STRICTLY PRIVATE AND CONFIDENTIAL - Deloitte …...Opinion • It is our opinion that it would not be in the creditors’ best interests for the Administration of the Companies to

STRICTLY PRIVATE AND CONFIDENTIAL

P.P.B. & Associates Pty Ltd (Administrators Appointed) and

Lightstorm Holdings Pty Ltd (Administrators Appointed)

t di G b k D illitrading as Grovebrook Drilling

Report to Creditors pursuant to section 439A of the Corporations Act 2001

29 October 200929 October 2009

©2009 Deloitte Touche Tohmatsu

Grovebrook Drilling Report to Creditors 29 October 2009

Contents Page

1 Introduction 7

2 B k d 112 Background 11

3 Conduct of administration 13

4 Historical financial statement analysis 14

5 Reasons for failure 16

6 Investigations 17

7 Liquidation 24q

8 Alternatives available to creditors 27

9 Administrators opinion for PPB 28

10 Administrators opinion for Lightstorm 2910 Administrators opinion for Lightstorm 29

Appendix A: Form 529 – Notices of meetings 30

Appendix B: Form 532 – Appointment of proxy forms 31

Appendix C: Informal proof of debts 32

Appendix D: Remuneration reports 33

©2009 Deloitte Touche Tohmatsu 2


Definitions

$ Australian dollars(the) Act Corporations Act 2001 (Cth)Administrators or ‘we’ Gary Doran and Timothy Norman Joint and Several Voluntary Administrators of P P B & Associates Pty LtdAdministrators or we Gary Doran and Timothy Norman, Joint and Several Voluntary Administrators of P.P.B. & Associates Pty Ltd

(Administrators Appointed) and Lightstorm Holdings Pty Ltd (Administrators Appointed)ASIC Australian Securities and Investments CommissionATO Australian Taxation Office(the) Business Grovebrook Drilling (operated by P.P.B. & Associates Pty Ltd (Administrators Appointed))C itt C itt f C dit f P P B & A i t Pt Ltd (Ad i i t t A i t d)Committee Committee of Creditors of P.P.B. & Associates Pty Ltd (Administrators Appointed) (the) Companies or (the) Group P.P.B. & Associates Pty Ltd (Administrators Appointed) and/or Lightstorm Holdings Pty Ltd (Administrators

Appointed) trading as Grovebrook Drilling (the) Court Supreme Court of Western AustraliaDIRRI Declaration of Independence, Relevant Relationships and Indemnities Deloitte or DTT Deloitte Touche TohmatsuDOCA Deed of Company ArrangementEBIT Earnings Before Interest and TaxationEBITDA Earnings Before Interest, Taxation, Depreciation and AmortisationERV Estimated Realisable ValueFYXX Financial year ended 30 June 20XXGEERS General Employee Entitlements & Redundancy SchemeGFC Global Financial CrisisGP Gross ProfitGolden West Golden West Resources LimitedGolden West Golden West Resources LimitedGST Goods and Services TaxationGregsons Gregsons Auctioneers and Valuers “k” ThousandLightstorm Lightstorm Holdings Pty Ltd (Administrators Appointed) LVR Loan to Value Ratio


LVR Loan to Value Ratio“m” MillionManagement Together Paul Doropoulos (Director) and Lee Robert (Bob) Griffiths (General Manager)


Definitions

Monarch Monarch Gold Mining Limited (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) and its subsidiaries including Davyhurst Gold Pty Ltd (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement)Company Arrangement)

nab National Australia Bank Limited NPAT Net Profit After TaxationNPBT Net Profit Before TaxationPAYG Pay As You Go TaxationPPB P P B & A i t Pt Ltd (Ad i i t t A i t d)PPB P.P.B. & Associates Pty Ltd (Administrators Appointed) PPE Property, Plant and EquipmentRATA Report As To AffairsSmith Broughton Smith Broughton Industrial Auctioneers St George St George Bank LimitedWST Western Standard Time Westpac Westpac Banking CorporationYTD10 Financial Year To Date – 1 July 2009 to 2 October 2009



Executive summary

Appointment• On 2 October 2009, Gary Doran and Timothy Norman of Deloitte were appointed as Joint and Several Voluntary Administrators of PPB and

Lightstorm Holdings together know as “the Group” pursuant to section 436C of the Corporations ActLightstorm Holdings, together know as the Group , pursuant to section 436C of the Corporations Act. • The first meeting of creditors was held on 14 October 2009 where our appointment as Voluntary Administrators was confirmed and a committee of

creditors of PPB was formed. Trade on and sale of Business• Following our appointment, we commenced an urgent analysis of the Group’s financial position including an assessment of each of PPB and

Lightstorm In attempting to preserve value in the assets for creditors we continued to trade the business and immediately applied to Court forLightstorm. In attempting to preserve value in the assets for creditors we continued to trade the business and immediately applied to Court for consent to borrow funds to pay outstanding employee wages. As as result, we were able to pay approximately $37,000 of outstanding wages.

• We sought expressions of interest for the sale of whole or part of the Group’s business including the opportunity for interested parties to submit restructure proposals/equity injections for the business.

• Subsequent to our review of the Group’s operations and financial position, it was determined that it was in the best interests of creditors, given the uncertainty of the Group’s drilling contracts and the risk of continuing to trade, to cease trading the business effective 14 October 2009. y p g g , g

• Fourteen parties expressed interest in the purchase of all or part of the business. Of these, two have put forward offers to purchase the business which are currently being evaluated. We expect to finalise this evaluation and select the preferred offer prior to the second meeting of creditors on 6 November 2009.

Investigation• In our opinion, the Group's failure was caused by the deterioration of the Group’s financial position resulting from the purchase of two new drill rigs p p y p p g p g

and support equipment in June to November 2008. It relied heavily on borrowings to fund the equipment purchases. The delays/terminations of a number of key contracts, primarily as a result of the impact of the GFC, meant that the Group did not have sufficient cash flow to service its debt and pay its creditors as and when they became due and payable.

• Our investigations into the affairs of the Group, indicates that there may be a number of recoverable claims available to a Liquidator of the Group including potential insolvent trading claims against the Directors for approximately $500,000 and potential claims against a number of creditors for preferential pa ments of appro imatel $390 000 We note that the Liq idator o ld need to in estigate all potential claims and an defences inpreferential payments of approximately $390,000. We note that the Liquidator would need to investigate all potential claims and any defences in further detail.

Return to creditors• In a liquidation scenario, on a pessimistic basis, we estimate employees will receive a dividend of approximately 74 cents in the dollar on their

outstanding entitlements in addition to the outstanding wages that we paid after our appointment. On an optimistic basis, employees may receive up to 100 cents in the dollar however this will depend on future recoveries that may be made by the Liquidators


to 100 cents in the dollar, however this will depend on future recoveries that may be made by the Liquidators. • We estimate that the return to unsecured creditors of PPB, on an optimistic basis, will be no more than 24 cents in the dollar and will depend on

successful recoveries being made by the Liquidators.• It is unlikely that there will be any amounts available for distribution to Lightstorm’s unsecured creditors.


Executive summary

Opinion• It is our opinion that it would not be in the creditors’ best interests for the Administration of the Companies to end because they are insolvent. • We note that a DOCA has not been proposed for either PPB or Lightstorm• We note that, a DOCA has not been proposed for either PPB or Lightstorm. • Therefore, we recommend that creditors vote in favour of winding up both PPB and Lightstorm as both are insolvent and a Deed of

Company Arrangement (“DOCA”) has not been proposed.

Second meeting of creditorsW i ti th t d ti f dit f th G h b d f 11 00 (WST) 6 N b 2009• We give notice that a second meeting of creditors of the Group has been convened for 11.00am (WST) on 6 November 2009.

• For creditors who cannot attend the meeting, we have enclosed a form of proxy that you may use to appoint another person to vote on your behalf. We have also included an informal proof of debt form, which should be completed and submitted to our office no later than one business day prior to the meeting.



1. Introduction A i

Appointment of AdministratorsOn 2 October 2009, the nab, a secured creditor of the Group with a charge over substantially all of the Group’s assets appointed Gary Doran and Timothy N J i t d S l V l t Ad i i t t f th f ll i C i ( ll ti l k th “G ”) t t ti 436C f th

Appointment

Norman as Joint and Several Voluntary Administrators of the following Companies (collectively known as the “Group”) pursuant to section 436C of the Corporations Act 2001 (the Act):

• P.P.B. & Associates Pty Ltd (Administrators Appointed) A.C.N. 111 494 341 (“PPB”)• Lightstorm Holdings Pty Ltd (Administrators Appointed) A.C.N. 117 280 323 (“Lightstorm”).

Basis of Report

This report has been prepared primarily from information received from the Directors and Management and the books and records of the Group. We have investigated the affairs of the Group; however, there may be certain matters of which we are not aware, or of which we have not been advised. We have not performed an audit of the Group.

In order to complete this report, and in conducting our investigations, we have utilised information from:• the ASIC• the Group’s books and records• questionnaires completed by the Directors• discussions with Directors, Management and staff.

Whilst we have no reason to doubt any information contained in this report, we reserve the right to alter our conclusions should the underlying data prove to be inaccurate or materially change from the date of this report.



1. Introduction continued D l i f I d d R l R l i hi d I d i i

A Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) was included in the first report to creditors dated 6 October 2009 and provided to all known creditors of the Group. A summary of the DIRRI is as follows:

Independence Statement

Declaration of Independence, Relevant Relationships and Indemnities

Independence Statement

A proper assessment of the risks to our independence was undertaken prior to accepting our appointment to the Companies. This assessment identified no real or potential risks to our independence.

Relevant relationships

Deloitte has a professional relationship with the National Australia Bank Limited (nab), an entity that is entitled to enforce a charge on the whole or substantially the whole of the Companies’ assets. However, this professional relationship does not preclude us from accepting the appointment as Administrators of the Companies.

Commencing on 15 September 2009, Deloitte undertook a high-level business review of the Companies for the nab. This engagement was limited in scope and does not impact on our ability to comply with statutory and fiduciary obligations involved in our role nor in our objectivity impartiality orscope and does not impact on our ability to comply with statutory and fiduciary obligations involved in our role, nor in our objectivity, impartiality or judgement in performing our duties. We do not believe that this engagement gives rise to a conflict that excludes us from accepting the appointments.

