FEDERAL COURT OF AUSTRALIA Mustang Marine Australia Services Pty Ltd, (ACN 129 124 223) (Administrators Appointed), in the matter of Mustang Marine Australia Services Pty Ltd (ACN 129 124 223) (Administrators Appointed) [2010] FCA 416 Citation: Mustang Marine Australia Services Pty Ltd (ACN 129 124 223) (Administrators Appointed), in the matter of Mustang Marine Australia Services Pty Ltd (ACN 129 124 223) (Administrators Appointed) [2010] FCA 416 Parties: IN THE MATTER OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (Administrators Appointed) ALAN GODFREY TOPP AND CLIFFORD JOHN SANDERSON AS ADMINISTRATORS OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (ADMINISTRATORS APPOINTED), MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ADMINISTRATORS APPOINTED), MMAS NSW PTY LTD (ADMINISTRATORS APPOINTED), MMAS VICTORIA PTY LTD (ADMINISTRATORS APPOINTED and MMAS QLD PTY LTD (ADMINISTRATORS APPOINTED) File number: NSD 426 of 2010 Judge: EMMETT J Date of judgment: 21 April 2010 Legislation: Corporations Act 2001 (Cth) ss 439A and 447A Date of hearing: 21 April 2010 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 12 Counsel for the Plaintiffs: PT Russell Solicitor for the Plaintiffs: Blake Dawson IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 426 OF 2010 IN THE MATTER OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (ADMINISTRATORS APPOINTED), MMAS NSW PTY LTD (ACN 130 336 131) (ADMINISTRATORS APPOINTED), MMAS VICTORIA PTY LTD (ACN 134 257 855) (ADMINISTRATORS APPOINTED) AND MMAS QLD PTY LTD (ACN 132 121 558) (ADMINISTRATORS APPOINTED) ALAN GODFREY TOPP AND CLIFFORD JOHN SANDERSON AS ADMINISTRATORS OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (ADMINISTRATORS APPOINTED) First Plaintiffs MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ADMINISTRATORS APPOINTED) Second Plaintiff MMAS NSW PTY LTD (ADMINISTRATORS APPOINTED) Third Plaintiff MMAS VICTORIA PTY LTD (ADMINISTRATORS APPOINTED) Fourth Plaintiff MMAS QLD PTY LTD (ADMINISTRATORS APPOINTED) Fifth Plaintiff JUDGE: EMMETT J DATE OF ORDER: 21 APRIL 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) the period within which the first plaintiffs must convene the second meetings of each of the companies under s 439A of the Act be extended up to and including 26 May 2010. 2. Pursuant to s 447A(1) of the Act the second meetings of each of the creditors of the companies required by s 439A of the Act may be held at any time during or within 5 business days after the end of the convening period, as is extended by order 1 above, notwithstanding the provisions of s 439A(2) of the Act. 3. Liberty to apply be granted to any person who can demonstrate a sufficient interest to modify or discharge these orders upon appropriate notice being given to the plaintiffs. 4. The costs of the application be paid out of the assets of the companies. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 426 of 2010 IN THE MATTER OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (ADMINISTRATORS APPOINTED), MMAS NSW PTY LTD (ACN 130 336 131) (ADMINISTRATORS APPOINTED), MMAS VICTORIA PTY LTD (ACN 134 257 855) (ADMINISTRATORS APPOINTED) AND MMAS QLD PTY LTD (ACN 132 121 558) (ADMINISTRATORS APPOINTED) ALAN GODFREY TOPP AND CLIFFORD JOHN SANDERSON AS ADMINISTRATORS OF MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ACN 129 124 223) (ADMINISTRATORS APPOINTED) First Plaintiffs MUSTANG MARINE AUSTRALIA SERVICES PTY LTD (ADMINISTRATORS APPOINTED) Second Plaintiff MMAS NSW PTY LTD (ADMINISTRATORS APPOINTED) Third Plaintiff MMAS VICTORIA PTY LTD (ADMINISTRATORS APPOINTED) Fourth Plaintiff MMAS QLD PTY LTD (ADMINISTRATORS APPOINTED) Fifth Plaintiff JUDGE: EMMETT J DATE: 21 APRIL 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The first plaintiffs, Misters Alan Topp and Clifford Sanderson (the Administrators), are administrators of the second, third, fourth and fifth plaintiffs. The second, third, fourth and fifth plaintiffs are Mustang Marine Australia Services Pty Ltd (MMAS), MMAS NSW Pty Ltd (MMAS NSW), MMAS Victoria Pty Ltd (MMAS Victoria) and MMAS QLD Pty Ltd (MMAS QLD) (together the Companies). The Administrators were appointed joint and several administrators of each of those companies on 19 March 2010. By the operation of s 439A(1) of the Corporations Act 2010 (Cth) (the Act), they would be required to convene a meeting of the creditors of the companies by 28 April 2010. 2 Section 439A(1) provides that the administrator of a company under administration must convene a meeting of the company's creditors within the convening period as defined or extended under s 439A(6). Under s 439A(6) the Court may extend the convening period on an application made during or after the convening period defined in s 439(5). The Administrators now apply for an extension of the period pursuant to s 439A(6) for reasons that I shall briefly describe. 3 MMAS specialises in the manufacture, sale and export of luxury boats. Its present shareholders are Standard Bank Asia Limited (Standard Bank), which holds one fully paid preference share, and Russell Watkins, who holds two fully paid ordinary shares. The Board of MMAS consists of three directors being Messrs Martin Lodge, Philip Armstrong, and Christopher Heaton. MMAS is the ultimate holding company of MMAS NSW, MMAS Victoria, and MMAS QLD. The Boards of MMAS NSW, MMAS Victoria, and MMAS QLD consist of two directors, namely Messrs Lodge and Heaton. MMAS also owns all the issued share capital of a New Zealand company, which operates a sale office from leased premises in Auckland. 4 On 30 March 2010, the first meetings of creditors of the Companies were held pursuant to s 436E of the Act. At the meetings, the creditors decided that a committee of creditors was not required for each of the Companies. 5 Since their appointment, the Administrators have conducted and carried out a wide range of tasks including: · investigating and ascertaining the financial position of each of the Companies; · meeting with interested parties and with Standard Bank to discuss the attitude of Standard Bank to their appointment and to the administration generally; · negotiating with lessors of sites concerning the continued trading of the Companies and the use of those sites by the Administrators; and · generally overseeing the continued trading of the Companies, including the completion of four vessels and investigating the capacity of the Companies to complete a further three vessels having a combined sale price well in excess of one million dollars. 