9 July 2013
TO CREDITORS
Dear Sir/Madam
Drilling & Grouting Services Pty Ltd (Administrators Appointed) (the Company) ACN 009 457 087
I refer to the appointment of Darren Weaver, Ben Johnson and I as Joint and Several Administrators of the Company on 11 June 2013 pursuant to Section 436A of the Corporations Act 2001 (the Act). Creditors ratified our appointment at the first meeting of creditors held on 21 June 2013. At that meeting, creditors resolved to appoint a Committee of Creditors. Please find enclosed my report to creditors pursuant to Section 439A(4)(a) of the Act. You will note there is no proposal for a Deed of Company Arrangement between the Company and its creditors. Accordingly, I have convened a second meeting of creditors to consider and if thought fit resolve that the second meeting of creditors be adjourned for a period not exceeding 45 business days. I enclose the following with respect to the meeting of creditors: 1. Notice of Meeting. Please note that the concurrent meeting of creditors commences
on Tuesday 16 July 2013 at 10:00am (WST) at the Rydges, 815 Hay Street PERTH WA 6000. You should arrive for registration at least thirty (30) minutes prior to the meeting.
2. Informal Claim for Voting Purposes. If you submitted one of these for the purpose of
the first meeting of creditors, you do not need to submit another one for this meeting unless you seek to amend your claim.
A person is not entitled to vote at the meeting unless they provide particulars of the debt or claim to the Administrators before the meeting. Please note this form is for voting purposes only. All creditors must furnish full details of their claim, indicating whether they rank as secured, preferential or unsecured, and whether they claim title to any goods supplied to the company or any lien/pledge over goods in their possession which are property of the company.
3. Appointment of Proxy form. The form enables you to appoint another person to act on
your behalf at the meeting. Proxy forms submitted for the first meeting of creditors are not valid for this meeting.
The Informal Claim Form for Voting Purposes and Proxy Form should be lodged with the Ferrier Hodgson Perth office before the meeting and in any event, not later than 4:00pm on the day prior to the meeting.
Forms can be sent by facsimile on (08) 9214 1400 marked to the attention of Jerome Perera or scanned and emailed to [email protected]. However, Corporations Regulation 5.6.36A requires lodgement of the original of the Proxy Form with the Administrators’ office within 72 hours of lodging the faxed/emailed copy.
4. First Administrators’ report to creditors pursuant to Section 439A(4)(a) of the Act
which includes an opinion, with supporting reasons, on each of the following matters:
1) Whether it would be in creditors’ interest for the second meeting of creditors to be adjourned for a period not exceeding 45 business days.
2) Whether it would be in the creditors’ interest for the Company to be wound up. 3) Whether it would be in the creditors’ interest for the administration to end.
Administrator’s Remuneration The Administrators’ report includes detailed schedules explaining their remuneration claim setting out:
Details of time spent by category of staff at the rates applicable for such staff A summary of the work undertaken by the Administrators and their staff in the
administration Estimate of time for the period between the meeting and execution of DOCA
should the Administration continue in the event a DOCA is approved. Liquidator’s Remuneration Where creditors resolve that the Company be wound up, the Liquidators intend that their remuneration be fixed on the basis of time spent by then and their staff of an appropriate level having regard to the return and complexity of the work and calculated by reference to the hourly rates as set out in the accompanying remuneration report send out for the purpose of the second meeting of creditors. A schedule of the Liquidators anticipated tasks is also detailed in the attached remuneration report. For further information concerning the Voluntary Administration process at Ferrier Hodgson, you may wish to visit our website at www.ferrierhodgson.com. Should you have any queries in relation to the administration or the enclosed report, please do not hesitate to contact Dario Musulin or Kinjal Vakil of this office.
Yours faithfully
Drilling & Grouting Services Pty Ltd
Andrew Saker
Joint and Several Administrator
Encl.
FORM 529A
CORPORATIONS ACT 2001
Paragraph 5.6.12(2)
DRILLING & GROUTING SERVICES PTY LTD
(ADMINISTRATORS APPOINTED) (THE COMPANY) ACN 009 457 087
NOTICE OF SECOND MEETING OF CREDITORS OF THE COMPANY UNDER ADMINISTRATION
NOTICE is given that the second meeting of creditors of the Company will be held at the Rydges Perth
Hotel, 815 Hay Street, PERTH WA 6000 on 16 July 2013 at 10:00am (WST).
AGENDA
1. To receive a Statement of the Company’s business, property, affairs and financial circumstances. 2. To receive the first report from the Administrators. 3. Questions from Creditors’ 4. For creditors to resolve:
That the second meeting of creditors be adjourned for a period not exceeding 45 business days; or
The Administration should end; or
That the Company be wound up.
5. To approve the remuneration of the Administrators
6. If the Company is wound up, to consider appointing a Committee of Inspection.
7. If no Committee is appointed, to fix the remuneration of the Liquidators.
8. If no Committee is appointed, to consider destruction of the books and records at the conclusion of the winding up.
9. Any other business that may be lawfully brought forward
Proxies to be used at the meeting should be lodged at the office of the Administrators by 4.00pm on the day prior to the meeting. A corporation may only be represented by proxy or by an attorney appointed pursuant to Corporations Regulations 5.6.28 and 5.6.32 inclusively or, by a representative appointed under Section 250D of the Corporations Act 2001. In accordance with Regulation 5.6.23(1) of the Corporations Regulations, creditors will not be entitled to vote at the meeting unless they have previously lodged particulars of their claims against the company with in accordance with the Corporations Regulations and that clause has been admitted for voting purposes wholly or inpart of the Administrators.
Pursuant to Corporations Regulations 5.6.13A, creditors attending the meeting telephonically arerequired to provide a written statement to the Administrators setting out the appointed proxy, the address and facsimile to which notices are to be sent, a telephone number at which the proxy may be contacted on and submit a proxy form with the Administrators by 4.00pm on 15 July 2013. Parties attending by telephone do so at their own cost and are not entitled to be reimbursed for any costs in attending.
Telephone No.
(tollfree within Australia) Passcode
1800 672 949 7531 5052 6158
International callers should contact my office for toll free international numbers. Any creditors wishing to attend via telephone must register with my office 24 hours prior to the meeting.
DATED this 9th day of July 2013
Andrew Saker
Joint and Several Administrator
INFORMAL PROOF OF DEBT FORM
Regulation 5.6.47
DRILLING & GROUTING SERVICES PTY LTD (ADMINISTRATORS APPOINTED) (THE COMPANY)
ACN 009 457 087
Name of creditor: ..................................................................................................................................... Other trading names: ..................................................................................................................................... Address of creditor: ..................................................................................................................................... ..................................................................................................................................... ABN: ..................................................................................................................................... Telephone number: ..................................................................................................................................... Email address: ..................................................................................................................................... Amount of debt claimed: $ ........................................................ (including GST $ ............................................... ) Consideration for debt (i.e. the nature of goods or services supplied and the period during which they were supplied): ...................................................................................................................................................................................... ...................................................................................................................................................................................... Is the debt secured? YES/NO If secured, give details of security including dates, etc: ...................................................................................................................................................................................... ...................................................................................................................................................................................... Other information: ...................................................................................................................................................................................... ...................................................................................................................................................................................... ................................................................................. Signature of Creditor (or person authorised by creditor) Please attach any relevant supporting documents to further provide evidence of debt
Notes: Under the Corporations Regulations, a creditor is not entitled to vote at a meeting unless (Regulation 5.6.23): a. his or her claim has been admitted, wholly or in part, by the Joint and Several Administrators; or b. he or she has lodged with the Joint and Several Administrators particulars of the debt or claim, or if required, a formal proof of
debt. At meetings held under Section 436E and 439A, a secured creditor may vote for the whole of his or her debt without regard to the value of the security. Proxies must be made available to the Joint and Several Administrators.
FORM 532
Regulation 5.6.29
APPOINTMENT OF PROXY
SECOND CREDITORS MEETING
DRILLING & GROUTING SERVICES PTY LTD (ADMINISTRATORS APPOINTED)
ACN 009 457 087 (THE COMPANY)
*I/*We(1) ...............................................................................................................................................................
of ...........................................................................................................................................................................
a creditor of the company indicated above, appoint(2) .....................................................................................
or in his absence .................................................................................................................................................
as *my/our *(i) general OR *(ii) special proxy(3) to vote at the second meeting of creditors to be held on 16
July 2013 to vote
(i) on all matters arising at the meeting; OR
(ii) on each of the following kinds of resolution in the manner specified:
Resolutions For Against Abstain
(a) A resolution that the Company be wound up
(b) A resolution that the Administration end
(c) A resolution that the second meeting of creditors be adjourned for a period of not more than forty-five (45) business days
(d) That the remuneration of the Administrators, as set out in the Administrators’ remuneration report dated 9 July 2013 for the period 11 June 2013 to 30 June 2013 in the sum of $148,146 exclusive of GST be approved
(e) That a provision for the Administrators’ future remuneration for the period 1 July to 16 July 2013 in the amount of $75,000 exclusive of GST be approved, but subject to upward or downward adjustment by resolution of creditors
(f) If the convening period for the second creditors’ meeting is extended to a date not exceeding 45 business days:
That a provision for the Administrators’ future remuneration for the period 17 July 2013 to 16 September 2013 in the amount of $100,000 exclusive of GST be approved but subject to upward or downward adjustment by resolution of creditors
(g) If the Company is placed in Liquidation:
A resolution that a provision for the Liquidators remuneration in the amount of $250,000 as set out of the Administrators remuneration report dated 9 July 2013, be approved but subject to upward and downward resolution by creditors’ and that the Liquidators be authorised to draw their fees monthly in arrears.
(h) If the Company is placed into Liquidation:
A resolution that a Committee of Inspection be appointed
(i) If the Company is placed into Liquidation:
A resolution that the books and records of the company be disposed of 12 months after the dissolution of the company or earlier atthe discretion of the ASIC
DATED this day of 2013
...................................................................... OR The Common Seal of(4)
Signature(5) of individual or person(6) was hereunto affixed in the presence of:
authorised by corporate resolution to
represent the corporation
............................................................
Director / Secretary
CERTIFICATE OF WITNESS
(This section is only relevant in the case of a proxy given by a blind or
other person incapable of writing)
I,.....................................................................................of..................................................................................
certify that the above instrument appointing a proxy was completed by me in the presence of and at the
request of the person appointing the proxy and read to him before he attached his signature or mark to the
instrument.
DATED this day of 2013
..................................................................
Signature of Witness
..................................................................
Description
..................................................................
Place of Residence
(1) If a firm, strike out “I” and set out the full name of the firm.
(2) Inset the name, address and description of the period appointed.
(3) If a special proxy add the words “to vote for” or the words “to vote against” and specify the
particular resolution.
(4) The method of affixing the Common Seal is prescribed in Section 127(2) of the Corporations Act
2001 and, usually, the creditor’s corporations constitution.
(5) The signature of the creditor is not to be attested by the person nominated as proxy.
(6) A corporation may only be represented by proxy or by attorney appointed pursuant to
Corporations Regulations 5.6.28 and 5.6.31A respectively, or, by a representative appointed
under Section 250D of the Corporations Act 2001. Copy of authority/power of attorney to be an
annexed.
FERRIER HODGSON
LEVEL 26, 108 ST GEORGES TERREACE PERTH WA 6000
GPO BOX 2537 PERTH WA 6001
TELEPHONE 08 9214 1444 FACSIMILE 08 9214 1400
Drilling & Grouting Services Pty Limited
(Administrators Appointed)
ACN 009 457 087
Report by Administrators Pursuant to Section 439A(4)(a) of
The Corporations Act 2001
Andrew Saker
Darren Weaver
Ben Johnson
9 July 2013
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 1
Table of Contents
Glossary of terms 2
1. Executive summary 3
2. Introduction 4
3. Company information 7
4. Historical financial information 8
5. Statement by directors 11
6. Trading by Administrators 14
7. Sale of business 16
8. Statutory investigations 17
9. Creditors’ options, dividend estimates and cost estimates 26
10. Administrators’ opinion 26
11. Administrators’ remuneration report 28
12. Further queries 29
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 2
Glossary of terms
Abbreviation Description
ABN Australian Business Number
ACN Australian Company Number
Act The Corporations Act 2001
APPAP All Present and After Acquired Property
ASIC Australian Securities and Investments Commission
ATO Australian Taxation Office
BAS Business Activity Statement
Company or DGS Drilling & Grouting Services Pty Limited (Administrators Appointed)
DOCA Deed of Company Arrangement
DGS Drilling & Grouting Services Pty Ltd
DGSWA Drilling & Grouting Services (WA) Pty Ltd as trustee for Drilling & Grouting Unit Trust
ERV Estimated Realisable Value
FEG Fair Entitlements Guarantee Scheme
GST Goods and Services Tax
IPA Insolvency Practitioners Association of Australia
PAYG Pay As You Go
PMSI Personal Money Security Interest
PPSR Personal Property Securities Register
PPSA Personal Property Securities Act 2009
SGC Superannuation Guarantee Charge
Statement Directors’ Statement about the Company’s Business, Property, Affairs and Financial Circumstances
ROT Retention of Title
Listing of annexures Annexure 1 Administrators’ Remuneration Report Annexure 2 IPA - Creditor Information Sheet – Offences, Recoverable
Transactions and Insolvent Trading Annexure 3 Registered Chargeholders
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 3
1. Executive summary We advise that Ben Johnson, Darren Weaver and Andrew Saker were appointed Joint and Several Voluntary Administrators of the Company on 11 June 2013 pursuant to section 436A of the Corporations Act 2001 (the Act). Creditors ratified our appointment as Voluntary Administrators at the first meeting of creditors held on 21 June 2013 and a Committee of Creditors was formed. Creditors will determine the Company’s future at a second meeting of creditors convened for 16 July 2013 and will be held at The Rydges Perth Hotel on 815 Hay Street, Perth Western Australia 6000 at 10:00am (WST). At the second meeting, creditors will decide the Company’s future in voting on one of the following options: That the administration should end and control of the Company revert to its directors; or,
That the Company should be wound up; or,
That the second meeting of creditors be adjourned for a period not to exceed 45 business days. Immediately following our appointment we took control of the Company’s business and it assets. We initiated a process to solicit expressions of interest to restructure or purchase the business. To date we have received expressions of interest from eleven (11) parties to either restructure the Company or purchase its assets either in part or as a whole. The interested parties are currently conducting due diligence with final offers due to be received by 23 July 2013. Further, the Directors of the Company have advised that they intend formulate a DOCA with a view to recapitalising the Company, however to date no draft proposal has been provided to us. We expect to receive the Directors’ proposal within the next week. As such, at this stage we are unable to provide an estimate of the likely return to creditors under the DOCA scenario. Accordingly, we intend to propose a resolution at the second meeting of creditors to adjourn the meeting for a period of up to 45 business days, reconvening on or before 16 September 2013. This additional time will allow for us to engage with the interested parties regarding their offers and to receive and review any draft DOCA proposal from them or the Directors and for us to a form a view on what is in the best interests of creditors and make an appropriate recommendation to creditors. It is our opinion that it is in the best interests of creditors that the second creditors’ meeting be adjourned for a period not exceeding 45 business days for the following reasons: To provide for additional time for the Directors to present a draft DOCA for consideration by
creditors at the reconvened creditors’ meeting;
To provide for additional time for the interested parties to present a draft DOCA or offer to purchase the business in part, or as a whole, for consideration by creditors at the reconvened creditors’ meeting; and
To continue to preserve the Company’s assets by continuing to trade on a going concern basis. In addition, the Voluntary Administrators consider that preserving the ability to enter into a DOCA is likely to provide a better return to creditors than an immediate winding up of the Company because: The costs associated with the DOCA should, consistent with general practice, be lower than
those of a liquidation; and;
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 4
In a liquidation, recoveries from the voidable and other transactions are unlikely; and
There is uncertainty as to whether any realisation of the Company’s assets will occur in a timely manner.