Our investigations did not reveal any prior professional relationships within the preceding 24 months with members of Deloitte Touche Tohmatsu. This assessment identified no real or potential risks to our independence.

I d ith t IPA id li “ h i f i l l ti hi h d b t th P titi d th i l t i tIn accordance with recent IPA guidelines “where a prior professional relationship has occurred between the Practitioner and the insolvent or an associate of the insolvent within two years before the proposed appointment, the Practitioner may accept the appointment if the prior professional relationship was an Immaterial Professional Relationship”. For the avoidance of doubt we believe that the previous work conducted would give rise to an Immaterial Professional Relationship and accordingly does not preclude us from acting as Administrators.

IndemnitiesIndemnities

We disclose to all creditors that the nab has indemnified the Administrators for professional fees and costs that cannot be recovered from the Companies’ assets.



M i f di1. Introduction continued

First Meeting of Creditors

On 14 October 2009, a concurrent meeting of the creditors of both Companies was held in accordance with Section 436E of the Act.

Meetings of creditors

At this meeting: • our appointment as Joint and Several Voluntary Administrators of both Companies was confirmed by the creditors in attendance• we advised that we would undertake an investigation into the Companies’ affairs whilst we pursued a potential sale of the Group’s business

and assets• it was also resolved that a Committee of Creditors (“Committee”) be formed in relation to PPB only. The creditors who were elected as

members of the Committee are shown below:• Trevor Smitham – Hydraulic Contracting & Supply Pty Ltd• Lindsay Miller – Airdrill Pty Ltd • Ian Speer – Speer Compression Systems Pty Ltd.

Second meeting of creditors details

The second meeting of creditors of PPB and Lightstorm will be held concurrently and has been convened for 11.00am (WST) on 6 November 2009 and will be held at the Deloitte office in Perth located at Level 14 240 St Georges Terrace Perth WA 6000will be held at the Deloitte office in Perth, located at Level 14, 240 St Georges Terrace, Perth WA 6000.

The following documents relating to the upcoming meeting of creditors are attached to this report: Appendix A Form 529 – notice of meetingAppendix B Form 532 – appointment of proxy formAppendix C Informal proof of debtAppendix D Remuneration report for both PPB and Lightstorm



P f Ad i i ’1. Introduction continued

Section 435A of the Act states that the objective of a Voluntary Administration is to allow for the business, property and affairs of an insolvent (or likely to become insolvent) company to be administered in a way that either:

( ) i i th h f th h ibl f it b i ti i i i t

Purpose of Administrators’ report

(a) maximises the chances of the company or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its businesses to continue in existence, results in a better return for the company’s creditors and

members than would result from an immediate winding up of the company.

Benefits of the Voluntary Administration process

It was the initial determination that the voluntary administration process was likely to maximise the potential return to creditors in that it would allow the administrator to continue to use leased assets, whilst exploring the possibility of selling the assets as a package and/or if possible, consider any DOCA proposals that were received. Keeping the business together as a whole would provide the opportunity to sell the assets in a controlled manner which may result in a higher recovery for creditors, than would be achieved in a break up sale of individual assets.

Financial assessmentFinancial assessment

Immediately upon our appointment we commenced an urgent financial assessment of the Group to determine whether it was in the creditors’ best interests, as a whole, for the Group to continue to trade. Following the completion of this financial assessment it was determined that the ongoing uncertainty and short-term nature of the drilling contracts in place increased the risk of continuing to trade the Business and forced the Administrators to cease trading the business on 14 October 2009. We still intend to attempt to sell the assets of the Business as a whole if that will achieve the best outcome for creditors.

Conduct of the Administration to date

The purpose of this report is to provide creditors with a report on the conduct of the administration to date.

We have conducted an investigation into the affairs of the Companies pursuant to Section 438A of the Act The results of our investigations are set outWe have conducted an investigation into the affairs of the Companies pursuant to Section 438A of the Act. The results of our investigations are set out within section 6 of this report.

In addition to investigating the affairs of both Companies, section 438A of the Act requires the Administrators to form an opinion about the future of the Companies and to give reasons for our opinion in relation to whether it would be in creditors’ interests for:

1. one or both of the Companies to execute a DOCA


1. one or both of the Companies to execute a DOCA2. the administration to end and control be returned to the Directors3. the Companies to be wound up.


2. BackgroundG

Group structure and operations • PPB was incorporated on 22 October 2004 and operates the Business. • Lightstorm was incorporated on 24 November 2005 and is the trustee

Group structure

Lee Robert Griffiths Paul Doropoulos • Lightstorm was incorporated on 24 November 2005 and is the trustee of The Lightstorm Trust which predominately holds the assets that used used in the Business.

• PPB leases assets from Lightstorm to conduct the Business. • PPB employs eight full time and twelve casual staff and enters into

contracts with customers to provide drilling services.

100% 100%

p g• The sole director of both Companies is Paul Doropoulos. • Lee Robert (Bob) Griffiths is PPB’s General Manager. • Jetmode Pty Ltd owns 66.67% of both companies and Bob Griffiths is

its sole director and shareholder. • Openside Enterprises Pty Ltd owns 33.33% of both entities and Paul

Jetmode Pty Ltd Director – Lee Robert

Griffiths

Openside Enterprises Pty Ltd Director – Paul Doropoulos

Openside Enterprises Pty Ltd owns 33.33% of both entities and Paul Doropoulos is its sole director and shareholder.

• The Group operates a drilling business with six drill rigs, specialising in RAB, air core and reverse circulation (RC) exploration drilling.

• The Group’s main operations are based in Leonora, Western Australia with an administration office located in Osborne Park, Western

66.67% 33.33%

Administrators Appointed

Australia.• For the purposes of explaining the business we have grouped PPB and

Lightstorm together as PPB conducted the Business and has guaranteed most of the liabilities of Lightstorm. We have assessed the potential returns to creditors of each Company separately.Nab holds a fi ed and floating charge o er both Companies PPB has

Lightstorm Holdings Pty Ltd

Director – Paul Doropoulos

P.P.B. & Associates Pty Ltd t/as

Grovebrook DrillingDirector – Paul Doropoulos

Operations

Leased assets

• Nab holds a fixed and floating charge over both Companies. PPB has guaranteed Lightstorm’s liabilities to nab, Westpac and St George. Additionally, according to the ASIC, eleven fixed charges were registered over specific assets owned by Lightstorm.

• On 2 October 2009, the nab appointed Voluntary Administrators to both PPB and Lightstorm.

The LightstormTrust

Trustee

Operations


g• The Administrators ceased to trade the business on 14 October 2009.

Source: ASIC register

Assets


2. Background continuedB k d f i l di i

According to Management, the following provides a background of operations and events preceding the appointment of the voluntary administrators: • In November 2004, the Group purchased its first drill rig and began drilling for a newly discovered iron ore deposit for Golden West

Resources Ltd (“Golden West”)

Background of operations leading up to appointment

Resources Ltd ( Golden West ).• With the expanding resources industry in Western Australia during 2005 to mid 2008, there was abundant demand for drilling service

providers and the Group expanded its fleet to four rigs. This expansion was primarily funded from the Business’ cash flow.• With the increase in activity Lightstorm purchased premises in Leonora, Western Australia. • In May 2008, the Business had the opportunity to secure a long-term contract with Golden West which required a large capacity drill rig.

Based on this contract and a deposit provided by Golden West Lightstorm ordered a Hydco drill rig and support equipment at a cost ofBased on this contract and a deposit provided by Golden West, Lightstorm ordered a Hydco drill rig and support equipment at a cost of approximately $3m. The Hydco rig was expected to be delivered in November 2008 for the start of the Golden West contract.

• In June 2008, Monarch Gold Mining Limited and its subsidiary Davyhurst Gold Pty Ltd appointed voluntary administrators. Thesecompanies are indebted to the Group for $216,625.

• In November 2008 the Golden West contract was due to commence, however as a result of production delays, the Hydco drill rig was not available. Lightstorm purchased the Tatra drill rig for approximately $1m to commence drilling until the Hydco was delivered. g p g pp y g y

• Around the same time, the effects of the Global Financial Crisis (“GFC”) slowed demand within the resources sector and commencement of the Golden West contract was suspended indefinitely.

• The Business shut down operations in December 2008 for the Christmas holiday period. The duration of this shut down was longer than expected and other anticipated drilling programs which were expected to commence in January 2009 were deferred. During this period, the Companies’ financial position deteriorated significantly.

• The Hydco drill rig was delivered in March 2009 and the Business secured initial short term contracts to utilise the two new rigs. • However, by the end of March 2009, contracts for both rigs had been terminated due to further reductions in demand resulting from the

effects of the GFC. • From around July 2009, several short-term drilling contracts were secured and Management was optimistic that with additional short-term

working capital funding the Business could begin to generate sufficient income to improve the Companies’ financial position and potentially recover losses from the first half of the year. However, as at 31 August 2009, the Companies: • were in arrears with their financiers for approximately $400,000• had an overdue liability of approximately $550,000 in overdue trade creditor liabilities• owed approximately $400,000 to the Australian Taxation Office (“ATO”) and the ATO had commenced recovery action• had exceeded their $400,000 overdraft facility.


• As such, in September 2009, nab requested Deloitte to review the nab’s security position and following the outcome of this review appointed Voluntary Administrators on 2 October 2009.


3. Conduct of the Administration

Overdue wages on appointment

Following our appointment on 2 October 2009, we immediately commenced an urgent analysis of the Group’s financial position. As part of this analysis it was identified on the day of our appointment that employee wages for the previous two weeks had not been paid due to a lack of available funds. In order to continue to trade the business with a view to preserving and maximising value for creditors, we urgently sought to borrow approximately $37,000 which would cover payment of the outstanding wages and continue to trade the Business. Following an urgent application to Court, we borrowed the funds from nab and paid the outstanding wages.

Expressions of interest processExpressions of interest process

Shortly after our appointment we sought expressions of interest for: • a sale of the whole or part of the Business• capital injection and/or restructure proposals for the Business.

Advertisements were placed in the West Australian and the Australian Financial Review newspapers seeking expressions of interest in purchasing the Business. We received expressions of interest from fourteen parties and forwarded an information memorandum to all interested parties.

