Supreme Court New South Wales Medium Neutral Citation: In the matter of Patinack Farm Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 2 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 3 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 4 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 5 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 6 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 7 Pty Limited (administrators appointed); In the matter of Patinack Farm Holdings No 8 Pty Limited (administrators appointed); In the matter of Monegeetta Holdings Pty Ltd (administrators appointed) [2015] NSWSC 1638 Hearing dates: 17 September 2015 Decision date: 17 September 2015 Jurisdiction: Equity - Corporations List Before: Black J Decision: Extension of convening period granted. Orders in accordance with short minutes of order. Catchwords: CORPORATIONS – administration – creditor's meeting – where administrators sought extension of convening period for second meeting of creditors – whether to grant extension to convene second meeting of creditors under Corporations Act 2001 (Cth) s 439A(6) – whether to adjourn winding up application. Legislation Cited: - Corporations Act 2001 (Cth) pt 5.3A, ss 439A(6), 440A(2) Cases Cited: - Offshore & Ocean Engineering Pty Ltd v Greenwich Contractors Pty Ltd [2012] NSWCA 371 - Owen: RiverCity Motorway Pty Ltd (admin apptd) (recs and mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 - Re Diamond Press Australia Ltd [2001] NSWSC 313 - Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296 - Re Riviera Group Pty Ltd (admin apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352 - Weriton Finance Pty Ltd v PNR Pty Ltd (in admin) [2012] NSWSC 1402; (2012) 92 ACSR 88 Category: Procedural and other rulings Parties: 2015/69639 Jefferies Group LLC (Plaintiff) Patinack Farm Pty Ltd (Defendant) 2015/69657 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 2 Pty Ltd (Defendant) 2015/69659 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 3 Pty Ltd (Defendant) 2015/69685 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 4 Pty Ltd (Defendant) 2015/69670 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 5 Pty Ltd (Defendant) 2015/69683 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 6 Pty Ltd (Defendant) 2015/69705 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 7 Pty Ltd (Defendant) 2015/69722 Jefferies Group LLC (Plaintiff) Patinack Farm Holdings No 8 Pty Ltd (Defendant) 2015/69720 Jefferies Group LLC (Plaintiff) Monegetta Holdings Pty Ltd (Defendant) Representation: Counsel: D Stack (Applicant Administrators) Solicitors: Kemp Strang (Applicant Administrators) File Number(s): 2015/69639; 2015/69657; 2015/69659; 2015/69685; 2015/69670; 2015/69683; 2015/69705; 2015/69722; 2015/69720 Judgment – EX TEMPORE 1. By Interlocutory Process filed on 17 September 2015, the applicants, Mr Neil Cussen and Mr David Mansfield, in their capacity as administrators of Patinack Farm Pty Limited and several other companies ("Companies"), seek orders extending the convening period for a second meeting of creditors from 18 September 2015 up to and including 23 October 2015, that is for a further period of approximately five weeks. That application is made in connection with the administration of each of the Companies, but brought in winding up proceedings relating to those Companies. The administrators also seek to adjourn winding up proceedings in respect of the Companies which are presently listed in the Motions List in the Corporations List on 12 October 2015 to 9 November 2015, after the second meeting of creditors. 2. The application is supported by the affidavit of Mr Cussen, who is one of the administrators. Mr Cussen points out that he and Mr Mansfield, the other administrator, were appointed voluntary administrators on 23 August 2015, shortly before winding up applications in respect of the Companies were listed for hearing, and notes that those winding up applications were subsequently adjourned by consent. Mr Cussen gives evidence of the first meeting of creditors of the Companies held on 2 September 2015, in two separate meetings. The first meeting relates to several companies which he describes as the "Patinack Land meeting" and the second meeting relates to a second company, the primary operating company within the Group, Patinack Farm Pty Limited. 3. Mr Cussen notes that two principal creditors claim to be secured in respect of the Companies, namely G Harvey Nominees Pty Limited and Jefferies Group LLC, which is also the plaintiff in the winding up application. He notes that the Deputy Commissioner of Taxation has also taken security, by way of mortgage, over assets of the Patinack Land companies, and that it appears that that security has been taken in respect of taxation obligations and debts of other companies. There is evidence that the security given to Jefferies Group LLC also relates to the obligations of another entity. 4. Mr Cussen refers to the fact that creditors, at the meeting of creditors of the Patinack Land companies, expressed support for an application to extend the convening period for the second meeting of creditors, if the administrators considered such an application was in the interests of creditors. It appears the same position was adopted in respect of creditors of Patinack Farm. The Deputy Commissioner of Taxation attended the meeting of the Patinack Land companies as an observer, but attended the Patinack Farm meeting as a creditor, and lodged a proof of debt in respect of that entity. 5. Mr Cussen also referred to the preliminary investigations undertaken by the administrators, which indicate there are approximately 160 creditors in Patinack Farm, and he notes the possibility that other creditor claims may exist. He notes that Patinack Farm does not have employees and those persons who are working the land are employed by another entity, which is not presently under administration. 