Federal Court of Australia

Mableson (administrator), in the matter of Salena Estate Wines Pty Ltd (administrators appointed) [2024] FCA 316

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the date of the convening period as defined by s 439A(5) of the Act, for the second meeting of creditors of Salena Estate Wines Pty Ltd ACN 087 397 411 (Administrators Appointed), B.S.F. Fruits Pty Ltd ACN 057 789 518 (Administrators Appointed), and Continent Australia Pty Ltd ACN 124 612 148 (Administrators Appointed) (together, the Companies), required under s 439A of the Act (Second Meetings) be extended up to and including Wednesday, 2 October 2024.

2.    Pursuant to s 447A of the Act, Pt 5.3A of the Act is to operate in relation to the Companies as if the Second Meetings may be convened and held at any time during the convening period or within 5 business days after the end of the convening period, as extended by Order 1 of these orders, notwithstanding the provisions of s 439A(2) of the Act.

3.    Pursuant to s 447A(1) of the Act, s 90-15 of Sch 2 of the Act, the Insolvency Practice Schedule (Corporations) (IPS), Pt 5.3A of the Act is to operate in relation to the Companies such that the requirements on the plaintiffs to issue notices under r 75-15 and r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) are modified such that notice of the Second Meetings will be validly given to the creditors of the Companies (including the persons claiming to be creditors) by, not less than 5 business days prior to the date of the proposed meeting, the plaintiffs:

(a)    sending such notice electronically to the email address of the creditors, or those persons claiming to be creditors, of the Companies for whom the plaintiffs have an email address;

(b)    sending such notice to the postal address, or otherwise as provided for by the Act, the IPS or the IPR to any creditors, or persons claiming to be creditors of the Companies, not being a person referred to in Order 3(a) of these orders; and

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

4.    Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Pt 5.3A of the Act is to operate in relation to the Companies such that any notice (other than a notice referred to in Order 3 above), report and/or communication that the plaintiffs must or may give or send to creditors of the Companies (including the persons claiming to be creditors) may be given or sent as follows:

(a)    sending such notice, report and/or communication electronically to the email address of the creditors, or those persons claiming to be creditors, of the Companies for whom the plaintiffs have an email address;

(b)    sending such notice, report or communication to the postal address, or otherwise as provided for by the Act, the IPS or the IPR to any creditors, or persons claiming to be creditors, of the Companies not being a person referred to in Order 4(a) of these orders; and

(c)    upon receipt of a written request to the plaintiffs by a creditor, or person claiming to be a creditor of the Companies, by providing that creditor or person with a copy of any such notice, report and/or communication.

5.    The plaintiffs are to give notice of these orders to the creditors, or persons claiming to be creditors, of the Companies by:

(a)    placing a copy of the orders on the online creditor portal maintained by the plaintiffs; and

(b)    sending a copy of the orders made by the Court:

(i)    by email to any creditor, or person claiming to be a creditor, of the Companies for whom or which the plaintiffs have an email address; and

(ii)    by mail to all other creditors, or persons claiming to be creditors, of the Companies for whom the plaintiffs do not have an email address but have a postal address.

6.    Liberty be granted to any person who can demonstrate sufficient interest to apply to discharge or vary any of these orders on the giving of 3 business days’ notice to the plaintiffs.

7.    The plaintiffs’ costs of and incidental to the originating process filed on 25 March 2024 be costs in the administration of the Companies and be paid out of the assets of the Companies.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

HALLEY J:

A.    Introduction

1    By an originating process dated 22 March 2024, Timothy David Mableson and Ryan Reginald Eagle (Administrators) in their capacity as joint and several voluntary administrators of Salena Estate Wines Pty Limited (Salena), B.S.F. Fruits Pty Limited (BSF), and Continent Australia Pty Limited (Continent) (together, the Companies) seek orders pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) to extend the convening period of the second meeting of creditors of each of the Companies, and ancillary orders.