For the reasons outlined above, and in anticipation of receiving at least one (1) suitable DOCA proposal, the Voluntary Administrators are of the view that creditors should vote in favour of adjourning the second creditors meeting for a period of up to 45 business days and preserve their ability to consider any DOCA proposals at the reconvened meeting and maintain the possibility of a return to creditors greater than that provided in a liquidation scenario.
2. Introduction 2.1 Purpose of appointment and this report Darren Weaver, Ben Johnson, and Andrew Saker were appointed Voluntary Administrators of the Company on 11 June 2013, pursuant to Section 436A of the Act. Immediately following our appointment, we took control of the Company’s assets and its business. The purpose underlying a Voluntary Administrator’s appointment is to allow for independent control and investigation of an insolvent company’s affairs. During the administration period, creditors’ claims are put on hold. We are required to provide creditors with information and recommendations to assist creditors to decide upon the Company’s future. Section 439A(4) of the Act explains the purpose of a Voluntary Administrator’s report in providing that the notice (of second meeting) must be accompanied by a copy of: (a) A report by the Voluntary Administrator about the company’s business, property, affairs and
financial circumstances; and (b) A statement setting out the Voluntary Administrator’s opinion about each of the following matters:
Whether it would be in the creditors’ interests for the company to execute a Deed of Company Arrangement;
Whether it would be in the creditors’ interest for the administration to end;
Whether it would be in the creditors’ interest for the company to be wound up;
His or her reasons for those opinions; and
(c) If a Deed of Company Arrangement is proposed – a statement setting out details of the proposed deed.
In the available time, we have undertaken the investigations detailed in section 8 of this report. These investigations have enabled us to form an opinion about the Company’s future. Our opinion is set out in section 10 of this report.
2.2 First meeting of creditors and committee of creditors Creditors attended a first meeting of creditors held on 21 June 2013. At that meeting, creditors ratified our appointment as Voluntary Administrators of the Company. Creditors elected the following creditors to a Committee of Creditors:
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 5
Committee of Creditors Representative
National Drilling Equipment Pty Ltd Bruce Perkins
Employee Karen Miels
Employee Christopher Allan
A meeting of the Committee of Creditors is intended to be held on 11 July 2013.
2.3 Second meeting of creditors Pursuant to Section 439A of the Act, the second meeting of creditors of the Company is convened for 16 July 2013 held at The Rydges Perth Hotel on 815 Hay Street, Perth Western Australia 6000 at 10:00am (WST). At the second meeting, creditors will decide the Company’s future in voting on one of the following options: That the administration should end and control of the Company revert to its directors; or,
That the Company should be wound up; or,
That the second meeting of creditors be adjourned for a period not to exceed 45 business days. At this stage no DOCA proposal has been put forward and accordingly the option that creditors resolve to execute a DOCA proposal falls away.
2.3.1 Intention to Adjourn the Second Meeting
The Directors of the Company have indicated that they intend to propose a DOCA. Accordingly, we intend to propose a resolution to creditors to adjourn the second meeting of creditors for a period of up to 45 business days reconvening on or before 16 September 2013. The Voluntary Administrators anticipate the Directors will be in a position to submit a DOCA proposal in the near future. The adjournment will allow the Voluntary Administrators sufficient time to assess the proposal in the event one is submitted, which may offer a more favourable overall return to creditors in comparison to a liquidation scenario. For completeness, we note that the Voluntary Administrator can apply to the court to seek an extension to the convening period without convening a meeting of creditors to seek a resolution for the adjournment of the second meeting of creditors. We have considered both alternatives on a cost benefit basis, and have elected to convene a meeting of creditors for the following reasons: To provide creditors with an update under as to the Voluntary Administration process and an
outline of our preliminary statutory investigations; and
To provide a forum for each creditor body to consider whether the adjournment is in their best interests, or whether to resolve to wind up the Company.
2.4 Non-disclosure of certain information There are sections of this report wherein we considered it inappropriate to disclose certain information to creditors. Such information includes: Valuations of specific assets
Valuation of the business
Commercially sensitive prospective financial information (for example, projections/forecasts)
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 6
We fully recognise the need to provide creditors with complete disclosure of all necessary information relating to the Company. However, we believe this information is commercially sensitive and it is not in creditors’ interests for us to disclose the information publicly at this stage. Where necessary in this report, we provide a combined figure for potential realisations of assets when comparing estimated dividends under the relevant options. The Committee of Creditors is privy to all information. The committee members all signed confidentiality agreements with the Voluntary Administrators.
2.5 Declaration of independence, relevant relationships and indemnities The Voluntary Administrators provided a Declaration of Independence, Relevant Relationships and Indemnities to creditors with their first circular to creditors and also tabled the declaration at the first meeting of creditors. The Voluntary Administrators had 4 meetings with the Company’s Directors, Mr Ivan Carstensen and Mr Warren Symons across a two week period for the purpose of discussing the financial position of the Company, considering the alternatives to Voluntary Administration and the consequences of insolvency. We received no remuneration for this advice. These meetings do not affect our independence for the following reasons: Ferrier Hodgson’s advice was limited to assessing the Companies’ financial position, the consequences of insolvency and restructuring options. Advice was given to the Companies only. We did not advise the Directors personally or others. The Courts and the IPA’s Code of Professional Practice specifically recognises the need for practitioners to provide advice on the insolvency process and the options available and do not consider that such advice results in a conflict or an impediment to accepting the appointment. The nature of the advice is such that it would not be subject to review and challenge during the voluntary administration. The pre-appointment advice will not influence our ability to fully comply with the statutory and fiduciary obligations associated with the voluntary administration in an objective and impartial manner. Neither us, nor our firm, have, or have had within the preceding 24 months, any relationships with the Companies, an associate of the Companies, a former insolvency practitioner appointed to the Companies or any other person or entity that has a charge on the whole or substantially the whole of the Companies’ property. We have not been indemnified in relation to this administration, other than any indemnities that we may be entitled to under statute and we have not received any upfront payments in respect of our remuneration or disbursements. Darren Weaver and Ben Johnson are Chartered Accountants, Registered Liquidators and members of the IPA with over 20 years of experience of combined experience in corporate insolvency. Andrew Saker is also a Chartered Accountant and Registered Liquidator with over 25 years of experience in corporate insolvency. Darren Weaver, Ben Johnson and Andrew Saker are partners of Ferrier Hodgson. Ferrier Hodgson is one of Australia’s and the Asia-Pacific’s largest independent corporate restructuring practice with 47 partners and over 440 staff throughout Australia and Asia. Ferrier Hodgson does not provide accounting, audit, legal or taxation services. Further information regarding Ferrier Hodgson and the Voluntary Administrators can be obtained from the firm’s website at www.ferrierhodgson.com.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 7
3. Company information
3.1 Statutory information A search of the ASIC database revealed the following information. 3.1.1 Incorporation date and registered office The Company was incorporated on 6 June 1990. The Company’s registered office is listed as 1 Kew Street, Welshpool Western Australia 6106. 3.1.2 Company officers The Company’s officers over the past 12 months were: Name Role Appointment Date Cessation Date
Ivan Ronald Carstensen Director 6 June 1990 Current
Warren Mark Symons Director 6 June 1990 Current
Ivan Ronald Carstensen Secretary 6 June 1990 Current
A search of the National Personal Insolvency Index maintained by the Insolvency Trustee Service Australia, indicates that the Company Directors are not bankrupt or subject to a Personal Insolvency Agreement under Part X of the Bankruptcy Act 1966. 3.1.3 Shareholders The ASIC database discloses the Company’s shareholders to be: Shareholders Shares Held
Ivan Ronald Carstensen 1
Warren Mark Symons 1
There have been no changes to the Company’s shareholdings in the past 12 months. 3.1.4 Registered chargeholders Under the new PPSA legislation, which took effect on 30 January 2012, security over property, except land, must be registered as a security interest on the PPSR. Briefly, the concept of fixed and floating charges was replaced under the PPSA by “security interests over non-circulating assets” and “security interests over circulating assets” respectively. In the case of inventory, the title to any inventory will require registration as a PMSI on the PPSR. Unless a supplier (including an ROT supplier) registers a PMSI as a security interest on the PPSR, the goods under the ROT clause may become property of the company in liquidation. Searches of the PPSR disclosed a number of parties potentially holding security interests in the Company’s assets, summarised in Annexure 3 of this report. 3.1.5 Winding up Applications There were no winding up applications outstanding as at the date of my appointment.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 8
3.2 Company history The Company operated a national drilling and grouting business and throughout South-East Asia supplying specialised equipment, technical expertise and an experienced workforce since its incorporation in 1990. The Company’s assignments included construction, mining, marine and infrastructure developments including remote and isolated locations. The Company’s main premises are located at 1 Kew Street, Welshpool Western Australia 6106. As at the date of our appointment, DGS employed approximately 70 people.
3.3 Decision to appoint Administrators We had 4 meetings with the Company’s Directors, Mr Ivan Carstensen and Mr Warren Symons across a two week period for the purpose of discussing the financial position of the Company, considering the alternatives to Voluntary Administration and the consequences of insolvency. We understand that DGS had insufficient cash to pay employee wages (and other overhead commitments) for the week ending 9 June 2013 and as such the Directors were of the view that they had no alternative other than the appointment of Voluntary Administrators. Accordingly, the Administrators attended the Company’s offices and met with the Directors on the morning of 11 June 2013. The conclusion of that meeting was the passing of a resolution by the Directors that the company was insolvent, and appointing Darren Weaver, Ben Johnson and Andrew Saker as Joint and Several Voluntary Administrators of the Company.
4. Historical financial information
4.1 Preparation of financial statements The Company prepared audited financial statements were up to 30 June 2012 audited by BDO Audit (WA) Pty Ltd and various management accounts and reports up to 11 June 2013 on a quarterly basis. At section 8.2.3 of this report, I comment on the adequacy of the Company’s books and records.
4.2 Profit and loss statement and preliminary analysis Set out below is a summary of the Company’s profit and loss statement for the past two (2) financial years and the 11 June 2013 management accounts together with my preliminary analysis.
Profit and Loss Summary
11 Jun 2013 Management Accounts
Unaudited $
30 Jun 2012 Audited
$
30 Jun 2011 Audited
$
Project revenue 12,790,710 35,813,123 32,740,455
Other revenues 3,641,194 500,627 105,882
Profit/Loss on sale of plant & equipment - 31,187 416,550
Total Income 16,431,904 36,344,937 33,262,887
Cost of projects (8,220,447) (18,446,221) (17,401,817)
Administration and corporate expenses (4,517,810) (4,871,739) (4,253,913)
Borrowing costs expense (863,967) (1,009,460) (1,052,426)
Depreciation (2,247,199) (2,731,439) (2,594,721)
Consumables (147,052) (507,252) (661,629)
Marketing expenses - (283,412) (157,317)
Occupancy (536,069) (677,803) (730,560)
Other (1,188,234) (315,798) (1,144,245)
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 9
Profit and Loss Summary
11 Jun 2013 Management Accounts
Unaudited $
30 Jun 2012 Audited
$
30 Jun 2011 Audited
$
Service Fee (33,801) (137,430) (194,767)
Workshop expenses (2,144,824) (2,804,694) (3,219,936)
Total Expenses (19,899,403) (31,785,248) (31,411,331)
Profit / (Loss) Before Tax (3,467,499) 4,559,689 1,851,556
In respect of the above, we make the following comments: Despite a 9% uplift in project revenue in FY2012 from FY2011, project revenue dropped
significantly in YTD 11 June 2013 falling 66% from the preceding year. Our preliminary investigations indicate that the significant decline may be attributed to the completion of existing long term contacts and limited availability of future contacts;
During YTD 11 June 2013 the Company’s overheads and cost of projects did not reduce in line with the Company’s diminishing project revenue, causing a shortage in working capital, a tax loss in YTD 11 June 2013 and cashflow strain;
Other income primarily relates to an internal plant charge out rate payable by DGS to DGSWA. We understand that this is a book entry and that the amount is eliminated upon consolidation;
Whilst revenue declined between 30 June 2012 and the current financial year, the administration and corporate expense amounts remained relatively constant. These significant overhead costs were a contributing factor in DGS generating a loss for the period ending 11 June 2013;
The lack of liquid assets significantly impaired the Company’s ability to meet its debts as and when they fell due;
Depreciation charges relate to plant and equipment and motor vehicles owned by DGS;
We note that EBITDA for the period ending 11 June 2013 was a loss of $286,000.
