Extension of convening period under s.439A & 447A of the Corporations Act: Lombe, re Babcock & Brown Ltd (Administrators apptd)
Babcock & Brown Ltd (BBL) went into voluntary administration on 13 March 2009, with David Lombe and Simon Cathro appointed administrators. The first meeting of creditors was held on 25 March 2009, with the second meeting of creditors to be held no later than 17 April 2009. BBL was the parent company to some 1500 subsidiaries.
The administrators made an application pursuant to s.439A of the Corporations Act for a four-month extension of the convening period to 17 August 2009.
The application was brought on the basis that further time was required to enable the administrators to properly investigate the affairs, operations and financial position of BBL and one of its subsidiaries (Babcock & Brown International Pty Ltd, which was not in administration), which the administrators argued involve complex legal and valuation issues which will take time to adequately consider. The administrators asserted that further time to conduct such investigations, and the consequent extension of the convening period, was in the interests of BBL’s creditors as opposed to BBL going into liquidation. This was because, among other things, the administrators were yet to receive the statutory Report as to Affairs and had not yet had direct access to the books and records of BBL (and could therefore not make a meaningful recommendation to creditors based on BBL’s financial position). Also, the administrators were not yet in a position to negotiate with any stakeholders who might be interested in proposing a deed of company arrangement.
In considering the application, Justice Jacobson considered it important that in BBL’s case, “the ordinary parties affected by the statutory moratorium are not involved in the administration”, as there were no employees, no leases on foot, and no secured creditors. The only substantial creditors were some 8000 subordinated noteholders owed $610 million (for whom a trustee had been appointed), and notably, the trustee company had consented to the extension. Also persuasive was that the administrators, at the first meeting of creditors, had indicated their intention to seek an extension of the convening period, and no objections were raised by the creditors. In other words, the usual prejudice that might face creditors in such applications appeared to be absent in this case.
Justice Jacobson therefore granted the extension of the convening period, but subject to a note of caution – the court must always balance the competing considerations of a speedy administration with allowing sufficient time for a maximum return to creditors. Accordingly, his Honour clearly indicated that any application for a further extension would not be met favourably. Perhaps Justice Jacobson would prefer Mr Lombe to have the investigative powers of a liquidator to ensure he receives the answers he is seeking from BBL’s subsidiary.
