Supreme Court New South Wales Medium Neutral Citation: In the matter of Pinnacle Drilling Pty Ltd (admins apptd) & Ors [2015] NSWSC 1051 Hearing dates: 20 May 2015 Decision date: 20 May 2015 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Order for the extension of the convening period for second meeting of creditors. Orders in accordance with short minutes of order. Catchwords: CORPORATIONS – administration – creditor's meeting – where contemplated sale of the business of the company – where the employees of the company would be benefited by the sale of the business – where several significant creditors and the employees of the Company consent to the extension – whether extension of convening period of second meeting of creditors under s 439A(6) of the Corporations Act 2001 (Cth). Legislation Cited: - Corporations Act 2001 (Cth) ss 439A(6) Cases Cited: - Darin Re Palamedia Ltd [2010] NSWSC 451 - Re Mothercare Australia Ltd (admin apptd) [2013] NSWSC 263 - Re Owen; RiverCity Motorway Pty Ltd (admins apptd) (recs & mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 - Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77 - Re Riviera Group Pty Limited (admin apptd) (recs and mgrs appt) [2009] NSWSC 585; (2009) 72 ACSR 352 - Silvia, in the matter of Austcorp Group Ltd (admins apptd) [2009] FCA 636 Category: Principal judgment Parties: Vaughan Strawbridge and Neil Cussen in their capacity as administrators of Pinnacle Drilling Pty Ltd (admins apptd) (ACN 052 316 579); Pinnacle Drilling Underground Pty Ltd (admins apptd) (ACN 129 163 837); Zig Zag Investments Pty Ltd (admins apptd) (ACN 002 053 321) (Applicants) Representation: Counsel: D R Stack (Applicants) Solicitors: Dibbs Barker (Applicants) File Number(s): 2015/150380 Judgment – ex tempore 1. By application made under s 439A(6) of the Corporations Act 2001 (Cth), Mr Vaughan Strawbridge and Mr Neil Cussen, in their capacity as administrators of Pinnacle Drilling Pty Limited (administrators appointed) ("Company") and certain associated entities seek orders extending the time for the convening period and holding of the second meeting of creditors of each of the relevant companies up to and including 26 August 2015. They also seek an order providing the giving of notice by electronic circular and an order in a common form that reserves liberty to apply to any person with a sufficient interest to vary the orders. Such an order is useful in applications of this kind, so far as the extension of a convening period may have any adverse impact on third parties which is not identified at the time of the application. 2. The application is supported by a detailed affidavit of Mr Strawbridge dated 19 May 2015 which provides information as to the circumstances of the Administrators' appointment and the nature of the Company's business. Mr Strawbridge's evidence indicates that the Company and associated entitles are involved in providing drilling services, involving a substantial level of equipment, and a significant number of employees, at locations in various parts of Australia. His evidence is that a creditors' committee is in place, and that the Company has significant liabilities, including to a number of secured creditors, and in respect of secured loans over property and assets of the Company, as well as an invoice finance facility offered by an entity which holds a registered security interest over the Company's assets. 3. Mr Strawbridge gives evidence of the steps that have been taken to secure the Company's assets since his appointment and to deal with creditors of the Company, and of a view that he has formed that the realisation of the Company's assets on a going concern basis would provide the best opportunity to maximise the return to creditors. He elaborates on why he holds that view in his affidavit, and points out that the sale of the Company's business as a going concern would maximise the prospects of continued employment of the 119 employees of the business as well as maximise the return to the Company's creditors. He has commenced a sale process, and there is evidence, by way of a confidential exhibit, as to the progress of that sale process, which has involved several indicative offers already having been made. 4. Mr Strawbridge sets out the reasons for the extension application in respect of the convening period, which involved both the sale of the relevant business, the number of employees that are involved, and his assessment that a sale as a going concern would maximise the opportunity to ensure the continued operation of the business, the continued employment of its employees, and the best possible return to creditors. He notes, and his evidence plainly demonstrates, that a sale of the business could not realistically occur before the expiration of the convening period and that, if the second meeting of creditors were to take place, that would occur in circumstances where the sale had not be completed, and, I interpolate, the costs of that meeting would likely be wasted if it were then adjourned to allow the sale process to be completed. He also points out, importantly, that the provision of accurate information at the second meeting, which is a significant purpose of that meeting, would not be possible until the sale process had progressed. 