Federal Court of Australia

Beattie (Administrator), in the matter of Sharvain Facades Pty Ltd (Administrator Appointed) (No 2) [2025] FCA 355

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 447A(1) of the Corporations Act 2001 (Cth), the period within which the plaintiffs must convene the second meeting of creditors of Sharvain Facades Pty Ltd ACN 116 437 462 (Administrators Appointed) (the Company) be extended to 20 June 2025.

2.    Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to the Company such that, notwithstanding s 439A(2) of the Act, the second meeting must be held at any time before, or within five business days after, the end of the convening period as extended by order 1.

3.    The plaintiff’s costs of the interlocutory process dated 7 April 2025 be costs in the voluntary administration of the Company.

4.    The plaintiff 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; and

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

5.    Any person who demonstrates a sufficient interest to vary or discharge orders 1 to 3 above (including any creditor of the Company) have liberty to apply to the Court on three business days’ written notice to the plaintiff.

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

7.    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

CHEESEMAN J:

INTRODUCTION

1    These reasons concern an application by Graham Beattie (Administrator), of Sharvain Facades Pty Ltd (Administrator Appointed) (Company) for an extension of time within which to hold the second meeting of creditors and related orders. The Company is in voluntary administration. The application came before me as the Commercial and Corporations Duty Judge as an urgent application by reason of the impending end of the convening period unless extended by the Court.

2    An application for an extension was previously made and granted but for a period of only two weeks. That extension was made under s 439A of the Corporations Act 2001 (Cth). The Administrator now seeks to obtain a further extension of the convening period, relying in this instance on s 447A(1) of the Act. The Administrator also seeks a “Daisytek order” order under s 447A(1) to the effect that Part 5.3A operate in relation to the Company such that the second meeting of creditors required under s 439A may be convened at any time before, or within, five business days after the end of the convening period as extended by the Court (so called after the decision in In the matter of Daisytek Australia Pty Ltd (administrators appointed) [2003] FCA 575; 45 ACSR 446).

3    The previous extension of the convening period was from Tuesday, 1 April 2025 to Friday, 11 April 2025 by orders made on 28 March 2025 by the then Duty Judge: Beattie (Administrator), in the matter of Sharvain Facades Pty Ltd (Administrator Appointed) [2025] FCA 304 (Halley J).

4    In his first application, the Administrator had sought an order extending the convening period until 1 July 2025 and an accompanying Daisytek order. The Court did not accede to making orders in those terms, preferring instead to extend the period for two weeks only to enable the creditors of the Company (who had very little notice of the application) an opportunity to consider their position with respect to the application, particularly given the length of the extension that was sought by the Administrator. That explains the genesis of the present application, by which the Administrator now seeks to extend the convening period until 20 June 2025 with an accompanying Daisytek order.

5    The Administrator has used the intervening period to engage with creditors and interested persons in relation to the present application and to explain to creditors his rationale for seeking the extension now sought. In the result, following notice of today’s hearing being given, no creditors or interested persons sought leave to be heard on the application. Two interested persons asked that the Administrator bring certain matters to the Court’s attention on this application. The interested persons were (1) the Department of Employment and Workplace Relations in its capacity as administrator of the Fair Entitlements Guarantee Scheme (FEG Scheme) and (2) Roberts & Co (NSW) Pty Ltd, a party to a construction contract with the Company. The Administrator has addressed in his evidence the matters raised by the Department and by Roberts & Co and I consider each of those matters below.

6    At the hearing on 10 April 2025, and in the teeth of the imminent expiration of the existing extension, I concluded that the convening period should be extended until 20 June 2025 and accordingly, I made orders substantially in the terms sought by the Administrator. These are my reasons for doing so.

EVIDENCE

7    The Administrator relied on the following evidence:

(1)    the affidavit of Graeme Beattie sworn 26 March 2025 and exhibit GB-1;

(2)    the affidavit of Graeme Beattie sworn 27 March 2025 and exhibits GB-2 and GB-3;

(3)    the affidavit of Graeme Beattie sworn 7 April 2025 and exhibit GB-4;

(4)    the affidavit of Graeme Beattie sworn 9 April 2025 and annexure GB-5;

(5)    the affidavit of Boris Kostura sworn 7 April 2025;

(6)    the affidavit of Michael Lalji sworn 27 March 2025;

(7)    the affidavit of Michael Lalji sworn 9 April 2025;

(8)    the affidavit of Matthew Williams sworn 9 April 2025;

(9)    exhibit 1 on the application being a print out of orders made on 4 April 2025 in the New South Wales Supreme Court proceeding 2025/00122342;

(10)    exhibit 2 on the application being an email from Colin Biggers & Paisley to Chamberlains Law Firm sent on 9 April 2025 at 8:27pm; and

(11)    exhibit 3 on the application being an email from Chamberlains Law Firm to the Court sent on 10 April 2025 at 1:29pm.

