In the matter of Bobos Engineering Australia Pty Limited [2015] NSWSC 2045

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Bobos Engineering Australia Pty Limited [2015] NSWSC 2045 Hearing dates: 7 April 2015 Date of orders: 07 April 2015 Decision date: 07 April 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Winding up proceedings adjourned. Catchwords: CORPORATIONS – winding up – further adjournment of winding up proceedings – where short adjournment previously granted – where voluntary administrators appointed – whether further adjournment in interests of unsecured creditors – where potential for sale of business as going concern – where deed of company arrangement may be proposed – where no significant prejudice would be occasioned by adjournment – held, further adjournment granted. Legislation Cited: (Cth) Corporations Act 2001, s 440A(2) Category: Procedural and other rulings Parties: Workers Compensation Nominal Insurer ACN 564 379 108 (plaintiff) Bobos Engineering Australia Pty Ltd ACN 083 002 411 (defendant) Representation: Counsel: K Metlej (solicitor) (plaintiff) J Hynes (defendant)

Solicitors: Craddock Murray Neumann Lawyers Pty Ltd (plaintiff) Fisher Jeffries (defendant) File Number(s): 2014/361767

Judgment (ex tempore) 1. HIS HONOUR: Despite the powerful and persuasive submissions of Mr Metlej, I am satisfied that a further adjournment should be granted pursuant to (Cth) Corporations Act 2001, s 440A(2). 2. Proceedings for the winding up of the defendant company in insolvency were set down for hearing before me on 25 March this year. On that day, for reasons I then gave, I granted an adjournment to today, on the application of the company's administrators, pursuant to Corporations Act, s 440A(2), in circumstances where the company had appointed voluntary administrators a few days before the date for hearing of the winding up petition. 3. I did so on the basis that a short adjournment, as then sought by the administrators, was in the interests of the creditors, as it would enable it to be ascertained in the interim whether some proposal would emerge which had the prospect of a better outcome for them than a winding up in insolvency. No such concrete proposal has yet emerged, but a number of factors of significance suggest that it is in the interests of the creditors for the administration to remain on foot for the time being. 4. The first is that, although no one has yet formally made an offer to acquire the company's business, a number of expressions of interest in the acquisition of the company's business as a going concern have been elicited, and the administrator is of the view that at least some of them are genuine and made by persons who have a sound understanding of and experience in such transactions. Those who have expressed interest require some further time to consider the information memorandum, conduct due diligence and formulate an offer. 5. The evidence indicates that the company's plant and equipment is worth some $2.283 million on a going concern basis, but only $1.453 million on a for sale basis. While it is not impossible that a liquidator could negotiate a sale on a going concern basis, and while it is by no means certain that a sale on a going concern basis by an administrator would realise that $2.2 million, nonetheless there is such a marked discrepancy between those two values that it must be in the interests of creditors to at least fully explore the prospect of achieving a sale on going concern basis. As the administrator (but not a liquidator) will have the protection of the statutory moratorium that is associated with voluntary administration, the prospects of achieving a going concern sale are much greater in the hands of an administrator than in the hands of a liquidator. 6. What appears to be a realistic possibility that such a sale can be negotiated by the administrators is by far the dominant consideration in my view. It must be much in the interests of the unsecured creditors as a whole that such a sale be realised, as the availability of any value to provide a dividend for ordinary unsecured creditors will largely depend on realising assets in excess of $1.453 million. 7. A secondary, but very much subsidiary, consideration is that there is a realistic prospect that a deed of company arrangement may be proposed. Although it is not entirely clear at this stage how it would operate in conjunction with a going concern sale, at least if it is additional to a going concern sale and involves a contribution of $550,000 over and above the proceeds of the sale, that would indicate a further significant potential benefit for ordinary unsecured creditors. 8. At the first meeting of creditors, a resolution was carried that supported the continuation of the voluntary administration process to enable a going concern sale and/or a DOCA proposal. The petitioning creditor and the supporting creditor, who together represent perhaps in the order of 30 per cent of value of the creditors by value, did not participate in the meeting. The Commissioner of Taxation abstained, and that Commissioner represents another 30 or so per cent of the creditors by value. 26 creditors present – although admittedly some of them for relatively small amounts – voted in favour of the resolution, and no votes were cast against the resolution. It seems to me that that is some indication of support by ordinary unsecured creditors for the continuation of the voluntary administration process, although I must take into account that the petitioning creditor and supporting creditor did not participate, and that the 26 votes cast for the resolution do not represent by any means the majority by value of the creditors. 9. Although it is true that the first adjournment was granted on the basis that the time allowed was the time sought and said to be necessary by the administrator at that point, I think it is fair to say that it was always indicated and understood that that was what was sought at that stage, and it is understandable enough that further time may be required for potential purchasers to conduct due diligence and put forward a concrete proposal. It remains the case that no significant prejudice from an adjournment, other than the costs of administration, has been identified. It may be that a liquidator would have available claims to recover voidable transactions or compensation for insolvent trading, and that that is an alternative means of recovery for the benefit of ordinary unsecured creditors. That said, it seems to me that the attraction of achieving a significantly enhanced result from a going concern sale at a relatively early stage of the administration offers many attractions for creditors over the prospects of recovering the proceeds of as yet unidentified voidable transactions or any compensation for insolvent trading. 10. Chiefly in order to enable the possibility of a going concern sale, and also – although as a subsidiary consideration – to enable the prospects of a deed of company arrangement proposal to be further explored and finalised, it is in the interests of creditors that the administration continue for a further period, rather than that the company be immediately wound up. 11. The Court orders that, pursuant to Corporations Act, s 440A(2), the proceedings be adjourned to 21 April 2015 at 9.45 am before me.