In the matter of Byron Group Holdings Pty Ltd (administrators appointed) and others [2016] NSWSC 1947

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Byron Group Holdings Pty Ltd (administrators appointed) and others [2016] NSWSC 1947 Hearing dates: 14 November 2016 Decision date: 14 November 2016 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders that the convening period for the second meeting of the company's creditors be extended and that the administration of the companies be taken not to have ended Catchwords: CORPORATIONS — Winding up — Conduct of liquidation — Meeting of creditors – Application under Corporations Act 2001 (Cth) ss 439A to extend convening period for second meeting of creditors – where application made after end of convening period – where deed of company arrangement proposed at end of convening period – whether extension would be in best interests of creditors Legislation Cited: - Corporations Act 2001 (Cth) ss 435C(3), 439A, 447A Cases Cited: - Re FEA Plantations Ltd (admins apptd) [2010] FCA 468 - Re Tendiris Pty Ltd (admin apptd) (recs and mgrs apptd) [2013] NSWSC 739 Category: Principal judgment Parties: Philip Patrick Carter and Daniel Austin Walley in their capacities as voluntary administrators of Byron Group Holdings Pty Ltd (administrators appointed) and other companies Representation: Counsel: M Oakes SC (Plaintiffs)

Solicitors: Herbert Smith Freehills (Plaintiffs) File Number(s): 2016/340262

Judgment – ex tempore 1. By Originating Process filed on 14 November 2016 by leave, Messrs Carter and Walley in their capacities as voluntary administrators of Byron Group Holdings Pty Limited (admins apptd) and other companies within the Byron Group of companies seek orders, under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) to extend the convening period for the second meeting of creditors in respect of the administration of the relevant companies. That convening period has only just expired, on 11 November 2016. 2. Section 439A(6) of the Corporations Act relevantly provides that the Court may extend a convening period on an application made during or after the period referred to in s 439A(5) of the Act, that is, the period in which the second meeting of creditors should be convened. That provision is subject to ss 439A(7) and 439A(8) which provide that, if an application is made under s 439A(6) after the relevant convening period, the Court may only extend the convening period if it is satisfied that it would be in the best interests of creditors if the convening period were extended, and must have regard to specified factors, including the fact that the application was made after that period, any other conduct of the administrator and any other relevant matters. 3. The application is supported by an affidavit of Mr Carter dated 14 November 2016 which sets out the structure of the Byron Group and the nature of its business. Mr Carter refers to the circumstances in which the Byron Group was placed in administration and identifies the fact that there are substantial claims of creditors, including amounts owing to a secured creditor, employee entitlements, and substantial trade and statutory creditor entitlements. Mr Carter also identifies the factors which, in his view, contributed to the Byron Group's declining financial position. 4. Mr Carter also refers to steps which have been taken by the administrators to continue to trade the business of the Byron Group since his appointment, and notes that the administrators have had ongoing support of customers, landlords, suppliers and continuing employees, as well as the Byron Group's secured creditor, in support of that appointment. Mr Carter notes that the administrators commenced a sale process immediately following their appointment, and there is reference to several parties who remain actively involved in the sale process, comprising alternatively interests in the whole of the business or various parts of that business. 5. Mr Carter also refers to the fact that late on Thursday 10 November, the day before the convening period expired, the administrators were presented with a draft proposal for a deed of company arrangement ("DOCA") by the solicitors for one of the bidders in respect of one part of the business, Byron Aviation, and the next day, the day of expiry of the convening period, they were provided with a revised version of that proposal incorporating a creditors' trust. Mr Carter identifies a practical need for that proposal to take the form of a DOCA which may allow the retention of certificates of approval issued by the Civil Aviation Safety Authority to Byron Aviation, which could not otherwise readily be transferred to a bidder for the business. Mr Carter expresses the view that, no doubt as matters stand, and subject to further developments including other offers that he may receive, he considers the DOCA proposal to be in the best interests of creditors of Byron Aviation, and intends to recommend it to those creditors if the convening period for the second meeting of creditors of Byron Aviation is extended to enable that resolution to be put to creditors. 