all of the companies in the Toplace group. Those investigations do reveal the following matters.

8    Prior to the appointment of the administrators, the business of the Toplace Companies involved purchasing and developing real property, primarily in the development of residential apartment buildings and mixed-use developments in the greater Sydney region.

9    That business was generally structured using special purpose vehicle companies incorporated to acquire and develop particular parcels of real property. Toplace performed licenced building works at those developments, and the fifty-fifth plaintiff (Toplace Property) sold those properties and provided property management services to other companies in the group. From time to time, companies were incorporated for specific functions, such as acting as the primary borrower for certain loans.

10    In addition to undertaking building work, Toplace acted as the central administrator and clearing house for the group. In particular, Toplace: controlled the bank accounts operated by the group; employed all of the employees whose services were used in connection with the business undertaken by the group; guaranteed the repayment of monies borrowed from some of the secured creditors which enabled development sites to be purchased and building and development work to be undertaken at those sites; occupied the central office from which the business was administered; kept and maintained all the records created in the course of conducting the business; and owned, leased or otherwise provided all the computer hardware and software utilised in the running of the business.

11    In or about March 2023, on the application of the New South Wales Building Commissioner, Toplace’s licence to undertake building work in New South Wales was suspended. This suspension was subsequently stayed until on or about 6 July 2023, when it was lifted. Toplace has not conducted business since 6 July 2023. Further, on 13 July 2023 the New South Wales Department of Fair Trading cancelled the licence held by Toplace Property which had enabled it to sell the apartments in the developed properties.

12    At that time, Toplace and its related companies were undertaking work on projects known as:

(1)    the Skyview Apartment Project, including the construction of five residential apartment buildings at Castle Hill, consisting of 960 apartments by OCHR Pty Ltd;

(2)    the Box Hill Centre Project, involving the construction of 668 residential apartments and a shopping centre at Box Hill by the tenth plaintiff;

(3)    the Zetland Project, involving the construction of 181 residential apartments in Zetland by the fourth plaintiff; and

(4)    the Schofields Road Project, involving the construction of 1,381 residential apartments at Schofields, by the thirty-third plaintiff.

13    The Toplace Companies also had 10 extant claims against them in respect of allegedly defective building works. The administrators understand these claims to be for amounts in the tens of millions of dollars. Mr Resnick described these claims as being primarily made against the relevant Toplace company qua the developer of the site and against Toplace itself qua the builder. Work addressing those claims has ceased as a result of the suspension of Toplace’s building licence.

Investigations to date

14    Mr Resnick provided an overview of the administrators’ work up to 28 July 2023. In broad terms, that work has involved: securing, to the extent possible, the books and records of the Toplace Companies and undertaking a review of those books and records; contacting all major banks with respect to any accounts held in the name of the Toplace Companies; opening a new bank account for the purpose of the administration of the Toplace Companies; communicating with the Australian Taxation Office regarding the Toplace Companies’ tax affairs; instructing solicitors; preparing and lodging with the Australian Securities and Investments Commission (ASIC) the required notices relating to their appointment and the convening of the first meetings of creditors of the Toplace Companies; meeting with the employees of Toplace to gain an understanding of the financial affairs of the Toplace Companies and the projects on which Toplace had been performing work; identifying the Toplace Companies’ creditors from the currently available books and records and from information provided by Toplace’s employees; and the public records on the Personal Property Securities Register (PPSR) and ASIC registers; taking steps to verify the validity and enforceability of security over property of the Toplace companies held by secured creditors; communicating with the Toplace Companies’ creditors; taking steps to verify the debts owed to those creditors; conducting (to the extent possible) an initial assessment of the cash flow of the Toplace Companies, together with an ongoing assessment of available strategies to improve the performance of the Toplace Companies; investigating and reviewing contracts entered into by the Toplace Companies; discussions with the New South Wales Building Commissioner; conducting investigations into the assets of the Toplace Companies comprising six motor vehicles and in excess of 500 items of plant and equipment, including tools and other machinery; commencing a review of the financial position of the Toplace Companies; preparing and issuing initial notices to creditors of the Toplace Companies; preparing for and conducting the first meetings of creditors of each of the Toplace Companies; investigations pursuant to s 438A of the Act, including to identify potential voidable transactions, unreasonable director-related transactions and insolvent trading claims which may be available to a liquidator of the Toplace Companies; and addressing a high volume of queries from creditors and employees.