8    The Administrator also provided written submissions in support of the application.

BACKGROUND

9    The following matters of background are drawn from Sharvain Facades and supplemented as necessary by the additional evidence led before me.

10    The Company is in the business of supplying and installing custom-made façade materials for large construction projects. The Company is the lessee of warehouse premises in Banksmeadow (the Banksmeadow Warehouse) and Ingleburn. A large volume of the Company’s custom-made façade materials are held in those warehouses and a commercial storage facility. In the event that the Company is placed in liquidation, the Company’s right to occupy the Banksmeadow Warehouse will end as a result of a trigger clause in the lease.

11    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 the following construction contracts:

(1)    a contract with Multiplex Constructions Pty Ltd with respect to the Sydney Fish Market development project;

(2)    a contract with Mirvac Constructions Pty Limited in relation to a development project at Pitt Street;

(3)    a contract with Roberts & Co in relation to the Westmead Children's Hospital development project;

(4)    a contract with Lendlease Construction Pty Limited in relation to the Victoria Cross Station and Victoria Cross Tower Development projects;

(5)    a contract with Scentre, Design and Construction Pty Ltd, in relation to a development project at Castlereagh Street.

12    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. As at 9 April 2025, a further two employees were terminated and the Company continued to employ 16 employees. Claims submitted by unsecured creditors to date total some $54,266,229, including known employee credit claims totalling approximately $1,260,820.

13    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) over all present and after acquired property of the Company, and which are registered on the Personal Property Securities Register.

14    Since his appointment the Administrator, with other members of his staff, has 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 its lease arrangements. The Administrator has also been engaged in various negotiations to maximise the Company’s recovery from the sale of a variety of materials, including materials that have been customised for particular clients.

15    The Administrator has identified that the Company’s major assets as at the date of his appointment comprised the following:

(1)    cash received in trust in the amount of approximately $200,000;

(2)    a large volume of custom-made façade building materials held in its leased premises and at third-party storage facilities;

(3)    non-custom building materials held in leased premises and third-party storage facilities;

(4)    claims against principal contractors for outstanding work;

(5)    motor vehicles and mobile and fixed cranes;

(6)    tools of trade; and

(7)    office and IT equipment.

16    In relation to custom façades and or the non-custom materials, there were a number of completing claims of liens and or title which were described at Sharvain Facades at [12] to [13] and [18] to [23]. It is not necessary to recite the competing contentions made in support of those claims for the purpose of this application.

17    The Administrator makes the point that the custom-made façade materials, being realisable assets of the Company, are valuable to the contractors for whom they have been fabricated but significantly less valuable to any other prospective purchaser. Indeed, the evidence suggests that for some of the customised materials the amount recoverable may be less than salvage value because of the customisation. The Administrator relied on advice provided by an auction house in this respect.

18    If the Company is placed in liquidation, the Administrator is concerned that the lessors of the warehouse premises will terminate the leases. The landlord of the Banksmeadow Warehouse had advertised that property for lease.

19    The Administrator has identified approximately 169 known creditors of the Company. Claims submitted by unsecured creditors to date total $54,266,229, which includes the known employee creditor claims totalling $1,268,020 to which I have referred above.

20    Some of the Company’s contractors have asserted legal title to materials in the Company’s possession, including:

(1)    Multiplex;

(2)    Scentre;

(3)    Lendlease;

(4)    Roberts & Co;

(5)    Mirvac; and

(6)    QQT Investment 1 Pty Limited.

21    On 2 April 2025, the Administrator reached an agreement with Multiplex concerning the materials in the Company’s possession that Multiplex contended were owned by it and which relate to the new fish market development in Sydney being undertaken by Multiplex. The Administrator deposes that Multiplex requires two weeks to remove the materials the subject of that agreement. I note that the Administrator has extracted an agreement from Multiplex that it will pay $350,000 to the Company as part of the resolution of that dispute.

