Federal Court of Australia

Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 3) [2024] FCA 85

ORDERS

THE COURT ORDERS THAT:

Limitation of Administrators' liability

Property leased, used or occupied

1.    Pursuant to s 443B(8) and s 447A(1) of the Corporations Act 2001 (Cth), Part 5.3A of the Corporations Act be modified insofar as it applies to the first and second plaintiffs (in their capacities as joint and several administrators of the third plaintiff) and the third plaintiff (as a company under administration) such that:

(a)    s 443B(2)(a) of the Corporations Act operates as if the expression 'that begins more than 5 business days after the administration began' were replaced with the expression 'that begins on 27 February 2024'; and

(b)    s 443B(3) of the Corporations Act operates as if the expression 'Within 5 business days after the beginning of the administration' were replaced with the expression 'By 27 February 2024'.

Extension of the convening period

2.    Pursuant to s 447A(1) and s 439A(6) of the Corporations Act, s 439A of the Corporations Act is to operate as if the period within which the first and second plaintiffs must convene the second meeting of creditors of the third plaintiff (Second Meeting) pursuant to s 439A of the Corporations Act be extended to 27 February 2024.

3.    Pursuant to s 447A(1) of the Corporations Act, that Part 5.3A of the Corporations Act is to operate such that the Second Meeting of the third plaintiff may be held at any time during, or within five business days after the end of, the convening period as extended by order 2 above, notwithstanding the provisions of s 439A(2) of the Corporations Act.

Confidentiality

4.    Pursuant to s 37AF and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), and until further order, on the ground that the order is necessary to prevent prejudice to the proper administration of justice, the following documents be marked confidential on the Court file and not be made available for inspection without prior notice being provided to the plaintiffs and an order of this Court:

(a)    the confidential affidavit of Richard Scott Tucker dated 12 February 2024 (Confidential Tucker Affidavit); and

(b)    annexure 'RST-5C' to the Confidential Tucker Affidavit.

Suppression

5.    Pursuant to s 37AF and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), and until further order, on the ground that the order is necessary to prevent prejudice to the proper administration of justice, disclosure of the identity of the interested parties referred to in the Confidential Tucker Affidavit is prohibited.

Other ancillary orders

6.    Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate such that the requirement on the first and second plaintiffs to issue notices under s 75-15 and s 75-225(1) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) be modified such that notice of the Second Meeting will be validly given to any creditors, not less than five business days prior to the date of the proposed meeting, by:

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

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

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

7.    The plaintiffs must take all reasonable steps to cause notice of these orders to be given to each known creditor of the third plaintiff and each known owner or lessor and each known sub-lessee of property affected by order 1 of these orders and to the Australian Securities and Investments Commission in accordance with the regime provided for in order 2 of the Court's orders dated 22 December 2023.

8.    The plaintiffs and any person who can demonstrate a sufficient interest (including any creditor of the third plaintiff) have liberty to apply on two (2) business days' notice being given to the plaintiffs and the Court to modify or discharge any orders made pursuant to orders 1 to 3 above.

9.    The plaintiffs' costs of, or incidental to, this application be costs in the administration of the third plaintiff.

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

REASONS FOR JUDGMENT

BANKS-SMITH:

1    On 22 December 2023 the Court made orders extending the period under s 443B of the Corporations Act 2001 (Cth) for which the Administrators are not personally liable for rent in respect of property leased by Quintis Leasing until 30 January 2024: Tucker, in the matter of Quintis Leasing Pty Ltd [2023] FCA 1673 (Quintis (No 1)) (Feutrill J)

2    On 30 January 2024 the Court made orders for a further two week extension of the period under s 443B until 13 February 2024, and also made orders under s 439A of the Act extending the period for convening the second creditors' meeting until 13 February 2024: Tucker (Administrator) v Bolten (Trustee), in the matter of Quintis Leasing Pty Ltd (Administrators Appointed) (No 2) [2024] FCA 46 (Quintis (No 2)).

3    The background to this administration is set out in Quintis (No 1) and Quintis (No 2) and it is not necessary to repeat it. These reasons assume familiarity with the previous decisions.

4    It is also significant to note that the application that involves the larger Quintis Group brought in the Supreme Court of Western Australia by Sandalwood Properties Limited (SPL) to wind up the relevant sandalwood managed investment schemes has been programmed for hearing on 10 and 11 April 2024.

5    As explained in Quintis (No 2), the reason for the previous extension applications was to provide a short-term opportunity for the Administrators to ascertain if there was any scope for a sale or recapitalisation in the interests of the creditors of Quintis Leasing.

6    On 13 February 2023 I heard a third application on short notice. It was inevitable that the hearing be on short notice because of the imminent expiry of the prior extensions on that date. The Administrators sought a further extension of the period under s 443B to 27 February 2024, and sought an extension for the period for convening the second meeting of creditors to the same date. I made orders on that date, and now publish my reasons.

7    The Administrators provided additional evidence for the purpose of this application by way of further affidavits of Mr Tucker (his Fourth Affidavit and Fifth Affidavit respectively).

8    In Quintis (No 2) at [48], I explained that the basis for the grant of the previous extensions to 13 February 2024 was to facilitate consideration of any proposal or prospect for the sale or recapitalisation of Quintis Leasing or the Quintis Group that might see the Quintis Leasing leases (its main asset) remain on foot. I expressed the reservation that there was no guarantee any proposal would be forthcoming in that period, but to deny an extension would foreclose, in effect, that chance.

9    As it happens, in the intervening period the Administrators have received expressions of interest from 19 growers and a proposal from an interested party in relation to a deed of company arrangement (DOCA). The Fourth Affidavit disclosed that the proposal relates to Quintis Leasing. It was first made by a terms sheet emailed to the Administrators on 11 February 2024, and since then the Administrators have been in communications with the proponent and solicitors. The negotiations are continuing.

10    In the limited time available, the Administrators have not been able to form a concluded view about whether the DOCA proposal is capable of forming the basis for a viable transaction which is capable of completion. The Administrators believe, however, that within a fortnight the proponent may be in a position to provide a more developed proposal, which is capable of forming the basis for a viable transaction and which may provide a better return for creditors than the immediate winding up of Quintis Leasing.

11    The extension to 27 February 2024 is based on that assessment of time by the Administrators.

12    The Administrators submitted that the further extension of the s 443B period will cause limited prejudice to the lessors. This is essentially for the reasons identified in the context of the previous extension. Refusal of the extension will not improve the lessors' position as to the payment of rent, and steps are in place to minimise risk to the sandalwood trees in the intervening period. In particular, SPL has confirmed that, as far as reasonably possible, it will continue to supervise and manage all commercial silvicultural activities carried out on the plantations.

13    At the earlier hearing before me (30 January 2024), I was informed by counsel for the respondents that they were keen to access their land to take care of the trees if any extension were granted, and that discussions were underway with the Administrators in that regard. Those discussions have clearly continued. Since the previous extension, the Administrators and the respondents have agreed the terms of a licence deed to allow the respondents to re-enter their land to care for and otherwise maintain the sandalwood trees until the second creditors' meeting. That licence deed remains subject to SPL's consent but the correspondence adduced in evidence before me indicated that SPL was cooperative and I expect there may be some progress in that regard in due course.

14    The respondents were represented by counsel at the hearing and indicated they took no position with respect to the extension application.

15    I gave leave to counsel for a particular grower, Mr Des Caling, to appear, and counsel indicated that Mr Caling supported the extension application.

16    Mr Sharp of King & Wood Mallesons (the Administrators' solicitors) deposed to communications received from stakeholders in relation to the extension application. Relevantly, the secured creditor and Quintis Australia informed Mr Sharp that they had no objection to the application. Communications from five growers were in evidence. Of those, one opposed any further extension, two supported it and another two were neutral, although the writers voiced various concerns about short notice and the need for further information.

17    I took into account those communications and submissions from the stakeholders.

18    I also took into account that to refuse an extension would inevitably lead to the leases being terminated and to Quintis Leasing being wound up, for the reasons addressed in Quintis (No 2) at [33], [34] and [49].

19    In all of those circumstances I was satisfied that there was a clear case to grant the further extension of the s 443B period.

20    Similarly, it followed that there was a clear case to further extend the period for convening the second meeting of creditors to 27 February 2024.

21    It was also appropriate to make ancillary orders, consistent with those made in Quintis (No 2).

22    Finally, I made a non-disclosure and suppression order with respect to an affidavit of Mr Tucker (the Fifth Affidavit) and the identity of interested persons named in it, being persons who are said to be involved in the discussions with the Administrators about a potential sale, recapitalisation or the proposed DOCA. I was satisfied that it was appropriate that their identities and the current details of the proposed DOCA be protected pending finalisation of any negotiations and the DOCA proposal. Disclosure might risk those steps, an outcome that would not be in the interests of creditors.

23    Orders were made accordingly.

Associate:

Dated:    14 February 2024