Federal Court of Australia
Albarran, in the matter of Bonza Aviation Pty Ltd (Administrators Appointed) [2024] FCA 575
ORDERS
order made by: | JACKMAN J |
DATE OF ORDER: | 27 May 2024 |
THE COURT ORDERS THAT:
Substitution and Joinder
1. Pursuant to r 8.21(1)(f) of the Federal Court Rules 2011 (Cth) (Rules) the first plaintiff in the plaintiffs’ Originating Application filed 6 May 2024 be substituted:
(a) from “RICHARD ALBARRAN, KATHLEEN VOURIS, BRENT KIJURINA AND CAMERON SHAW IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF BONZA AVIATION PTY LTD (ACN 653 309 909) (ADMINISTRATORS APPOINTED)”,
(b) to “RICHARD ALBARRAN, KATHLEEN VOURIS, BRENT KIJURINA AND CAMERON SHAW IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF BONZA AVIATION PTY LTD (ACN 653 309 909) (ADMINISTRATORS APPOINTED), 777 OZ HOLDCO PTY LTD (ACN 623 307 496) (ADMINISTRATORS APPOINTED) AND OPS IN A BOX PTY LTD (ACN 656 464 498) (ADMINISTRATORS APPOINTED).
2. Pursuant to r 9.05(1)(b) of the Rules:
(a) 777 Oz Holdco Pty Ltd (ACN 623 307 496) (Administrators Appointed) is joined as third plaintiff to the proceeding; and
(b) Ops In A Box Pty Ltd (ACN 656 464 498) (Administrators Appointed) is joined as fourth plaintiff to the proceeding.
Suppression and Non-Publication Order
3. Pursuant to ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, the following documents (Documents) are to be marked “confidential” on the physical and electronic Court file and publication or disclosure of the information contained therein is prohibited, except pursuant to an order of the Court, until such time as the administration, deed administration or winding up of the Companies has been finalised (whichever is later):
(a) the confidential affidavit of Brent Kijurina sworn 22 May 2024 (Kijurina Confidential Affidavit); and
(b) Confidential Exhibit C-BK-1 to the Kijurina Confidential Affidavit.
4. Order 3 above does not prevent the first plaintiffs (Administrators), the Administrators’ legal representatives or the Administrators’ agents or employees from disclosing, publishing or accessing the Documents and the information contained therein.
5. Order 3 above is to apply throughout the Commonwealth of Australia.
Convening Period and “Daisytek” Order
6. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the convening period as fixed in s 439A(5)(b) of the Act in respect of each of the second, third and fourth plaintiffs (together the Companies and each a Company) be extended up to and including 29 July 2024.
7. Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate such that the second meeting of creditors of each Company required by s 439A of the Act may be held at any time during, or within five business days after the end of, the convening period as extended by order 6 above, notwithstanding s 439A(2) of the Act.
Notice and Liberty to Apply
8. The Administrators must cause notice of these orders to be given, within 3 hours of the making of these orders, to the Australian Securities and Investments Commission, and to creditors of the Companies, in the manner specified in order 3 of the orders made by Cheeseman J on 7 May 2024.
9. Any person who can demonstrate a sufficient interest has liberty to apply to vary or discharge any orders made above, on 2 business days’ written notice being given to the Administrators and the Court.
10. The first plaintiffs have liberty to apply on 2 hours’ written notice to the Court in relation to any variation of these orders, any further extension to the convening period, or any other matter generally arising in the administrations of the Companies.
Costs and Other Orders
11. The first plaintiffs’ costs of the application are to be treated as costs in the administrations of the Companies, jointly and severally.
12. These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Delivered ex tempore, revised from transcript
JACKMAN J:
1 By an interlocutory process dated 22 May 2024, the first plaintiffs (Administrators) seek orders:
(a) joining two related entities of the second plaintiff (Bonza), namely 777 Oz Holdco Pty Ltd (777 Holdco) and Ops in a Box Pty Ltd (Ops), as plaintiffs; and
(b) extending the convening period of Bonza, 777 Holdco and Ops (Companies) by two months to 29 July 2024, and permitting the Administrators to hold the second meeting of creditors at any point during that period.
2 There is no opposition to those orders and no creditor or other person has sought leave to appear at today’s hearing.
3 The Administrators were appointed by resolutions of the directors of the Companies on 30 April 2024. As at the date of the Administrators’ appointment, Bonza operated a low-cost domestic airline primarily servicing regional locations in Australia (Business). 777 Holdco owns the majority of the shares in Bonza and all of the shares in Ops. 777 Holdco is a holding company and does not have any trading or other operating activities in its own right. Ops does not have any substantial operations. Based on the Administrators’ investigations to date, 777 Holdco and Ops do not have any assets or unrelated creditors.