22    The Administrator deposes that he is still in what he describes as “good faith without prejudice negotiations” with Scentre regarding the release of materials held by the Company in respect of the Scentre development. Counsel appearing for the Administrator informed me that while he had hoped to be in a position to inform the Court that the dispute with Scentre had resolved, it has not and the parties remain in the final stages of negotiating the terms of a deed that will achieve that end. The Administrator gave evidence that it is anticipated that the agreement will be finalised within the next several business days.

23    The Company reached a confidential agreement with Lendlease on 21 March 2025 in relation to material in the Company's possession relating to the Lendlease Victoria Cross Station project. Lendlease is in the process of removing the relevant materials, some of which are stored at the Banksmeadow Warehouse. The evidence relied on by the Administrator suggests that Lendlease has indicted that it requires 12 weeks (from 26 March 2025) to take possession of relevant materials.

24    The evidence relied on by the Administrator demonstrates that the Banksmeadow Warehouse is a vast storage facility in which a substantial amount of materials are stored. The evidence of one of the Company’s directors, Mr Kostura, is that approximately:

(1)    75% of the relevant space is occupied by materials procured for Scentre in respect of a development project at Castlereagh Street;

(2)    15% of the relevant space is occupied by materials procured for Lendlease in respect of the Victoria Cross Station projects; and

(3)    10% of the relevant space is occupied by materials procured for other contractors and projects such as Roberts & Co, Mirvac and Multiplex.

25    The cost of moving the materials to new premises would be significant. Based on the volume of material at the Banksmeadow Warehouse, Mr Kostura estimates that it would take approximately 100 to 200 heavy vehicles, at a cost of approximately $1,000 per vehicle, to transport the materials to an alternate nearby storage facility. Mr Kostura estimates that moving the material would cost about $100,000 to $200,000, calculated at a cost of approximately $1,000 a vehicle, and take about six to eight weeks to do so in an orderly way, assuming there were no significant disruptions. In addition to the likely cost of relocating, there is the added difficulty and cost in identifying and securing an alternative storage facility that is both available and suitable.

26    On 31 March 2025, the Company commenced proceedings against Roberts & Co in the Supreme Court of New South Wales seeking judgment for the unpaid portion of a payment claim served by the Company on Roberts & Co, being $3,207,999.03 plus interest. The Company also filed a Notice of Motion seeking summary judgment. The proceeding is in the Technology and Construction List of the Supreme Court, which is a specialist list that has procedures in place to list and determine matters expeditiously. The subject matter of those proceedings and application for summary judgment concerns whether Roberts & Co served a payment schedule within the time prescribed by the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA). Without an extension of the convening period, the Company will be placed in liquidation and the moratorium in effect as a result of the administration will end. A consequence of that is that the Company is likely to lose its rights under Part 2 of SOPA (and its rights in the SOPA proceedings) by reason s 32B of the SOPA. In that circumstance, the Company would lose the ability to avail itself of the procedure available under the SOPA and its claim against Roberts & Co would likely need to be funded in the liquidation, if the claim was to be pursued. In evidence before me is a Deed of Undertaking and Declaration of Trust the effect of which is that any judgment obtained in the Company’s favour will be held on trust for Roberts & Co pending the outcome of the adjudication of any proof of debt or appeal from the adjudication of such a proof by Roberts & Co. The Administrator has not separately given a personal undertaking to Roberts & Co to be personally liable for any adverse costs order made in an appeal from a proof of debt adjudication and any further appeal therefrom, and have not provided evidence of Mr Beattie’s financial circumstances. Roberts & Co contend that the proffering of that undertaking will likely impact the scope of any dispute as to whether this action constitutes an abuse of process, or any judgment would otherwise be enforceable. That is a matter that Roberts & Co seek to have raised on this application. The correspondence in evidence before me suggests that the issue in relation to the provision of a personal undertaking is a matter that is or may be agitated in the SOPA proceeding in the context of Roberts & Co challenging the Administrator’s conduct in those proceedings as an abuse of process. That is not a matter on which I express any opinion based on the limited material before me.

27    Orders have been made in those proceedings for the Company's motion to be listed for directions on 9 May 2025. It is anticipated that the summary judgment application will be allocated a hearing date at that directions hearing and the motion will be determined shortly thereafter. Roberts & Co has contested the time of service of the payment claim and requested further particulars. It thus appears that Roberts & Co intend to defend the summary judgment application, and the claim more broadly.