6. Mr Cussen also refers to receipt of advice, from a director of Patinack Farm, about the possibility of a deed of company arrangement. A letter dated 16 September 2015 is in evidence which records the director's intent to put forward the deed proposal, and describes that proposal in very general form. It is not possible to assess, from the limited detail provided, whether that proposal is ultimately likely to be feasible. However, the administrator's present position is that it is desirable to allow an opportunity for a deed proposal to be put and to be assessed, and that does not require an assessment at this point of whether that proposal will be feasible. 7. Mr Cussen expresses the view that, as matters stand, an immediate winding up of the Companies will not be of benefit to creditors, and particularly unsecured creditors, where there would be no dividend to unsecured creditors in the event of a winding up. While his affidavit does not contain detailed analysis in respect of that view, it is plainly a plausible analysis of the Companies' position, given the extent of the secured creditors to which reference is made in that affidavit. 8. Mr Cussen expresses the view that it is in the interests of unsecured creditors that the winding up applications, having being adjourned to 12 October, be further adjourned in connection with an extension of the convening period, and also supports an extension of the convening period to allow further investigations to be carried out, particularly in relation to the third party securities given by the Companies, to allow engagement with the deed proposal, and, at least by implication, to allow the result of those further investigations and negotiations of the deed proposal to place him in a position to better inform creditors at the time of the second meeting of creditors. 9. The application has been notified to at least some of the persons affected by it, including the relevant secured creditors, Jefferies Group, which is a secured creditor and the applicant for the winding up, has been in correspondence, by its solicitors, with the administrators' solicitors, but did not appear today and, it appears, has not yet expressed a view as to the application. In fairness to Jefferies Group, it appears there may have been difficulties in its solicitors obtaining instructions, since their client is an overseas entity, given the timing in which the application has been brought forward. However, the orders which are sought would preserve its position by allowing affected parties to bring an application to apply to vary the orders made if so advised. It appears that G Harvey Nominees neither consents to nor opposes the application. At least so far as the Australian Taxation Office's view can be deduced from its attendance at the meeting of creditors which supported such an application if the administrator considered it necessary to make it, then it supports the application. 10. The application accordingly raises two elements, the first being whether the Court should extend the convening period for the second meeting of creditors under s 439A(6) of the Corporations Act 2001 (Cth), which permits the Court to extend that convening period during an application made in that period. The principles applicable to the extension of that time are well established and Mr Stack, who appears for administrators, draws attention to several of the leading cases. The Court is required to reach an appropriate balance between the expectation that an administration will be relatively speedy and the countervailing factor that the undue speed should not prejudice sensible actions directed to maximising a return to creditors: Re Diamond Press Australia Ltd [2001] NSWSC 313 at [10]. Relevant matters in such an application, as identified in Re Riviera Group Pty Ltd (admin apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352, include the nature of the company's business, the time which would be taken to execute an orderly process of disposal of assets and any other possibility such as deed of company arrangement and whether an extension of time will enhance the return for secured creditors. There is also authority the Court will give weight, in applications of this kind, to the view that is formed by the administrator to the relevant matters: Owen: RiverCity Motorway Pty Ltd (admin apptd) (recs and mgrs apptd) v Madden (No 4) (2012) FCA 1491; [2012] 92 ACSR 255. 11. In this case, Mr Stack points to several matters which support the extension of a convening period, having regard to the objectives of Pt 5.3A of the Act, namely that it maximises the chances of continuing the existence of the relevant business and, if that is not possible, giving creditors a result that would be better than in a winding up. He points to the desirability of allowing continued investigation of the securities granted to the Australian Taxation Office and Jefferies Group and points out that, if it were ultimately possible to challenge those securities, to the extent they secure third party obligations, then a better return to unsecured creditors would likely be achieved. He notes, it seems to me correctly, that the exploration of the deed of company arrangement is likely to be in the interests of creditors since, whatever its prospects, a prospect that it might bring about, for example, the exclusion of related party claims, or the possibility that related parties do not prove in competition with other unsecured creditors would be of advantage to creditors. He notes that several of the factors identified in Re Riviera Group Pty Limited above are present here including the fact that the