15    The administrators are also in the process of investigating complex inter-company loans recorded in the books and records of the Toplace group. Payments made from or to Toplace by other companies in the Toplace group appear to have been recorded in the loan accounts maintained by the group. Accordingly, these books and records show Toplace as a creditor of a number of entities within the Toplace group, and a debtor of others. The net amount that other members of the Toplace group owe to Toplace appears to be in the hundreds of millions of dollars.

16    Mr Resnick observed that in the time available since their appointment the administrators have not been able to verify the accuracy of the loan accounts. He also observed that the books and records under the control of the administrators are not up to date. In particular, full financial statements for each entity in the group have not been prepared past the end of the 2021 financial year, and Mr Resnick did not anticipate that the process of bringing them up to date would be completed for at least five weeks.

17    Further, Mr Resnick observed that it is unclear whether the amounts recorded in those books and records relate to monies actually paid to or by Toplace for other companies in the Toplace group, and whether adjustments have been made to take into account any offsetting claim any other company may have as a result of Toplace performing defective building work.

18    The administrators have been unable to form a view as to whether it is in the interest of creditors to undertake the various rectification and other works referable to the claim of allegedly defective building works (see [13] above). The administrators’ view, based on their experience, is that it is reasonable to expect that completion of those works would maximise the value of the remaining assets, rather than a forced liquidation sale of those assets without the rectification and other works first being completed.

19    The administrators have had no contact with Mr Nassif since their appointment. Mr Nassif has not provided the administrators with a report on the Companies’ business, property, affairs and financial circumstances as required by s 438B(2) of the Act. Prior to the administrators’ appointment, Mr Nassif left Australia for Lebanon, where he appears to remain. Mr Nassif has been charged with fraud and on or about 9 June 2023, a warrant was issued for his arrest at the request of the New South Wales Police Force. Mr Nassif informed authorities that he was in a remote location in Lebanon, and unable to return to Australia as he was undergoing medical treatment for mental illness.

20    Based on the administrators’ investigations to date, Mr Resnick explained that the Toplace Companies had, on a consolidated basis (and subject to adjudication), debts owing to:

(1)    secured creditors, with claims exceeding $1 billion. Those secured creditors comprised a number of bank and non-bank lenders, who had security in the form of first registered mortgages over real property assets owned by the Toplace Companies. There appeared to be substantial cross-collateralisation in respect of those debts, and in some places, in significant amounts, exceeding $100 million in at least three instances. Apart from the appointment of receivers to certain assets, no other secured party had enforced any security interest over the assets and undertakings of any of the Toplace Companies;

(2)    personal property security interest holders. In this regard, 138 security interests are registered on the PPSR with respect to Toplace, with claims estimated to exceed $1.5 million;

(3)    Toplace’s 27 employees or former employees;

(4)    owners corporations, with defects claimed in excess of $120 million. Mr Resnick explained that it appears that those owners corporations are, subject to further investigation, creditors of both the particular development company and Toplace. The administrators were unable to quantify the true value of those claims, as the proofs of debt lodged in respect of them did not appear to quantify those claims. Mr Resnick explained that in circumstances where those claims related to defects or alleged defects, quantification is not likely to be straightforward and will likely require assistance from expert remedial builders and potentially a line-by-line analysis of those claims;

(5)    ordinary trade creditors, with claims in respect of supplies and works carried out on various building sites, with a value of approximately $88.5 million; and