6. Mr Carter also notes that it had been the intention, prior to these developments, for the second meeting of other companies within the Byron Group to be convened within the relevant period, under s 439A(5) of the Act, and that he would recommend an adjournment of those meetings to allow the administrators to conclude negotiations with other bidders and complete any sale or formulate any DOCA proposals. However, he refers to the complexities of the operation of the Byron Group and the intertwined financial position of the companies, and indicates these complicate any attempt to take that course in respect of companies other than Byron Aviation, on the basis that only the convening period for the second creditors' meeting in respect of Byron Aviation should be extended. His assessment is that it is preferable to instead extend the convening period for all of the relevant companies for a short period to enable reports to creditors to be completed and allow an additional week to finalise negotiations with the bidders for the remaining parts of the Byron Group's business. It is notable, in that respect, that the extension sought is only for a further week, so that the convening period would be extended to 21 November 2016. 7. There is a benefit to creditors, particularly in respect of Byron Aviation, of having access to a proposal which Mr Carter assesses as the best available proposal. It seems to me that the Court should accept Mr Carter's reasoning that it is likely to be in the interests of creditors generally that they be presented with information in respect of the Byron Group as a whole, rather than seeking to separate out the position in respect of one company, and convene separate second meetings of creditors for Byron Aviation only and separately for other companies within the Byron Group. It is generally in the interest of creditors that they be provided the best possible information at a second meeting of creditors and also access to any proposal which will maximise the value of the business or the return to creditors. It is, of course, also in the interests of the employees of the Byron Group that the business be continued as a going concern, to the extent that that is possible. It seems likely that other creditors are likely to be supportive of the application, to the extent that they have been supportive of the administration to date. In any event, the application contains a common, and desirable, provision which provides for notice of the extension to be given to creditors, and will allow any person whose interests are affected to apply to vary or set aside the order in that respect. 8. As I noted above, this application is made after the convening period has expired, by reason of the timing of the DOCA proposed in respect of Byron Aviation to which I referred above. I am satisfied, for the reasons that I have noted, that it is in the best interests of creditors of Byron Aviation and also the other companies in the Byron Group to extend the convening period for the short period that is sought, so the requirement of s 439A(7) of the Act is satisfied. I have regard to the fact that the application was made after the period, as s 439A(8) requires. I also have regard to the conduct of the administrators, which seems to me to be entirely reasonable in the relevant circumstances, so far as it is directed to maximising the potential return of the creditors and the quality of information which is provided to them at the second meeting of creditors. For those reasons, it seems to me that the requirements of s 439A(8) of the Act are satisfied. 9. One issue of the form of orders arises, to which Mr Oakes, who appears for the Applicants, has drawn attention. Section 435C(3) of the Act relevantly provides that the administration of a company may end if the convening period ends, without the relevant second meeting having been convened in accordance with s 439A of the Act, and without an application having been made to the Court to extend the time under s 439A(6) of the Act. That was plainly the case here since the application was not made until today, when the convening period would end last Friday. In Re FEA Plantations Ltd (admins apptd) [2010] FCA 468, to which Mr Oakes refers, Dodds-Streeton J contemplated that, if the convening period expired without an extension first being made, the administration would end under s 435C(3)(b) of the Corporations Act. Her Honour was not there specifically directing her attention to the position in respect of an application made after the end of the convening period. I dealt with an application made after the end of the convening period in Re Tendiris Pty Ltd (admin apptd) (recs and mgrs apptd) [2013] NSWSC 739, where my attention was not, so far as I can recall, specifically drawn to s 435C(3)(b) of the Act or to her Honour's decision in Re FEA Plantations Ltd (admins apptd) above. I proceeded on the basis that an order made under s 439A(6) of the Act, after the convening period, would operate in a self-contained way to extend the convening period. That, of course, would be a logical and desirable result, but it seems to me that it could be argued that an order under s 439A(6), although it extends the convening period, is not effective without more, in circumstances that s 435C(3) had come into effect. That argument might be regarded, by some, as unduly technical and, if it were advanced, it would almost inevitably be met by a further order, nunc pro tunc, under s 447A of the Corporations Act to avert that undesirable result. 10. In these circumstances, it seems to me that it is desirable to make a further order under s 447A of the Corporations Act, at this point, to avert any risk that a difficulty may arise under s 435C(3) of the Act, and such an order under s 447A of the Act might then need to be made at a future point. That possibility was contemplated by the Applicants, in a form of order that they propose, and I propose to make that order, against the contingency that it is necessary to address the issues arising from the operation of ss 439A(6)–(8) and s 435C(3) of the Act in these circumstances. For these reasons, I will make orders in the form of the orders that have been provided. I will make a further order 6 that these orders be entered forthwith.