Outcome of review of financial position

Following a detailed review of the Business and the Companies’ financial position, we determined that due to the uncertainty associated with the Business’ drilling contracts and the risk of continued trading we could not continue to trade the Business and on 14 October we ceased tradingBusiness drilling contracts and the risk of continued trading, we could not continue to trade the Business and on 14 October we ceased trading. Lightstorm’s assets, that had been used during the trade on period were transported to the Business’ premises in Leonora and secured whilst we continued to explore the possibility of selling the Business and/or assets.

Valuation

We commissioned two valuations of Lightstorm’s plant and equipment assets from Gregsons and Smith Broughton. These valuations are now complete d h i d l f b th G d S ith B ht t d t bli ti f th tand we have received proposals from both Gregsons and Smith Broughton to conduct a public auction of the assets.

Current status of sale of business and assets

Concurrently, we received two offers from third parties to purchase the Business. We are currently in the process of comparing these offers with the potential realisation from the assets being sold at public auction. We expect to finalise this comparison and determine which option provides the best outcome in the interests’ of creditors prior to the meeting of creditors on 6 November 2009. We will inform creditors of the determination at that meeting.


p g g


4. Historical financial statement analysisFi i l f f h G

• The opposite table summarises the consolidated Group’s financial performance for the past three financial years. We note that during FY07 and FY08 the consolidated special purpose financial accounts

Financial performance of the Group

Profit and loss FY07 FY08$'000 Actual Actual Actual ActualSales 3,271 5,953 4,254 627Oth 6 7

FY09 YTD10

p p pwere prepared by the Companies’ external accountant. The information summarised in FY09 and YTD10 has been based on the Companies’ management accounts. We have not verified or audited these values.

• Sales increased from $3.27m to $5.95m (i.e. 82%) during FY08 as a result of Western Australia’s expanding resources sector. M t ti i t d hi i i il l l l i FY09 ith

Other revenue 6 - - 7Total revenue 3,276 5,953 4,254 634

Cost of goods sold (1,950) (3,216) (2,974) (361)Gross Profit 1,326 2,737 1,280 272GP% 40.5% 46.0% 30.1% 43.0%

Other income 119 217 - - Management anticipated achieving similar sales levels in FY09 with a potential increase of approximately 40% as a result of its larger drilling fleet.

• Table 1 shows the difference between forecast and actual monthly revenue based on an expected 20% increase in revenue in both November 2008 and January 2009

Other income 119 217Expenses (1,261) (2,256) (1,259) (146)EBITDA 185 698 21 126Depreciation & amortisation (108) (259) - -EBIT 77 439 21 126Interest income - 2 - -Interest expense (6) (46) (121) (16) November 2008 and January 2009.

• Actual sales declined by 29% during FY09 to $4.25m due to a slow down in overall demand after November 2008 predominately as a result of the GFC.

• The Business stood down operations in December 2008 and the majority of contracts due to commence in January 2009 were delayed 1000

$'000 Monthly revenueTable 1:

Source: Consolidated special purpose financial accounts and Management accounts

Interest expense (6) (46) (121) (16)NPBT 71 396 (100) 111Tax - (108) - -NPAT 71 288 (100) 111

j y y yuntil March 2009.

• During the first three months of FY10, demand for drilling services began to slowly recover with the Business providing a number of quotes to potential customers. From 1 July 2009 to 2 October 2009, the date of the commencement of the Administration, the Business generated sales of $627k hich eq ates to an ann alised re en e of

600

700

800

900 Expected increase with 6 drill rigs

Expected increase with 5 drill rigs

generated sales of $627k, which equates to an annualised revenue of $2.5m compared to $4.3m in FY09.

• Whilst sales decreased by 29% during FY09, cost of goods sold only decreased by 7% during the period indicating Management did not act quickly enough to reduce expenditure as sales declined.

100

200

300

400

500


0

Forecast monthly revenue for larger fleet Actual monthly revenue

14Source: Management accountsSource: Management accounts


4. Historical financial statement analysis continuedFi i l i i f h G

• We note that the balance sheet provided in the consolidated special purpose financial accounts, prepared by the Companies' accountant, for FY07 does not balance. This appears to be due to differences in

Financial position of the Group

Balance sheet FY07 FY08$'000 Actual Actual Actual ActualCash 18 10 (398) (214)T d d bt 106 198 (36) 343

FY09 YTD10

ppinter-company loans which have not been reconciled for some time.

• The unexpired interest charge is accounting for interest over the remaining term of the leased assets which has not been expensed. It does not represent a tangible asset.

• Working capital represents the Companies’ current assets that can be used to pay current liabilities For the purposes of this calculation we

Trade debtors 106 198 (36) 343Other receivables 52 257 100 (20)Inventories 55 75 217 229Unexpired interest charge - - 680 680Total current assets 230 540 563 1,019

Receivables - 144 (125) (62) used to pay current liabilities. For the purposes of this calculation we have included cash, trade debtors and inventory less total current liabilities. We note that we have not included the ‘unexpired interest charge’ in the calculation or ‘other receivables’ as the majority relates to inter-company loans which, on the most part, are accounting entries.

• We note that for each period, the Companies had negative working

( ) ( )PPE 1,018 2,036 7,817 7,833Intangibles - 57 57 57Total non-current assets 1,018 2,236 7,749 7,828Total assets 1,248 2,777 8,313 8,847

Trade creditors (629) (1,059) (1,162) (1,213)

capital and a negative current ratio, which indicates they may have been unable to pay all liabilities as and when they became due and payable for some time.

• We also note that creditor days had been stretched to 100 days in FY09 and 175 days in YTD10 which suggests that funds for payment of creditors had been used to continue funding the Business.

Provisions (31) (108) (31) (31)Borrowings (553) (1,248) (73)Other - (59) (20) (20)Total current liabilities (1,214) (2,475) (1,286) (1,314)

Creditors & borrowings (54) (29) (6,840) (7,019)Total non-current liabilities (54) (29) (6 840) (7 019) creditors had been used to continue funding the Business.

• Additionally, we note that current liabilities in YTD10 does not include any interest bearing liabilities. Based on the Companies’ current debt levels, we estimate that current liabilities should have included approximately $1.2m of interest bearing liabilities which would have further increased the working capital shortfall.

$

Total non current liabilities (54) (29) (6,840) (7,019)Total liabilities (1,268) (2,504) (8,127) (8,333)Net assets (20) 272 186 514

Key ratios FY07 FY08Working capital ($'000) (1,035) (2,191) (1,503) (956)Working capital/sales (%) (32%) (37%) (35%) (151%)

YTD10FY09

• PPE increased by $5.7m in FY09 because of the purchase of the Hydco and Tatra drill rigs and support equipment.

• The overall financial position at YTD10 is relatively poor with a loan to value ratio (“LVR”) on property, plant and equipment (“PPE”) of 81% and a deficient working capital position.Source: Consolidated special purpose financial accounts and Management accounts

Working capital/sales (%) (32%) (37%) (35%) (151%)Current ratio (0.15) (0.11) 0.17 (0.27)Debtor days 12 12 (3) 49Creditor days 70 65 100 175LVR on PPE 60% 63% 80% 81%



5. Reasons for failure

Management have identified the cause of the Companies’ failure as relatively high borrowings during a period of significant downturn for the drilling industry. In addition to Management’s explanation of the reasons for the Companies’ failure, we make the following comments:

• It appears that as the Companies had a negative working capital position for some time prior to June 2008, they were not in a financial position to support the capital expenditure relating to the two new drill rigs and support equipment. This capital expenditure was fully funded by debt to be met by income from drilling contracts utilising the equipment. As a result, cash flow became extremely sensitive to any reduction in drilling activity.

• In November 2008, Lightstorm expected to take delivery of the Hydco drill rig and had made progress payments to the manufacturer for , g p y y g p g p yapproximately $3m. The delivery of this rig was delayed until March 2009 which resulted in further pressure on cash flow due to the interest charges arising from the borrowings used to fund the progress payments.

• The delay in delivery of the Hydco drill rig also caused Management to purchase another drill rig for approximately $1m to continue operations until delivery. The purchase of this rig was also fully funded by debt and further increased the demands on cash flow.

• In November 2008, the Business expected to commence drilling for Golden West however this contract was delayed due to the downturn in demand arising from the impact of the GFC. The Business eventually commenced drilling for Golden West in February 2009 however, during the period from December 2008 to February 2009, the financial position deteriorated further due to the additional borrowings of approximately $4m and insufficient cash flow to service the increased level of debt.

• We have reviewed the Companies’ financial reporting systems and conclude that Management did not have sufficient information in relation to its future cash flows and did not consider the sensitivity of these cash flows to adverse changes in market conditions. I l i b li th t th i f th C i ’ f il M t’ hi h i k t t hi h li d hi h• In conclusion, we believe that the main cause of the Companies’ failure was Management’s high risk strategy which relied on highborrowings and exposed the Companies to the market downturn in 2009. In addition, Management did not have sufficient, timely and reliable information to understand and manage the Companies’ cash flows.



6. Investigations I d i

Potential Liquidator’s actions An Administrator is required to investigate a company’s business, property, affairs and financial circumstances as soon as practicable after an administration begins in order to form an opinion about the future of the company A major purpose of the investigation is to determine whether there are

Introduction

administration begins in order to form an opinion about the future of the company. A major purpose of the investigation is to determine whether there are any ‘insolvent transactions’ which could be recoverable by a liquidator, which would result in a greater dividend to creditors than, among other things, entering into a DOCA. An ‘insolvent action’ is a transaction which occurred at a time that the company was insolvent or, by entering into it, caused the company to become insolvent.

Directors According to section 9 of the Act, a director of a company or other body means:

(a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and

(b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.

• Paul Doropoulos is registered with the Australian Securities and Investments Commission (“ASIC”) as sole director of both entities within the• Paul Doropoulos is registered with the Australian Securities and Investments Commission ( ASIC ) as sole director of both entities within the Group.

• It is the Administrator’s opinion that Lee Robert (Bob) Griffiths potentially appeared to operate as a shadow director of both Companies. Not only does Mr Griffiths, as sole director of Jetmode Pty Ltd, own 66.67% of both PPB and Lightstorm, but he also held the position of General Manager of the Business. We believe that Mr Griffiths acted in the position of a director primarily as he was based in Leonora, was solely responsible for operations and directed all staff.p



6. Investigations continuedK

Key events leading to administration

Key events

GFCGFC

Source: Discussions with Management

June 2008 The Business had the opportunity to secure a major drilling contract with Golden West which required a drill rig with larger capabilities than the current fleet. A Hydco drill rig and support equipment was ordered. Monarch appoints voluntary administrators and owes PPB $216,625.