6 Standard Bank is a secured creditor of MMAS in an amount of approximately $28 million. It holds a registered charge over substantially all of the property of MMAS. The unsecured trade creditors of the Companies amount to approximately $1.2 million. In addition, the Companies have accrued employee entitlements of between $500,000 and $900,000. 7 The Companies operate from a number of leased premises. The Administrators have paid all rent owing under the leases, with the exception of the seven day period immediately following their appointment. The Administrators are personally liable to meet all rent accruing under the leases during their occupation of the premises, which are located in Queensland, New South Wales and Victoria. 8 Since the appointment of the Administrators, several creditors have claimed rights to property that had been supplied to the Companies. The Administrators have resolved all but one of those claims, either by return of the property or payment of a sum agreed with the creditor. Following the appointment of the Administrators, the employment of approximately 50% of the employees was terminated. The Companies continue to employ approximately 50 employees or subcontractors. 9 The Administrators consider that the major realisable assets of the Companies consist of the boat building business referred to above. That business includes purchase orders for vessels to be built, accounts receivable, and partially completed boats, plant and equipment. The Administrators have taken steps, in consultation with Standard Bank, to market the assets of the Companies, including the business, as a going concern. Following the preparation of an information memorandum advertising the business for sale by expressions of interest, the Administrators received 17 expressions of interest. They have negotiated with seven of those parties. 10 As at the date of this application, the Administrators are negotiating seriously with one party who has made an in‑principle offer for the purchase of the business as a going concern. The Administrators expect that, if a bargain can be struck for the sale of the business, Standard Bank will formally propose deeds of company arrangement for consideration by the creditors of the Companies. Such a deed of company arrangement would be put forward for consideration at the second meeting of creditors of the Companies. However, before they will be in a position to formalise such a proposal, Standard Bank wishes to secure a sale of the business. Standard Bank prefers to do so while the Companies are in administration because the sale is likely to produce a better price than if it was sold by a liquidator. The terms of a deed of company arrangement proposal are currently being finalised by Standard Bank in conjunction with the negotiation of the prospective sale of the business of the Companies. 11 At the second meeting of creditors, the Administrators are required to provide a report which contains sufficient information about the business, property, affairs and financial circumstances of the Companies as would enable their respective creditors to be as fully informed as possible about matters that would be relevant to their decision whether or not to vote in favour of a resolution that: · the Companies execute deeds of company arrangements; · the administrations of the Companies end; or · the Companies be wound up. The opinion of the Administrators as to those matters will be determined by the outcome of the negotiations for the sale of the business. Upon receipt of terms of a proposed deed of company arrangement, the Administrators would need a further week to prepare a considered and accurate report for the benefit of creditors, which would assess fully the proposed deed of company arrangement, as opposed to the alternatives of liquidation or ending the administrations. 12 The Administrators consider that, if sale of the business can be achieved with the support of Standard Bank while the Companies are in administration, such that Standard Bank is able to propose a deed of company arrangement for consideration by creditors, there is a good prospect that the proposal may achieve a better price than if the Companies were allowed to go into liquidation. The Administrators consider that the assets of a company, when sold in liquidation, generally return significantly less than when sold by administrators. 13 The Administrators consider that an extension of the period for convening the second creditors' meeting, for up to four weeks, is in the best interest of creditors for the following reasons: · Standard Bank is supportive of the application to the Court and has agreed to fund the Administrators in the realisation of the assets of the Companies including the business. · The administration of the Companies is at a delicate stage and significant progress is being made in negotiating the sale, although that sale is yet to be formally documented or completed. · The Administrators are of the view that the unsecured creditors are unlikely to receive any return in the winding up of the Companies. · Having devoted considerable time and energy to the running of the business of the Companies and the marketing and sale of the business as a going concern, the Administrators are not presently able, in the time available to them, to prepare a meaningful report to creditors and to finalise their recommendations, particularly in the absence of a proposal for a deed of company arrangement, the prospect of which seems likely. · Finally, there do not appear to be any specific classes of creditors whose interests may be adversely affected by an extension of the convening period. 14 In all of the circumstances, I consider that it is appropriate to accede to the application by the Administrators and extend the convening period for the second meeting of creditors. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 11 May 2010