4 The administration was precipitated by the lessors of the aircraft used by Bonza terminating the relevant leases on 29 April 2024. As a result, the Administrators have not been able to carry on the Business since their appointment. Because the Administrators have not been able to continue to trade, customers with forward bookings have been treated as contingent creditors. There are approximately 57,933 customer creditors, and 58,428 creditors in total.
5 Although the Business cannot currently be sold as a going concern, Bonza has a number of assets. These include an Air Operator Certificate (AOC) granted by the Civil Aviation Safety Authority (CASA), policies and procedures associated with the AOC, agreements with suppliers, inventory, intellectual property, and plant and equipment.
6 Due to the regulatory requirements to obtain an AOC, the Administrators’ view is that the AOC held by Bonza has significant value and is in fact Bonza’s most valuable asset. The Administrators further understand that an AOC cannot be transferred by the entity which holds it under the Civil Aviation Act 1988 (Cth). The transfer of the shares in Bonza (and if required, 777 Holdco and Ops) could be effected either in liquidation pursuant to s 493A of the Corporations Act 2001 (Cth) (Corporations Act) or under a deed of company arrangement (DOCA) pursuant to s 444GA of the Corporations Act. The Administrators consider there is a risk that the AOC could be cancelled if Bonza enters liquidation.
7 The Administrators have commenced a sale process to sell the business and assets of the Companies which has involved a marketing campaign, the publication of an information memorandum, and the establishment of a data room for interested parties. The progress of the sale process and confidential information about the number of interested parties is set out in a confidential affidavit of Mr Kijurina, which is the subject of a non-publication order under ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth).
8 In view of the very large number of creditors of Bonza, on 7 May 2024 Cheeseman J made orders to facilitate the conduct of the first meeting of creditors as a hybrid physical and virtual meeting. The orders also imposed a deadline for the submission of questions, proxies and proofs of debt by creditors. That meeting occurred on 10 May 2024. On 9 May 2024, Cheeseman J made further orders permitting the administrators to propose a committee of inspection to creditors by written proposal circulated after the first meeting of creditors. That proposal was put to creditors by a circular dated 15 May 2024.
9 By paras 6 and 7 of the interlocutory process, the administrators seek an order pursuant to s 439A(6) of the Corporations Act extending the convening period for the Companies up to and including 29 July 2024, and pursuant to s 447A of the Corporations Act, a so-called Daisytek order. A Daisytek order allows administrators to hold the second meeting of creditors prior to the expiry of the extended convening period if desirable, so as to avoid requiring administrators to sit on their hands until the end of the convening period: In the matter of Daisytek Australia Pty Ltd [2003] FCA 575; (2003) 45 ACSR 446 at [14]–[17] (Lindgren J).
10 The administrators were appointed on 30 April 2024. If not extended, the convening period will expire on Tuesday, 28 May 2024, which is tomorrow (see Corporations Act s 439A(5)(b)).
11 The purpose of the power to grant an extension of the convening period is to enable the court to allow further time for the conduct of the administration where that is appropriate to advance the interests of the administration. The court must balance the expectation that an administration should be relatively swift against the need to ensure that constructive options which may provide better returns for creditors can be properly considered: Farnsworth v About Life Pty Ltd (Administrator Appointed), in the matter of About Life Pty Ltd (Administrator Appointed) [2019] FCA 11 at [3]–[6] and the cases cited in those paragraphs (Thawley J).
12 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 central instances in which it will generally be appropriate for the court to extend the convening period. An additional factor in favour of extending the convening period is the need for creditors to have sufficient information at the second meeting to allow them to exercise their decision as to the future of the company in as informed a manner as possible.
13 The first plaintiffs submit, and I accept, that the extension of the convening period sought is in the best interests of the creditors of the Companies, and that the extension sought should be granted for the following reasons.
14 First, the sale process which the administrators are currently undertaking offers the best prospect of a substantial return to creditors. The administrators’ view is that a sale of the business and execution of a DOCA is likely to result in a better outcome for creditors than immediate liquidation. The AOC is likely to be Bonza’s most valuable asset in the context of a sale. Bonza currently has insufficient cash flow and funding to continue its operations and, as at 6 May 2024, claims by creditors excluding customer creditors were in the order of $116 million. The administrators have not yet received a DOCA proposal. Accordingly, if the convening period is not extended, it is very likely that the administrators would have no option but to recommend to creditors that Bonza be wound up. The administrators’ view is that any interested party would be very unlikely to purchase the AOC by acquiring the shares in Bonza if it were in liquidation as the purchaser would not obtain managerial control of Bonza and all of its creditor claims would remain due and owing. There is also a risk if Bonza enters liquidation of CASA cancelling Bonza’s AOC or imposing additional and burdensome regulatory requirements. Accordingly, if the second meeting of creditors were required to be held without an extension of the convening period, the potential value in the sale of the business, including Bonza’s AOC, is likely to be lost.