November 2008 The Golden West contract was due to commence, however manufacture of the Hydco drill rig was not complete therefore Lightstorm p rchased the Tatra drill rig Ho e er the Golden West contract is dela edLightstorm purchased the Tatra drill rig. However, the Golden West contract is delayed.

December 2008 Operations shut down over the Christmas break and re-commencement of exploration drilling is delayed. The majority of operations did not start up again until February 2009.

February 2009 Golden West contract was ready to commence. The Hydco had not been delivered and therefore the Tatra was utilised on this project.

March 2009 The Hydco drill rig is delivered and utilised on other smaller contracts


March 2009 The Hydco drill rig is delivered and utilised on other smaller contracts.April 2009 Contracts utilising both the Hydco and Tatra drill rigs were terminated. October 2009 Voluntary Administrators appointed.


I l di (S i 588G)6. Investigations continued

In assessing whether there is an insolvent trading case against the Directors, the Administrators need to assess, among other things:

h th d t f i l b t bli h d i t th

Insolvent trading (Section 588G)

The Companies’ books and records indicate that in December 2008 the Companies had property, plant and equipment with a book value of $7.1m and debt associated with these assets of $5 7m This represents a loan to• whether a date of insolvency can be established prior to the

appointment of Administrators• the strength of defences available to Directors• if established, the Directors’ capacity to meet the insolvent trading

claim.

and debt associated with these assets of $5.7m. This represents a loan to value ratio of over 80% and confirms that the Companies were highly geared.

We believe that the Companies began to fail the balance sheet test during November 2008 due to:

The basic tests of insolvency relate to both the net asset position of the company (the balance sheet test) and whether the company can pay its debts as and when they fall due (the cash flow test).

Balance Sheet Test

1. delays in the commencement of contracts which caused a significant deterioration in the working capital position

2. relatively high borrowings which would have prevented the Companies from raising further funds to support their position. Balance Sheet Test

Net current assets (working capital) represents the Companies’ current assets that can be used to pay current liabilities. A review of the Companies’ consolidated balance sheet shows that the Companies had negative working capital since at least May 2008. This supports the view

g pp p

We believe that as at 1 December 2008, there was sufficient cause to believe that the Companies were balance sheet insolvent due to their relatively high gearing, deteriorating working capital position and the effect of the GFC which restricted Management’s ability to raise further funds.

that the Companies’ financial position was relatively weak prior to ordering the Hydco rig in June 2008 and that this expansion significantly increased the Companies’ risk profile.

Throughout the period from May to November 2008, the Group’s working capital fluctuated between deficiencies of $200k and $600k however in

Further investigation is required to confirm the date of insolvency.

0

Working capital

capital fluctuated between deficiencies of $200k and $600k however in December 2008 the working capital deteriorated significantly to a deficiency of over $1m. This was due to:

• additional borrowings for equipment purchases which created significant repayment commitments

(1,000)

(800)

(600)

(400)

(200)

$'00

0

Potential date of insolvency


• although the new equipment was expected to translate into greater income, there was a significant short fall in revenue due to the GFC.

19

(1,600)

(1,400)

(1,200)

Source: Management accounts


I l di (S i 588G)6. Investigations continued

Cash Flow Test In considering whether a company is insolvent, consideration must be given to the Companies’ ability to raise cash to meet liabilities. Our investigations i di t th t th C i ’ h fl h d b ti htl d ith dit ll b i id t id f l t f t l t 12 th i

Insolvent trading (Section 588G)

indicate that the Companies’ cash flow had been tightly managed, with creditors generally being paid outside of normal terms, for at least 12 months prior to our appointment. To meet working capital shortfalls, the Companies were able to source funding from related party loans, extending PPB’s overdraft facility and extending creditor payments. Based on the cash flow restrictions that the Companies were experiencing up to November 2008 and the sensitivity to any contract delays, we believe that the delay experienced on the Golden West contract in November 2008 resulted in the Companies being cash flow insolvent from 1 December 2008.

Damages Our investigations indicate that the potential insolvent trading claim against the Directors, being the increase in unsecured creditors claims from the potential date of insolvency, 1 December 2008, to the date of the Administrators’ appointment, 2 October 2009, amounts to approximately $500,000.

Directors’ DefencesClaims for insolvent trading are often difficult to prove and Directors have a number of defences available to them which are summarised as follows:

• that when the debt was incurred, the Director had reasonable grounds to expect that the company was solvent and would remain solvent even if the debt was incurred

• that a competent and reliable person was responsible for the provision of information about whether the company was solvent, and based on the information they provided, the Director expected the company was solvent and would remain solvent even if the debt was incurred

• that when the debt was incurred the Director, because of illness or for some other good reason did not take part at that time in the management of the company

• that the Director took all reasonable steps to stop the company from incurring the debt.It is important to note that these defences are defences that the Directors have against personal liability for insolvent trading From our discussions withIt is important to note that these defences are defences that the Directors have against personal liability for insolvent trading. From our discussions with the Directors, they believed the Group was always able to pay its debts as and when they fall due.

Conclusion on Insolvent Trading The Administrators consider that whilst an insolvent trading claim may be made, there are defences available which may be raised by the Directors. Additional investigations would be required prior to concluding whether a case would be successful, including the strength of defences available to


g q p g g gDirectors. Further, the success of any potential recoveries will depend on the Directors’ personal financial position in being able to meet any damages should action be successful. We have requested financial information from the Directors in this regard as outlined on page 23.


P f f i l d i l i6. Investigations continued

Preference Payments (Section 588FE(4))

A Liquidator is able to recover a payment made to a creditor where:

Preference payments, unfair loans and uncommercial transactions

• the company is insolvent at the time the payment was made, or becomes insolvent by making the payment• the payment resulted in a better result than what the creditor would have received in the winding up of the company• the transaction occurred within six months of the commencement of the liquidation (four years for related entity transactions).

It is a defence if the creditor can prove that among other things it entered into the transaction in good faith and did not suspect, or had no reasonable grounds to suspect, that the company was insolvent.

We have examined the books and records of the Companies and reviewed 184 payments to creditors and related parties. We conclude that if the liquidator is able to prove that the Companies were insolvent from 1 December 2008, there may be preference claims against eleven creditors, for a total of approximately $390,000. However there may be defences available to these creditors weakening the strength of the claims. As Liquidators we would

d t i ti t th t f thneed to investigate these payments further.

Unfair Loans (Section 588FD)

A loan is unfair if it is made to a company at an unusual rate of interest or charges and may be set aside if a liquidator is subsequently appointed.

Our investigations did not reveal any unfair loans.g y

Uncommercial Transactions (Section 588FE(3))

A transaction is uncommercial if:• the transaction was entered into within two years of commencement of liquidation• at the time the transaction was entered into the company was insolvent or became insolvent as a result of entering into the transaction• at the time the transaction was entered into, the company was insolvent or became insolvent as a result of entering into the transaction• a reasonable person in the company’s circumstances would not have entered into the transaction having regard to the benefit and

detriments to the company of entering into that transaction.

We do not consider that the Companies entered into uncommercial transactions within two years of our appointment.



O h ff6. Investigations continued

Floating charges created within six months (Section 588FJ)

A floating charge created within six months of the appointment of a liquidator is void and unenforceable as against a Liquidator, where the company was

Other offences

insolvent at the time of granting the charge, subject to a number of exceptions.

A search of the Companies’ register of charges reveals that no floating charges have been created over the Companies’ assets within the six months leading up to our appointment.

Transactions for the purpose of defeating creditors (Section 588FE(5))

We have conducted a review of the transactions of the Companies for the 12 months prior to our appointment to identify any transactions that may have been entered into with the purpose of defeating creditors. We reviewed 184 payments to creditors and employees.

We have not identified any transactions undertaken for the purposes of defeating creditors that may be recoverable by a Liquidator.

Other OffencesOther Offences

Maintenance of proper books and records

Section 588E(4) of the Act provides that where the Directors of a company fail to meet the obligations outlined in section 286 of the Act to keep proper books and records, that company is presumed to be insolvent for the period it failed to meet the requirements. We have reviewed the books and records of the Companies and have relied on these throughout the administrationof the Companies and have relied on these throughout the administration. In our opinion the books and records of the Companies may not have been maintained in accordance with the requirements of section 286 of the Act. Accordingly, it is possible that the presumption of insolvency afforded to a Liquidator under Section 588E(4) of the Act may be available if the Companies were liquidated. This would require further investigation by the Liquidators to determine the potential extent of inadequate record keeping.

Section 180 – Care and Diligence and other Directors’ duties

Section 180 of the Act requires that Directors must discharge their duties with the same degree of care and diligence as a reasonable person would in the Director’s position. Further investigation of any such claims is warranted in the Administrators’ opinion.

In the time available we have not fully considered potential breaches of sections 181 – 184 of the Act. If the Companies are wound up then these issues will be considered further and form part of any examination of the conduct of the Directors.



P i l l i6. Investigations continued

Claims against Directors

The Companies' director, Mr Paul Doropoulos, has provided a statutory declaration as to his personal financial position. Based on the information

Potential claims

provided, it appears that Mr Doropoulos may have approximately $130k of net assets that could be recovered in a potential claim, however we note that Mr Doropoulos provided personal guarantees to Lightstorm’s secured creditors. As a result, it appears there may be significant claims against Mr Doropoulos’ personal assets arising from shortfalls suffered by secured creditors.

For the purpose of this report we have assumed that no recovery can be made from Mr Doropoulos’ personal assets. As Liquidators we will investigate Mr Doropoulos’ personal financial position furtherMr Doropoulos personal financial position further.

It is our opinion that Mr Bob Griffiths may have acted as a shadow director of the Companies. In arriving at this conclusion we have taken the following into consideration:

• Mr Griffiths is the ultimate shareholder of 66.67% of shares in the Companies

• Mr Griffiths was employed as General Manager of PPB and effectively controlled the Business

• we believe that the Companies’ director and employees were accustomed to acting in accordance with Mr Griffith’s instructions or wishes.