28    No deed of company arrangement (DOCA) has been proposed, and the directors of the Company have not indicated any intention to propose a DOCA. In the absence of any DOCA proposal, the Administrator adheres to his view that at the conclusion of the administration, it will be necessary for the Company to be placed into liquidation.

29    Other than the evidence outlined above, no further communication had been received by the Administrator from any creditor or current or former employee in response to the notice. No further communication has been received from any interested persons.

APPLICABLE PRINCIPLES

30    The principles which apply to an application such as the present are well-settled, and as Neskovcin J recently observed in the context of an application for a lengthy extension of time in the unique and complicated setting of the Whyalla Steelworks, such applications have become commonplace: Hams (Administrator), in the matter of Onesteel Manufacturing Pty Ltd (Administrators Appointed) [2025] FCA 219 at [24]. Justice Neskovcin canvassed the relevant authorities in some detail in Onesteel at [24] to [30].

31    By contrast, the present application is for a relatively short period. It is sufficient in the present context to note that the overarching object of Part 5.3A of the Act, of which s 439A and s 447A form part, is to administer a financially stressed company in such a way as to maximise the chance of the company continuing in existence or, if that is not possible, obtaining a better return for the company’s creditors and members than would result from an immediate winding up: s 435A. The essential tension that the Court must balance is between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure the administration is not conducted without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders.

32    Out of an abundance of caution, the Administrator relies on the Court’s power to make orders under s 447A given this is the second application for an extension after an initial short extension was granted: see Lombe, Re Australian Discount Retail Pty Ltd [2009] NSWSC 110; 27 ACLC 115 at [31] where Barrett J expressed doubt as to whether the power in s 439A(6) extended to granting multiple extensions. It is clear that the Court has that power under s 447A: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182 at [12] to [13] (Middleton J). The principles that apply when considering a further extension are the same as those that apply for any extension of the convening period: Virgin at [14].

33    I otherwise refer to and adopt the summary of the applicable principles set out in Frisken, in the matter of Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) [2023] FCA 448 at [30] to [38].

CONSIDERATION

34    In his advice to creditors dated 2 April 2025, the Administrator identified that his purpose in applying for the extension was to allow further time for him to conduct further investigations, particularly around competing security interests and ownership claims with respect to the Company’s façade building materials and to continue negotiating a resolution with respect to the competing security interests where possible and performing any agreements that emanate from those negotiations. In the brief period in which the convening period has already been extended, the Administrator’s efforts in that regard have borne fruit. The further extension is principally directed at enabling the orderly execution of the process which has been agreed for the realisation of the relevant materials. At the hearing before me, the Administrator confirmed that the extension sought was principally for the purpose of affording the Administrator sufficient time to maximise the likely returns for creditors before the Company is placed in liquidation, as that remains the probable outcome of the second meeting of creditors. The Administrator submits that the extension will be used to:

(1)    progress his investigations into competing claims;

(2)    progress the remaining negotiations with one of the principal contractors with a view to reaching a commercial resolution of the Company’s claims, if possible; and

(3)    to enable time for the orderly removal of materials the subject of the existing agreements and prospectively the final agreement.

35    In addition to the objects which the Administrator has identified as his primary purposes outlined above, there is a collateral advantage that will flow from the period of any extension (if the present application is granted) which is that the Administrator will be able to pursue the summary judgment application in respect of the SOPA proceeding. The Administrator candidly acknowledges that in the event that the summary judgment application does not succeed, or is not determined in the period before the second meeting is held, then the Administrator will be faced with a decision as to whether to bring a fresh application for a further extension, and that that is no more than a possibility at the present time.

36    In the Administrator’s opinion, which was supported by the evidence of the Company’s director in relation to the necessary logistics, the extension, if granted, will allow sufficient time for these tasks to be completed in an orderly way that will facilitate a better return to creditors, while preserving the Company’s rights to continue in occupation in its leasehold premises at which some of the materials are held. I accept the force of this evidence.

37    I have reviewed the evidence that has been marshalled by the Administrator in support of this application. In undertaking that task, I have been considerably assisted by the written and oral submissions made on behalf of the Administrator. I am satisfied that so far as it is practicable to do so, all known relevant stakeholders have been notified of this application and been informed of the Administrator’s rationale in bringing it. As mentioned, the extension is of limited duration. The evidence relied on by the Administrator establishes that the length of the extension sought has been carefully considered by reference to what is required to be done in that period. The period sought is framed on the basis that the requisite tasks be undertaken in both an efficient and orderly manner and with a view to minimising costs that would otherwise be incurred if the period was shortened.