4.3 Balance sheet and preliminary analysis A summary of the Company’s balance sheet for the past two (2) financial years and 11 June 2013 management accounts are set out below together with our preliminary analysis:
Balance Sheet
11 Jun 2013 Management
Accounts Unaudited
$
30 Jun 2012
Audited $
30 Jun 2011
Audited $
Current Assets
Cash and cash equivalents 185 10,589 10,517
Trade and other receivables 1,447,512 6,276,393 6,615,649
Inventories 123,095 251,513 158,999
Total Current Assets 1,570,792 6,538,495 6,785,165
Non-Current Assets
Receivables 4,400,344 4,315,140 4,216,365
Deferred tax asset 869,549 869,557 792,046
Property, plant and equipment 10,019,502 11,405,302 10,417,928
Total Non-Current Assets 15,289,395 16,589,999 15,426,339
Total Assets 13,860,187 23,128,494 22,211,504
Current Liabilities Trade and other payables 1,342,355 4,310,889 6,390,596
Borrowings 2,804,371 6,249,564 5,859,583
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 10
Balance Sheet
11 Jun 2013 Management
Accounts Unaudited
$
30 Jun 2012
Audited $
30 Jun 2011
Audited $
Current tax payable 874,993 785,491 98,659
Total Current Liabilities 5,021,719 11,345,944 12,348,838
Non-Current Liabilities
Borrowings 7,342,196 4,758,311 4,926,237
Provisions 2,534,355 458,289 511,068
Total Non-Current Liabilities 9,876,551 5,216,600 5,437,305
Total Liabilities 14,898,270 16,562,544 17,786,143
Surplus/(Deficiency) 1,038,083 6,565,950 4,425,361
In respect of the above, we make the following comments: Cash and cash equivalents relate to two bank accounts maintained by the Company. As at the
date of our appointment the Company held approximately $185 in a separate account to the main operating account which was in overdraft;
Trade and other receivables relate to outstanding debtors which were approximately $963,000 as at the date of our appointment with the balance relating to debtor retentions;
Inventories pertain to consumables which were purchased for previous contracts. For example, these items, include, but are not limited to, drill bits and drill strings. The carrying value of these items continues to diminish given their age and relative wear;
Receivables pertain to Director related loans and a loan from the DGS (WA) Pty Ltd Unit Trust. The balance of these loans as at 11 June 2013 were $2.28 million and $2.25 million respectively;
Property plant and equipment includes items of plant and motor vehicles leased and owned by the Company. The amounts included about are net of accumulated depreciation;
The bank overdraft and bills under borrowings in the current liabilities are secured by a circulating charge by St George Bank over the assets and undertakings of the Company. The bank bill facility is rolled over on a quarterly basis and is reviewed annually. The interest rates reported in the 2012 and 2011 annual reports were 5.65% and 4.95% respectively;
The trade debtor balance was significantly lower in 31 March 2013 than in previous periods which is consistent with the reduced project revenue in the profit and loss statement;
Whilst the Company maintained a positive net asset position, its circulating assets appear to have been absorbed by significant trading losses in YTD 11 June 2013, with debtor collections used to pay overheads and costs of projects;
The trade and other payables did not decline in during YTD 11 June 2013 in line with a reduction in the cost of projects, indicating that the Company was not paying its trade creditors within their normal terms of trade; and
The borrowings for the periods 2012 and 2011 under non-current liabilities represent hire purchase liabilities and an equipment facilitate mortgage to GE Commercial. This liability has almost doubled by 31 March 2013 significantly contributing to the reduction of the Company’s net asset position.
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5. Statement by directors
5.1 Summary Pursuant to section 438B(2) of the Act, the Directors of the Company are required to submit a Statement of Affairs (SOA) to the Voluntary Administrators within 5 business days of their appointment. Due to the size and complexity of the Company’s operations the Directors were granted an extension to 26 June 2013 to submit their Statement of Affairs to the Voluntary Administrators. However, despite the extension the Directors’ Statement of Affairs was not available at the time of writing. Accordingly, based on our preliminary investigations into the affairs of the Company we as follows: 5.1.1 Interest in land A property search indicates that the Company does not currently own any real property. 5.1.2 Debtors The Company’s debtors’ ledger as at 11 June 2013 totalled $805,008. The below ‘aged’ analysis indicates that the majority of debtors are in excess of 30 days.
30 Day
$
60 Days
$
90 Days
$
120+ Days
$
Total
$
Total 428,555 137,146 227,575 110,427 903,702
Percentage of total 48% 15% 25% 12% 100%
Please note that the above debtor balance does not take into account retentions for which we have reservations as to collectability. We confirm that total debts collected since my appointment is $286,111 in respect of pre-appointment debtors. We have utilised these funds to pay wages for the week ending 14 June 2013 and 21 June 2013 and for general working capital purposes. We are continuing to assess the collectability of the balance of debtors noted in the above table. 5.1.3 Cash on hand and cash at bank The Company operated two (2) bank accounts, one with an overdraft facility with St George Bank Ltd with a current drawn balance of $949,948 and the other appeared to be an investment account with $185 as at the date of our appointment. We suspended both accounts upon my appointment on 11 June 2013. 5.1.4 Stock / Consumables The Company’s internal management accounts indicated the cost of consumables held in the warehouses to be approximately $16,000,000 however, the Company’s stock records revealed stock written down with a book value of $123,095 as at 11 June 2013. The Voluntary Administrators have serious reservations as to the saleability of the consumables as they primarily relate to excess stock purchased for completed jobs including unused drill strings, heavily worn drill bits and unused cement.
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5.1.4.1 Contracts At the date of our appointment the Company had a number of contracts in progress. We are currently undertaking an assessment of the viability of each contract to determine whether or not to complete the contract, and if not, how best to withdraw from or terminate the agreement. 5.1.5 Plant and equipment As noted above, the Company’s plant and equipment consists of a variety of specialised drill and other equipment. The equipment has a book value of circa $10,457,388 (as per the June 2013 management accounts). On our appointment we engaged an independent valuer to conduct a valuation of the Company’s plant and equipment. As noted throughout this report, we have initiated a process to solicit expressions of interest to restructure or purchase the business. Accordingly, the current value of the Company’s plant and equipment is commercially sensitive and cannot be disclosed at this time. 5.1.6 Motor vehicles The Company’s motor vehicles include 42 cars and trucks of which 37 are subject to finance and discussed in section 5.1.7 below. On our appointment we engaged an independent valuer to conduct a valuation of the Company’s motor vehicles. As discussed in section 7 of this report, we are currently conducting an expression of interest campaign for the Company’s business and assets, accordingly, the current value of the Company’s motor vehicles is commercially sensitive and cannot be disclosed at this time. 5.1.7 Assets subject to specific charges We confirm that the Company is in possession of a number of assets that are subject to specific charges. These relate to hire purchase agreements which we have identified as having valid PPSR registrations. Further, we note that the Company entered into an equipment mortgagee with GE Capital in respect of two specialised items of plant. We are continuing to liaise with these financiers in respect of their individual positions. On our appointment we engaged an independent valuer to conduct a valuation of the Company’s assets subject to specific charges. The valuation indicated that a number of assets did not contain any equity and we therefore issued notices not to exercise property rights with respect to the same. The balance of assets subject to specific charges are included in the expressions of interest sale and will be realised for the benefit of creditors. 5.1.8 Contingent assets Our preliminary investigations have not identified any contingent assets of the Company. 5.1.9 Employee claims The Company’s books and records indicate that circa $4.4million is outstanding in respect of unpaid employee entitlements and is summarised below.
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Employee Entitlements Total
Employee
Entitlements
$
Excluded
Employees
$
Net
Priority
Entitlements
$
Wages and expenses 112,958.52 8,226.62 104,731.90
Sick leave 15,899.29 - 15,899.29
Annual leave 1,859,274.54 1,287,157.68 572,116.86
Annual leave loading 22,813.41 - 22,813.41
Long service leave 596,035.77 306,969.22 289,066.55
Redundancy 1,228,257.59 184,615.38 1,043,642.21
Pay in lieu of notice 590,091.77 76,923.07 513,091.77
Total 4,425,330.89 1,863,891.97 2,561,483.92
In respect of the above, we make the following comments:
We note that the above leave entitlements are only calculated to 19 May 2013 and wage entitlements to 9 June 2013;
Pursuant to Section 556 of the Act, employee claims are afforded priority of repayment from circulating assets and in priority to other unsecured creditors;
Further, the Act provides that ’Excluded Employees’, which includes company directors and their spouses, are each restricted to a total maximum priority claim of $2,000 for unpaid wages and $1,500 for annual leave entitlements. Amounts owed to Excluded Employees that exceed the statutory cap for wages and superannuation together with annual leave/long service leave, and all payments owing in respect of retrenchment, being redundancy and payment in lieu of notice, rank for dividend with all other unsecured creditors. Accordingly, total known priority employee claims are circa $2.5 million. 5.1.10 Secured creditors St George Bank Ltd and Westpac Banking Corporation Ltd hold first registered APPAP’s against the Company and have advised that that amounts secured by the APPAP’s are circa $2.7 million and $1.7 million respectively. The ultimate return to the secured creditors will be dependent upon the quantum of priority creditor claims and realisations from the Company’s assets. We also note that the Company’s secured debts owed to St George Bank Ltd and Westpac Banking Corporation Ltd are cross-collateralised with the Directors’ personal properties. Accordingly, the secured creditors may exercise their securities over these properties to partially repay its debts after which the Directors may be subrogated to the secured creditors’ position. We understand that the Directors are formulating a plan to realise a number of these properties to partially satisfy the secured creditor’s debt, however, no details on the timing or proposed attribution of the sale proceeds have been received to date. 5.1.11 Ordinary unsecured creditors Based on the Company’s records and informal proofs of debts received to date, I estimate that the total liability to the Company’s unsecured creditors is circa $3,600,751 (including excluded employee unpaid entitlements).
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This figure is subject to change pending receipt and adjudication of formal proofs of debts from creditors. 5.1.12 Related entities Our preliminary investigations have not revealed any monies owed by the Company.
5.2 Explanation for current financial position As discussed in section 5.1 of this report, to date, the Directors have not provided a Statement of Affairs. Notwithstanding, it is our preliminary view that the following factors contributed to the failure of the Company. Low operating margins;
Lack of adequate working capital;
Lack of control over costs and expenditure;
Completion of long term contacts with limited future projects available; and
Industry downturn.
6. Trading by Administrators
6.1 Overview On appointment we took control of the Company’s business and assets and are continuing to operate the business while we solicit expressions of interest to restructure or purchase the business. Appropriate controls and systems have been put in place in respect of cash/banking, purchase orders, stock control and reporting. Since our appointment we have completed the following key tasks: Attended to initial trading issues, statutory obligations met in management and undertook a
review of the Company’s business operations.
Arranged the placement of an ‘automatic’ insurance cover through our insurance broker and sought an urgent review of the adequacy of the pre appointment policies.
Froze all outstanding orders while an assessment of the order was made.
Took control of the Company’s assets including bank accounts, receivables, plant and equipment and contracts.
Implemented appropriate control systems (i.e. purchase order system authorised by the Voluntary Administrators).
Quantified plant, equipment and stock and engaged independent valuers to conduct a valuation of same.
Assessed employee requirements moving forward.
Completed preliminary investigations into the affairs of the Company.
Prepared a report to creditors pursuant to Section 439A(4)(a) of the Act.
Assessed ROT / PPSA claims as and when they were made.
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6.2 Trading issues Immediately following our appointment we undertook an assessment of the Company’s financial position including a review of the Company’s current and future contracts, some of which are scheduled to commence in the near term. Whilst the overall operating position of the Company was forecasted to generate a net profit, there was a significant working capital deficiency during the months of August and September 2012. On this basis, we undertook a further review of the Company’s financial position with a view to reducing the overhead cost structure to a sustainable level. Our review of the Company’s lease and hire purchase equipment resulted in the identification of a number of surplus items. Accordingly, we issued notices not to exercise property rights pursuant to Section 443B(3) and (4) of the Act in respect of same, reducing overhead costs by circa $105k per month. We are continuing to review this position with a view to further reducing the Company’s overhead cost structures. Further, the Directors of the Company, under our instructions, are soliciting offers for the sale of a number of surplus items of plant and equipment, both freehold and hire purchase. We note that offers have been received to date in excess of $1million. Additionally, we have sold certain surplus items of consumables (primarily offshore drill bits). These funds have been utilised to continue to operations of the Company during the administration period. In respect of the Company’s ongoing contracts we advise the following: Under our supervision, the Company has completed works on three (3) contracts during the
administration period. These clients have been invoiced and we are waiting for receipt of payment; and
We contacted each of the counterparties in respect of the Company’s pending contracts. We advised these parties that we were continuing our assessment of the Company’s financial position and viability with a view to committing to the contracts moving forward. However, in the event that we were unable to commit to the same, we would work with the counterparties to negotiate an alternative arrangement, which may include, but not be limited to, the sale of the equipment.
In view of the above, the Directors under our instructions, sought a proposal from Marine & Civil Pty Ltd (M&C) to provide labour hire services and absorb the Company’s current and future labour requirements to complete the pending contracts. M&C’s proposal was subject to the relevant counterparties reducing their trading terms to 21 days from the date of the invoice, to coincide with M&C’s trading terms for payment from the Company. If implemented, the M&C proposal alleviates the working capital deficiency during the months of August and September 2013, whilst still providing for economic benefit to the Company on each of the upcoming contracts. We confirm that we have written to a number of counterparties in respect of the above arrangement. To date one counterparty has confirmed that they accept the proposed terms and conditions of the ongoing arrangement, and in this regard, we are drafting an appropriate addendum to the contract. We anticipate refining these arrangements between the date of issuing this report to creditors and the second meeting of creditors on 16 July 2013.
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6.3 Summary of receipts and payments A summary of the Voluntary Administrators’ receipts and payments for the period 11 June 2013 to 8 July 2013 is included within Part B of the Voluntary Administrators’ Remuneration Report attached as Annexure 1.