(6)    statutory creditors, with apparent claims in excess of $30 million. Those claims primarily arise in respect of a claim by the New South Wales Department of Customer Service, which has lodged a proof of debt in the amount of $20 million on the basis of building work rectification orders. The administrators have admitted that claim for $1 on the basis that the claim was not substantiated – however, the administrators anticipate that when substantiated, that claim will be significant, and Mr Resnick is of the view that it will be necessary for the administrators to obtain professional advice regarding that claim for the purpose of reporting to creditors. Further, the Deputy Commissioner of Taxation has lodged a proof of debt in respect of one of the Toplace Companies for an amount in excess of $5 million, in respect of which the administrators’ investigations are ongoing. The books and records of the Toplace Companies also disclose in excess of $5 million worth of potential debt owing to Revenue NSW.

21    Mr Resnick also deposed that:

(1)    with the exception of any monies that may be recovered from any choses in action that may be available to Toplace and its liquidators, the only prospects of the creditors of Toplace being paid a dividend come from it being repaid monies it is owed by other members of the Toplace group;

(2)    in order to increase the prospects of those monies being paid it is critical that the value of all assets held by other companies in the Toplace group is maximised;

(3)    at this stage, the administrators have been unable to undertake any significant investigations into potential voidable transactions. Those investigations have, in part, been complicated by the intermingling of the affairs of the Toplace Companies and the apparent absence of any recent reconciliation of the financial records of the Toplace group;

(4)    where the assessment and quantification of any voidable transactions necessarily calls into consideration the question of the solvency of each of the Toplace Companies, and the Toplace group as a whole, a proper understanding of the financial position of the Toplace Companies is necessary. Due to the absence of co-operation by Mr Nassif, together with the intermingling of finances, and the incomplete nature of the administrators’ investigations into the Toplace Companies’ books and records, Mr Resnick is unable to form an opinion on when each individual company, and the Toplace group as a whole, became insolvent; and

(5)    it is necessary for that opinion to be formed in order for the administrators to properly report to creditors. The administrators will only be in a position to form that opinion properly once their investigations into the financial affairs of each of the Toplace Companies has been progressed to a sufficient level.

22    Mr Resnick also deposed that if the Toplace Companies were to be placed into liquidation:

(1)    the ability of any liquidator(s) appointed to undertake any of the work required to maximise the value of improvable assets would be severely hampered as it is unlikely any creditor would be prepared to contract with the liquidators to undertake any further work;

(2)    the options available for funding this work would be reduced. The primary secured creditor indicated to Mr Resnick that it would continue to support the administrators’ effort of an orderly realisation of the Toplace Group’s assets, and that it would only do so provided the Toplace Companies remain in administration. That creditor also indicated that, in principle, it will agree to allow the administrators to undertake the work referred to and to sell the assets in an orderly fashion, however, if the Toplace Companies were to be placed into liquidation then the primary secured creditor would likely enforce its security; and

(3)    the value of the remaining land holdings and real estate assets held by the Toplace Companies would be severely affected as potential purchasers of those assets would likely perceive the assets as being sold in a forced liquidation or “fire-sale” scenario. The valuers retained by the administrators share this view.

C.    Application for an extension

23    As noted above, the second meeting of creditors of Toplace was due to occur by 4 August 2023 and the second meetings of creditors of the Other VA Companies were due to occur by 11 August 2023.

The basis on which an extension of time was sought

24    The administrators sought an extension of the convening periods for the second meetings in the following circumstances:

(1)    the administrators’ efforts had been concentrated on identifying the Toplace Companies’ assets and liabilities, and dealing with stakeholders;

(2)    the administrators’ investigations had found that the Toplace group appeared to have been run, as a practical matter, with various levels of financial interconnectivity and intermingling, particularly with respect to the assets and liabilities of the companies;

(3)    as a consequence of these issues, the administrators required time to investigate these arrangements and confirm where the respective assets and liabilities properly lie within the group. This includes obtaining advice in relation to any equitable interests that some of the Toplace Companies may have and whether there is a basis for treating assets and liabilities on a pooled basis; and