Consequently we believe that whilst Mr Griffiths was not a validly appointed director, it may be held that he was subject to duties imposed on directors under the Act including duties of care and diligence and importantly the positive duty to prevent insolvent trading. We note that it can be difficult to establish that an individual has acted as a shadow director.

We requested a statement of financial position from Mr Griffiths, however he was unwilling to provide this information to us on the basis that he is not registered as a director of the Companies.

Publicly available information registered with the ASIC indicates that Mr Griffiths has interests in several companies, however we have not yet determined y g p ythe value of these investments. If appointed as Liquidators we will investigate this further.

Claims against other Parties

One of the primary purposes of the public examination mentioned above is to determine whether there are claims against other parties including legal and accounting advisors. As this stage we do not have sufficient information to form an opinion as to whether or not a claim against any other party may be


g g p g y p y ysuccessful.


7. LiquidationLi id i i f PPB

Note 1 – in the RATA the Director did not identify any amounts receivable, however the Administrators’ estimates are based on the following:

Liquidation scenario of PPB

Estimated statement of position ($000)Director's estimate

Administratrors' estimate

Estimated realisable value

Debtors Low HighPre‐appointment receivables ‐ collected $48,150 $48,150Net income from trading period ‐ collected $64,262 $64,262Administrators' receivables ‐ outstanding $5,236 $5,236Monarch cash distributions (60% of $216,625 claim) ‐ outstanding $126,975 $126,975Monarch script distributions (40% of $216,625 claim) ‐ outstanding $43,325 $86,650

Note Low HighAssets subject to floating chargeDebtors 1 ‐ 288 331Stock 2 ‐ 10 40Total unencumbered assets ‐ 298 371

Assets subject to specific charges

The Monarch script distribution relates to the remaining 40% of the Monarch claim which is expected to be distributed as shares in Swan Gold Mining Pty Ltd. The value of these shares at this stage is unknown, however we have

Administrators' estimate $287,948 $331,273Assets subject to specific chargesPlant & Equipment 3 2,275 ‐ ‐Less amounts owing under charge 3 (2,275) ‐ ‐Potential claims against the directors 4 ‐ ‐ 890Total assets available to priority creditors ‐ 298 1,261Less Administrators' fees & expenses 5 ‐ (195) (400)Amount available to priority creditors Nil 103 861 included the full outstanding amount of $86,650 in our high estimate of this

asset and 50% of the amount in our low estimate.

Note 2 – for the purposes of the RATA the Director attributed no value to stock as it is covered under the fixed and floating charge held by nab. We believe the value of the stock ranges from approximately $10 000 to

Amount available to priority creditors Nil 103 861Priority creditors (employee entitlements) 6 (197) (140) (140)Estimated dividend to priority creditors Nil 74 cents 100 centsAmount available to unsecured creditors ‐ ‐ 721Amount owing to unsecured creditors 7 664 3,712 3,020Estimated dividend to unsecured creditors Nil Nil 24 cents

believe the value of the stock ranges from approximately $10,000 to $40,000.

Note 3 – the Director has recorded all plant and equipment secured by the fixed and floating charge. However, the Administrators have accounted for all PPE within Lightstorm as that is the entity which owns the assets used in the

• Pursuant to section 438B of the Act, the Director is required to submit a Report as to Affairs (“RATA”) which represents the Director’s view on the assets and liabilities of each Company.

• A summary of the estimated statement of financial position of PPB as

Source: RATA and Deloitte analysis

g yBusiness.

Note 4 – as recorded in section 5 of this report, the Administrators believe there may be an insolvent trading claim against the directors of approximately $500,000 and preference payment claim of approximately $390 000 Th t ld d t b i ti t d i t d t il b

A summary of the estimated statement of financial position of PPB as at 2 October 2009 from the Director is shown in the above table.

• The Administrator’s estimate as to the possible low and high values of the assets and liabilities are also provided in the above table.

• We have calculated the estimated return to creditors of each Company individually rather than pooling the assets of PPB and


$390,000. These amounts would need to be investigated in greater detail by the Liquidator as would the financial viability of pursuing any recovery actions.

p y y p gLightstorm as each Company incurred specific liabilities relating to each Company's activities.

• We provide the following comments to the notes opposite.


7. Liquidation continuedLi id i i f PPB i d

Note 5 – the Administrators’ fees and expenses include the following:

Liquidation scenario of PPB continued


Administratrors' estimate

Estimated realisable value

Administrators' remuneration to 23 October 2009 $62,100Note Low High

Assets subject to floating chargeDebtors 1 ‐ 288 331Stock 2 ‐ 10 40Total unencumbered assets ‐ 298 371

Assets subject to specific charges

Administrators'/Liquidators' future remuneration (estimate) $40,000Legal fees $20,567Working capital loan $36,863Costs incurred during trade‐on $35,254Total $194,784

Note 6 – The Director recorded employee entitlements in the RATA as $197,000 however, according to the books and records, employee entitlements are approximately $140,000. As at the date of our appointment, there were additional unpaid wages of approximately $37,000 however following our appointment we borrowed funds to pay these wages

Assets subject to specific chargesPlant & Equipment 3 2,275 ‐ ‐Less amounts owing under charge 3 (2,275) ‐ ‐Potential claims against the directors 4 ‐ ‐ 890Total assets available to priority creditors ‐ 298 1,261Less Administrators' fees & expenses 5 ‐ (195) (400)Amount available to priority creditors Nil 103 861 following our appointment we borrowed funds to pay these wages.

Note 7 – the Director has estimated the amount of unsecured creditors at $664,000 however we note that his does not include amounts owing to the ATO and shortfalls to financiers from the sale of secured assets where PPB guaranteed the liability. We estimate total unsecured creditors to be between

Amount available to priority creditors Nil 103 861Priority creditors (employee entitlements) 6 (197) (140) (140)Estimated dividend to priority creditors Nil 74 cents 100 centsAmount available to unsecured creditors ‐ ‐ 721Amount owing to unsecured creditors 7 664 3,712 3,020Estimated dividend to unsecured creditors Nil Nil 24 cents

$3.0m and $3.7m.Source: RATA and Deloitte analysis

• In the event that PPB is placed into liquidation, we estimate that priority creditors are likely to receive a dividend of at least 74 cents in the dollar. In addition to the wages that we paid following our appointment, priority creditors may receive up to 100 cents in theappointment, priority creditors may receive up to 100 cents in the dollar. However, this is dependent on successful recoveries from the directors for insolvent trading and/or third parties for preference payments.

• We estimate that unsecured creditors may receive a dividend of no


more than 24 cents in the dollar and this is dependent on the Liquidators’ ability to recover amounts claimed against directors and/or any preference payments to creditors.


7. Liquidation continued Li id i i f Li hLiquidation scenario of Lightstorm

Note 1 – the Director’s estimate relates to the book value of the property located at 1125 Hall Street, Leonora. Our investigations reveal that the property is subject to charge by nab The Administrators’ estimate the value


Estimated realisable valueAdministratrors'

estimateproperty is subject to charge by nab. The Administrators estimate the value of the property is between $200,000 to $350,000. The liability associated with the property is $73,864.

Note 2 – in the RATA, the Director has not noted a value of unencumbered plant and equipment as the assets of Lightstorm are subject to a fixed and

Assets subject to fixed and floating charge Note Low HighProperty 1 85 ‐ ‐Plant & equipment 2 ‐ 650 900Total unencumbered assets 85 650 900

Assets subject to specific chargesPlant & Equipment 3 p q p g j

floating charge. The Administrators have had all assets valued, and believe the Lightstorm is in possession of approximately $650,000 to $900,000 plant and equipment which is not subject to specific charge.

Note 3 – the Director provided his estimate based on the value of plant and i d d i Li h ’ b k d d Th

Plant & Equipment 3

Estimated value 5,432 2,490 3,275Less amounts owing under charge (5,826) (5,241) (5,241)

Surplus from specifically charged equipment Nil Nil NilProperty 1

Estimated value ‐ 200 350Less amounts owing under charge (74) (74) equipment as recorded in Lightstorm’s books and records. The

Administrators have had all assets valued, and plant and equipment subject to specific charge has an estimated value of approximately $2.490m to $3.275m. The amounts owing under specific charges against these assets is $5.241m.

Less amounts owing under charge ‐ (74) (74)Surplus from specifically charged property Nil 126 276Total assets available to secured creditors 85 776 1,176Less Administrators' fees & expenses 4 (78) (78)Amounts owing to secured creditors 5 (2,143) (1,772) (1,345)Amounts available to unsecured creditors Nil Nil NilLess amounts owing to unsecured creditors 6 (1 957) (807)

Note 4 – the Administrators’ fees and expenses include the following:

• A summary of the estimated statement of financial position of Lightstorm as at 2 October 2009 as estimated by the Director is

Source: RATA and Deloitte analysis

Less amounts owing to unsecured creditors 6 ‐ (1,957) (807)Estimated dividend to unsecured creditors Nil Nil Nil

Administrators' remuneration to 23 October 2009 $70,968Administrators'/Liquidators' future remuneration (estimate) $7,500Total $78,468

Note 5 – we estimate the amount owing to nab after realisation of its specifically charged assets will be between $1.9m and $2.7m.

Note 6 – this includes the shortfall to secured creditors that have specific charges over assets and accordingly will rank with unsecured creditors.

Lightstorm as at 2 October 2009 as estimated by the Director is shown in the above table.

• The Administrators’ estimate as to the possible low and high values of the assets and liabilities are also provided in the above table.

• It is unlikely that there will be any amounts available for distribution to Lightstorm’s unsecured creditors.


g• We provide the following comments to the notes opposite.