7. Sale of business Given the short statutory timeframe imposed by the Act and the Company’s critical funding position, we initiated a process to solicit expressions of interest to restructure or purchase the business. Expressions of interest were requested by close of business 5 July 2013. However, subject to the outcome of this meeting, we intend to extend this timeframe to allow interested parties a further opportunity to conduct their due diligence as set out below.
7.1 Advertisements Advertisements appeared in the ‘The Australian Financial Review’ on 26 June 2013, 28 June 2013 and 2 July 2013 with respect to the asset sale or recapitalisation of the Company. Since the advertisements were published, we have received expressions of interest from eleven (11) parties.
7.2 Data Room Due to the costs and short timeframe to presenting information on the Company, we established a Data Room for interested parties to review relevant documents in lieu of an Information Memorandum. To date, eleven (11) interested parties have signed a Confidentiality Agreement and have received access rights to the Data Room containing particulars of the Company’s assets and operations.
7.3 Sale Process Timeframe We set out below a summary of the relevant transactions: Category Date
Expressions of interest close 5 July 2013
Non-binding indicative offers 16 July 2013
Second phase due diligence 19 July 2013
Final offers 23 July 2013
In light of the above timeline, it is our opinion that the second creditors meeting for the Company should be adjourned for a period not exceeding 45 business days to allow the Voluntary Administrators further time to continue discussions with a number of interested parties and with a view to receiving a DOCA proposal to put to creditors for the consideration at the reconvened meeting of creditors. Given the commercially sensitive nature of the restructure or sale and the impact that the release of certain information may have on offers which may be forthcoming, we are unable to provide further information at this stage of the process.
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8. Statutory investigations
8.1 Nature and scope of review The Act requires a voluntary administrator to carry out preliminary investigations into a company’s business, property, affairs and financial circumstances. Investigations centre on transactions entered into by the company that a liquidator might seek to void or otherwise challenge where the company is wound up. Investigations allow an voluntary administrator to advise creditors what funds might become available to a liquidator such that creditors can properly assess whether to accept a DOCA proposal or resolve to wind up the company. Funds recovered would be available to the general body of unsecured creditors including secured creditors but only to the extent of any shortfall incurred after realising their security. A liquidator may recover funds from each type of transaction detailed in the Creditor Information Sheet described in Annexure 2 of this report. A deed administrator does not have recourse to these voidable transactions. A liquidator may also recover funds through other avenues; for example, through action seeking compensation for insolvent trading or breach of director duties. A voluntary administrator is not obliged to carry out investigations to the same extent as a liquidator. A liquidator may require many months of investigation and conduct public examinations before forming a concluded view on recovery action. We investigated matters to the extent possible in the time available. The Voluntary Administrators’ knowledge of the Company’s affairs comes principally from the following sources:
Communications with the Company’s major creditors regarding the nature and amount of the
debts owed.
Discussions with the Directors and their advisors.
An independent valuation of the Company's property, plant and equipment obtained upon my
instructions.
A search of the ASIC records relating to the Company and any related entities.
An examination of the Company’s books and records including its financial statements and
management accounts.
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8.2 The Company’s solvency 8.2.1 Overview A precursor to the recovery of funds by a liquidator through the voiding of certain transactions or through other legal action, such as seeking compensation from directors for insolvent trading, is establishing the Company’s insolvency at the relevant time. Establishing insolvency is a complex matter due in part to the complexity of corporate financial transactions and the lack of clear prescriptive legal authority on proof of insolvency. Notwithstanding, there are two primary tests used in determining a company’s solvency, at a particular date; namely: Balance sheet test; and
Cash flow or commercial test. The Courts have widely used the cash flow or commercial test in determining a company’s solvency at a particular date. Section 95A of the Act also contains a definition of solvency. That definition reflects the commercial test in stating that a person is solvent if “the person is able to pay all the person’s debts as and when they become due and payable”. However, the commercial test is not the sole determinant of solvency. Determining solvency derives from a proper consideration of a company’s financial position in its entirety and in the context of commercial reality. Relevant issues include, but are not limited to the following: The degree of illiquidity. A temporary lack of liquidity is not conclusive;
Regard should be had to:
Cash resources Monies available through asset realisations, borrowings against the security of assets or
equity/capital raising;
All a company’s assets might not be relevant when considering solvency. For example, where a company proposes selling assets which are essential to its business operations, the proceeds of those assets should not be taken into account;
The voluntary and temporary forbearance by creditors not to enforce payment terms; and
It is not appropriate to base an assessment of whether a company can meet its liabilities as and when they fall due on the prospect that a company might trade profitably in the future.
In summary, it is a company’s inability using such resources as are available to it through the use of its assets, or otherwise, to meet its debts as they fall due, which indicates insolvency. 8.2.2 Preliminary determination Set out below is a summary of my preliminary investigations and my preliminary determination as to the Company’s solvency. Cashflow As stated in Section 5.1.3 the Company has one (1) operating bank account with an overdraft facility with St George Bank Ltd. This facility forms part of a multi-option facility that has an overall limit of $2,950,000 as a combination of Commercial Bills and an overdraft facility. The Company was
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 19
permitted to draw down under any one or more of the facilities so far as the overall limit is not being exceeded. Our preliminary review of the Company’s overdraft facility revealed that the Company breached its overdraft limit on several occasions during November 2012 and April 2013 and once during May 2013 and June 2013. However, we note that on most occasions the breach was rectified immediately, indicating that the cashflow shortage was temporary. Working capital The working capital position determines whether or not a Company can pay its debts as and when they fall due from current assets. Below is a summary of the Company’s working capital for the last three (3) financial years to 30 June 2013. 31 Mar 13
$ 30 Jun 12
$ 30 Jun 11
$
Current Assets 2,833,468 6,538,495 6,785,165
Current Liabilities 6,778,140 11,345,944 12,348,838
Working Capital (3,944,672) (4,807,449) (5,563,673)
Current Ratio 42% 58% 55%
We note the following in respect to the table above: Current assets represent cash at bank, debtors, stock and other current assets noted in the
balance sheet analysis under Section 4.
Current liabilities comprise trade creditors, employee entitlement provisions, overdraft and other current liabilities noted in the balance sheet analysis under Section 4.
The Company has had negative net working capital for the last three (3) financial years to 30 June 2013, indicating that it was unable to meet is current liabilities from its current assets and would have therefore been reliant on its current assets or external funding to meet its current obligations.
Aged payables review
The table below sets out an analysis of the aged payables as at 11 June 2013.
Current
$ 30 Days
$ 60 Days
$ 90+ Days
$ Total
$
Trade creditors as at 11 June 2013
4,004 229,256 270,543 579,471 1,083,274
Percentage of total 0.3% 21.2% 25.0% 53.5% 100.0%
We comment on the above analysis as follows: We understand that the trading terms for payment to creditors were, on average, 30 days from
invoice.
At the date of appointment, the Company was in breach of its trading terms with over 75% of its trade creditors, with more than 50% in excess of 90 days overdue. Indicating that the Company was not meeting its debts as and when they fell due.
The Directors of the Company advised that the Company had not received any statutory demands or notices of demands in the six (6) months prior to the appointment of the Voluntary Administrators. However, immediately prior to our appointment, the Company was put on notice by a creditor that it intended to issues proceedings for non-payment.
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Finance Commitment Review Pursuant to its funding agreement with St George bank Limited, the Company is required to maintain certain reporting and financial benchmarks to satisfy St George Bank Ltd’s debt covenants. We understand that the Company breached its overdraft covenant several times and had it submitted its 31 March 2013 and 30 June 2013 quarter management accounts to St George Bank Ltd it would have breached its debt ratio covenants. Net Assets The table below summarised the Net Assets position for the Company for the last three (3) financial years to 30 June 2013. 11 Jun 2013
Management Accounts Unaudited
$
30 Jun 2012 Audited
$
30 Jun 2011 Audited
$
Total Assets 16,860,187 23,128,494 22,211,504
Total Liabilities 14,898,270 16,562,544 17,786,143
Net Assets 1,961,917 6,565,950 4,425,361
The Company had net positive assets for the above three (3) periods, indicating that its total assets were sufficient to meet its total liabilities. Payment of statutory commitments including Superannuation Guarantee Charge We understand that the Company has outstanding PAYG, GST and superannuation tax liabilities of circa $297,593, $278,757 and $153,760 respectively. These liabilities have been overdue since March 2013. Conclusions Based on the above analysis, it is our preliminary view that the Company was more likely than not insolvent from at least February 2013. Further investigations by a liquidator, if one is appointed, would be required to determine the date at which the Company became insolvent. 8.2.3 Presumption of insolvency – inadequate books and records Failure to keep or retain adequate books and records in accordance with Section 286 of the Act provides a rebuttable presumption of insolvency under Section 588E of the Act. A liquidator can rely on the presumption of insolvency in litigation including: Compensation claims arising from insolvent trading; and
Recovery of voidable transactions from related entities. The presumption cannot be relied upon in the recovery of an unfair preference except where the recovery is sought from a related entity. Our preliminary view is that the Company maintained adequate books and records in accordance with Section 286. Accordingly, the presumption of insolvency under Section 588E would not be available.
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8.3 Potential liquidator recoveries - voidable transactions 8.3.1 Unfair preferences A payment to a creditor is preferential if it is made at a time when the Company is insolvent and it results in the recipient receiving a greater return than they would receive if the payment were set aside and the creditor lodged a claim in the liquidation. Should a liquidator establish any such unfair preference payments, these amounts may be recouped thereby increasing the funds available to ordinary unsecured creditors. If a creditor disgorges an unfair preference payment to a liquidator, the creditor is entitled to prove for dividend. Therefore, whilst recovering an unfair preference increases the pool of funds available to creditors, it also increases total creditor claims. Factors which indicate these payments might be unfair preferences are: Payments in response to winding up applications, statutory demands and other pressure from
the creditor;
Repayment plans with the creditor;
Significant ‘round’ figure payments were made to the creditor. The payments would be protected if the creditor from whom the liquidator seeks to recover: Became a party to the transaction in good faith; and
At the time when they became a party:
They had no reasonable grounds for suspecting that the Company was insolvent at that time, or would become insolvent; and
A reasonable person in that person’s circumstances would have had no such grounds for so suspecting; and
Provided valuable consideration under the transaction or has changed their position in reliance
on the transaction. A creditor seeking protection must prove all three elements. Further, where a creditor received a series of payments as part of a so called ‘running account’ and their overall indebtedness increases over the same period, the creditor is taken not to have received an unfair preference. This is called ’the running account defence’. A liquidator would likely seek legal advice on the strength of a claim including the applicability of these defences. It is likely any recovery action commenced by a liquidator would be defended. Therefore, costs are a major consideration. For the purposes of this report, we have not identified any payments that appear to be preferences, however, if the Company were to be placed into liquidation, further investigations into the Company’s transactions would be conducted by the liquidator. 8.3.2 Uncommercial transactions Our preliminary investigations do not disclose any transactions of an uncommercial nature which may lead to recoveries by a liquidator in the event that the Company is wound up.
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8.3.3 Unfair loans Based on our preliminary investigations to date, the Company was not a party to any unfair loans. 8.3.4 Unreasonable director-related transactions Our preliminary investigations do not reveal any unreasonable director related transactions. 8.3.5 Obstruction of creditors’ rights Our preliminary investigations do not disclose any transactions intended to obstruct creditors’ rights. 8.3.6 Voidable charges Our preliminary investigations do not reveal any potential voidable charges.
8.4 Potential liquidator recoveries - insolvent trading 8.4.1 Director liability Section 588G of the Act imposes a positive duty upon company directors to prevent insolvent trading. If a director is found guilty of an offence in contravening Section 588G, the Court may order him or her to pay compensation to the Company equal to the amount of loss or damage suffered by the creditors of the Company. The Court may also impose upon the directors one of two types of civil penalty orders. The first can include a fine not exceeding $200,000 or an order prohibiting directors from participating in the management of a company. The second, where there is criminal intent and a conviction, a director could also be imprisoned for up to five years or fined as well. ASIC usually applies for civil penalty orders while applications for compensation payable to the Company are usually made by a Liquidator, or in specified circumstances a creditor. The substantive elements of Section 588G are:
A person must be a director of a company at a time when the company incurs a debt;
The company must be insolvent at that time or becomes insolvent by incurring the debt;
The director must have reasonable grounds for suspecting that the company is insolvent or would so become insolvent by incurring the debt;
Summarised below are the defences contained in Section 588H:
The directors had reasonable grounds at the time the debt was incurred to expect the company to be solvent and would remain solvent even after the debt was incurred;
The directors relied on another person to provide information about whether or not the company was solvent;
The directors were ill or for some other good reason did not take part in the management of the company;
The directors took reasonable steps to prevent the incurring of the debt.
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A Liquidator must form an opinion as to the date the company became insolvent and determine the debts incurred from that date; thereby quantifying the loss to the company. Based on our analysis at Section 8.2.2 of this report, we indicated it was probable that the Company was insolvent from at least as early as February 2013, and that the Directors would have had reasonable grounds for suspecting so. Based on that analysis, we have formed the preliminary view that the Company may have traded whilst it was insolvent. Moreover, there appears to be significant defences that may be available to the Directors in refute of the above and thus we are of the preliminary view that it is unlikely to be a potential claim that could be brought against the Directors with respect to a potential insolvent trading. Summarised below are the defences contained in Section 588H:
The directors had reasonable grounds at the time the debt was incurred to expect the company to be solvent and would remain solvent even after the debt was incurred;
The directors relied on another person to provide information about whether or not the company was solvent;
The directors were ill or for some other good reason did not take part in the management of the company; and
The directors took reasonable steps to prevent the incurring of the debt. A Liquidator must form an opinion as to the date the company became insolvent and determine the debts incurred from that date; thereby quantifying the loss to the company. In addition, a liquidator would be required to conduct further investigations into the affairs of the Company in relation to insolvent trading. In effect there may be information that we have not considered which may give rise to such a claim. However, given the complexity of proving such a case, the costs of proceeding with an insolvent trading action must be considered as does the personal financial capacity of the directors to pay a judgement obtained against them. The Directors capacity to meet any claims against them is set out in section 7.12 of this report.
