FEDERAL COURT OF AUSTRALIA Kaso, in the matter of Speedpanel Australia Ltd (Administrators Appointed) (No 2) [2017] FCA 862 File number: VID 413 of 2017 Judge: MOSHINSKY J Date of judgment: 28 July 2017 Legislation: Corporations Act 2001 (Cth), ss 435A, 439A, 440B, 447A Personal Property Securities Act 2009 (Cth) Cases cited: Algeri; Re Colorado Group Ltd [2011] VSC 260 Georges, In the Matter of Midas Australia Pty Ltd (Administrators Appointed) [2009] FCA 38 Kaso, in the matter of Speedpanel Australia Ltd (Administrators Appointed) [2017] FCA 453 Re ABC Learning Centres (No 8) (2009) 73 ACSR 478 Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 Re Dimidium Group Pty Ltd [2010] NSWSC 1086 Re Pan Pharmaceuticals Ltd (2003) 46 ACSR 77 Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 Silvia, in the matter of FEA Plantations Ltd (Administrators Appointed) [2010] FCA 468 Date of hearing: 28 July 2017 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: No Catchwords Number of paragraphs: 26 Counsel for the Applicants: Mr MP Costello Solicitor for the Applicants: Mills Oakley Lawyers ORDERS VID 413 of 2017 IN THE MATTER OF SPEEDPANEL AUSTRALIA LTD (ADMINISTRATORS APPOINTED); SPEEDPANEL (VIC) PTY LTD (ADMINISTRATORS APPOINTED); SPEEDPANEL CORPORATE SERVICES PTY LTD (ADMINISTRATORS APPOINTED) SAM KASO AND BRUNO SECATORE (IN THEIR CAPACITIES AS JOINT AND SEVERAL ADMINISTRATORS OF SPEEDPANEL AUSTRALIA LTD (ADMINISTRATORS APPOINTED); SPEEDPANEL (VIC) PTY LTD (ADMINISTRATORS APPOINTED); SPEEDPANEL CORPORATE SERVICES PTY LTD (ADMINISTRATORS APPOINTED)) Applicants JUDGE: MOSHINSKY J DATE OF ORDER: 28 JULY 2017 THE COURT ORDERS THAT: 1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period within which the applicants must convene the second meeting of creditors of: (a) Speedpanel Australia Ltd (ACN 107 723 240) (administrators appointed); (b) Speedpanel (Vic) Pty Ltd (ACN 107 723 955) (administrators appointed); and (c) Speedpanel Corporate Services Pty Ltd (ACN 107 723 964) (administrators appointed), (together, the Companies), be extended to and include 29 August 2017. 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 meeting of creditors of the Companies is required by s 439A of the Act to be held at any time during, or within five business days after, the end of the convening period as extended by the order in paragraph 1 above, notwithstanding the provisions of s 439A(2) of the Act. 3. The applicants give notice of these orders to the Companies' creditors by sending a circular letter to the creditors of the Companies (by email in respect of those creditors who have informed the applicants that email is their preferred method of communication and by post in respect of all other known creditors) informing them of the substance of these orders and enclosing a copy of the orders. 4. Liberty to apply is granted to any person who can demonstrate sufficient interest to modify or discharge paragraph 1 or 2 of these orders above on not less than 48 hours' notice to the applicants. 5. Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), until further order, access to the annexures to the affidavits of Sam Kaso affirmed 21 July 2017 and Geofrey Lord sworn 27 July 2017 identified in the table below be restricted to the Court, the parties to the proceeding, and the parties' legal representatives: Affidavit Annexure Number Description of annexure Affidavit of Sam Kaso affirmed "SK-1" Summary of the business' trading position as at 18 July 2017 21 July 2017 "SK-3" Information memorandum "SK-4" Email to unsuccessful bidders dated 19 July 2017 "SK-5" DOCA proposal and update letter "SK-6" Email to Duncan Russell of Scottish Pacific Group Ltd dated 20 July 2017 Affidavit of Geofrey Lord sworn 27 July "GL-1" Email from the proponent to Mr Kaso and Mr Lord dated 26 July 2017 2017 "GL-2" Letter from the proponent's solicitor to Mr Lord dated 26 July 2017 6. The ground under s 37AG upon which paragraph 5 of these orders is made is that set out in s 37AG(1)(a) of the Federal Court of Australia Act. 7. The applicants' costs of the application be costs in the administration of the Companies. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MOSHINSKY J: Introduction 1 The applicants (the Administrators) are administrators of three companies: (a) Speedpanel Australia Ltd (administrators appointed); (b) Speedpanel (Vic) Pty Ltd (administrators appointed); and (c) Speedpanel Corporate Services Pty Ltd (administrators appointed), (together, the Companies). 2 The Administrators seek orders under s 439A of the Corporations Act 2001 (Cth) (the Act) to further extend the convening period for the second meetings of the Companies' creditors until 29 August 2017. 3 In support of their application, the Administrators rely on: (a) the affidavit of Sam Kaso affirmed 24 April 2017 (the First Kaso Affidavit); (b) the second affidavit of Sam Kaso affirmed 21 July 2017 (the Second Kaso Affidavit); and (c) the affidavit of Geofrey Lord sworn 27 July 2017. The first extension application 4 The Administrators have previously applied for, and been granted, an extension of the convening period (the first extension application). But for that application, the convening period would have ended on 28 April 2017. On 26 April 2017, O'Callaghan J ordered that the period be extended to 29 July 2017 (along with other ancillary orders): Kaso, in the matter of Speedpanel Australia Ltd (Administrators Appointed) [2017] FCA 453. 