5. Mr Strawbridge gives evidence of notice to creditors, which includes notice at the first meeting of creditors of the likelihood that an application of this kind would be made, a further update to creditors of that matter, and he also gives evidence that several significant secured creditors have consented to the application. There is also evidence that another secured creditor has subsequently consented to the application, and there is at least some evidence that employees are aware of and do not oppose the application. I can give greater weight to that evidence because it would be, plainly, in the interests of employees that the period be extended, so as to maximise the prospect of their retaining their jobs through a sale process. 6. Mr Strawbridge also points out that equipment financiers would not be prejudiced by the extension, so far as rent continues to be paid during the period of the administration, and while equipment is not disclaimed. He notes that the director, shareholders and co-owner of a property occupied by the Company have consented, so that, in particular, the moratorium which the continuance of the administration will apply to the owner of the property does not give rise to any reason not to extend the period. 7. Mr Stack, by helpful submissions, has outlined the relevant facts, drawn from Mr Strawbridge's affidavit to which I have referred above. He summarises the notice of the application which has been given to various parties, to which I have referred above, and also refers to relevant authorities. It is not necessary to deal with those authorities in detail. Mr Stack helpfully refers to Re Riviera Group Pty Limited (admin apptd) (recs and mgr apptd) [2009] NSWSC 585; (2009) 72 ACSR 352 at [13] where Austin J identified a number of matters that are relevant to an application of this kind. Mr Stack points out that, having regard to the factors to which Austin J referred, the size and scope of the business here support the application, so far as a large scale business which is geographically diverse obviously has the capacity to give rise to more complex issues in an administration; there are a significant number of employees, whose interests will be served by the extension of time; and, most importantly, time is needed to bring about an orderly disposal of assets, including any assessment of a proposal for a deed of company arrangement, of which one has been received, and to maximise the prospect of the sale of the business as a going concern and enhance the return for the Company's unsecured creditors. Mr Stack also points to the Administrators' evidence that they do not believe there is any real prejudice to creditors if the extension is granted, and that inference may be more readily drawn where creditors are on notice of the application and several secured creditors have consented to it, including the major secured creditors, as noted above. 8. There are several cases, subsequent to Re Riviera Group above, where the Court has been prepared to extend the convening period for a second meeting in order to facilitate sale of business assets, including Re Pan Pharmaceuticals Ltd [2003] FCA 598; (2003) 46 ACSR 77, where Lindgren J noted the relevance, on the one hand, of the need for a speedy administration, but importantly, also the need to maximise potential recoveries, which are considerations to which I have referred above; Silvia, in the matter of Austcorp Group Ltd (admins apptd) [2009] FCA 636, where an extension of time was granted to maximise the prospect that a deed of company arrangement would occur; and Darin Re Palamedia Ltd [2010] NSWSC 451, where an extension of time was given for a period which was a little shorter than is now sought, to allow the administrators to seek to enter into a transaction to realise value from the company's corporate shell. I also recognise, as the decision in Re Owen; RiverCity Motorway Pty Ltd (admins apptd) (recs & mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 at [26] emphasises, that the Court should give weight to the considered judgment of administrators in matters of this kind, and I do so, particularly where I have the benefit of comprehensive evidence by way of Mr Strawbridge's affidavit. 9. In these circumstances, I am satisfied that the case for an extension of convening period, of the period sought, has been made out. 10. I note that Mr Strawbridge also seeks an order that he may give notice of these orders to creditors of the companies by way of an electronic circular sent to creditors which attaches a copy of the Court's orders. In my decision in Re Mothercare Australia Ltd (admin apptd) [2013] NSWSC 263 at [8], I pointed to the Court's increasing willingness to modify the manner in which notices may be given in respect of companies in administration to address issues of cost and practicality and to allow electronic means of such notices, reflecting the wider acceptance of such electronic notices in the community generally. I am satisfied in this case, that where there are a number of creditors and employees situated in diverse locations, electronic notice is likely to be a cost-efficient means of providing such notice, which will at the same time ensure that such notice is made available to creditors' and employees' attention. For that reason I will also make the order sought in that form. 11. The administrators otherwise seek orders dealing with the costs of, and the remuneration in respect of, this application. It seems to me the application is one that is properly brought in the conduct of the administration, and that conclusion follows from the observations which I have made above. I will, with one amendment as to which I will hear Mr Stack, make such an order. 12. I make orders in accordance with the short minutes of order initialled by me and placed in the file. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2015