8.5 Other potential liquidator recoveries 8.5.1 Compensation for breach of director duties Based on our preliminary investigations, it does not seem that the Directors have breached their duties as directors in: Failing to act in good faith;
Failing to discharge their duties with reasonable care and diligence;
Improperly using their position or information;
Failing to avoid conflicts of interest.
8.5.2 Arrangements to avoid employee entitlements Based on our investigations to date, there has been no contravention of Part 5.8A of the Act by any person.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 24
8.5.3 Falsification of Books Pursuant to Section 1307 of the Act, it is an offence for a person to engage in conduct that results in the concealment, destruction, mutilation or falsification of any securities of or belonging to the Company or any books effecting or relating to affairs of the Company. If a breach is proven, Part 9.4 of the Act provides for criminal penalties only. Therefore, any breaches of Section 1307 will not result in recovery of funds by a Liquidator. Our preliminary investigations do not reveal any evidence of falsification of books. 8.5.4 False or Misleading Statements Pursuant to Section 1308 of the Act, a company must not advertise or publish a misleading statement regarding the amount of its capital. It is an offence for a person to make or authorise a statement that, to the person’s knowledge, is false or misleading in a material particular. If a breach is proven, Part 9.4 of the Act provides for criminal penalties only. Therefore, any breaches of Section 1308 will not result in recovery of funds by a Liquidator. Our preliminary investigations do not reveal any evidence of any false or misleading statements. 8.5.5 False Information Pursuant to Section 1309 of the Act, it is an offence for an officer or employee to make available or give information to a director, auditor, member, debenture holder, or trustee for debenture holders of the Company that is to the knowledge of the officer or employee: False or misleading in a particular manner; or
Has omitted from it a matter the omission of which renders the information misleading in a material respect.
If a breach is proven, Part 9.4 of the Act provides for criminal penalties only. Therefore, any breaches of Section 1309 of the Act will not result in any recovery by a Liquidator.
8.6 Possible offences Based on preliminary investigations, we have not identified any offences the Directors may have committed under the Act.
8.7 Other matters arising from investigations Our preliminary investigations have not revealed any matters that require further investigation.
8.8 Summary of potential liquidator recoveries Set out below is a summary of the potential recoveries by a liquidator in the event the Company is wound up:
Potential Recovery Item High ($) Low ($)
Unfair preferences TBD TBD Uncommercial transactions TBD TBD Unfair loans TBD TBD
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 25
Potential Recovery Item High ($) Low ($)
Unreasonable director related transactions TBD TBD Transactions undertaken to obstruct creditors’ rights TBD TBD Compensation from director for insolvent trading TBD TBD Compensation from holding company for insolvent trading TBD TBD Breaches of directors duties TBD TBD Avoidance of employee entitlements TBD TBD Debts incurred by Company as trustee TBD TBD Total TBD TBD
8.9 Directors’ ability to pay a liquidator’s claims Searches disclose the directors have interests in the following real property: H 12 Hotham Av, Boddington, Western Australia 6390 H 51 Murray Rd, Welshpool, Western Australia 6106 H 235 Mars St, Welshpool, Western Australia 6106 H 45-47 Briggs St, Welshpool, Western Australia 6106 Apartment 406, H 2 Oldfield St, Burswood, Western Australia 6100 (Aqua) Apartment 905, H 2 Oldfield St, Burswood, Western Australia 6100 (Aqua) Unit 21, H 23 Bow River Cr, Burswood, Western Australia 6100 H 20 Wilfred Rd, Canning Vale, Western Australia 6155 We note that the above property in Canning Vale is a primary residence of one of the directors. Our searches did not identify the other director as having an interest in his main residence. At this stage of our investigations we have not requested that the Directors of the Company provide us with a statement of their financial position so that we may determine if they may be able to meet any possible claims arising out of my investigations. The reason for this is that further investigations and legal advice is required before any of the above claims can be accurately finalised and the benefits for creditors after costs quantified. Further investigations will need to be done to determine the Directors capacity to meet any claim made by the liquidator.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 26
9. Creditors’ options, dividend estimates and cost estimates Pursuant to Section 439A(4)(b) of the Act, we are required to provide creditors with a statement setting out our opinion on whether it is in the creditors’ interests for the: Administration to end;
Company to be wound up;
That the second meeting of creditors be adjourned for a period not to exceed 45 business days to consider potential DOCA proposal.
In forming our opinion, it is necessary to consider an estimate of the dividend creditors might expect, and the likely costs, under each option.
9.1 Administration to end Creditors may resolve that the administration should end if it appears the Company is solvent or, for some other reason, control of the Company should revert to its directors. Based on my preliminary investigations and analysis of the Company’s financial information, the Company is insolvent. There appears to be no valid commercial reason why control of the Company should revert to its directors. If the administration were to end, there is no mechanism controlling an orderly realisation of assets and distribution to creditors. In those circumstances, we are unable to say what the Company might ultimately pay creditors or what costs it might incur. Therefore, our opinion is that it is not in the creditors’ interest for the administration to end. It is appropriate that the Company’s affairs be dealt with under Part 5.3A of the Act under one of the options detailed below.
9.2 Winding up of Company Given the commercially sensitive nature of the value of DGS’s assets, we are not in a position to estimate the return to creditors if the Company was wound up. At this stage in time, we do not recommend winding up the Company as the value that may be provided back to creditors / stakeholders would be substantially decreased in comparison to nay future DOCA that may be proposed by the Directors, or interested parties. Please note that the costs of winding up the Company’s affairs are estimated at $250,000. In view of the above, the greatest potential value that could be derived by creditors and stakeholders will be subject to consideration of a DOCA proposal by one or more interested parties.
10. Administrators’ opinion As discussed throughout this report, the option for the Administration to end is clearly not viable, or is placing the Company into Liquidation. Based on the level of interest received to date, along with the potential for a DOCA proposal to be submitted by the Directors, we consider that an extension will provide the Voluntary Administrators with further time to explore these restructuring opportunities.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 27
We note that the Directors’ of the Company have advised that they intend formulate a DOCA with a view to recapitalising the Company, however to date no draft proposal has been provided to us. We expect to receive the Directors’ proposal within the next week. As such, at this stage we are unable to provide an estimate of the likely return to creditors under the DOCA scenario. We set out below a comparison table of the effect of various stakeholders in respect of the options available to creditors at the Second Meeting of Creditors:
Stakeholder Adjournment of Meeting for Period not Exceeding 45 Business days
Liquidation
Unsecured Creditors
Return may be greater than a liquidation scenario.
Return may be less than under a DOCA or recapitalisation proposal
Secured Creditor
Return may be greater than a liquidation scenario.
Return may be less than under a DOCA or recapitalisation proposal
HP Creditors
Use of certain equipment for operational purposes during trading.
Directors continuing to solicit offers for the sale of surplus equipment
Return may less than under a DOCA or recapitalisation proposal given that the assets will likely be sold by way of auction.
Employees
Current employees retain their employment during the voluntary administration and potentially under the restructured Company.
Distributions to terminated employees in respect of their outstanding entitlements are delayed and will be subject to any proposed payment terms under a DOCA or recapitalisation proposal.
Following receipt of DOCA proposal, the Voluntary Administrator will prepare a further report to creditors for their consideration. Employees will be provided an opportunity to consider the proposal, including an assessment of the estimated return, however payments under any such scenario will be delayed as compared to if the Company was wound up at this meeting.
Payment of outstanding Employee Entitlements upon application by the Liquidators to FEG.
Timing generally 12 weeks from date of application and receipt of required information by employee
Based on the above, we are of the opinion that it is in the best interests of creditors that the second creditors meeting be adjourned for the Company for a period not exceeding 45 business days for the following reasons: To provide for additional time for the Directors to present a draft DOCA for consideration by
creditors at the reconvened creditors’ meeting;
To provide for additional time for the interested parties to present a draft DOCA or offer to purchase the business in part, or as a whole, for consideration by creditors at the reconvened creditors’ meeting; and
To continue to preserve the Company’s assets by continuing to trade on a going concern basis.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 28
In addition, the Voluntary Administrators consider that preserving the ability to enter into a DOCA is likely to provide a better return to creditors than an immediate winding up of the Company because: The costs associated with the DOCA should, consistent with general practice, be lower than
those of a liquidation; and;
In a liquidation, recoveries from the voidable and other transactions are unlikely; and
There is uncertainty as to whether any realisation of the company’s assets will occur in a timely manner.
Based on the above, it is our opinion that creditors should adjourn the second meeting of creditors for a period not to exceed 45 business days.
11. Administrators’ remuneration report Pursuant to Section 446E of the Act, we enclose as Annexure 1 the Administrators’ Remuneration Report. We advise that as at the date of writing this report we intend to seek approval from the Committee of Inspection in respect of our claimed remuneration for the Voluntary Administration period, however in the event that creditors resolve to wind up the Company we intend to resolution for the approval of the Liquidators’ prospective remuneration. At the second meeting of creditors, we intend seeking approval of the following remuneration.
11.1 Administrators’ Remuneration Voluntary Administrators’ remuneration for the period 11 June 2013 to 30 June 2013 in the amount of $148,146 excluding GST in accordance with the summary as set out in Annexure 1. Voluntary Administrators’ remuneration for the period 1 July 2013 to 16 July 2013 in the amount of $75,000 excluding GST in accordance with the summary as set out in Annexure 1.
11.2 Future Administrators’ Remuneration If creditors decide to adjourn the second meeting of creditors for a period of up to 45 Business Days that a provision for the Voluntary Administrators’ future remuneration for the period from 17 July 2013 to the date of the reconvened second meeting of creditors in the amount of $100,000.00 excluding GST be approved. The amount is an estimate only as it is not possible, at this stage, to state a precise amount. An actual fee summary will be presented to creditors for approval. A summary of the anticipated tasks is set out in Annexure 1.
11.3 Prospective Liquidators’ Remuneration In the event creditors vote to wind up the Company, that a provision for the Liquidators’ remuneration in the amount of $250,000 excluding GST be approved. The amount is an estimate only as it is not possible, at this stage, to state a precise amount. An actual fee summary will be presented to creditors for approval. A summary of the anticipated tasks is set out in Annexure 1. The Voluntary Administrators, (or, where appointed, Liquidators) seek approval of their remuneration on a time basis in accordance with Ferrier Hodgson’s schedule of hourly rates set out in Annexure 1.
Section 439A(4)(a) Report by Administrators 9 July 2013 Page 29
12. Further queries We will advise creditors in writing, if practicable, of any additional matter that comes to our attention after the dispatch of this report that, in my view, is material to creditors’ deliberations. In the meantime, should creditors have any queries, please do not hesitate to contact either Dario Musulin or Tom Guthrie of this office. DATED this 9th day of July 2013. Andrew Saker Joint and Several Administrator of Drilling & Grouting Services Pty Ltd
Annexure 1
Administrators’ Remuneration Report
CORPORATIONS ACT 2001
Section 449E
DRILLING & GROUTING SERVICES PTY LTD (ADMINISTRATORS APPOINTED) (“THE COMPANY”)
009 457 087
REMUNERATION REPORT
Darren Weaver, Ben Johnson, and I have undertaken a proper assessment of this remuneration claim for our appointment as Joint and Several Administrators of the Company in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed in the conduct of the administration. The Administrators’ Remuneration Report, prepared pursuant to Section 449E of the Corporations Act 2001, takes the following format. Part A A1 Schedule of hourly rates and general guide to staff experience. A2 Tasks undertaken by the Administrators and remuneration calculation for the period 11 June
2013 to 30 June 2013 A3 Schedule of the Administrators’ anticipated tasks and remuneration estimate for the period 1
July 2013 to 16 July 2013 A4 Schedule of anticipated tasks and Administrators’ estimated prospective remuneration for the
period 17 July 2013 to 16 September 2013 A5 Where Liquidators are appointed, a schedule of the Liquidators’ anticipated tasks and
remuneration estimate from 17 July 2013 to the conclusion of the Liquidation A6 Resolutions to be put to creditors at the meeting convened for 16 July 2013 Part B B1 Administrators’ disbursements. B2 Summary of Receipts and Payments for the period 11 June 2013 to 8 July 2013. B3 Other creditor information on remuneration.
The Remuneration Report must be read in conjunction with the report to creditors dated 9 July 2013.
Page 2
PART A A1 SCHEDULE OF HOURLY RATES & GENERAL GUIDE TO STAFF EXPERIENCE
Title
Rates to 30 June
2013 ($)
Rates from 1
July 2013 ($)
Experience
Partner/Principal/ Appointee
580 595
The Partner/Appointee is a registered liquidator and member of the ICAA and, generally, the IPA, bringing specialist skills to the administration or insolvency task. For specific experience and other details of the appointee/s, please visit our website at www.ferrierhodgson.com
Director / Specialist
490
495
Generally, minimum of 12 years’ experience at least 2 years of which is to be at Manager level. University degree; member of the ICAA and, generally, the IPA, with deep knowledge and lengthy experience in relevant insolvency legislation and issues.
Senior Manager 440 455
Generally, more than 7 years’ experience with at least 2 years as a Manager. University degree; member of the ICAA and, generally, the IPA; very strong knowledge of relevant insolvency legislation and issues.
Manager 370 385
Generally, 5-7 years chartered accounting or insolvency management experience. University degree; member of the ICAA and, generally, the IPA; sound knowledge of relevant insolvency legislation and issues.
Assistant Manager
330 345
Generally, 4-6 years chartered accounting or insolvency management experience. University degree; member of the ICAA; completing IPAA Insolvency Education Program. Good knowledge of relevant insolvency legislation and issues.
Senior Analyst 285 295
Generally, 2-4 years chartered accounting or insolvency management experience. University degree; completing the ICAA’s CA, program. Good knowledge of basic insolvency legislation and issues.
Analyst 255 265 Generally, 2-3 years chartered accounting or insolvency management experience. University degree, ICAA’s CA program commenced.
Accountant 200 225
0 to 2 years’ experience. Has completed or substantially completed a degree in finance/accounting. Under supervision, takes direction from senior staff in completing administrative tasks.
Junior Accountant 120 140 0 – 1 years’ experience. Undertaking a degree part-time in finance/accounting. Under supervision, takes direction from senior staff in completing more complex administrative tasks.
Senior Secretary / Personal Assistant
170 180 Appropriate skills including machine usage.
Clerk 170 180 Completed schooling and plans to undertake further studies. Required to assist in administration and day to day field work under the supervision of more senior staff.
Notes:
1. The hourly rates are exclusive of GST.
2. The guide to staff experience is intended only as a general guide to the qualifications and experience of our staff engaged in the administration. Staff may be engaged under a classification that we consider appropriate for their experience.
3. Time is recorded and charged in six-minute increments.
4. Rates are subject to change from time to time. The hourly rates reflect the total cost of providing professional services and should not be compared to an hourly rate. See Part B1 for details of disbursements.
Page 3
A2. Tasks undertaken by the Administrators and remuneration calculation for the period
11 June 2013 to 30 June 2013 Based on the following tasks, the Administrators remuneration for the period 11 June 2013 to 30 June 2013 was $148,146 (exclusive of GST).
Task Area General Description Includes:
Assets 91.8 hours
$22,872
Sale of business as a going concern Preparing a Data Room Liaising with potential purchasers Internal meetings to discuss / review offers received
Plant and equipment Liaising with valuers, auctioneers and interested parties Reviewing asset listings and analysts
Assets subject to specific charges All tasks associated with realising charged assets
Debtors Correspondence with debtors Reviewing and assessing debtors ledgers
Stock Conducting stock takes Reviewing stock values and corresponding with valuers Liaising with purchasers
Other assets Tasks associated with realising other assets
Leasing Reviewing leasing documents Liaising with owners / lessors Tasks associated with issuing notices not to exercise property
rights
Creditors 127 hours $32,803
Creditor Enquiries Receive and follow up creditor enquiries via telephone and email Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Correspondence with members of the committee of creditors
Retention of title claims Receive initial notification of creditors’ intention to claim Provision of retention of title claim form to creditor Receive completed retention of title claim form Maintain retention of title file Meeting claimant on site to identify goods Adjudicate retention of title claim Forward correspondence to claimant notifying outcome of
adjudication
Secured creditor reporting Preparing reports to secured creditors Responding to secured creditor’s queries
Creditor reports/circulars Initial circular to creditors. Prepare report pursuant to section 439A of the Act.
Dealing with proofs of debt Receipting and filing POD’s when not related to a dividend Corresponding with OSR and ATO regarding POD’s not related
to a dividend
Meeting of Creditors Preparation of meeting notices, proxies and advertisements Forward notice of meeting to all known creditors Preparation of meeting file, including agenda, certificate of
postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting.
Preparation and lodgement of minutes of meetings with ASIC Respond to stakeholder queries and questions immediately
following meeting
Administration 177.1 hours
50,350
Correspondence General correspondence
Document maintenance/file review/checklist
Filing of documents File reviews Updating checklists
Bank account administration Preparing correspondence regarding opening and closing accounts
Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers
Insurance Identification of potential issues requiring attention of insurance specialists
Correspondence with Blue Broking regarding initial and ongoing insurance requirements
Reviewing insurance policies Correspondence with previous brokers
Page 4
Task Area General Description Includes:
ASIC Forms Preparing and lodging ASIC forms including 505. Correspondence with ASIC regarding statutory forms
ATO & other statutory reporting Notification of appointment
Planning / review Discussions regarding status/strategy of administration Planning and administration control
Employees 19.1 hours
$4,601
Employee enquiries
Review and prepare correspondence to creditors and their representatives via facsimile, email and post
Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Preparation of letters to employees advising of their entitlements
and options available Receive and prepare correspondence in response to employees
objections to leave entitlements
Calculation of entitlements Calculating employee entitlements Reviewing employee files and Company’s books and records Reconciling superannuation accounts Reviewing awards
Other employee issues Correspondence with Child Support Correspondence with Centrelink
Trade On 98.1 hours
$31,142
Trade On Management Liaising with suppliers Liaising with management and staff Attendance on site Authorising purchase orders Maintaining purchase order registry Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Liaising with superannuation funds regarding contributions,
termination of employees employment Liaising with OSR regarding payroll tax issues
Processing receipts and payments Entering receipt and payments into accounting system
Budgeting & financial reporting Reviewing company’s budgets and financial statements Preparing budgets and comparison of actual to budget Preparing weekly financial reports Finalising trading profit or loss position Meetings to discuss trading position
Investigation 16.0 hours
$6,379
Conducting investigation Collection of company books and records Reviewing company’s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of and enquiries into comparative financial
statements Preparation of deficiency statement Review of specific transactions and investigations into certain
transactions Preparation of investigation file
Page 5
A2 (cont) Tasks undertaken by the Administrators and remuneration calculation for the period 11 June 2013 to 30 June 2013.
Employee Position
Charge Rate
Total Assets Creditors Administration Employees Trade On Investigation
$ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hour
s $
Andrew Saker Partner
580
36.2
20,996
0.4
232
2.4
1,392
25.4
14,732
-
-
8.0
4,640
-
-
Darren Weaver Partner
580
0.5
290
-
-
0.2
116
0.3
174
-
-
-
-
-
-
Ben Johnson Partner
580
0.9
522
-
-
-
-
0.6
348
-
-
0.3
174
-
-
Andrew Smith Director
490
6.7
3,283
-
-
-
-
6.7
3,283
-
-
-
-
-
-
Sean Powell Senior Manager
440
12.5
5,500
-
-
-
-
-
-
-
-
-
-
12.5
5,500
Tom Birch Manager
370
0.4
148
-
-
-
-
0.4
148
-
-
-
-
-
-
Sean Holmes Assistant Manager
330
131.8
43,494
25.0
8,250
41.3
13,629
4.3
1,419
-
-
61.2
20,196
-
-
Dario Musulin Senior Analyst
285
23.2
6,612
5.1
1,454
6.7
1,910
11.4
3,249
-
-
-
-
-
-
Jonathan Hartman Senior Analyst
285
0.8
228
0.8
228
-
-
-
-
-
-
-
-
-
Dawn Murchison Senior Analyst
285
17.6
5,016
6.7
1,910
1.4
399
3.2
912
-
-
4.2
1,197
2.1
599
Darren Xu Analyst
255
3.8
969
-
-
0.7
179
2.8
714
0.1
26
0.2
51
-
-
Melanie Khoo Analyst
255
0.7
179
-
-
-
-
0.7
179
-
-
-
-
-
-
Nadia Thomas Analyst
255
47.7
12,164
0.7
179
5.8
1,479
26.3
6,707
14.1
3,596
0.8
204
-
-
Karen Quigley Analyst
255
0.2
51
-
-
-
-
0.2
51
-
-
-
-
-
Thomas Guthrie Accountant
200
105.5
21,100
53.1
10,620
23.0
4,600
7.7
1,540
0.3
60
21.4
4,280
-
-
Kieran Harding Accountant
200
13.8
2,760
-
-
-
-
12.8
2,560
-
-
-
1.0
200
Kinjal Vakil Accountant
200
51.0
10,200
-
-
14.4
2,880
36.6
7,320
-
-
-
-
-
-
Jerome Perera Accountant
200
52.5
10,500
-
-
31.1
6,220
14.4
2,880
4.6
920
2.0
400
0.4
80
Nirav Shah Accountant
200
5.8
1,160
-
-
-
-
5.8
1,160
-
-
-
-
-
Genevieve Caldera Senior Secretary
170
1.0
170
-
-
-
-
1.0
170
-
-
-
-
-
Jacqui Titlestad Senior Secretary
170
14.5
2,465
-
-
-
-
14.5
2,465
-
-
-
-
-
Page 6
Employee Position
Charge Rate
Total Assets Creditors Administration Employees Trade On Investigation
$ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hour
s $
Talia Newland Clerk 170 0.1 17 - - - - 0.1 17
-
- - -
-
-
Mitchell Seward Clerk 170 1.4 238
-
- - - - -
-
-
-
-
-
-
Amy Jamieson Clerk 170 0.5 85 - - - - 0.5 85 - - - - - -
Total 592.1 148,146 91.8 22,872 127.0 32,803 177.1 50,350 19.1 4,601 98.1 31,142 16.0 6,379
GST 14,815 2,287 3,280 5,035 460 3,114 638
TOTAL (inc GST) 162,961 25,159 36,083 55,385 5,061 34,256 7,016
Average Hourly Rate 280 249 258 284 241 317 399
Page 7
A3 Schedule of anticipated tasks and Administrators’ estimated prospective
remuneration for the period 1 July 2013 to 16 July 2013 Based on the following anticipated tasks, we estimate the Administrators’ fees for the above period to be $75,000 (exclusive of GST).
Task Area General Description Includes:
Assets $20,000
Sale of business as a going concern Preparing a Data Room Liaising with potential purchasers Internal meetings to discuss / review offers received
Plant and equipment Liaising with valuers, auctioneers and interested parties Reviewing asset listings and analysts
Assets subject to specific charges All tasks associated with realising charged assets
Debtors Correspondence with debtors Reviewing and assessing debtors ledgers
Stock Conducting stock takes Reviewing stock values and corresponding with valuers Liaising with purchasers
Other assets Tasks associated with realising other assets
Leasing Reviewing leasing documents Liaising with owners / lessors Tasks associated with issuing notices not to exercise property
rights
Creditors $22,000
Creditor Enquiries Receive and follow up creditor enquiries via telephone and email Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Correspondence with members of the committee of creditors
Retention of title claims Receive initial notification of creditors’ intention to claim Provision of retention of title claim form to creditor Receive completed retention of title claim form Maintain retention of title file Meeting claimant on site to identify goods Adjudicate retention of title claim Forward correspondence to claimant notifying outcome of
adjudication
Secured creditor reporting Preparing reports to secured creditors Responding to secured creditor’s queries
Creditor reports/circulars Circular to creditors. Prepare report pursuant to section 439A of the Act.
Dealing with proofs of debt Receipting and filing POD’s when not related to a dividend Corresponding with OSR and ATO regarding POD’s not related
to a dividend
Meeting of Creditors Preparation of meeting notices, proxies and advertisements Forward notice of meeting to all known creditors Preparation of meeting file, including agenda, certificate of
postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting.
Preparation and lodgement of minutes of meetings with ASIC Respond to stakeholder queries and questions immediately
following meeting
Administration $15,000
Correspondence General correspondence
Document maintenance/file review/checklist
Filing of documents File reviews Updating checklists
Bank account administration Preparing correspondence regarding opening and closing accounts
Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers
Insurance Identification of potential issues requiring attention of insurance specialists
Correspondence with Blue Broking regarding initial and ongoing insurance requirements
Reviewing insurance policies Correspondence with previous brokers
Page 8
Task Area General Description Includes:
ASIC Forms Preparing and lodging ASIC forms including 505. Correspondence with ASIC regarding statutory forms
ATO & other statutory reporting Notification of appointment
Planning / review Discussions regarding status/strategy of administration Planning and administration control
Employees $5,000
Employee enquiries
Review and prepare correspondence to creditors and their representatives via facsimile, email and post
Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Preparation of letters to employees advising of their entitlements
and options available Receive and prepare correspondence in response to employees
objections to leave entitlements
Calculation of entitlements Calculating employee entitlements Reviewing employee files and Company’s books and records Reconciling superannuation accounts Reviewing awards
Other employee issues Correspondence with Child Support Correspondence with Centrelink
Trade On $10,000
Trade On Management Liaising with suppliers Liaising with management and staff Attendance on site Authorising purchase orders Maintaining purchase order registry Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Liaising with superannuation funds regarding contributions,
termination of employees employment Liaising with OSR regarding payroll tax issues
Processing receipts and payments Entering receipt and payments into accounting system
Budgeting & financial reporting Reviewing company’s budgets and financial statements Preparing budgets and comparison of actual to budget Preparing weekly financial reports Finalising trading profit or loss position Meetings to discuss trading position
Investigation $3,000
Conducting investigation Collection of company books and records Reviewing company’s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of and enquiries into comparative financial
statements Preparation of deficiency statement Review of specific transactions and investigations into certain
transactions Preparation of investigation file
Page 9
A3 (cont) Schedule of anticipated tasks and Administrators’ estimated prospective remuneration for the period 1 July 2013 to 16 July 2013
Position
Charge Rate
Total Assets Creditors Administration Employees Trade On Investigation
$ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hour
s $
Partner
595
15.5
9,223
5.0
2,975
5.0
2,975
3.0
1,785 - -
2.0
1,190
0.5
298
Director / Specialist
495
2.0
990 - - - -
2.0
990 - -
- -
- -
Senior Manager
455
4.5
2,048 - - - - - - - -
- -
4.5
2,048
Manager
385
19.7
7,585
7.5
2,888
7.5
2,888
3.0
1,155 - -
- -
1.7
655
Assistant Manager
345
30.3
10,454
10.0
3,450
10.0
3,450
4.3
1,484
1.0
345
5.0
1,725
- -
Senior Analyst
295
31.3
9,234
4.5
1,328
10.0
2,950
8.0
2,360
2.0
590
6.8
2,006
- -
Analyst
265
48.0
12,720
10.0
2,650
12.0
3,180
10.0
2,650
7.0
1,855
9.0
2,385
- -
Accountant
225
76.7
17,247
20.0
4,500
23.7
5,328
13.0
2,925
8.0
1,800
12.0
2,694
- -
Junior Accountant
140
28.4
3,972
10.0
1,400
7.5
1,050
7.9
1,112
2.9
410 -
- -
Personal Assistant
180
5.0
900
2.0
360
1.0
180
2.0
360 - - -
- -
Clerk
180
3.5
630
2.5
450 - -
1.0
180 - -
- -
- -
Total
264.8
75,000
71.5
20,000
76.7
22,000
54.2
15,000
20.9
5,000
34.8
10,000
6.7
3,000
GST
7,500
2,000
2,200
1,500
500
1,000
300
TOTAL (incl. GST)
82,500
22,000
24,200
16,500
5,500
11,000
3,299
Average hourly rate
283
280
287
277
239
288
448
Page 10
A4 Schedule of anticipated tasks and Administrators’ estimated prospective remuneration for the period 17 July 2013 to 16 September 2013
Based on the following anticipated tasks, we estimate the Administrators’ fees for the above period to be $100,000 (exclusive of GST).
Task Area General Description Includes:
Assets $28,000
Sale of business as a going concern Preparing a Data Room Liaising with potential purchasers Internal meetings to discuss / review offers received
Plant and equipment Liaising with valuers, auctioneers and interested parties Reviewing asset listings and analysts
Assets subject to specific charges All tasks associated with realising charged asset
Debtors Correspondence with debtors Reviewing and assessing debtors ledgers
Stock Conducting stock takes Reviewing stock values and corresponding with valuers Liaising with purchasers
Other assets Tasks associated with realising other assets
Leasing Reviewing leasing documents Liaising with owners / lessors Tasks associated with issuing notices not to exercise property
rights
Creditors $25,000
Creditor Enquiries Receive and follow up creditor enquiries via telephone and email Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Correspondence with members of the committee of creditors
Retention of title claims Receive initial notification of creditors’ intention to claim Provision of retention of title claim form to creditor Receive completed retention of title claim form Maintain retention of title file Meeting claimant on site to identify goods Adjudicate retention of title claim Forward correspondence to claimant notifying outcome of
adjudication
Secured creditor reporting Preparing reports to secured creditors Responding to secured creditor’s queries
Creditor reports/circulars Circular to creditors.
Dealing with proofs of debt Receipting and filing POD’s when not related to a dividend Corresponding with OSR and ATO regarding POD’s not related
to a dividend
Meeting of Creditors Preparation of meeting notices, proxies and advertisements Forward notice of meeting to all known creditors Preparation of meeting file, including agenda, certificate of
postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting.
Preparation and lodgement of minutes of meetings with ASIC Respond to stakeholder queries and questions immediately
following meeting Preparation of Second Administrators’ Report under s439A
Administration $20,000
Correspondence General correspondence
Document maintenance/file review/checklist
Filing of documents File reviews Updating checklists
Bank account administration Preparing correspondence regarding opening and closing accounts
Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers
Insurance Identification of potential issues requiring attention of insurance specialists
Correspondence with Blue Broking regarding initial and ongoing insurance requirements
Reviewing insurance policies Correspondence with previous brokers
Page 11
Task Area General Description Includes:
ASIC Forms Preparing and lodging ASIC forms including 505. Correspondence with ASIC regarding statutory forms
ATO & other statutory reporting Notification of appointment
Planning / review Discussions regarding status/strategy of administration Planning and administration control
Employees $7,000
Employee enquiries
Review and prepare correspondence to creditors and their representatives via facsimile, email and post
Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Preparation of letters to employees advising of their entitlements
and options available Receive and prepare correspondence in response to employees
objections to leave entitlements
Calculation of entitlements Calculating employee entitlements Reviewing employee files and Company’s books and records Reconciling superannuation accounts Reviewing awards
Other employee issues Correspondence with Child Support Correspondence with Centrelink
Trade On $15,000
Trade On Management Liaising with suppliers Liaising with management and staff Attendance on site Authorising purchase orders Maintaining purchase order registry Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Liaising with superannuation funds regarding contributions,
termination of employees employment Liaising with OSR regarding payroll tax issues
Processing receipts and payments Entering receipt and payments into accounting system
Budgeting & financial reporting Reviewing company’s budgets and financial statements Preparing budgets and comparison of actual to budget Preparing weekly financial reports Finalising trading profit or loss position Meetings to discuss trading position
Investigation $5,000
Conducting investigation Collection of company books and records Reviewing company’s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of and enquiries into comparative financial
statements Preparation of deficiency statement Review of specific transactions and investigations into certain
transactions Preparation of investigation file
Page 12
A4 (cont) Schedule of anticipated tasks and Administrators’ estimated prospective remuneration for the period 1 July 2013 to 16 September 2013
Position
Charge Rate
Total Assets Creditors Administration Employees Trade On Investigation
$ Hours $ Hour
s $ Hours $ Hours $ Hours $ Hours $ Hour
s $
Partner
595 17.0 10,115 5.0 2,975 5.0 2,975 3.0 1,785 - - 3.0 1,785 1.0 595
Director / Specialist
495 2.0 990 - - - - 2.0 990 - - - - - -
Senior Manager
455 6.5 2,985 - - - - - - - - - - 6.5 2,958
Manager
385 25.3 9,725 10.0 3,850 7.5 2,888 4.0 1,540 - - - - 3.8 1,448
Assistant Manager
345 36.0 12,420 12.0 4,140 12.0 4,140 5.0 1,725 1.0 345 6.0 2,070 - -
Senior Analyst
295 40.0 11,807 12.1 3,564 12.0 3,540 8.0 2,360 1.9 574 6.0 1,770 - -
Analyst
265 68.4 18,128 15.0 3,971 15.8 4,190 16.8 4,460 5.8 1,531 15.0 3,975 - -
Accountant
225 100.7 22,653 25.0 5,625 23.7 5,328 20.0 4,500 14.0 3,150 18.0 4,050 - -
Junior Accountant
140 66.7 9,344 22.1 3,094 10.0 1,400 15.0 2,100 10.0 1,1400 9.6 1,350 - -
Personal Assistant
180 6.9 1,242 1.9 342 3.0 540 2.0 360 - - - - - -
Clerk
180 3.4 618 2.4 438 - - 1.0 180 - - - - - -
Total 372.9 100,000 105.5 28,000 89.0 25,000 76.8 20,000 32.7 7,000 57.6 15,000 11.3 5,000
GST
10,000 2,800 2,500 2,000 700 1,500 500
TOTAL (incl. GST) 110,000 30,800 27,500 22,000 7,700 16,500 5,500
Average hourly rate 268 265 281 260 214 260 444
Page 13
A5 Schedule of anticipated tasks and Liquidators’ estimated prospective remuneration for
the period 17 July 2013 the conclusion of the Liquidation Based on the following anticipated tasks of the Liquidation, we estimate the Liquidators’ fees to be $250,000 (exclusive of GST).
Task Area General Description Includes:
Assets $75,000
Plant and equipment Liaising with valuers, auctioneers and interested parties Reviewing asset listings and analysts Sale of plant and equipment
Assets subject to specific charges All tasks associated with realising charged asset s
Debtors Correspondence with debtors Reviewing and assessing debtors ledgers
Stock Conducting stock takes Reviewing stock values and corresponding with valuers Liaising with purchasers
Other assets Tasks associated with realising other assets
Leasing Reviewing leasing documents Liaising with owners / lessors Tasks associated with issuing notices not to exercise property
rights
Creditors $50,000
Creditor Enquiries Receive and follow up creditor enquiries via telephone and email Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Correspondence with members of the committee of creditors
Retention of title claims Receive initial notification of creditors’ intention to claim Provision of retention of title claim form to creditor Receive completed retention of title claim form Maintain retention of title file Meeting claimant on site to identify goods Adjudicate retention of title claim Forward correspondence to claimant notifying outcome of
adjudication
Secured creditor reporting Preparing reports to secured creditors Responding to secured creditor’s queries
Creditor reports/circulars Circular to creditors.
Dealing with proofs of debt Receipting and filing POD’s when not related to a dividend Corresponding with OSR and ATO regarding POD’s not related
to a dividend.
Meeting of Creditors Preparation of meeting notices, proxies and advertisements Forward notice of meeting to all known creditors Preparation of meeting file, including agenda, certificate of
postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting.
Preparation and lodgement of minutes of meetings with ASIC Respond to stakeholder queries and questions immediately
following meeting
Administration $50,000
Correspondence General correspondence
Document maintenance/file review/checklist
Filing of documents File reviews Updating checklists
Bank account administration Preparing correspondence regarding opening and closing accounts
Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers
Insurance Identification of potential issues requiring attention of insurance specialists
Correspondence with Blue Broking regarding initial and ongoing insurance requirements
Reviewing insurance policies Correspondence with previous brokers
Page 14
Task Area General Description Includes:
ASIC Forms Preparing and lodging ASIC forms including 505. Correspondence with ASIC regarding statutory forms
ATO & other statutory reporting Notification of appointment
Planning / review Discussions regarding status/strategy of administration Planning and administration control
Finalisation Notifying ATO of finalisation Cancelling ABN / GST / PAYG registration Completing checklists Finalising WIP
Books and records / storage Dealing with records in storage Sending job files to storage
Employees $25,000
Employee enquiries
Review and prepare correspondence to creditors and their representatives via facsimile, email and post
Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to creditors and their
representatives via facsimile, email and post Preparation of letters to employees advising of their entitlements
and options available Receive and prepare correspondence in response to employees
objections to leave entitlements
Calculation of entitlements Calculating employee entitlements Reviewing employee files and Company’s books and records Reconciling superannuation accounts Reviewing awards
Other employee issues Correspondence with Child Support Correspondence with Centrelink
Investigation $25,000
Conducting investigation Collection of company books and records Reviewing company’s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of and enquiries into comparative financial
statements Preparation of deficiency statement Review of specific transactions and investigations into certain
transactions Preparation of investigation file
Dividend $25,000
Processing proofs of debt Preparation of correspondence to potential creditors inviting lodgement of proofs of debt
Receipt of proofs of debt Maintain proof of debt register Adjudicating proofs of debt Request further information from claimants regarding proofs of
debt Preparation of correspondence to claimant advising outcome of
adjudication
Dividend procedures Preparation of correspondence to creditors advising of intention to declare dividend
Advertisement of intention to declare dividend Obtain clearance from ATO to allow distribution of Company’s
assets Preparation of dividend calculations Preparation of correspondence to creditors announcing
declaration of dividend Advertise announcement of dividend Preparation of distribution Preparation of dividend file Preparation of payment vouchers to pay dividend Preparation of correspondence to creditors enclosing payment of
dividend
Page 15
A5 (cont) Schedule of anticipated tasks and Liquidators’ estimated prospective remuneration for the period 17 July 2013 the conclusion of the Liquidation
Position Charge
Rate Total Assets Creditors Administration Employees Investigation Dividend
$ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $
Partner
595
23.5
13,983
14.0
8,330
5.0
2,975
3.0
1,785
0.5
298
0.5
298
0.5
298
Director / Specialist
495
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Senior Manager
455
7.5
3,413
-
-
-
-
-
-
1.5
683
4.5
2,048
1.5
683
Manager
385
70.2
27,011
34.5
13,266
13.0
5,005
13.0
5,005
4.0
1,540
1.7
655
4.0
1,540
Assistant Manager
345
137.8
47,541
50.0
17,250
12.5
4,313
12.5
4,313
19.4
6,693
24.0
8,280
19.4
6,693
Senior Analyst
295
185.6
54,749
40.0
11,800
45.6
13,449
34.0
10,030
24.0
7,080
18.0
5,310
24.0
7,080
Analyst
265
183.8
48,716
48.0
12,720
41.9
11,104
41.9
11,113
18.0
4,770
16.0
4,240
18.0
4,770
Accountant
225
163.2
36,710
37.0
8,325
32.2
7,235
51.0
11,475
14.0
3,150
15.0
3,375
14.0
3,150
Junior Accountant
140
117.4
16,437
18.5
2,589
41.0
5,740
41.0
5,740
5.6
787
5.7
795
5.6
787
Personal Assistant
180
8.0
1,440
4.0
720
1.0
180
3.0
540
-
-
-
-
-
-
Clerk
180
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total 896.9 250,000 7.0 75,000 192.1 50,000 199.4 50,000 87.0 25,000 85.4 25,000 87.0 25,000
GST 25,000 7,500 5,000 5,000 2,500 2,500 2,500
TOTAL (incl. GST) 275,000 82,499 55,000 55,000 27,500 27,500 27,500
Average hourly rate 279 10,714 260 251 287 293 287
Page 16
A6 Resolutions to be put to creditors at the meeting convened for 16 July 2013. At the meeting of creditors convened for 16 July 2013, creditors will be asked to consider the following resolution: “That the remuneration of the Administrators, as set out in the Administrators’ remuneration report dated 9 July 2013 for the period 11 June 2013 to 30 June 2013 in the sum of $148,146 exclusive of GST be approved” “That a provision for the Administrators’ future remuneration for the period 1 July 2013 to 16 July 2013 in the amount of $75,000 exclusive of GST be approved, but subject to upward or downward adjustment by resolution of creditors.” If the convening period for the second creditors’ meeting is extended to a date not exceeding 45 business days: “That a provision for the Administrators’ future remuneration for the period 17 July 2013 to 16 September 2013 in the amount of $100,000 exclusive of GST be approved but subject to upward or downward adjustment by resolution of creditors.” If the company is placed into Liquidation: “That a provision for the Liquidators’ future remuneration in the amount of $250,000 exclusive of GST be approved subject to upward or downward adjustment by resolution of creditors / committee of inspection and that the Liquidators be authorised to draw their fees monthly in arrears.”
Page 17
PART B B1 Administrators’ Disbursements Disbursements are divided into three types D1, D2 and D3. D1 Disbursements are all externally provided professional services and are recovered at cost. An
example of a D1 disbursement is legal fees. D2 Disbursements are externally provided non-professional costs such as travel, accommodation
and search fees. D2 disbursements are recovered at cost. D3 Disbursements are internally provided non-professional costs such as photocopying and
document storage. D3 disbursements are charged at cost except for photocopying, printing and telephone calls which are charged at a rate which is intended to recoup both variable and fixed costs. The relevant rates are set out below.
Disbursements Charges
(Excluding GST)
Advertising At cost
Couriers At Cost
Mileage Reimbursements $0.67 per kilometre
Photocopying (colour) $0.50 per page
Photocopying (mono) $0.20 per page
Photocopying (outsourced) At cost
Printing (colour) $0.50 per page
Printing (mono) $0.20 per page
Printing (outsourced) At cost
Postage At cost
Searches At cost
Storage and Storage Transit At cost
Telephone Calls At cost
Page 18
Disbursements incurred by the Administrators for the period 11 June 2013 to 8 July 2013 in the amount of $2,301.40 (exclusive of GST) are set out in the below schedule.
Disbursements Charges (Excluding GST)
$
Photocopying 31.00
Printing 2,054.70
Postage 215.70
Total 2,301.40
Creditor approval for the payment of disbursements is not required, however the Administrators must account to creditors. Creditors have the right to question the incurring of disbursements and can challenge disbursements in court. B2 Summary of Receipts and Payments for the period 11 June 2013 to 8 July 2013.
Receipts and Payments Summary
Amount $
RECEIPTS
bf Pre-Appointment Debtors 427,488.03
Sale of Plant & Equipment 251,755.23
Sale of Consumables 110,000.00
Total Receipts 789,243.26
PAYMENTS
Wages & Salaries (121,132.31)
Site Allowances (1,800.00)
Employee Expense Reimbursements (2,781.86)
Professional Fees (29,734.00)
Valuation Costs (22,000.00)
Total Payments (145,453.17)
Cash at Bank as at 8 July 2013 643,709.09
B3 Other creditor information on remuneration The partners of Ferrier Hodgson are, generally, members of the Insolvency Practitioners Association of Australia. Ferrier Hodgson follows the IPA Code of Professional Practice. A copy of the Code of Professional Practice may be found on the IPA website at www.ipaa.com.au An information sheet concerning approval of remuneration in external administrations can also be obtained from the IPA website.
Page 19
If you require further detail of our remuneration claim, or have other queries, please contact Kinjal Vakil of this office prior to the creditors’ meeting. Dated this 9th day of July 2013 Andrew Saker Joint and Several Administrator of Drilling & Grouting Services Pty Ltd
Annexure 2
IPA - Creditor Information Sheet – Offences, Recoverable Transactions and Insolvent Trading
Insolvency Practitioners Association of Australia ABN 28 002 472 362 33 Erskine Street, GPO Box 3921, Sydney NSW 2001 P+61 2 9290 5700 F +61 2 9290 2820 www.ipaa.com.au
Creditor Information Sheet
Offences, Recoverable transactions and Insolvent Trading
Offences A summary of offences that may be identified by the administrator:
180 Failure by officer to exercise a reasonable degree of care and diligence in the exercise of his powers and the discharge of his duties.
181 Failure to act in good faith.
182 Making improper use of position as an officer or employee, to gain, directly or indirectly, an advantage.
183 Making improper use of information acquired by virtue of his position.
184 Reckless or intentional dishonesty in failing to exercise duties in good faith for proper purpose. Use of position or information dishonestly to gain advantage or cause detriment.
206A Contravening an order against taking part in management of a corporation.
206A, B Taking part in management of corporation while being an insolvent under an administration.
206A, B Acting as a director or promoter or taking part in the management of a company within five years after conviction or imprisonment for various offences.
209(3) Dishonest failure to observe requirements on making loans to directors or related companies.
254T Paying dividends except out of profits.
286 Failure to keep proper accounting records.
312 Obstruction of auditor.
314-7 Failure to comply with requirements for financial statement preparation.
437C Performing or exercising a function or power as officer while a company is under administration.
437D(5) Unauthorised dealing with company's property during administration.
438B(4) Failure by directors to assist administrator, deliver records and provide information.
438C(5) Failure to deliver up books and records to administrator.
590 Failure to disclose property, concealed or removed property, concealed a debt due to the company, altered books of the company, fraudulently obtained credit on behalf of the company, material omission from Report as to Affairs or false representation to creditors.
Voidable Transactions
Preferences
A preference is a transaction such as a payment between the company and one or more of its creditors, in which the creditor receiving the payment is preferred over the general body of creditors. The relevant time period is six months before the commencement of the liquidation. The company must have been insolvent at the time of the transaction, or become insolvent as a result of the transaction.
Where a creditor receives a preferred payment, the payment is voidable as against a liquidator and is liable to be paid back to the liquidator subject to the creditor being able to successfully maintain any of the defences available to the creditor under either the Corporations Act. Uncommercial Transaction
An uncommercial transaction is one that it may be expected that a reasonable person in the company's circumstances would not have entered into having regard to: • the benefit or detriment to the company; • the respective benefits to other parties; and, • any other relevant matter.
To be voidable, an uncommercial transaction must have occurred during the two years before the liquidation. However, if a related entity is a party to the transaction, the time period is four years and if the intention of the transaction is to defeat creditors, the time period is ten years.
Insolvency Practitioners Association of Australia Creditor Information Sheet s439A report (2) Page 2
The company must have been insolvent at the time of the transaction, or become insolvent as a result of the transaction. Unfair Loan
A loan is unfair if and only if the interest was extortionate when the loan was made or has since become extortionate. There is no time limit on unfair loans – they only have to have been entered into any time on or before the day when the winding up began. Arrangements to avoid employee entitlements
If an employee suffers loss because a person (including a director) enters into an arrangement or transaction to avoid the payment of employee entitlements, the liquidator or the employee may seek to recover compensation from that person. It will only be necessary to satisfy the court that there was a breach on the balance of probabilities. There is no time limit on when the transaction occurred. Unreasonable payments to directors
Liquidators have the power to reclaim "unreasonable payments" made to directors by companies prior to liquidation. The provision relates to transactions made to, on behalf of, or for the benefit of, a director or close associate of a director. To fall within the scope of the section, the transaction must have been unreasonable, and have been entered into during the 4 years leading up to a company's liquidation, regardless of its solvency at the time the transaction occurred. Voidable charges
Certain charges are voidable by a liquidator: • Floating charge created with six months of the liquidation unless it secures a subsequent advance; • Unregistered charges; and • Charges in favour of related parties who attempt to enforce the charge within 6 months of its creation. Insolvent Trading
In the following circumstances, directors may be personally liable for insolvent trading by the company: • a person is a director at the time a company incurs a debt; • the company is insolvent at the time of incurring the debt or becomes insolvent because of incurring the
debt; • at the time the debt was incurred, there were reasonable grounds to suspect that the company was
insolvent; • the director was aware such grounds for suspicion existed; and • a reasonable person in a like position would have been so aware.
The law provides that the liquidator, and in certain circumstances the creditor who suffered the loss, may recover from the director, an amount equal to the loss or damage suffered. Similar provisions exist to pursue holding companies for debts incurred by their subsidiaries.
A defence is available under the law where the director can establish: • there were reasonable grounds to expect that the company was solvent and they actually did so
expect; • they did not take part in management for illness or some other good reason; or, • they took all reasonable steps to prevent the company incurring the debt.
The proceeds of any recovery for insolvent trading by a liquidator are available for distribution to the unsecured creditors before the secured creditors. Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances.
Annexure 3
Registered Chargeholders
Secured Party Registration No. Collateral Type
Collateral Description
Proceeds Claimed
PMSI
ATF Services Pty Ltd
201201060022024 Commercial property
Other Goods Yes Yes
ATF Services Pty Ltd
201202030025659 Commercial property
Other Goods Yes Yes
Atlas Specialty Metals Pty Ltd
201202110026120 Commercial property
Other Goods Yes Yes
Australia And New Zealand Banking Group Limited
201112290057596 Commercial property
All Present and After Acquired Property No Exceptions
N/A N/A
Australia And New Zealand Banking Group Limited
201208150074873 Commercial property
Other Goods Yes No
Australia And New Zealand Banking Group Limited
201208150074524 Commercial property
Motor Vehicle Yes No
Australia And New Zealand Banking Group Limited
201208150074613 Commercial property
Motor Vehicle Yes No
Australia And New Zealand Banking Group Limited
201203050010181 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201305280055617 Commercial property
Motor Vehicle Yes No
BOQ Equipment Finance Limited
201112111562091 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112112122614 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112112122874 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
MR0FU29G804006634 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112111562091 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112111562268 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112100971349 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112111256480 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201112104632960 Unknown Property
Motor Vehicle No No
BOQ Equipment Finance Limited
201203020044027 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201208030046631 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201208030046649 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201208030046654 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201208030046665 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201209210066920 Commercial property
Motor Vehicle Yes Yes
BOQ Equipment Finance Limited
201205010025391 Commercial property
Motor Vehicle Yes No
BOQ Equipment Finance Limited
201205010025406 Commercial property
Motor Vehicle Yes No
BOQ Equipment Finance Limited
201205010025410 Commercial property
Motor Vehicle Yes No
BOQ Equipment 201205010025423 Commercial Motor Vehicle Yes No
Secured Party Registration No. Collateral Type
Collateral Description
Proceeds Claimed
PMSI
Finance Limited property
BP Australia Pty Ltd
201201101152267 Commercial property
Other Goods Yes Yes
Capital Finance Australia Limited
201112212770446 Commercial property
Other Goods Yes No
Castrol Australia Pty Limited
201201101177733 Commercial property
Other Goods Yes Yes
Caterpillar Financial Australia Limited
201112202666966 Commercial property
Motor Vehicle Yes Yes
Caterpillar Financial Australia Limited
201112202648371 Commercial property
Motor Vehicle Yes Yes
Cevol Industries Pty. Limited
201207100017718 Commercial property
Other Goods Yes Yes
Coates Hire Operations Pty Limited
201112201707573 Commercial property
Motor Vehicle Yes Yes
Coates Hire Operations Pty Limited
201112201707671 Commercial property
Other Goods Yes Yes
Energy Power Systems Australia Pty. Limited.
201202020010432 Commercial property
Other Goods Yes Yes
Energy Power Systems Australia Pty. Limited.
201202020010534 Commercial property
Other Goods Yes Yes
Energy Power Systems Australia Pty. Limited.
201202280069068 Commercial property
Other Goods Yes Yes
Energy Power Systems Australia Pty. Limited.
201202280069081 Commercial property
Motor Vehicle Yes Yes
Enviroclean (WA) Pty Ltd
201209060085419 Commercial property
Other Goods Yes No
Freo Group Limited
201201060118913 Commercial property
Other Goods Yes Yes
GE Commercial Pty Ltd
201302010032606 Commercial property
ChattelPaper Yes No
GE Commercial Pty Ltd
201302010032610 Commercial property
All Present and After Acquired Property No Exceptions
No No
GE Commercial Pty Ltd
201302010039093 Commercial property
Motor Vehicle Yes No
GE Commercial Pty Ltd
201302010056111 Commercial property
Other Goods Yes No
Kennards Hire Pty Limited
201201051235905 Commercial property
Other Goods Yes Yes
Liebherr-Australia Pty. Ltd.
201209270019933 Commercial property
Other Goods Yes Yes
Macquarie Bank Limited
201206180086551 Commercial property
Motor Vehicle Yes Yes
Macquarie Bank Limited
201206180086567 Commercial property
Motor Vehicle Yes Yes
Macquarie Leasing Pty Ltd
201205260009140 Commercial property
Other Goods Yes No
Macquarie Leasing Pty Ltd
201112104645165 Unknown Property
Motor Vehicle No No
Mercedes-Benz Financial Services
201112092325227 Unknown Property
Motor Vehicle No No
Secured Party Registration No. Collateral Type
Collateral Description
Proceeds Claimed
PMSI
Australia Pty Ltd
Mercedes-Benz Financial Services Australia Pty Ltd
201205010070560 Commercial property
Motor Vehicle Yes Yes
Metal Manufactures Limited
201202280093306 Commercial property
Other Goods Yes Yes
MTU Detroit Diesel Australia Pty Limited
201202200022528 Commercial property
Other Goods Yes Yes
National Australia Bank Limited
201202030164529 Commercial property
Other Goods No No
National Australia Bank Limited
201202080289282 Commercial property
Motor Vehicle Yes Yes
National Australia Bank Limited
201202100325495 Commercial property
Other Goods Yes Yes
National Australia Bank Limited
201212200065564 Commercial property
Motor Vehicle Yes No
National Australia Bank Limited
201212200065555 Commercial property
Motor Vehicle Yes No
National Australia Bank Limited
201212200040143 Commercial property
Motor Vehicle Yes No
National Australia Bank Limited
201212200039425 Commercial property
Motor Vehicle Yes No
National Australia Bank Limited
201201090399841 Commercial property
Other Goods Yes No
National Australia Bank Limited
201112091104560 Unknown Property
Motor Vehicle No No
National Australia Bank Limited
201201090593067 Commercial property
Other Goods Yes No
National Australia Bank Limited
201201090612973 Commercial property
Other Goods Yes No
P.P.I. Corporation Pty. Ltd.
201201030000915 Commercial property
Other Goods Yes Yes
Resource Equipment Ltd
201202220061500 Commercial property
Other Goods Yes Yes
RYCO Hydraulics Pty Ltd
201204030055026 Commercial property
Other Goods Yes Yes
Sanwa Pty Ltd 201204180071807 Commercial property
Other Goods Yes No
SKF Bearing Supplies Pty Ltd
201204190074048 Commercial property
Other Goods Yes Yes
St. George Finance Limited
201112310050059 Commercial property
All Present and After Acquired Property No Exceptions
N/A N/A
Totalrubber Ltd 201206280053579 Commercial property
Other Goods Yes Yes
Tru Blu Hire Australia Pty Ltd
201301160018630 Commercial property
Other Goods Yes Yes
Tru Blu Hire Australia Pty Ltd
201301160045082 Commercial property
Motor Vehicle Yes Yes
Westpac Banking Corporation
201201100432222 Commercial property
Motor Vehicle Yes No
Westpac Banking Corporation
201201100488007 Commercial property
Other Goods Yes No
Westpac Banking Corporation
201201100491872 Commercial property
Other Goods Yes No
Westpac Banking Corporation
201211210117132 Commercial property
All Present and After Acquired Property No
Yes Yes
Secured Party Registration No. Collateral Type
Collateral Description
Proceeds Claimed
PMSI
Exceptions
Westpac Banking Corporation
201302150056743 Commercial property
All Present and After Acquired Property No Exceptions
Yes No
Westpac Banking Corporation
201112200693667 Commercial property
All Present and After Acquired Property No Exceptions
N/A N/A
Westpac Banking Corporation
201112102242913 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112102243014 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112102246693 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112102246798 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112102246906 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101812916 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101812985 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101813062 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101813101 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101813418 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201112101813494 Unknown Property
Motor Vehicle No No
Westpac Banking Corporation
201201100430514 Commercial property
Motor Vehicle Yes No
Westpac Banking Corporation
201201100430567 Commercial property
Motor Vehicle Yes No
Westpac Banking Corporation
201201100432884 Commercial property
Motor Vehicle Yes No
Westpac Banking Corporation
201201100434376 Commercial property
Motor Vehicle Yes No
Westpac Banking Corporation
201112092214252 Commercial property
Motor Vehicle No No
Westpac Banking Corporation
201208210028835 Commercial property
Motor Vehicle Yes Yes