In the matter of Ellton Conveyors Pty Ltd (in administration) [2016] NSWSC 1968

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Ellton Conveyors Pty Ltd (in administration) [2016] NSWSC 1968 Hearing dates: Friday, 5 February 2016 Date of orders: 05 February 2016 Decision date: 05 February 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Convening period extended for 60 days Catchwords: CORPORATIONS – extend administration – voluntary administration – application for order to extend convening period in (CTH) Corporations Act 2001, s 439A – where extension sought to enable going concern sale – where all those who may be adversely affected by extension support extension – where going concern sale likely to produce greater value than immediate liquidation Legislation Cited: (CTH) Corporations Act, s 439A(6), s 447A(1) Cases Cited: Struthers; Re PACI Pty Ltd (No 3) [2005] NSWSC 1113 Category: Procedural and other rulings Parties: Vaughan Strawbridge and David Lombe (joint and several administrators) Representation: Solicitors: Mark Robert Petrucco File Number(s): 2016/00038217

Judgment (EX TeMPORE) 1. HIS HONOUR: Pursuant to (CTH) Corporations Act 2001, s 439A(6), the administrators of Ellton Conveyors Pty Limited apply for an order to extend the convening period, referred to in s 439A, for a period of 60 days so that it will expire on 8 April 2016 rather than on 8 February 2016, by originating process, leave to file which in Court today is sought. By resolution of its director, the plaintiffs were appointed administrators on 8 January 2016, pursuant to s 436A. 2. The company operates a material handling business. As I understand the evidence, the company is essentially a coal conveyor business. The business of the company has some complexities; in particular, its assets include current work in progress and the administrators have identified four major projects in respect of which they consider there is value for creditors in carrying them to completion. The administrators have also reasonably formed the view that a sale of the company's business as a going concern is likely to realise greater value for creditors than a liquidation sale. 3. The extension is sought, not in order to permit a proposal for a deed of company arrangement to be advanced – at least at this stage, there is no suggestion that a deed of company arrangement will be proposed – but to enable a going concern sale to be negotiated and carried to completion. With this in mind, the administrators have prepared and distributed an Information Memorandum, caused an advertisement to be published, received 20 expressions of interest, 6 indicative offers and identified 5 short listed potential purchasers who are currently conducting due diligence and have been given confidential access to information concerning the company for that purpose. The administrators propose, perhaps somewhat ambitiously, that expressions of interest be received by 20 January 2016 and indicative non-binding offers by 25 January 2016 (which dates, of course, have already passed) and that, following due diligence, final binding offers be received by Wednesday, 10 February 2016. 4. As the administrators observe, while they have set a very short timeframe for the submission of final offers, it may be anticipated that interested parties will require additional time to complete their due diligence and submit final offers and that, even if binding offers were received and contracts exchanged shortly after 10 February, it is unlikely that settlement will be completed prior to the end of February 2016. 5. The administrators estimate, I think reasonably, that it would be prudent to allow 30 days for the receipt and consideration of offers, negotiations with the purchaser and preparation of contractual documentation, and a further 30 days for contingencies for unexpected delays, protracted sale negotiations and delayed exchange – and, presumably, for completion of the contract following exchange. Accordingly, at this stage they seek an extension of 60 days to the convening period which would otherwise expire, as I have said, on 8 February 2016. 6. The evidence adduced on the present application establishes that the creditors were informed, at the first creditors meeting, of the intention of the liquidators to make this application. All creditors and employees of the company have been circularised, on 2 February 2016, with notice of the administrators' intention to make this application, and requested that any objection be provided by 4pm on 4 February 2016; none has been received. The company's secured creditor, the Commonwealth Bank, has been informed of the administrators' intention to make this application, and has acknowledged and indicated support for it. Of the employees and contractors of the company, 11 have responded to notification by the administrators confirming that they support the application. The Creditors Committee, on 4 February 2016, resolved unanimously to support the application for a period of up to 60 days. Accordingly, it seems that all those who might be adversely affected by an extension of the moratorium associated with administration – including, in particular, the secured creditor – not only do not oppose but support the extension. 7. The value of the secured creditor's security is likely to be maintained, as the company will continue to trade during the extension, whereas it may well deteriorate if the company ceases to trade. The company is continuing to pay rent to the landlord of the premises it occupies, so the landlord will not be prejudiced, and access has been given to the landlord to the premises so that it may commence marketing the property for sale. Employees will remain in employment during the extension and continue to receive their salary and superannuation. If a going concern sale is negotiated, they may be able to secure ongoing employment with the purchaser; whereas if the company goes into liquidation, then their employment will come to an end, and the company's liabilities would be increased by notice and retrenchment or redundancy obligations. 8. The administrators are of the view that, by continuing to trade, the likely return to creditors through a potential sale of the business and the ability to realise work in progress and debtors and stock at a profit, instead of selling it at a loss in a liquidation scenario, will at least potentially enhance the likely return to creditors. On the material before the court, it is plain that a going concern sale is a preferable outcome, if it can be achieved, and that a period of 60 days at least is reasonable in order to permit it to be achieved. There appears to be no prejudice from such an extension to any person interested, and that substantially all of those interested consent to the extension in any event; moreover their interests will be further protected by a reservation of liberty to apply.