5 The reasons advanced in support of the first extension application were set out in the First Kaso Affidavit (at [65]-[69]). In summary, further time was required: (a) for the Administrators to complete their investigations, in particular as to the ownership of certain patents in Australia, Brazil, Canada, China, Hong Kong, Israel, Japan, Mexico, New Zealand, Poland, South Africa and the United States; (b) to review the validity and priority of purported security interests under the Personal Property Securities Act 2009 (Cth) and the interests asserted by other unsecured parties over the Companies' assets; (c) to continue trading the business – which manufactures and supplies concrete wall panels for use in large scale construction and infrastructure projects (the Business) – in the short term in order to preserve the value of the assets; (d) to allow the Companies to continue occupying and using the premises from which they operate, by reason of the protection afforded by s 440B of the Act; (e) in order to allow a sale campaign to be run for the sale of the Business; (f) in the event that the sale of business campaign was unsuccessful, to allow sufficient time to conduct an orderly auction and removal of the assets; and (g) to allow the Administrators sufficient time to prepare a report containing the opinions required by s 439A(4) of the Act. Developments since the first extension application 6 The Second Kaso Affidavit (at [7]-[22]) deposes to the tasks undertaken by the Administrators since the first extension application. In particular, the Administrators have continued to operate the Business and generate a profit since the first extension application. They have also continued with their statutory, administrative and investigative tasks. 7 Perhaps most significantly, the Administrators have conducted an expression of interest campaign which resulted in four binding final offers being received. The Administrators have carefully considered each such offer against a number of criteria and have selected a preferred bidder (the bidder). The preferred offer involves the execution by each of the Companies of a deed of company arrangement (DOCA) and the Administrators are in negotiations with the bidder as to the final terms of the DOCA to be proposed to creditors. 8 The broad detail of the bidder's DOCA proposal was submitted to the Administrators on 16 June 2017 and further clarification of the proposal was provided by the bidder on 7 July 2017 (in combination, the DOCA Proposal). 9 Broadly, the DOCA Proposal provides for the following: (a) the Companies' Business is to continue as a going concern; (b) the employees of the Companies are to be offered continuing employment on substantially the same terms and conditions as their current employment; (c) a reduction of the Companies' secured debt owing to the National Australia Bank (NAB); and (d) the establishment of a deed fund comprising, among other things, a cash payment from the bidder to be distributed to the participating Companies' creditors. 10 Since the DOCA Proposal was received, the Administrators have been liaising with the bidder in order to finalise the specific terms of the DOCA Proposal. The Administrators consider that there are some aspects of the DOCA Proposal that require refinement, namely: (a) the treatment of employees; (b) the proposed treatment of "non-participating creditors" under the DOCA; and (c) the terms on which the support of the Companies' principal secured creditor, the NAB, can be obtained. 11 The NAB's preference is to cease its role as the Companies' banker in respect of the Companies' debtor finance facilities. The bidder now requires some further time to finalise working capital funding for the Business. In that regard, it is exploring a debtor finance facility with Scottish Pacific Group Ltd (Scottish Pacific). 12 It is expected to take the bidder approximately a fortnight to refine the DOCA Proposal and to conclude its negotiations with the NAB and Scottish Pacific (or an alternative financier). 13 By their affidavits, the Administrators have also updated the Court as to the various issues concerning the Companies' intellectual property. Key reasons for a further extension 14 The convening period for the second meeting of creditors of the Companies will, unless extended, expire on 29 July 2017. 