2    The convening period for the second meeting of creditors for each of the Companies would otherwise expire during the course of the week commencing 1 April 2024. The Administrators rely upon the affidavit of Timothy Mableson affirmed on 22 March 2024, together with exhibit TDM-1 to that affidavit, and the affidavit of Melissa Fung sworn on 25 March 2024, a solicitor employed by the solicitors for the plaintiffs, addressing the notification of the proceedings to creditors. The application by the Administrators is supported by detailed written submissions prepared by counsel for the plaintiffs, Mr J. Hynes and Mr A. Berriman. I have found those submissions to be of considerable assistance in the determination of this application. Mr Hynes has also made oral submissions in support of the application today.

B.    Background

3    The Salena Group comprises the Companies, Lock 4 Distillery Pty Limited, Tyrone’s Estate Pty Limited and Fanchitto Winery Trust and its trustees. The Salena Group, the Franchitto Winery Trust and its trustees are referred to as the Salena Corporate Group.

4    The Salena Group is a South Australian winemaker that is engaged in (a) growing, harvesting, transporting and crushing grapes, and (b) bottling, packaging and shipping processed wine in either bottles or in bulk. The business of the Salena Group is conducted on six properties in South Australia (Properties). The vineyards, winery and associated properties are located on the Properties. The Salena Group has 19 employees, whose contracts would likely be terminated if the Companies are wound up.

5    In the period between 2021 and 2022, Salena entered into various facility agreements with the Westpac Banking Corporation (Westpac). The Salena Corporate Group granted securities to Westpac in the nature of guarantees, general security agreements and first ranking registered mortgages in respect of each of the Properties.

6    From about 2021, the Salena Group encountered financial difficulties arising from the imposition of tariffs and other restrictions on Australian exports into the Peoples’ Republic of China.

7    In order to meet its commitments to Westpac, the Salena Group sought to sell its business operations in April 2023. Those efforts, however, were unsuccessful.

8    On 15 February 2024, the bank appointed Andrew Heard and Anthony Phillips as receivers and managers (Receivers) of all of the assets and undertakings of the Salena Corporate Group.

9    On 14 February 2024, Elders Rural Services Australia Limited (Elders) filed an application to wind up BSF to be heard on 20 March 2024, based on a judgment debt in the sum of $25,116.98. That application was subsequently adjourned by agreement until 1 May 2024.

10    On 22 February 2024, the Administrators were appointed as joint and several voluntary administrators of Salena pursuant to s 436A of the Act.

11    On 23 February 2024, the Administrators were also appointed as joint and several administrators of BSF and Continent.

12    As at the date of the Administrators’ appointments, Salena owed $20,445,966.43 to secured creditors, including Westpac, and BSF and Continent owed $20,186,735.61 to Westpac. In addition, the Companies have a considerable number of unsecured and priority creditors.

13    As at the date of the Administrators’ appointments, Mr Mableson gives evidence that in his opinion, each was insolvent.

14    On 27 February 2024, the Receivers were retired from their appointment over all of the assets and undertakings of the Companies, but remained joint and several receivers and managers of the Properties. Following the retirement of the Receivers, the Administrators continued to trade the business of the Salena Group. These activities have included realising the existing inventory and conducting inventory sales on a wholesale basis online or at the cellar door in the ordinary course of business.

15    In February 2024, prior to the Administrators’ appointment, the companies commenced harvesting 191 hectares of vineyards (2024 Vintage). The harvest of the 2024 Vintage was completed on 21 March 2024. The grape juice extracted, however, from the harvested grapes will not be ready for sale until late 2024. In the case of red varietal grapes, it is likely that the grapes will not be ready for sale for a longer period. Mr Mableson gives evidence that extensive work will be required throughout 2024 to make the grape juice ready for sale, and that work is time sensitive.

16    The assets of the Companies include over five million litres of bulk wine from the 2023 vintage (2023 Vintage). The 2023 Vintage wine is not yet ready for sale. In addition, the assets of the companies include 135,000 bottles of wine that have been bottled and are located at the winery of the Companies. The wine harvested from the 2023 Vintage and the 2024 Vintage is to be stored as bulk wine until it is ready to be sold. Mr Mableson gives evidence that employees must maintain that wine during storage in order to prevent it from spoiling.