business is of some size and scope; that there are here a complex corporate group structure, involving some nine companies and intercompany loans; there are complexities in the relevant transactions, particularly where third party securities have been given; and there is at least a possibility that the extension of time will enhance the return for unsecured creditors, where it may allow a deed of company arrangement to be worked out. It might be added to those factors that, to the extent there is presently uncertainty as to those factors, an extension of time will also allow the administrators to be better informed, and to provide more helpful information to creditors, so far as they would need to assess the three alternatives available to them at a second meeting of creditors, including potential entry into a deed of company arrangement, or allowing the administration to terminate. 12. Mr Stack points out, and I accept, that there does not appear to be real prejudice to creditors from an extension of the convening period in this case. There is no suggestion that the lessors of land are adversely affected by any extension of a statutory moratorium arising under an administration. There are no employees of the Companies and, to the extent employees who work on the land are affected, their interests are likely to be served by the continuance of the Companies' business for as long as possible rather than by a winding up. To the extent that secured parties are affected, Mr Stack points out that the administrators have consented to both Jefferies Group and G Harvey Nominees exercising their securities, if they seek to do so, and their rights as secured creditors are therefore not adversely affected by the continuance of the administration. It appears such consent has not been given to the Australian Taxation Office, but as I noted above, it is plainly aware of the prospect of the application, having attended the first meeting of creditors of Patinack Farm, and may, on one view, have indicated its support for this application so far as that position was taken at the meeting of the creditors of Patinack Farm. 13. On balance, it seems to me that the complexity of the Companies' affairs, and the need for further investigation, supports the extension of time of the convening period as sought, notwithstanding that there may be some uncertainty as to whether a deed of company arrangement will ultimately be effected. For that reason, I propose to grant the order extending the convening period. I note that orders are also sought, in a form that is now commonplace, that provide for notification of that outcome to creditors by electronic means, and I would grant such an order, for the reasons I have indicated in earlier judgments. 14. There remains a question as to whether the Court should now further adjourn the winding up application. Section 440A(2) of the Corporations Act provides that the Court is to adjourn a winding up proceedings when the Court is satisfied that it is in the interests of a company's creditors for the company to continue under administration rather than be wound up. I summarised the relevant principles in Weriton Finance Pty Ltd v PNR Pty Ltd (in admin) [2012] NSWSC 1402; (2012) 92 ACSR 88 and Brereton J also addressed the relevant issues in Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296, noting that such an extension of time required satisfaction that it is in the interests of the company's creditors for the company to continue under administration, as distinct from satisfaction that it may be so, and that a substantial degree of persuasion that administration, rather than liquidation, is in the interests of the company's creditors may be required. Leave to appeal from that decision was refused by the Court of Appeal in Offshore & Ocean Engineering Pty Ltd v Greenwich Contractors Pty Ltd [2012] NSWCA 371. This is perhaps not the strongest case for the adjournment of a winding up application, in particular, because the information available to the administrators, and made available to the Court, does not yet make it possible to model the outcome, or potential outcome, of the administration. However, as Mr Stack points out, Mr Cussen's evidence is that he considers unsecured creditors are unlikely to receive a return in a liquidation, and, to put it colloquially, in that situation the prospect of a return under an administration is more favourable for unsecured creditors than no return in a liquidation. 15. I also bear in mind that the winding up application has previously been adjourned by consent; that its next return date is in the motions list, so that it might or might not go to a hearing on the date of that listing; that the further adjournment that is sought is a relatively short one, and will not significantly delay the decision of a winding up application; that the Court has extended the time for the winding up application and the adjournment that is sought would not prevent its determination within that extended time; and that leave will be reserved to the plaintiff in the winding up application, Jefferies Group, to seek to set aside the adjournment of the winding up application, if so advised. 16. For all these reasons, on balance, it seems to me that I can be satisfied that to adjourn the winding up proceedings, in connection with the extension of the convening period, is in the interests of the Companies' creditors and that, conversely, to decline to do so would not be so, where that would require a further attendance, on the date the winding up application is next listed. The costs of attendances before the Court are matters which otherwise erode the return available to creditors in insolvency administrations. 17. Accordingly, 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: 11 November 2015