8. Alternatives available to creditors

Explanation of alternatives available to creditorsIt is our obligation to make a recommendation to creditors on which alternative is in the best interests of creditors. Our recommendation is based on what is in the best interests of creditors with regard to repaying their existing debts I make the following comments in respect of each option:is in the best interests of creditors with regard to repaying their existing debts. I make the following comments in respect of each option:Winding up the GroupAt the second creditors meeting, creditors may resolve that the Companies be wound up. Should they do so, each Company will be placed into liquidation and is taken to have nominated the Administrators to be the Liquidators. As Liquidators, we would be required to realise the assets, distribute the proceeds in accordance with the Act and complete a further thorough investigation into each Companies’ past dealings and affairs and the past actions of the Director The effects of the liquidation of each Company include:the Director. The effects of the liquidation of each Company include:

1. the moratorium available under the voluntary administration process will cease2. the liquidator will be empowered to recover potential voidable transactions and pursue other courses of action, as outlined in section 6 of this

report3. the liquidator will be required to conduct an investigation into the affairs of each Company pursuant to Section 533 of the Act and lodge a report

with the ASIC.The result to creditors of PPB, of it going into liquidation, is that on a high/optimistic estimate unsecured creditors may receive up to 24 cents in the dollar depending on the realisation of assets and the outcome of any potential recovery actions against the Director(s) and/or preference claims. Priority creditors may receive the full amount of their entitlements however, this return is contingent upon the Liquidators successfully recovering funds as a result of their investigation, which are detailed in section 6 of this report.It is unlikely that there will be any amounts available for distribution to Lightstorm’s unsecured creditors.Bringing the administration to an endCreditors can consider ending the administration and returning control of the Companies to the Director. This is not a commercial proposition at this stage given both Companies are insolvent. Proposed DOCAProposed DOCAManagement has not been able to put forward a DOCA that the Administrator deems would provide a better return to creditors than under a liquidation scenario.



9. Administrators opinion for PPB

IntroductionPursuant to Section 439A of the Act this is our statement as Administrators setting out our opinion regarding whether it would be in the creditor’s best interests forinterests for

• the Company to execute a Deed of Company Arrangement• the administration to end• the Company be wound up

and the reasons for those opinions.and the reasons for those opinions.Proposed DOCAThis option is not available to the creditors. Ending the AdministrationIt is our opinion that it would not be in the creditors’ best interests for the administration to end and the Company returned to the control of the director p p ybecause PPB is insolvent. Winding up PPBIt is our opinion that it would be in the creditors’ best interests for PPB to be wound up as it is insolvent and a DOCA has not been proposed. SummaryWe, having regard to the information available to us, have formed the opinion that it would be in the creditors’ best interests for PPB to be wound up.

Dated this 29th day of October 2009

For and on behalf ofGary Doran and Tim Norman


Gary Doran and Tim NormanJoint and Several Administrators


10. Administrators opinion for Lightstorm

IntroductionPursuant to Section 439A of the Act this is our statement as Administrators setting out our opinion regarding whether it would be in the creditor’s best interests forinterests for

• the Company to execute a Deed of Company Arrangement• the administration to end• the Company be wound up

and the reasons for those opinions.and the reasons for those opinions.Proposed DOCAThis option is not available to the creditors. Ending the AdministrationIt is our opinion that it would not be in the creditors’ best interests for the administration to end and return control of the Company to the director because p p yLightstorm is insolvent. Winding up LightstormIt is our opinion that it would be in the creditors’ best interests for Lightstorm to be wound up as it is insolvent and a DOCA has not been proposed. SummaryWe, having regard to the information available to us, have formed the opinion that it would be in the creditors’ best interests for Lightstorm to be wound up.


For and on behalf ofGary Doran and Tim Norman


Joint and Several Administrators


Appendix A: Form 529 – Notices of meetings


FORM 529 CORPORATIONS ACT 2001

Subregulation 5.6.12(2)

NOTICE OF MEETING OF CREDITORS

P.P.B & ASSOCIATES PTY LTD (ADMINISTRATORS APPOINTED) ACN 111 494 341 (“the Company”)

NOTICE is given that a meeting of the creditors of the company will be held at the offices of Deloitte Touche Tohmatsu, on Friday 6 November 2009 at 11:00am (AWST).

A G E N D A 1. To receive a report from the Administrator pursuant to Section 439A of the Act 2. To consider, and if thought fit, approve the Administrators’ remuneration for the period 2

October 2009 to 23 October 2009 3. To consider, and if thought fit, pass one of the following alternative resolutions:

a. “That the Company execute a Deed of Company Arrangement (DOCA),” or

b. “That the administration end,” or

c. “That the Company be wound up,” 4. If the creditors vote in favour of the Company being wound up, consider, and if thought fit:

a. approve the basis of the liquidators remuneration b. appoint a committee of inspection; and if so, who are to be the committee's members

5. To consider and, if thought fit, resolve any other business which may properly be brought before

the meeting DATED this 29th day of October 2009.

Gary Doran Administrator

FORM 529 CORPORATIONS ACT 2001

Subregulation 5.6.12(2)

NOTICE OF MEETING OF CREDITORS

LIGHTSTORM HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 117 280 323 (“the Company”)

NOTICE is given that a meeting of the creditors of the company will be held at the offices of Deloitte Touche Tohmatsu, on Friday 6 November 2009 at 11:00am (AWST).

A G E N D A 1. To receive a report from the Administrator pursuant to Section 439A of the Act 2. To consider, and if thought fit, approve the Administrators’ remuneration for the period 2

October 2009 to 23 October 2009 3. To consider, and if thought fit, pass one of the following alternative resolutions:

a. “That the Company execute a Deed of Company Arrangement (DOCA),” or

b. “That the administration end,” or

c. “That the Company be wound up,” 4. If the creditors vote in favour of the Company being wound up, consider, and if thought fit:

a. approve the basis of the liquidators remuneration b. appoint a committee of inspection; and if so, who are to be the committee's members

5. To consider and, if thought fit, resolve any other business which may properly be brought before

the meeting DATED this 29th day of October 2009.

Gary Doran Administrator


Appendix B: Form 532 – Appointment of proxy forms


FORM 532 Regulation 5.6.29

CORPORATIONS ACT 2001

APPOINTMENT OF PROXY CREDITORS MEETING

P.P.B. & ASSOCIATES PTY LTD (ADMINISTRATORS APPOINTED)

ACN 111 494 341 *I/*We (1) ..............................................................................................................................................................

of .............................................................................................................................................................................

a creditor of P.P.B. & Associates Pty Ltd (Administrators Appointed), appoint (2) ............................................

................................................................................................................................................................................

or in his or her absence ..........................................................................................................................................

as *my/our *general/special proxy to vote at the meeting of creditors to be held on Friday 6 November 2009 at

11:00am (AWST), or at any adjournment of that meeting and to vote generally as he/she determines or

specifically in accordance with the following special instructions:

RESOLUTIONS:

1. “That the remuneration of the Administrators, their partners and staff for the period 2 October 2009 to

23 October 2009, calculated on a time basis at hourly rates in accordance with Deloitte Touche

Tohmatsu schedule of hourly rates, in the sum of $62,100.40 plus GST be approved for payment”

FOR / AGAINST / ABSTAIN

2. To consider, and if thought fit, pass one of the following alternative resolutions:

a. “That the Group execute a Deed of Company Arrangement (DOCA),”


b. “That the administration end,”


c. “That the Group be wound up,”


3. “If the creditors vote in favour of the Group being wound up, consider, and if thought fit, approve the

remuneration of the Official Liquidators, their partners and staff to be calculated on a time basis at

hourly rates in accordance with Deloitte Touche Tohmatsu schedule of hourly rates, in the sum of

$40,000.00 plus GST.”


DATED this day of 2009. Signature

CERTIFICATE OF WITNESS This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy. 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 or her before he or she signed or marked the instrument. Dated: Signature of Witness: Description: Place of Residence: * Strike out if inapplicable (1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular resolution.

FORM 532 Regulation 5.6.29

CORPORATIONS ACT 2001

APPOINTMENT OF PROXY CREDITORS MEETING

LIGHTSTORM HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED)

ACN 117 280 323 *I/*We (1) ..............................................................................................................................................................

of .............................................................................................................................................................................

a creditor of Lightstorm Holdings Pty Ltd (Administrators Appointed), appoint (2) ...........................................

................................................................................................................................................................................

or in his or her absence ..........................................................................................................................................

as *my/our *general/special proxy to vote at the meeting of creditors to be held on Friday 6 November 2009 at

11:00am (AWST), or at any adjournment of that meeting and to vote generally as he/she determines or

specifically in accordance with the following special instructions:

RESOLUTIONS:

1. “That the remuneration of the Administrators’, their partners and staff for the period 2 October 2009

to 23 October 2009, calculated on a time basis at hourly rates in accordance with Deloitte Touche

Tohmatsu schedule of hourly rates, in the sum of $70,968.40 plus GST be approved for payment”


2. To consider, and if thought fit, pass one of the following alternative resolutions:

a. “That the Group execute a Deed of Company Arrangement (DOCA),”


b. “That the administration end,”


c. “That the Group be wound up,”


3. “If the creditors vote in favour of the Group being wound up, consider, and if thought fit, approve the

remuneration of the Official Liquidators, their partners and staff to be calculated on a time basis at

hourly rates in accordance with Deloitte Touche Tohmatsu schedule of hourly rates, in the sum of

$7,500.00 plus GST.”


DATED this day of 2009. Signature

CERTIFICATE OF WITNESS This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy. 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 or her before he or she signed or marked the instrument. Dated: Signature of Witness: Description: Place of Residence: * Strike out if inapplicable (1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular resolution.


Appendix C: Informal proof of debts


INFORMAL PROOF OF DEBT FORM

Regulation 5.6.47

P.P.B & ASSOCIATES PTY LTD (ADMINISRATORS APPOINTED) T/AS GROVEBROOK DRILLING

ACN 111 494 341 Name of creditor: ................................................................................................................................ Address of creditor: ................................................................................................................................ ................................................................................................................................ ABN: ................................................................................................................................ Telephone number: ................................................................................................................................ 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) 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 Administrator; or b. he or she has lodged with the Administrator 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 Administrator.

INFORMAL PROOF OF DEBT FORM

Regulation 5.6.47

LIGHTSTORM HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 117 280 323

Name of creditor: ................................................................................................................................ Address of creditor: ................................................................................................................................ ................................................................................................................................ ABN: ................................................................................................................................ Telephone number: ................................................................................................................................ Amount of debt claimed: $ ................................................................ (Including GST of $ ............................. ) 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)

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 Administrator; or b. he or she has lodged with the Administrator 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 Administrator.


Appendix D: Remuneration reports


P.P.B & ASSOCIATES PTY LTD (ADMINISTRATORS APPOINTED)

ACN 111 494 341

SECOND MEETING OF CREDITORS 6 NOVEMBER 2009

REMUNERATION REPORT

This Remuneration Report should be read in conjunction with the information provided to creditors in the notice of meeting.

