In the matter of Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed), Federal Court judge Elizabeth Cheeseman has provided a handy guide for external administrators on how not to proceed with an application for an extension of the convening period. O’Brien Palmer partner Daniel Frisken also deserves special mention.
“The approach taken by the administrator in this case should be avoided in future applications of this type unless it is demonstrated to be unavoidable.” Justice Elizabeth Cheeseman.
Firstly, if you’ve flagged to creditors your intention to make an extension application, as Frisken did at the first meetings of the Xpress Group (the Group) on April 18, don’t wait till May 8 to notify the Committee of Inspection (COI) that you’re in the middle of preparing an affidavit in support of said application that’s due to be heard on May 10.
Nor should you wait until May 9 to tell the receivers of your intended application, receivers who might already be ruffled by your appointment given their disputes with the sole director, disputes that include the receivers filing a police report in respect of the whereabouts of 80 of the Xpress Group’s vehicles and allegations of illegal phoenix activity.
Leaving further relevant details in respect of the application to a second affidavit not emailed to the judge’s associate until just before the hearing and to the solicitors representing one of the interested parties during the hearing might also be considered less than ideal. Certainly her honour thought so.
“In the circumstances of this matter, the approach taken by the administrator was unsatisfactory,” the judge said.
“It was not consistent with facilitating the overarching purpose of conducting proceedings in this Court. This application should not have been left to the last minute. Taking that approach adversely impacted interested parties being afforded a meaningful opportunity to engage on the application.
“As it was, even with the late notice, several interested parties sought to be heard, either in person or by requesting the administrator to draw to the Court’s attention communications in which they stated their position. The fact that some interested parties sought to be heard does not give me confidence that they received a fair opportunity to oppose the application.”
Frisken had come to court seeking an extension of up six months for the deadline to convene the second meeting of the Group’s creditors.
He’d been appointed administrator of the Group on April 4, 2023 after receiving a referral from Marsdens Law Group’s partner Aaran Johnson.
On April 18 he held meetings of each company in the Group. According to her honour’s judgment in Frisken, in the matter of Xpress Transport Solutions Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) [2023] FCA 448, Frisken told creditors of his intention to apply to extend the convening period.
Further, Frisken deposed that no creditor at any of the meetings, which he held consecutively rather than concurrently, objected to such an application.
In her reasons however Justice Cheeseman cast a shadow over this statement.
“The administrator says that at each of the first meetings of creditors, he foreshadowed making an application to extend the convening period.
“The administrator deposes to the fact that there were no comments, adverse or otherwise, made in respect of the foreshadowed application at any of those meetings.
“The administrator’s evidence in this respect is somewhat controversial. For the purpose of this application, it is neither necessary nor appropriate to determine that controversy.
“It suffices to note that it is clear that the administrator had an intention of bringing an application of this type from at least 18 April 2023 and that his principal reason for advancing the application has not changed since that time.”
iNO sought comment from Frisken to try and clarify the position.
In an email response he said: “The controversy referred to by her honour was the fact that some of the minutes lodged did not disclose my intention to make an application.
“Major creditors where (sic) present at all meetings and where (sic) on notice of my intention.
“My minutes were in line with the secretary notes and disclosed my intention in a number of the meetings but not all.
“Although it remains my belief my statement to creditors was consistent at each meeting as it was pre prepared. My lodged minutes were consistent with my minute takers (sic) notes as I believed this to be the most conservative course of action.”
The judgment also refers to Frisken having received only one response to his notice advising creditors of the pending application.
This was from Petro China International (Australia) Pty Ltd – a representative of which is a member of one of the Committees of Inspection.
“In an email to a staff member of the administrator, Mr David Wright objected on behalf of Petro China to the extension on the basis that “it does not take the director this long to get refinanced and moreover the chances of him getting refinanced is remote when he has a number of companies in administration”.
“Mr Wright noted that “[i]t also restricts our [i]nsured from taking action against the director under the personal guarantee provided which is not acceptable,” the judge said.
iNO was unable to contact Wright before deadline to ask if he had expressed such objections at the April 18 meetings.
Frisken’s appointment came approximately one month after NAB installed McGrathNicol’s Barry Kogan and Kathy Sozou as receivers.
Blindsided by the short notice of the extension applicaiton, Kogan and Sozou requested that correspondence between their lawyers at Allen’s and Piper Alderman which is acting for Frisken be submitted to the court at the hearing, though the receivers didn’t seek to oppose.
Contained therein is the revelation that Frisken had deemed the receivers’ recovery actions to be relevant to his decision to seek to extend the convening period.
Without knowing when the receivers will complete their job to realise assets sufficient to discharge NAB’s $48 million debt, any potential DoCA can’t be developed and then considered for potential recommendation.
It seems that in such circumstances Frisken thought extending the convening period would be the wisest course and that this was why he had not been able to bring the application before the court earlier.
That narrative however didn’t impress her honour, who described without approval how at the hearing Frisken’s counsel, Daniel Krochmalik “somewhat gingerly submitted that at least part of the plaintiffs’ delay should properly be regarded as lying at the feet of the Receivers, relying on the correspondence between the administrator’s solicitors and the Receivers’ solicitors which was belatedly provided to the Court and is extracted above. I do not accept that,” she said.
“On the evidence before me, I am not satisfied that the administrator was not in a position to bring the present application at an earlier time after taking reasonable steps to inform interested parties of the application. Clearly, in some cases the evidence will justify an administrator bringing an eleventh hour application. This is not such a case.”
And with that unmistakeable tone of finality her honour nailed Frisken’s coffin shut, refusing the application to extend and assigning the Group a plot in the cemetery of winding ups.
The question now might revolve around whether any of the significant unsecured creditors will want Frisken to be appointed liquidator.
This is a clear example of effect of delay and lack of full and candid disclosure by Mr Frisken and those advising him. The approach of the receivers appointed by the Bank would appear to have been reasonable. I suspect that the result would have been the same in the Supreme Court.