38    In relation to the Company’s employees, the Administrator has drawn to the Court’s attention that any extension to the date by which the second meeting must be convened and the consequential delay in date on which the Company is likely wound up, will delay employee creditors in being able to access their entitlement under the FEG Scheme. The estimated value of this category of claim approximately $1,260,820, including redundancy entitlements, which have not yet crystallised. On 8 April 2025, the Department requested that the Administrator bring the following matters to the Court’s attention:

1.    If any employees are likely to have their employment terminated during the extended administration resulting in crystallised redundancy entitlements, the additional prejudice of the delay in access to the FEG scheme.

2.    If any employees are likely to be stood down under the Fair Work Act 2009 (Cth) without pay during the extended administration:

a.     the length of any stand down;

b.    the uncertainty for those employees about their ability to obtain alternative work during the stand down; and

c.    the impact of them accepting alternative employment on their entitlements and subsequent eligibility for FEG assistance.

3.    The impact on employees, and other creditors, of increased costs arising from an extended administration.

4.     The impact on priority employee creditors of the use of secured circulating assets during an extended administration which would otherwise be available to pay employee entitlements in liquidation.

39    In response to the matters raised by the Department, the Administrator addressed each of the matters as follows:

(1)    It is expected that the employment of the remaining employees will be terminated gradually. The Administrator acknowledged the prejudice that those employees (as with other employees who are owed outstanding entitlement) will experience by reason of the extension because of their ability to access the FEG Scheme or payment from the liquidation of the Company will be delayed. That prejudice is to be measured against the substantial commercial benefit to the Company of preserving its rights in relation to the Banksmeadow Warehouse by way of the sale and removal of materials in an orderly matter.

(2)    To date, no employees have been stood down without pay, nor does the Administrator intend to do so for any remaining employees.

(3)    The Administrator has formed the view that the Company will not incur more in costs and expenses by remaining in administration for a further period of 10 weeks after 11 April 2025 against the costs of the Company being placed into liquidation shortly after 11 April 2025. The basis for the Administrator’s opinion is as follows. First, the work currently being undertaken by the Administrator and his staff is directed to conducting investigations and achieving the greatest realisation of the Company’s assets as possible. This is the same work that would be undertaken by a liquidator. The same expenses would be incurred. Secondly, employees continue to be retained to assist with the asset realisation process and their assistance would similarly be required if the Company was in liquidation. Thirdly, if the Company’s right to continue in occupation of the Banksmeadow Warehouse ceased as a result of the Company being placed in liquidation, the Company would incur substantial costs in moving the large volumes of materials stored at the Banksmeadow Warehouse to alternative commercial storage facilities. The costs of those alternative commercial storage facilities would likely be comparable to, or more than, the rental payments for the Banksmeadow Warehouse. Fourthly, the extension is sought to maximise the amount realised for the materials held in relation to Scentre and Lendlease (which cumulatively comprises approximately 90% of the Company’s materials) and to minimise the costs of realising those materials.

(4)    The impact on employee creditors of the extended administration would be to increase the amount realised in respect of circulating assets.

40    I am conscious of the serious balancing act that is required in an application such as this. I have considered the prejudice that has been identified in respect of the Company’s employees and the prejudice asserted in respect of Roberts & Co (in the correspondence sent on behalf of Roberts & Co which is in evidence). Notwithstanding that the extension will necessarily result in some prejudice as has been identified, on balance the likely outcome of the extension will be to improve the outcome for the Company’s creditors.

41    I accept the Administrator’s opinion that the costs of continuing the administration for the limited time and for the purposes identified will in the main be costs that would otherwise be incurred in the future liquidation of the Company. Moreover, that in the context of the impending summary judgment application in the SOPA proceeding that there is a further utility in granting the extension because the Company will be able to continue to avail itself of the processes available under the SOPA which would not be available to the Company if the Company is placed into liquidation.

42    In these circumstances I am satisfied that the plaintiffs have established a proper evidentiary basis for the grant of an extension. Taking into account the statutory objective of Part 5.3A, I am satisfied, that it is appropriate to extend the convening period for the period sought by the Administrator.

CONCLUSION

43    For the reasons I have given, I will make orders substantially in accordance with the orders sought by the Administrator.

Associate:

Dated:    10 April 2025