1. Description of Work Completed 2 October to 23 October 2009

Task Area General Description Includes

Creditors 60.6 Hours $14,466.40

Circular to Creditors Draft and finalise the first circular to creditors providing notification of the appointment of Administrators, the Administration process and details of the first meeting of creditors. Liaise with creditors in relation to the first circular to creditors.

Prepare and maintain a register of creditors for future correspondence. First Meeting of Creditors Preparation and finalisation of presentation to creditors detailing the conduct of the

administration to date. Preparation of first meeting of creditors file.

Liaise with various creditors in relation to the first meeting of creditors including resolutions and voting. Preparing facilities for the first meeting of creditors.

Attend and conduct first meeting of creditors. Reports/Attendance on Creditors

Receive and record proof of debt and proxy forms for first meeting of creditors.

Liaise with creditors in relation to the appointment of Administrators, the outcome of the first meeting of creditors, the administration process and general creditor queries. Amendments to creditor’s information as and when required.

Liaise with suppliers concerning the collection of stock recently invoiced.

Provide requested information to creditors. Commence report to creditors pursuant to s439A of the Corporations Act 2001 and

undertake the associated financial analysis/investigations. Employees 12.0 Hours $2,816.00

Appointment Liaise with employees concerning the appointment of Administrators and the trading of the business during the administration period. Prepare and process wages on appointment.

Entitlements Liaise with the NAB concerning the provision of funding for the payment of the wages.

Liaise with employees in relation to the final wages payment, termination letter and final entitlements calculation.

Termination Liaise with employees after termination letters received and general administration enquiries.


Administration 66.8 Hours $15,624.00

Appointment Interview with The West Australian media.

Notification of appointment to Willis insurance brokers to ensure appropriate insurance cover in place. Liaise with Willis throughout the administration to ensure changes in circumstances are recorded and noted. Prepare and execute statutory/standard appointment documentation.

Notification and lodgment of all statutory and/or requisite documentation as required.

Liaise with NAB in relation to the establishment of administration bank accounts. Set up of new IPS case. Review and maintain IPS case. Filing Prepare working files.

Reference and file all documentation in relation to the administration. Plant & Equipment Establish location and quantity of the Company’s computers to be backed up.

Liaise with Deloitte Forensic concerning the imaging all computer hard drives. Attend Osborne Park premises and attempt removal of hard drives. Seize all computers and transport to Deloitte offices. Commence image acquisition of hard drives. Taking Control Attend Osborne Park premises.

Meeting with director and management to discuss appointment. Trade On 41.5 Hours $15,040.00

Appointment Liaise with the director and general manager concerning various trade on issues including debtors, invoicing, staffing, scheduled works and relevant trading information.

Advise utilities of trading during administration period and request setup of administration accounts.

Application to the Court to allow the Administrators to borrow funds to pay wages on appointment.

Cash flow forecasts for determining exposure of the Administrators if trading was undertaken during administration period.

Review all lease obligations and notify respective lessors accordingly. Meetings with customers to negotiate trading during administration period. Assessment of Trading Internal discussions with staff to consider trading during administration period and

consideration of Deed of Company Arrangement proposal. Hold discussions with various suppliers regarding trading during the administration

period. Hold internal discussions regarding the risks associated with continuing to trade the

business. Maintain commitments register during the trade on period and monitor drilling

results. Shut Down Procedures Raise final invoice for White Cliff and liaise with director regarding collection. Implement standard close down procedures and inform necessary parties of

decision to cease trading. Liaise with director and staff regarding ceasing to trade the company’s business

and securing all assets. Directors 24.0 Hours $11,472.00

Statutory/Mandatory Requirements Request information and assistance from the director and general manager to facilitate investigations into the company’s affairs.

Liaise with the director in relation to the provision of a Report as to Affairs.

Report to the Australian Securities and Investments Commission that a RATA had not been received on time.

Lodgement of relevant documents with the ASIC.


Deed of Company Arrangement Discussions with the company’s director and general manager regarding a potential Deed of Company Arrangement.

Consider initial proposal by the company’s director and conduct negotiations with the director’s financiers.

Analysis of the potential return to creditors from a potential DOCA. Meeting with other financiers to discuss willingness to support any potential

DOCA submitted.

Total 217.9 Hours $62,100.40 (ex GST)

2. Calculation of Remuneration between 2 October to 23 October 2009

Employee Position Rate $/ph Total Actual Hours

Total ($) Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Doran, Gary Partner 520 3.8 1,950.00 0.0 0.00 1.5 780.00 1.0 520.00 1.3 650.00 0.0 0.00 0.0 0.00

Colan, Bob Partner 520 1.0 520.00 0.0 0.00 0.0 0.00 0.0 0.00 1.0 520.00 0.0 0.00 0.0 0.00

Mcveigh, Dermott Partner 520 53.8 27,950.00 0.0 0.00 8.0 4,160.00 8.5 4,420.00 16.3 8,450.00 21.0 10,920.00 0.0 0.00

Edwards, David Director 385 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

Ravlich, Natalee Manager 260 52.9 13,754.00 6.5 1,690.00 15.7 4,069.00 6.0 1,560.00 16.8 4,355.00 0.0 0.00 8.0 2,080.00

Sia, Shaun Manager 260 3.5 910.00 0.0 0.00 0.0 0.00 3.5 910.00 0.0 0.00 0.0 0.00 0.0 0.00

Ling, Nathan Manager 260 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

D'monte, Adam Senior Analyst 184 54.9 10,092.40 0.5 92.00 11.6 2,134.40 32.0 5,888.00 3.8 690.00 3.0 552.00 4.0 736.00

Sekhon, Gursharan Analyst 150 41.2 6,172.50 6.0 900.00 17.7 2,647.50 15.0 2,250.00 2.5 375.00 0.0 0.00 0.0 0.00

Meemeduma, Kusal Analyst 150 1.3 187.50 0.0 0.00 1.3 187.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

Peel, Charlotte Administration 125 0.3 31.25 0.0 0.00 0.3 31.25 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

Perakovic, Anita Administration 125 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

Gillespie, Donna Administration 125 0.5 62.50 0.0 0.00 0.5 62.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

Langmead, Jade Administration 95 1.1 99.75 0.0 0.00 0.3 23.75 0.8 76.00 0.0 0.00 0.0 0.00 0.0 0.00

Cassidy, Talia Administration 95 3.9 370.50 0.0 0.00 3.9 370.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00

TOTAL 217.9 62,100.40 13.0 2,682.00 60.6 14,466.40 66.8 15,624.00 41.5 15,040.00 24.0 11,472.00 12.0 2,816.00

GST 6,210.04

TOTAL (incl GST) 68,310.44

Average hourly rate 206.3 238.9 233.9 362.4 478.0 234.7

Directors Employees Investigations Creditors Administration Trade On

3. Disbursements

Disbursements are divided into three types: A, B1, B2.

A disbursements are all externally provided professional services and are recovered at cost. An example of an A disbursement is legal fees.

B1 disbursements are externally provided non-professional costs such as travel, accommodation and search fees. B1 disbursements are recovered at cost.

B2 disbursements are internally provided non-professional costs such as room hire and document storage. B2 disbursements are charged at cost except for photocopying, telephones and faxes which are charged at 5% of standard time costs. This rate has been formulated to recoup both variable and fixed costs.

A schedule of disbursements charged during the period 2 October 2009 to 23 October 2009 will be provided to creditors at a subsequent meeting.

4. Statement of Remuneration Claim

The following resolutions will be proposed to the forthcoming meeting:

“That the remuneration of the Joint and Several Voluntary Administrators, their partners and staff, as calculated on a time basis in accordance with the hourly rates of Deloitte, as tabled at the meeting of creditors on 14 October 2009, for the period 2 October 2009 to 23 October 2009 be approved in the sum of $62,100.40 plus GST”.

I confirm that I have not received any previous approvals for my outstanding fees.

5. Queries

Should committee members have any queries regarding the remuneration report, or any other aspect of the Voluntary Administration please contact Adam D’Monte of this office on (08) 9365 7049.

6. Information Sheet

Creditors are referred to the information sheet attached to this report for further information regarding the approval of Insolvency Practitioners’ remuneration.

Creditors should read the information sheet carefully.


Gary Doran Joint and Several Administrator

Creditor Information Sheet

Approving remuneration in external administrations

If company is in financial difficulty, it can be put under the control of an independent insolvency administrator. Such a person is called a ‘liquidator’ or a ‘voluntary administrator’ or an ‘administrator of a deed of company arrangement’ depending on the type of administration involved. For the purposes of this guide, we use the collective word ‘administrator’.

This information sheet gives general information for creditors on the approval of an administrator’s fees in a liquidation, a voluntary administration or a deed of company arrangement (other forms of insolvency administration are beyond the scope of this information sheet). It outlines the rights that creditors have in the approval process.

Work undertaken by administrators

The work undertaken by administrators depends on the type of administration concerned and the issues that need to be resolved. Some issues are straightforward, while others are more complex.

However, what is common amongst all administration types is that an administrator is, by law, required to undertake a number of tasks which may not directly benefit creditors (for example, the preparation of reports to the Australian Securities and Investments Commission or the preparation of six monthly receipts and payments). An administrator is still entitled to remuneration for undertaking these statutory tasks.

For more information on the tasks involved in different administrations, see ASIC’s information sheets: ‘Liquidation: a guide for creditors’ and ‘Voluntary administration: a guide for creditors’.

Entitlement to fees and costs

An administrator is entitled:

• to be paid reasonable fees, or remuneration, for the work they perform, once these fees have been approved by a creditors’ committee, creditors or a court, and

• to be reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need creditors’ committee, creditor or court approval).

Administrators are entitled to an amount of fees for the necessary work that they and their staff properly perform in the administration.

Out-of-pocket costs that are commonly reimbursed include:

• legal fees

• valuer’s, real estate agent’s and auctioneer’s fees

• trading costs involved in running the company’s business during the administration (e.g. for the purchase of stock)

• stationery, photocopying, telephone and postage costs

• retrieval costs for recovering the company’s computer records, and

• storage costs for the company’s books and records.

Creditors have a direct interest in the level of fees and costs, as the administrator will, generally, be paid from the company’s available assets before any payments to creditors are made. If there are not enough assets, the

administrator may arrange for a third party, for example another creditor, to pay any shortfall. As a creditor, you should receive details of such arrangements.