15 Second, the ongoing sale process which the administrators are currently undertaking will not be completed within the current convening period. Further, after that process concludes:
(a) the administrators will need time to consider the offers received and elect which, if any, they intend to proceed with;
(b) negotiation of any sale agreement prior to execution may take 2–3 weeks;
(c) any sale of the business will be in connection with a DOCA proposal. As the administrators are yet to receive any DOCA proposals, a suitable DOCA proposal will need to be formulated and negotiated;
(d) the sale is likely to require the approval of CASA to the change in control of Bonza and, depending on the successful bidder, may require the approval of the Foreign Investment Review Board; and
(e) there are likely to be numerous other conditions precedent in any sale agreement which will need to be satisfied prior to creditors voting on any related DOCA proposal at the second meeting of creditors.
16 An extension of the convening period is therefore necessary to enable the orderly progress of the sale process, including the formulation of a suitable DOCA proposal by the successful bidder, and to allow the successful bidder to obtain comfort that the preconditions for completion of the sale can be satisfied.
17 Third, the administrators have identified potential recovery claims which may yield substantial recoveries and require further investigation and advice in order for the administrators to be able to make a recommendation to creditors.
18 Fourth, there is a degree of complexity to the administration arising from the extremely large number of customer creditors, the wide range of other stakeholders including employees, plane lessors, trade creditors and statutory authorities (as reflected by the composition of the committee of inspection which the administrators have proposed), and the strict and complex regulatory environment the business operates in. The authorities recognise that this is a factor which supports the extension of the convening period.
19 Fifth, although there is some prejudice to employees of Bonza, the administrator’s view is that any such prejudice is outweighed by the benefit to all creditors of Bonza, including the 323 employees, from pursuing a sale and DOCA process to completion. The prejudice to employees includes: (a) delayed payment of entitlements by the Commonwealth’s Fair Entitlements Guarantee Scheme (FEGS); (b) the potential for the continuation of the stand down of employees under the Fair Work Act 2009 (Cth) without pay during the extended convening period; (c) the uncertainty for employees about their ability to obtain alternative work during the stand down period and any impact of them accepting alternative employment with another employer on their entitlements and subsequent eligibility for FEGS advances; and (d) the impact on employees and other creditors of increased costs arising from an extended administration.
20 An extension of the convening period may lead to a DOCA proposal that will ultimately allow the business to continue, thereby enabling customers to receive flights already booked, employees to be retained, and supplier relationships to be continued. If a transaction arising from the current sale process does not provide for continued employment of Bonza’s employees, then those employees will be given notice of that matter as soon as practicable. The uncertainty faced by employees and potential prejudice to them are regrettable, but in my view are outweighed by the potential benefits for the employees and other creditors arising from enabling sufficient time for the sale process to continue.
21 Sixth, an extension of two months is relatively brief and is appropriate in all the circumstances. It may take a number of weeks to finalise the terms of any sale agreement (assuming an acceptable offer is received), and regulatory approval of a change of control of the Companies is unlikely to be achieved in a shorter period of time.
22 As to the joinder of 777 Holdco and Ops, because 777 Holdco and Ops have no unrelated creditors, it was unnecessary for the administrators to seek orders varying the operation of the Corporations Act for the first meeting of creditors of those entities. They were accordingly not named as plaintiffs in the originating process filed on 6 May 2024. Given that I am prepared to extend the convening period for Bonza, it is appropriate and desirable to also extend the convening periods of 777 Holdco and Ops in circumstances where: (a) the administrators are seeking to sell the business of Bonza; (b) a share sale may be necessary to preserve the AOC; and (c) 777 Holdco holds the majority of the shares in Bonza.
23 The administrators also seek suppression and non-publication orders in respect of Mr Kijurina’s confidential affidavit and annexures on the ground that the orders are necessary to prevent prejudice to the proper administration of justice. In my view, such an order is clearly appropriate, as disclosure of the terms of the offers that the administrators have received to date and their intentions for the balance of the sale process would be likely to undermine the competitive tension in that sale process.
24 The administrators also seek an order allowing any person demonstrating a sufficient interest to apply to vary or discharge any orders which the court makes, and that order is also appropriate in the circumstances.
25 Accordingly, I make orders in accordance with the draft orders which have been prepared by the first plaintiffs and handed to me.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. |
Associate:
