Federal Court of Australia

Beattie (Administrator), in the matter of Sharvain Facades Pty Ltd (Administrator Appointed) [2025] FCA 304

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act), the period within which the plaintiff must convene the second meeting of creditors in respect of Sharvain Facades Pty Ltd ACN 116 437 462 (Administrators Appointed) (Company) under s 439A of the Act be extended to Friday, 11 April 2025.

2.    The costs of the proceeding be costs in the voluntary administration of the Company.

3.    The plaintiff is to take steps to cause notice of these orders to be given, within one business day of making these orders to the creditors of the Company by:

(a)    Publishing a copy of the orders on the creditor information portal of the website maintained by the accounting firm Worrells in respect of the administration of the Company;

(b)    By sending the orders by email to those creditors who have notified the Administrator of their email addresses.

4.    Any person who demonstrates a sufficient interest to vary or discharge Order 1 above (including any creditor of the Company) have liberty to apply to the Court on two business days’ written notice to the plaintiff.

5.    The plaintiff has liberty to apply for further or other orders and to vary or discharge these orders.

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

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

HALLEY J:

A.     Introduction

1    This matter is concerned with an application by the administrator, Graham Beattie (Administrator), of Sharvain Facades Pty Ltd (Administrator Appointed) (Company) for an extension of time for the holding of a second meeting of creditors. As matters currently stand, pursuant to s 439A of the Corporations Act 2001 (Cth) (Act), a second meeting of creditors must be convened by Tuesday, 1 April 2025, with the meeting to be held within five business days of that date. The Administrator seeks an order, pursuant to s 439A(6) and s 447A of the Act, extending the convening period until 1 July 2025 and permitting a second meeting of creditors to be held at any time until five business days after 1 July 2025.

2    The application is supported by affidavits of the Administrator sworn on 26 and 27 March 2025, together with affidavits of Michael Lalji sworn on 27 March 2025, Chris Li sworn on 27 March 2025, and Matthew Williams sworn on 27 March 2025.

3    The application is either not opposed or supported by all creditors, other than Multiplex Constructions Pty Ltd (Multiplex). Having said that, as candidly acknowledged by counsel appearing for the Administrator, Mr M Hazan, the creditors of the Company have had very little notice of the application and, therefore, may not have been in a position to fully consider their position with respect to the application, particularly given the length of the extension that has been sought by the Administrator.

4    Multiplex has sought leave, which has been granted, to appear today as an interested party and was represented today by Ms E Beechey, of counsel. Multiplex sought leave, which was granted, to rely on an affidavit of David Ghannoum affirmed on 28 March 2025 in which he gives evidence concerning a Design and Construct Subcontract (NSW) (Contract) between Multiplex and the Company with respect to the supply of materials for the New Sydney Fish Market Main Works development project (Fish Market development project).

5    The matter was first listed for hearing before me yesterday at 10.15 am on Thursday, 27 March 2025 in the Commercial and Corporations duty list.

6    At that time, there was an application to adjourn the hearing of the application to Monday, 31 March 2025 by the Administrator with the consent of the interested party, Multiplex. In view, however, of the fact that the period in which the convening of the second creditors’ meeting would end on 1 April 2025, I determined that it was appropriate to proceed with the hearing at 2.15 pm today, 28 March 2025. For present purposes, the most significant issue that has been raised is the evidence given by Mr Ghannoum in his affidavit that Multiplex cannot complete the Fish Market development project until it is able to access material that it claims title has passed to it under the Contract, including facade glazing, louvres, cladding and roof cassettes (cladding material). Mr Ghannoum gives evidence that the delay in obtaining access to and possession of the cladding materials is costing Multiplex approximately $65,000 per day in liquidated damages under its principal contract for the construction of the Fish Market development project, together with $250,000 per day in other costs incurred by reason of the delay caused by its inability to access the cladding materials.

B.    Factual Background

7    The Administrator was appointed to the Company on 4 March 2025, pursuant to a resolution of the directors of the Company. The first meeting of creditors was held on 14 March 2025. At the time the Administrator was appointed, the Company was partway through the performance of a number of construction contracts, including, as I have indicated above, a contract with Multiplex with respect to the Fish Market development project.

8    In addition, it was also in the course of performing works under a contract with Lendlease Construction Pty Limited in relation to the Victoria Cross Station and Victoria Cross Tower Development projects, together with a contract with Scentre, Design and Construction Pty Ltd, in relation to a development project at Castlereagh Street.

9    At the time of the Administrator’s appointment, there were some 35 employees of the Company. As at 26 March 2025, the Company continued to employ 18 employees. Claims submitted by unsecured creditors to date total some $54,266,229, including known employee credit claims totalling some $1,260,820.

10    The Company’s financier, the Commonwealth Bank of Australia, is owed an approximate net amount of $8,000,000 pursuant to various facilities and guarantees, which are secured by a security interest under the Personal Property Securities Act 2009 (Cth) (PPSA) over all present and after acquired property of the Company, and which are registered on the Personal Property Securities Register. Following the appointment of the Administrator, he, together with other members of his staff, have taken a number of steps in relation to the administration of the Company. These steps have included attending to statutory tasks and conducting investigations and reviews, particularly including an urgent assessment of the financial position of the Company and its operations in order to determine whether it was in the interests of creditors and stakeholders to retain staff, and communicating and negotiating with the Company’s landlord in relation to ongoing lease arrangements.

11    The Administrator has identified that the Company’s major assets on his appointment were cash received in trust in the amount of approximately $200,000, a large volume of custom-made facade building materials held in its leased premises and at third-party storage facilities, non-custom building materials held in leased premises and third-party storage facilities, claims against principal contractors for outstanding work undertaken by the principal contractors, together with motor vehicles, mobile and fixed cranes, tools of trade, and office and IT equipment.

12    Significantly for present purposes, the custom and non-custom materials are held across two leased commercial warehouses at Banksmeadow and Ingleburn, together with commercial storage facilities of Johnston’s Transport Industries Pty Ltd (Johnston’s Transport) and JJ Lawson Customs & Freight Brokers Pty Ltd (JJ Lawson). Both Johnston’s Transport and JJ Lawson have asserted liens over all materials in their possession to secure debts owing to them. In the case of Johnston’s Transport, the alleged debt is $1,669,452; and with respect to JJ Lawson, the alleged debt is $135,753. Further, and significantly again for present purposes, a number of principal contractors have asserted legal title to materials in the Company’s possession including, as explained above, the interested party Multiplex.

13    The Administrator is currently seeking to determine the principal contractors’ assertions of ownership, including whether the terms of the relevant construction contracts have the effect of transferring title in the materials as alleged, whether the Company had title to the materials at the time the principal contractors made payment, whether if a transfer of ownership occurred, that constituted an in-substance security interest for the purposes of s 12(1) of the PPSA, and related matters.

14    The Administrator confirmed that no deed of company arrangement has been proposed, and the directors of the Company have not indicated any intention to propose any deed of company arrangement.

15    In the absence of any such proposal, as presently advised, the Administrator has formed the view that at the conclusion of the administration, it will be necessary for the Company to be placed into liquidation. The Administrator seeks an extension for a period of some 12 weeks for the convening of the second meeting of creditors in order to (a) progress his investigations into competing claims, (b) progress negotiations with principal contractors with a view to reaching a commercial resolution of the Company’s claims, if that is possible, and (c) to the extent that agreement is reached with the contractors, allow time for the orderly removal of materials the subject of any agreement.

16    The Administrator has identified that if there is any delay in the holding of the second meeting of creditors and the likely winding up of the Company at that meeting, employee creditors of the administration will be prejudiced in that they will be delayed in accessing their entitlement under the Fair Entitlement Guarantee scheme for the amount of approximately $1,260,820, including redundancy entitlements, which have not yet crystallised.

17    On 25 March 2025, the Administrator and his staff and solicitors notified creditors, including the principal contractors, of the application for an extension of time. That has led to Multiplex appearing today and yesterday as an interested party to, initially, oppose any extension and, as now clarified by counsel for the interested party, to oppose any extension beyond a two-week period.

18    The dispute between Multiplex and the Administrator concerns cl 42.3 of the Contract between Multiplex and the Administrator. The clause is in the following terms:

Upon payment of the Subcontractor of the amount which includes the value of the item, and upon the release of any security, the Subcontractor shall ensure that the item shall be the property of Multiplex free of any lien or charge.

19    The parties have engaged in some correspondence advancing competing contentions as to the proper construction of that clause, in particular, whether that clause has or has not had the effect of passing title in the cladding material to Multiplex. It is not disputed between the parties that there is no money outstanding from Multiplex to the Company for the cladding material the subject of the Contract. I note, however, that it appears that the Contract extends to both the production of the cladding material and its installation. It is not simply a sale of the goods the subject of the Contract. The Administrator today advances three contentions as to why that clause does not provide for the transfer of title to the cladding material to Multiplex.

20    First, the Administrator contends that the words “and upon the release of any security” qualify any immediate transfer of title, and the Administrator has not yet had an opportunity to determine the extent and scope of any secured interest over those goods, including any secured interest of the Commonwealth Bank of Australia or liens asserted by manufacturers.