(4)    the administrators had commenced their investigations into the Toplace Companies’ affairs but were yet to finalise those investigations. These investigations are complex and include investigations in relation to potential voidable transactions and insolvent trading claims which may ultimately be available to a liquidator of the Toplace Companies, and also the consideration of creditor proofs of debt received to date, including:

(a)    reviewing PPSR interests and forming an opinion with respect to the validity of each registration;

(b)    considering the claims of the various owners corporations, including the extent to which there are, or may be, offsetting claims between the relevant development companies and Toplace in respect to inter-company loan accounts; and

(c)    considering the claim by the Department of Customer Service NSW.

25    Mr Resnick deposed, having regard to his experience in conducting similar investigations, that in order to finalise their views on relevant issues and to prepare a meaningful report and associated recommendation to creditors in accordance with s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (IPR) the administrators would require a further period of approximately six months.

26    Mr Resnick also deposed that the administrators are of the opinion that it would be in the interests of the Toplace Companies’ creditors for the convening periods to be extended for about six months for the following reasons:

(1)    no proposal had been received with respect to entry into a deed of company arrangement (DOCA) and the only recommendation the administrators could make in the circumstances is that each of the Toplace Companies be wound up. In the administrators’ view, a winding up in the short-term would not be in the interests of creditors for the reasons set out at [22] above;

(2)    whilst separate entities were incorporated to undertake the developments, the administrators’ initial investigations revealed that Toplace was not paid in the normal course of business but rather loan accounts were established to record liabilities paid on behalf of the land-owning companies or otherwise for amounts which Toplace ought to have been paid for undertaking the relevant projects; and

(3)    any amounts owed by the companies in the Toplace group to Toplace may, subject to consideration of various claims of owners corporations, be offset due to defective building works. In that connection, apart from one claim, the owners corporations have commenced proceedings however have not quantified their claims or obtained judgment. The administrators anticipate that they will require professional advice in respect to those claims, which may include specialist advice from building and construction experts, in order to properly report to creditors.

27    The administrators expressed the view that the extension sought would not cause prejudice to the creditors of the Toplace Companies because:

(1)    all real property assets of the Other VA Companies are encumbered, including with first ranking mortgages. The relevant secured parties have agreed (whilst reserving their rights to enforce their securities at a later time) to allow the administrators to sell those assets. If the relevant secured parties were to seek to enforce their securities (either as mortgagee in possession or by the appointment of receivers) any equity in the relevant properties would be significantly diminished;

(2)    if the Toplace Companies were to be placed into liquidation, then the key staff who would otherwise be available to assist the administrators in identifying and managing works required to be undertaken to maximise the value of certain property would likely resign;

(3)    a number of court proceedings involving certain of the Toplace Companies which are on foot will be stayed, including ten proceedings commenced by owners corporations in respect to claims for defective works.

28    Mr Resnick indicated that the administrators proposed to use the time available during the period of the extension to:

(1)    continue the process for the sale of the land holding/real estate assets of the Toplace Companies;

(2)    cause any work which is reasonably necessary to maximise the value of those assets to be performed, if it is in the interest of creditors to do so;

(3)    obtain further advice in respect to the various claims made by creditors in the administration of the Toplace Companies, including in respect to the claims made by various owners corporations;

(4)    prepare a detailed report in accordance with s 439A of the Act and s 75-225 of the IPR such that, if there is a DOCA proposal, that report will assess the return to creditors from the DOCA as opposed to a winding up; and

(5)    liaise with the various receivers appointed to certain of the Other VA Companies regarding the realisation of those entities’ assets, including the return of any surplus funds.

29    The administrators also propose to continue with the following matters (which have not been completed due to the size and complexity of the Toplace Companies and their operations):

(1)    obtaining and assessing valuations of the Toplace Companies’ assets, including the real property assets owned by certain of the Other VA Companies;

(2)    determining employee entitlements;

(3)    determining the extent to which certain of the Other VA Companies have offsetting claims against Toplace in circumstances where it appears no retentions were accounted for between Toplace and the Other VA Companies;

(4)    meeting with key stakeholders in relation to the affairs of the Toplace Companies;

(5)    responding to ongoing queries from creditors;

(6)    reviewing the Toplace Companies’ accounts;

(7)    ascertaining the existence of any claims; and

(8)    continuing to assess the works required to be undertaken in relation to certain assets of the Other VA Companies, including the costs of same, so those assets can be sold for the maximum value possible.

30    The administrators also intend to convene the second meetings at the first opportunity following a binding sale of the real property assets of the Other VA Companies or a binding proposal for a DOCA such that those meetings may be held earlier than six months from the date of the order granting the extension.

31    Mr Resnick explained that he considered an extension of the convening periods to be necessary not merely to facilitate effective reporting to the creditors of the Toplace Companies, but also to maximise the value of the Toplace Companies’ assets available for the benefit of creditors, and to increase the possibility of a greater return to the majority of the creditors.

32    Mr Resnick expressed the view that if the administrators were not allowed sufficient time to properly test the market by completing the process, there would be a material risk that:

(1)    the administrators would not have sufficient time to complete, if it is ultimately determined to be in the interest of creditors, the process of finalising work in relation to the various real property assets in order to secure a competitive offer or a DOCA; and

(2)    if a sale or DOCA is agreed, the return to secured and unsecured creditors will be significantly lower than is otherwise achievable or which fairly reflects the value of the assets and business of the Toplace Companies in the market.

33    Mr Resnick expressed the following summary view:

The administrators are of the view that it would be in the interests of the creditors of the Companies that the Convening Period for each of the Companies be extended as such an order would maximise the prospects of the administrators preserving or maximising the value of the assets held by the Companies, which have a book value of approximately $1.47 billion (noting that there is currently approximately $1 billion owed to secured creditors and approximately $244 million claimed to be owed by unsecured creditors, including amounts by various owners corporations for defective works.

Legal Framework

34    The object of Part 5.3A of the Act, as set out in s 435A of the Act, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (1) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (2) 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 of the company.

35    Section 439A, which is found in Part 5.3A, provides a convening period within which an administrator of a company under administration must convene a meeting of the company’s creditors. As noted above, the convening periods for Toplace and the Other VA Companies were due to expire on 4 and 11 August 2023 respectively. Section 439A(6) provides that the Court may extend the convening period.

36    Section 447A, also found within Part 5.3A, enables the Court to make such orders as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company.

37    The principles relevant to the extension of a convening period pursuant to ss 439A and 447A are well-established. In Algeri, in the matter of BHO Australia Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 234, Beach J explained those principles at [15] to [17]:

15.    Let me now say something about the relevant principles that are not in doubt.

16.    As I observed in Parbery, in the matter of NewSat Limited (administrators Appointed) (Receivers and Managers Appointed) [2015] FCA 435 and in Secatore, in the matter of In-Fusion Management Pty Ltd (administrators Appointed) [2016] FCA 1072, the Court has power to extend the convening period under ss 439A(6) and 447A, but in exercising this power the Court must have regard to the objects set out in s 435A, which seek to maximise the chance of the particular company under administration or as much as possible of its business continuing in existence, or if that is not possible, to achieve a better return for the company’s creditors than would result from an immediate liquidation. A central question is whether additional time is likely to enhance the return to creditors, particularly unsecured creditors. But the power to extend the time should not be exercised lightly, let alone as a matter of course. But Pt 5.3A should be given a commercial construction and application which reflects the reality of the setting in which both the relevant company under administration and the administrator find themselves. The Court must balance the expectation that administration will be a relatively speedy and summary matter against the consideration that undue speed should not be allowed to prejudice constructive commercial actions directed to maximising the return for creditors. The perspective from which Pt 5.3A should be applied should not be narrow, and its application should not be refracted through the pessimistic lens of an insolvency technician. And in that context, generally there is usually greater upside than downside in granting an extension for a reasonable period, where the reasonableness of the duration of the extension is contextualised by the particular circumstances.

17.    Now as to the well accepted factors that may justify an extension, these were set out by Austin J in Re Riviera Group Pty Ltd (administrators Appointed) (Receivers and Managers Appointed) (2009) 72 ACSR 352 at [13] and by Edelman J in Stimpson, in the matter of Eagle Boys Dial-A-Pizza Australia Pty Ltd (administrators Appointed) [2016] FCA 935 at [8] to [10]. I do not need to repeat them.

38    The factors set out by Edelman J in Stimpson, in the matter of Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) v Eagle Boys Dial-A-Pizza Australia Pty Ltd (Administrators Appointed) [2016] FCA 935, as referred to by Beach J in Algeri at [17], are as follows:

8.       Although the discretion is unconstrained by any express statutory criteria, it should also be exercised judicially. This includes a requirement for consistency with other decisions. An important matter to be considered is the obligation upon an administrator to produce a report and an opinion for creditors setting out the matters in s 439A(4) together with the notice convening the meeting under s 439A(3). If the s 439A(5) convening period is not reasonably sufficient for the preparation of this report and the formation of this opinion then this will be a powerful factor supporting the grant of an extension.

9.       In In the matter of Riviera Group Pty Ltd (admins apptd) (recrs & mgrs apptd) [2009] NSWSC 585 [13], Austin J described a number of categories, by way of examples, where Courts had previously granted extensions. These included cases where an extension was needed due to (i) the size and scope of the business; (ii) substantial offshore activities of the business; (iii) a large number of employees with complex entitlements; (iv) complex corporate group structure and intercompany loans; (v) complex transactions entered into by the company (e.g. securities lending or derivatives transactions); (vi) complex prospects of recovery proceedings; (vii) lack of access to corporate financial records; (viii) the time needed to execute an orderly process of disposal of assets; (ix) the time needed for thorough assessment of a proposal for a deed of company arrangement; (x) where the extension would allow sale of the business as a going concern; (xi) more generally, where that additional time is likely to enhance the return for unsecured creditors. In addition, as Barrett J said in Lombre Re Australian Discount Retail Pty Ltd [2009] NSWSC 110 [21], further “time for the formulation and digestion of recommendations based on established realities will avoid the possibility of what might be a premature decision in favour of winding up as the only practically available option”.

10.       The countervailing factors in the assessment of any of these matters include the inefficiency caused by delay and the consequence that while the voluntary administration continues, secured creditors, lessors and others cannot enforce their remedies: Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrator Appointed) [2009] FCA 25 [9] (Jacobson J). As I have said, another countervailing consideration will be where the administrators can reasonably prepare and provide their report and statements to accompany the notice to creditors, including setting out their opinions as required by s 439A(4)(b) of the Corporations Act, to provide adequate advice to the creditors as required five days before the meeting: Pan Pharmaceuticals 84-85 [41] (Lindgren J); Re ABC Learning Centres Ltd (application by Walker) (No 7) [2009] FCA 454; (2009) 71 ACSR 560, 566 [28] (Emmett J).

39    The need, in some circumstances, to order a significant extension of time is well-recognised. In Mighty River International Ltd v Hughes [2018] HCA 38; (2018) 265 CLR 480 at 511 ([72] to [73]), Nettle and Gordon JJ observed:

[72]    The period fixed by s 439A(5) for the convening of the meeting of the company’s creditors is designedly brief. As the Full Court of the Federal Court of Australia observed in Federal Commissioner of Taxation v Comcorp Australia Ltd, it may be gathered from the terms of the legislation and the words of the Explanatory Memorandum and the Second Reading Speech that the emphasis of Pt 5.3A is on informality and flexibility and on speed of action. The procedure is not designed to allow for the kind of indefinite administrations which can occur under the United States’ Ch 11 approach to corporate insolvency.

[73]    It is, however, recognised that it is not always practicable for an administrator to gather sufficient information within the convening period to form the requisite opinions under s 438A and communicate them in the notice given to creditors in accordance with ss 439A(3) and 439A(4). Accordingly, the courts are given specific power under s 439A(6), and also general power of varied application under s 447A(1), to extend the convening period. Consistent with the legislative intention of Pt 5.3A that the administration of a company be brought to an end within a short period of time, there is a presumptive expectation that extensions will be brief. But over time the courts have come to recognise that significant extra time may be required, and should be allowed, in complex cases. 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. As Barrett J rightly observed in Re Diamond Press Australia Pty Ltd:

The function of the Court on an application [for an extension under s 439A(6)] is … to strike an appropriate balance between, on the one hand, the expectation that administration will be a relatively speedy and summary matter and, on the other, 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.

(emphasis added; footnotes omitted)

Consideration

40    I was satisfied that it was appropriate to make the orders extending the time for convening the meetings of creditors, for the following reasons.

41    First, the extension sought was reasonable in light of: the complexity of the Toplace Companies’ affairs; the state in which those affairs have been left; and the investigations necessary for the administrators to undertake, in circumstances where the sole director of the Toplace Companies has provided, and will likely provide, no assistance.

42    Secondly, the extension would allow time for the administrators’ investigations to be properly carried out and thus allow the administrators to provide a meaningful report to the creditors of the Toplace Companies on the affairs of those companies.

43    Thirdly, no proposal had been received with respect to entry into a DOCA and the only recommendation the administrators could have made to a meeting held within the unextended convening period would have been that each of the companies be wound up. As the finalisation of building and rectification works in respect of numerous properties held by the Toplace group is yet to be completed, a winding up of the Toplace Companies at this early stage would likely have denied the administrators the opportunity to maximise the value of these assets and thus the monies available to be distributed to creditors.

44    Fourthly, no specific prejudice that would be suffered by creditors of the Toplace Companies by reason of the extension was identified. In this regard, creditors were put on notice of the administrators’ intention to seek an extension of the convening period.

45    Finally, the orders sought by the administrators, and which were made, make provision for any person who can demonstrate sufficient interest to apply to the Court for modification of those orders. This further ameliorated the risk that any creditor or other interested person may have been prejudiced by the extension.

D.    Single administration account

46    The administrators sought an order, pursuant to ss 65-45 and 90-15 of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Act) (IPS), that the administrators, in their capacity as administrators of each of the Toplace Companies, are not required to maintain a separate administration account in relation to each of those companies.

47    Division 65 of the IPS concerns the handling of funds by administrators. Section 65-5(1) provides that an administrator of a company must pay all money received by the administrator on behalf of, or in relation to, that company into an “administration account” (as defined by s 65-10) for that company within five business days after receipt. Section 65-15(1) provides that an administrator must not pay other monies into an “administration account”. Section 65-15(2) provides for an exception to s 65-15(1) where compliance with s 65-15(1) would be inconsistent with a direction given by the Court. Section 65-25 prohibits an administrator from paying money out of an “administration account” other than for purposes related to the administration of that company (or otherwise in accordance with the Act or an order of the Court). Section 65-45(1) provides that the Court may give directions regarding, inter alia, the payment, deposit or custody of moneys that are payable to or held by an administrator.

48    In Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 1144; (2017) 35 ACLC 17-044 at 671 ([91] and [94]), Markovic J noted the following matters as matters for the Court to take into account in deciding whether to make directions pursuant to s 65-45:

(1)    the power to make directions under s 65-45 is a broad power and includes the power to direct that external administrators be permitted to act in a manner that is inconsistent with the obligations set out in Division 65;

(2)    the directions must be made in the interests of the company’s creditors and be consistent with the objectives of Division 65, including the maintenance of proper standards of funds handling and record keeping in relation to the company’s affairs while under external administration and the reduction of unnecessary costs and inefficiencies in the conduct of the external administration;

(3)    the creditors of the company should not be prejudiced or disadvantaged by any directions that are sought; and

(4)    in some instances it may be necessary to give notice to those who may be affected by the proposed directions.