17    On 4 March 2024, the Administrators and the Receivers jointly (a) appointed CBRE Valuations Pty Ltd to prepare valuations in respect of each of the Properties, (b) appointed Gordon Brothers to prepare valuations of the plant and equipment owned by the Companies, the directors in their own capacities and as trustees of the Franchitto Winery Trust and (c) invited various sales agents to submit proposals regarding the sale of the assets.

18    On 5 and 6 March 2024, the Administrators convened the first meetings of creditors in respect of the companies. In the course of those meetings, Mr Mableson raised with creditors the prospect that the Administrators may extend the convening periods of the voluntary administrations. None of the creditors present objected to that proposal. Nor did any creditor challenge the Administrators appointments or seek to appoint a committee of inspection.

19    On 5 March 2024, Westpac advanced a working capital facility to the Companies to assist with their working capital requirements and to satisfy the Administrators’ costs and liabilities (Working Capital Facility).

20    The total amount advanced pursuant to the Working Capital Facility is repayable within two business days of the date of the winding up of one or more of the Companies.

21    On 13 March 2024, the Administrators issued a circular by email and by post to creditors, advising them of their intention to file this application for an extension of the convening period for the second meeting of creditors. Creditors were invited to provide any objections to that course to the Administrators by 10 am on 19 March 2024.

22    The Administrators received an objection from only one creditor, Australian Welding Solutions.

23    On 21 March 2024, however, Australian Welding Solutions withdrew its objection and confirmed that it consented to the Administrators making this application. As at the date of this application, the Administrators have resolved to sell the Companies’ assets (including the 2023 Vintage and 2024 Vintage) and the Properties as a going concern through a sale process to be conducted with the Receivers (Joint Campaign).

24    Mr Mableson gives evidence that (a) the Joint Campaign is the only means by which each of the Companies could be sold as a going concern because of the different entities and persons who control the business of the Salena Group and the Properties on which it operates, (b) the potential going concern value of the business will be greater than the breakup value of the Companies’ assets and undertakings, including in a liquidation context and (c) the Joint Campaign is expected to run for three to six months from commencement to completion.

25    Mr Mableson also gives evidence that Westpac, the Administrators and the Receivers have agreed to a protocol for the conduct of the Joint Campaign, including the appointment of a sales agent, the sharing of information and decisions as to the sale price and the selection of the ultimate purchaser.

26    Mr Mableson gives evidence that the Administrators intend to convene the second meeting of creditors for each of the companies at the first opportunity that arises following the earlier of either (a) the identification of a suitable sale proposal that the Administrators determine should be recommended to creditors for approval or (b) the exchange of a contract of sale in respect of the assets and if necessary, to ensure a successful completion of such a sale, the completion of the sale.

27    At the date of affirming his affidavit, Mr Mableson had not received any objections from creditors as to the proposed convening period extensions. Further, Mr Mableson gives evidence that in his view, the extensions will not prejudice creditors as they will (a) likely enhance returns to creditors and (b) preserve the value of the Companies’ assets.

C.    Statutory provisions and principles

28    As required by s 436E of the Act, the Administrators convened the first meeting of creditors within eight business days after the commencement of the administration of each of the companies. Pursuant to s 439A(2) of the Act, a second meeting of creditors must be held within five business days before or within five business days after the end of the convening period. The Court otherwise has power to extend the convening period for the second meeting of creditors pursuant to s 439A(6).

29    It is well established that in exercising the jurisdiction to extend the convening period pursuant to s 439A(6), (a) the Court is required to balance the interests of creditors in a timely administration and (b) the need to allow sufficient time to administrators to carry out their functions properly and maximise the benefits to creditors through a proper administration: Re Diamond Press Australian Pty Ltd [2001] NSWSC 313 at [10] (Barrett J); Blundell (Administrator), in the matter of MG Gold Pty Ltd (administrators appointed) [2023] FCA 282 at [2] (Jackman J).

30    As explained by Austin J in Re Riviera Group Pty Limited (2009) 72 ACSR 352; [2009] NSWSC 585 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’ve 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.