21    Second, the Administrator contends that the Contract is not simply for the fabrication of the products but also extends to installation and therefore falls within s 12 of the PPSA.

22    Third, the Administrator contends, in the alternative, that the payment that was made for the goods, was made from funds advanced by Multiplex pursuant to a discrete loan agreement and that the moneys advanced under the loan agreement did not constitute payments for the purposes of cl 42.3.

23    It is not necessary, and indeed undesirable on this application given the interim nature of the orders that I propose to make, that I express any view as to the merits of these contentions.

C.     Legal Principles

24    The principles concerning an extension of time for the holding of a second creditors’ meeting pursuant to s 439A of the Act are well settled. For present purposes, it is sufficient to note that the section which falls within pt 5.3A of the Act forms part of a suite of provisions designed to maximise the chance of a company continuing in existence or, if that is not possible, obtaining a better return for the company’s creditors and members that would result from an immediate winding up.

25    It is well established that in exercising the jurisdiction to extend the convening period pursuant to s 439A(6) of the Act, the Court is required to balance the interests of creditors and the timely administration and 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 Australia 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).

26    As Austin J stated in Re Riviera Group Pty Ltd (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 have set out, and there is no specific evidence of prejudice, an extension commensurate with the administrator’s task will be granted, notwithstanding that the Explanatory Memorandum suggested that extensions would not be granted frequently.

27    Further, as McKerracher J stated in Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) [2010] FCA 30 at [16]:

In order for the administrators to carry out their function properly, it is necessary that they should have sufficient time to investigate the affairs of the companies under administration and to provide sensible information and advice to the creditors: Hayes, in the matter of Estate Property Group Limited (Administrators Appointed) [2007] FCA 935 at [1]. …

D.     Consideration

28    In essence, the Administrator finds himself in a position where he has taken control of a company which has manufactured bespoke facade glazing and cladding products that are currently held in a number of different warehouses and locations. In the event of a liquidation, termination provisions in leases are likely to be crystallised, and the ability of the Administrator to seek to negotiate and complete contracts for the sale of those assets of the Company are likely to be materially prejudiced. The length of time necessary for the Administrator to negotiate and complete contracts for the orderly sale of those products, however, is not immediately apparent.

29    The Administrator has sought some 12 weeks, but on the evidence before me, I am not satisfied that a period of 12 weeks ultimately will be necessary. By the same token, I do not suggest on the evidence before me that a period of two weeks from today would be sufficient. Nevertheless, I have concluded that a period of two weeks, in the first instance, is necessary in order to provide a suitable period of time within which the Administrator and Multiplex can seek to resolve their outstanding differences and determine the position with respect to the products the subject of the dispute between Multiplex and the Administrator. The obvious impacts on Multiplex and the Fish Market development project – if that issue is not resolved in a timely fashion – are self-evident, but at the same time, if it be the case that the correct position is that title has not passed to those goods, then the interests of the other creditors of the Company must also be protected.  

30    It may well be the case, given the two-week extension, and if the matters between the Administrator and Multiplex cannot be resolved, that Multiplex may make an urgent application to the Court for relief pursuant to s 440B of the Act. Having said that, to the extent that the issue can be resolved between the parties independently of such an application, that is a desirable objective. An application pursuant to s 440B would require a resolution on an urgent basis of the three contentions advanced by the Administrator today in support of the construction of cl 42.3.

31    I have set out in some detail my reasons for making an order that the period within which the plaintiffs must convene the second meeting of creditors of the Company be extended by two weeks to 11 April 2025. I have done that because I anticipate that on or prior to that date, the Administrator will make an application for a further extension of the period. An extension of two weeks should provide sufficient time for the Administrator and Multiplex to seek to reach a resolution of their dispute.

32    Further, I note that, as explained by Cheeseman J in Frisken, in the matter of Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) [2023] FCA 448 at [24] to [28], it is highly desirable that, to the extent possible, creditors are given as much notice as possible of applications for extensions of convening periods for second meetings of creditors. As her Honour noted at [28], the problem created by a late application is not cured simply by the fact that an administrator may seek orders, including the grant of leave for interested parties to apply on notice after the event. It is, as her Honour pointed out, “to put the cart before the horse” to rely on such an order. Such orders should only be relied upon in circumstances where it is not reasonably possible to have provided more notice. The extension of time in the first instance of two weeks is intended to ensure that all creditors are given sufficient notice to ensure that the Court can be satisfied that, if there is to be an application for a lengthy extension, all potential matters have been brought to the Court’s attention.

E.    Disposition

33    For the foregoing reasons, I have concluded that orders should be made that the period in which the second creditors’ meeting is to be convened is to be extended to Friday, 11 April 2025.

Associate:

Dated:    2 April 2025