49    To similar effect, see Strawbridge, in the matter of Virgin Australia Holdings Ltd (Administrators Appointed) (No 2) (Strawbridge No 2) [2020] FCA 717; (2020) 144 ACSR 347 at 408 ([191] to [199]) (Middleton J).

50    Mr Resnick deposed that:

(1)    in practice and to reduce costs and complexity in the administration, funding and expenses of the Toplace Companies since the appointment of the administrators are being cleared through a bank account the administrators have caused to be opened with Macquarie Bank in the name of Toplace;

(2)    the process of opening, operating and maintaining separate bank accounts for each of the Toplace Companies would add additional difficulties and expenses to the administration. In the administrators’ opinion, operating a single bank account will streamline and make the administration process more efficient;

(3)    where one or other of the Toplace Companies other than Toplace pay or receive money, that money is paid from or into the administration accounts operated by Toplace and intercompany loan accounts are recorded in the financial records of the relevant Companies and the administrators’ records. This process will ensure the accounts are properly reconcilable; and

(4)    to date, payments have only been received by the administrators in respect to amounts owed or otherwise payable to Toplace. The administrators anticipate any settlements from the sale of real property assets will be paid to the accounts maintained by Toplace and receipted appropriately in the administration records of both Toplace and the relevant Toplace Companies.

51    The establishment, operation and maintenance of separate bank accounts for each of the Toplace Companies (all of which are within the same group) would add additional complexity and expense to the administration of the Toplace Companies disproportionate to the benefit of doing so. The course proposed by the administrators seems more efficient. As Middleton J noted in Strawbridge (No 2) at 408 [195], in circumstances where accounting entries are made to record transactions in a group, there is no utility in requiring the administrators to open separate accounts for each of the companies in that group.

E.    METHOD OF PROVISION OF Information to creditors

52    The administrators also sought an order pursuant to s 447A(1) of the Act, and/or s 90-15 of the IPS, that s 70-1(2)(a) of the IPR is to operate in relation to each of the Companies as if:

(1)    the words “5 business days after receiving the request” be read as “10 business days after receiving the request”; and

(2)    the administrators may provide the information, report or document requested by a creditor by publishing that information, report or document on the website maintained by the administrators and by referring the creditor to that website.

53    Section 70-1(2) of the IPR provides:

70-1      Time for complying with reasonable requests

...

(2)      Subject to subsections (3) and (5), if the external administrator of a company receives a request for information or a report or document under Division 70 of the Insolvency Practice Schedule (Corporations), the external administrator must send the information, report or document within:

(a)      5 business days after receiving the request; or

(b)      such later period as agreed with the person or body making the request.

54    I considered that this order should be made in light of: (1) the complexity of the Toplace group’s operations and the investigations necessary to be completed for the administrators to be able to provide accurate information to creditors; (2) the efficiency and reduction in cost, consistent with the purpose of Part 5.3A, that providing any such information, report or document, by publication on the website specified would provide; and (3) the lack of material prejudice to the creditors that the slight increase in the time allowed to provide such information may create.

F.    Service

55    Finally, the administrators sought orders providing for the electronic provision of reports and other documents to the Toplace Companies’ creditors. Such orders are now commonplace and are made with a view to saving costs and time: see e.g. In the matter of BBY Limited [2015] NSWSC 974 at [7] (Brereton J, as his Honour then was); Strawbridge, in the matter of Virgin Australia Holdings Ltd (Administrators Appointed) [2020] FCA 571; (2020) 144 ACSR 310 at 317 ([28] to [29]) (Middleton J); Ford, in the matter of Ten Sixty Four Limited [2023] FCA 862 at [29] (Moshinsky J).

56    I considered it appropriate to make the orders sought so as to facilitate the notification of the creditors of the Toplace Companies as quickly and as cheaply as possible.

Associate:    

Dated:    14 September 2023

SCHEDULE OF PARTIES