31    His Honour identified the following factors as constituting substantial grounds at [13], which relevantly included:

(a)    the size and scope of the business;

(b)    the large number of employees with complex entitlements;

(c)    a complex corporate structure;

(d)    the nature of the business transactions;

(e)    the time required to dispose of the assets; and

(f)    whether the extension will assist the sale as a going concern.

32    In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No. 2) (2020) 144 ACSR 347; [2020] FCA 717 at [65]-[66], Middleton J analysed the factors identified by Austin J in Re Riviera in the context of the administration of a large business, and concluded that an extension is appropriate to facilitate the sale of a business as a going concern, or to assist the progression of a deed of company administration.

33    Extensions of six months or more have been granted to administrators of large retail or wholesale businesses to allow a business to continue to trade to maximise the funds available for creditors and to facilitate a sale of the business as a going concern, particularly against the background of a likely winding up scenario: Rathner, in the matter of Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 at [39] (O’Bryan J); Strawbridge, in the matter of Sara Lee Holdings Pty Ltd (administrators appointed) [2023] FCA 1408 at [21], [24]-[25] (Halley J).

34    It is also relevant to take into account whether any objection to an extension has been raised at a first meeting of creditors where notice of a proposed extension has been given: In the matter of Henry Walker, Elton Group Limited (Administrators Appointed) [2005] FCA 316 at [2] (Healey J).

35    Finally, I note that s 447A(1) of the Act enables the Court to make what has been described as a “Daisytek” order: Re Daisytek Australia Pty Ltd (Administrators Appointed) (2003) 45 ACSR 446; [2003] FCA 575 at [10]-[14] (Lindgren J). A Daisytek order enables administrators, if they see fit, to hold a second meeting of creditors at any time during or within five business days after the end of the convening period extended by orders of the Court pursuant to s 439A(6) of the Act.

D.    Consideration

36    I am satisfied that the Administrators have established that it is appropriate to extend the convening periods for each of the companies up to and including 2 October 2024 (being a period of six months). I have reached that conclusion for the following principal reasons.

37    First, the extension sought by the Administrators is targeted and proportionate in order to facilitate the sale of the Salena Group’s business in a manner that maximises the return to creditors.

38    Second, each of the creditors of the Salena Group has been notified of the application for an extension of the convening period and has either consented or not objected to the application. The creditors present at each of the first meeting of creditors, and all creditors in a subsequent circular, were advised of the Administrators’ intention to make this application and were invited to raise any objection to the application. In addition, a further communication was sent by the Administrators to all creditors for whom the Administrators had email addresses (approximately 90% of all creditors) advising them of the hearing today. I note that no creditors applied or sought leave to appear at the hearing today.

39    Third, I am satisfied that if the convening periods are not extended, given the evidence of Mr Mableson, that liquidation of the Companies is the most likely scenario as the Companies are insolvent and the administrators to date have not received any deed of company arrangement proposal.

40    Fourth, I am satisfied that creditors are unlikely to achieve a better result in a winding up than if the Joint Campaign continues under the umbrella of an extended convening period, including because (a) in a winding up, the Companies’ wine export licenses may be revoked, (b) the sale of assets on a break up basis is unlikely to lead to a sale of the vintage bulk wine and the 2024 Vintage, (c) in a liquidation scenario, the Companies are likely only to be able to realise the value of the plant and equipment, which has limited value independently of the Properties and the business of the Salena Group and (d) as explained by Mr Mableson in his affidavit, certain key contracts will be lost which would limit the possibility of any sale of the business of the Salena Group as a going concern.

41    I am otherwise satisfied that orders should be made for (a) the making of a Daisytek order, (b) permitting notice of the creditors’ meetings to be given by electronic means to those for whom email addresses are available, (c) notification of these orders to creditors and (d) providing creditors who can demonstrate sufficient interest to apply to discharge or vary the orders made in this proceeding on giving three business days’ notice to the Administrators.

E.    Disposition

42    For the foregoing reasons, I am satisfied that orders should be made in accordance with the relief sought by the Administrators in the originating process.

Associate:

Dated:    26 March 2024