15 The reasons for the application to extend the convening period are to: (a) allow the Administrators to continue the Business in the short term in order to preserve the value of the assets (the value of which will likely decrease substantially and quickly if trading ceases); (b) allow the Companies to continue occupying and using, in particular, their current business premises (and other leased plant and equipment) with the protection afforded by s 440B of the Act, to enable the Administrators to continue trading the Business in the short term; (c) allow the bidder to: (i) complete its negotiations with the NAB and Scottish Pacific for the funding of the Business's working capital requirements; (ii) finalise the terms of the DOCA Proposal; and (d) allow the Administrators to finalise their investigations and conduct the calculations required to be in a position to prepare a report containing the opinions required by s 439A(4) of the Act. 16 In that regard, the Administrators do not consider that they can presently: (a) prepare reports to creditors under s 439A of the Act that will adequately inform them of the options for the future of the Companies; and (b) hold the meetings of creditors to decide on the future of the Companies, as any report completed within the current convening period would be inadequate for the purposes of fully informing creditors as to the options for the future of the Companies, including the DOCA Proposal. 17 It is relevant that if the convening period is not extended and the creditors' meetings are held, the Administrators would recommend that the meetings be adjourned. In effect, there would be two meetings (rather than one), and two consolidated reports to creditors prepared under s 439A of the Act. Consequently, substantial additional expenditure would be incurred. No opposition to the application 18 As set out in the Second Kaso Affidavit (at [55]-[56]) and the affidavit of Mr Lord (at [8]-[12]), there is no opposition to the application for a further extension and, indeed, a number of creditors are supportive of the proposal. In particular, the bidder supports the extension. The Court's balancing exercise 19 In this type of application, the Court will attempt to strike a balance between the expectation that the administration will be conducted relatively speedily and summarily, and the need to ensure that undue speed will not prejudice sensible and constructive actions directed towards maximising the return for creditors and shareholders: see Algeri; Re Colorado Group Ltd [2011] VSC 260 at [24], citing Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]; Re Pan Pharmaceuticals Ltd (2003) 46 ACSR 77 at [41]-[42]; Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18]; Georges, In the Matter of Midas Australia Pty Ltd (Administrators Appointed) [2009] FCA 38 at [11]; and Re Dimidium Group Pty Ltd [2010] NSWSC 1086 at [15]. 20 Where the relevant business group is large and complex, or there is a prospect of successful realisation of assets through negotiations with third parties, the administration process is often given more time: see Algeri; Re Colorado Group Ltd at [24]; Silvia, in the matter of FEA Plantations Ltd (Administrators Appointed) [2010] FCA 468 at [19]. In the present case, there is a well-developed proposal that, if accepted by the creditors, will result in the continuation of the Business and, in the Administrators' opinion, will generate a better outcome for creditors. These factors strongly support the grant of the further short extension sought. The length of the extension sought 21 The length of the extension sought by the Administrators is not itself a determinative factor as to whether an extension should be granted having regard to the statutory time period prescribed in s 439A of the Act. Rather, the authorities indicate that the Court is generally willing to tailor the time frame in Pt 5.3A to suit the needs and circumstances of the particular company or companies, having regard to the achievement of the objects of Pt 5.3A: see Re ABC Learning Centres (No 8) (2009) 73 ACSR 478 at [52]. 22 If the extension is granted, the total period by which the convening period will have been extended will be four months. That is not a lengthy extension given the complexity of the matters faced by the Administrators. Whether ancillary orders are necessary 23 The Administrators also seek orders as to their costs (in the standard form) and orders protecting the confidentiality of certain material annexed to the affidavits. 24 The confidentiality orders are necessary in order to preserve the integrity of the Administrators' negotiations in the period before the publication of their s 439A report. 25 At the time that report is published, all relevant information will be put to the creditors. There is a prospect, however, that the early release of some information contained with the identified confidential annexures would imperil the sale process to the disadvantage of the Companies' creditors. Such an outcome should not be allowed to eventuate simply by reason of the Administrators engaging the processes of the Court for the express purpose of enhancing the prospect of the DOCA proposal being put to creditors. It is in the interests of justice that such a result not be caused by the invocation of the Court's jurisdiction. Further extension is appropriate 26 In all of the circumstances, I consider that the case is a strong one for a further extension of the convening period. Such an extension is likely to advance the objects of Pt 5.3A as set out in s 435A of the Act and will cause no prejudice to any interested party. I will, accordingly, make orders in substance as sought by the Administrators. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky. Associate: Dated: 2 August 2017