If there are not enough assets to pay the fees and costs, and there is no third party payment arrangement, any shortfall is not paid and the administrator is in effect ‘out of pocket’.

Calculation of fees

Fees of an administrator may be calculated using one of a number of different methods, such as:

• on the basis of time spent by the administrator and their staff, according to hourly rates,

• a quoted fixed fee, based on an estimate of the costs, or

• a percentage, usually of asset realisations.

Charging on the basis of time spent is the most common method. Administrators have a scale of hourly rates, with different rates for each category of staff working on the administration, including the administrator.

If the administrator intends to charge on a time basis, you should receive a copy of these hourly rates before the administrator requests approval of their fees.

The administrator and their staff will record the time taken for the various tasks involved, and a record will be kept of the nature of the work performed.

It is important to realise that administrators are professionals who are required to have accounting qualifications and maintain up-to-date knowledge of accounting, business and legal issues. They have serious responsibilities under the law. Their hourly rates and those of their qualified staff reflect this.

The hourly rates do not represent an hourly wage for the administrator and their staff. The administrator is running a business—an insolvency practice—and the hourly rates will be based on the cost of running the business, including overheads such as rent for business premises, utilities, wages and superannuation for staff who are not charged out at an hourly rate (such as personal assistants), information technology support, office equipment and supplies, insurances, and taxes with allowance then made for profit.

Many of the costs of running an insolvency practice are fixed costs that must be paid, even if there are insufficient assets available to pay the administrator for their services.

These are all matters that committee members or creditors should be aware of when considering the fees presented. However, regardless of these matters, creditors have a right to question the administrator about the fees and whether the rates are negotiable.

It is up to the administrator to justify why the method chosen for calculating fees is an appropriate method for the particular administration. As a creditor, you also have a right to question the administrator about the calculation method used and how the calculation was made.

Report on proposed fees

In order to seek approval of fees, the administrator must hold a meeting of the members of any committee of creditors, or, if there is no committee, the creditors themselves. A report must be sent, with the notice of meeting, setting out:

information that will enable the committee members/creditors to make an informed assessment of whether the proposed fees are reasonable

a summary description of the major tasks performed, or to be performed, and

the costs associated with each of these tasks.

The report should also provide a summary of out-of-pocket costs incurred or expected to be incurred.

Committee members/creditors may be asked to approve fees for work already performed or fees based on an estimate of work yet to be carried out.

If the work is yet to be carried out, it is advisable for creditors to set a maximum limit (‘cap’) on the amount that the administrator may receive. For example, ‘future fees are approved calculated on hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X’. If the work involved then exceeds this figure, the administrator will have to ask the creditors’ committee/creditors to approve a further amount of fees, after accounting for the fees already incurred.

Who may approve fees

Who may approve fees depends on the type of external administration: see Table 1. The administrator must provide sufficient information to enable the creditors’ committee, the creditors or the court to make an informed assessment as to whether the fees are reasonable.

Table 1: Who may approve fees

Creditors’ committee

Creditors Court

Administrator in a voluntary administration 1 2 3

Administrator of a deed of company arrangement

1 2 3

Creditors’ voluntary liquidator 1 4 r5

Court-appointed liquidator 1, 6 2, 6 3

1 If there is one. 2 If there is no creditors’ committee or the committee fails to approve the fees. 3 If there is no approval by creditors. 4 If there is no creditors’ committee. 5 Unless an application is made for a fee review. 6 If insufficient creditors turn up to the meeting called by the liquidator to approve fees, the liquidator is entitled to

be paid up to a maximum of $5,000, or more if specified in the Corporations Regulations 2001.

Creditors’ committee approval

If there is a creditors’ committee, members are chosen by a vote of creditors as a whole. In approving the fees, it is important that the members realise that they represent all the creditors, not just their own individual interests.

A creditors’ committee will generally only be set up where there are a large number of creditors. If there is one, then they will ask the committee to approve their fees.

A creditors’ committee makes its decision by a majority in number of its members present in person at a meeting, but it can only act if a majority of its members attend.

If you would like to know more about creditors’ committees and how they are formed, see ASIC’s information sheets: ‘Liquidation: a guide for creditors’, ‘Voluntary administration: a guide for creditors’ and ‘Insolvency: a glossary of terms’.

Creditors’ approval

Creditors approve fees by passing a resolution at a creditors’ meeting. The vote requires a simple majority of creditors present and voting, in person or by proxy, indicating that they agree to the resolution. Unlike committee members, creditors may vote according to their individual interests.

If a ‘poll’ is taken at the meeting (that is, rather than a vote being decided on the voices or by a show of hands, a count of each vote and its value is taken), a majority in number and value of creditors present and voting must agree. A poll requires the votes of each creditor to be recorded.

A proxy is a document whereby a creditor appoints someone else to represent them at a creditors’ meeting and to vote on their behalf. A proxy can be either a general proxy or a special proxy. A general proxy allows the person holding the proxy to vote how they want on a resolution, while a special proxy directs the proxy holder to vote in a particular way.

A creditor will sometimes appoint the administrator as a proxy to vote on the creditor’s behalf. An administrator, their partners or staff must not use a general proxy to vote on approval of their fees; they must hold a special proxy in order to do this. They must vote all special proxies as directed, even those against approval of their fees.

Deciding if fees are reasonable

If you are asked to approve an amount of fees either as a committee member or by resolution at a creditors’ meeting, your task is to decide if that amount of fees is reasonable, given the work carried out in the administration and the results of that work.

The IPA’s Code of Professional Practice: Remuneration outlines the steps administrators should take to make sure they fulfil their responsibilities to creditors when asking creditors to approve fees, including when those creditors are acting in their capacity as committee members. This guide is available on the IPA website at www.ipaa.com.au

If you need more information about fees than is provided in the administrator’s report, you should let them know before the meeting at which fees will be voted on.

What can you do if you think the fees are not reasonable?

If you do not think the fees being claimed are reasonable, you should raise your concerns with the administrator. It is your decision whether to vote in favour of, or against, a resolution to approve fees.

Generally, if fees are approved by a creditors’ committee/creditors and you wish to challenge this decision, you may apply to the court and ask the court to review the fees. Special rules apply to court liquidations.

You may wish to seek your own legal advice if you are considering applying for a court review of the fees.

Reimbursement of out-of-pocket costs

An administrator should be very careful incurring costs that must be paid from the administration—as careful as if they were incurring the expenses on their own behalf. Their report on fees sent to creditors should also include information on the out-of-pocket costs of the administration.

If you have questions about any of these costs, you should ask the administrator and, if necessary, bring it up at a creditors’ committee/creditors’ meeting. If you are still concerned, you have the right to ask the court to review the costs.

Queries and complaints

You should first raise any queries or complaints with the administrator. If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with the IPA at www.ipaa.com.au or write to:

Complaints Manager IPA GPO Box 3921 SYDNEY NSW 2001

You can also contact ASIC at www.asic.gov.au, or write to:

Manager National Assessment & Action ASIC GPO Box 9827 IN YOUR CAPITAL CITY

Complaints against companies and their officers can also be made to ASIC. For other enquiries, email ASIC through [email protected], or call ASIC’s Infoline on 1300 300 630 for the cost of a local call.

To find out more

For an explanation of terms used in this information sheet, see ASIC’s ‘Insolvency: a glossary of terms’.

For more on insolvency administration, see ASIC’s related information sheets at www.asic.gov.au/insolvencyinfosheets:

• Voluntary administration: a guide for creditors

• Voluntary administration: a guide for employees

• Liquidation: a guide for creditors

• Liquidation: a guide for employees

• Receivership: a guide for creditors

• Receivership: a guide for employees

• Insolvency: a guide for shareholders

• Insolvency: a guide for directors

These are also available from the Insolvency Practitioners Association (IPA) website at www.ipaa.com.au.

The IPA website also contains the IPA’s Code of Professional Practice that is applicable to its members.

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.

H:\CRG\CURRENT ENGAGEMENTS\2. G DORAN JOBS\Grovebrook Drilling VA\P.P.B & Associates Pty Ltd\8. Reports to creditors\Remuneration Report 0210 to 2310 Lightstorm 291009

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LIGHTSTORM HOLDINGS P/L (ADMINISTRATORS APPOINTED)

ACN 117 280 323

SECOND MEETING OF CREDITORS 6 NOVEMBER 2009

REMUNERATION REPORT

This Remuneration Report should be read in conjunction with the information provided to creditors in the notice of meeting.

1. Description of Work Completed 2 October to 23 October 2009


Assets 99.5 Hours $36,544.50

Sale of Business Prepare and maintain an Interested Parties register. Review and consider offer to purchase assets from Australian Contract Mining Pty

Ltd. Meeting with ACM concerning same. Rejection of ACM offer and discussions with ACM concerning same. Prepare an Information Memorandum detailing the company’s operations and

equipment for interested parties. Prepare and execute a sales and marketing campaign including advertising the

business for sale as a going concern in the West Australian and the Australian Financial Review.

Liaise with various interested parties in relation to the sale of the business as a whole or in part.

Discuss strategy for sale of the business and contact parties that may be interested in purchasing the business.

Provide Interested Parties with additional information as requested. Review offers to purchase the business and conduct negotiations with potential

purchasers. Leases/Hire Purchase Notification of appointment. Cease trading notification and disclaimer of assets. Plant & Equipment Engage Gregsons Auctioneers and Valuers and Smith Broughton Auctioneers to

undertake valuations of the plant and equipment located in Leonora, Western Australia.

Liaise with Gregsons and Smith Broughton concerning the valuation reports and proposals for auction of the plant and equipment respectively.

Review valuation reports and analyse projected results of public auction for creditors.

Travel to site yard in Leonora, Western Australia, to inspect and secure plant and equipment.

Occupational Health, Safety and Environmental

Engage Parsons Brinkerhoff to undertake an Occupational Health, Safety and Environmental assessment of the six drills rigs and the site yard located in Leonora, Western Australia.

Liaise with Parsons Brinkerhoff concerning their findings upon attendance at the site yard in Leonora, Western Australia, and the findings of the report.

Secured creditor

Liaise with secured creditors concerning the assets of the business and negotiate their participation in any sale process in order to facilitate a sale of the business.

Review of the respective positions of the secured creditors based on the valuation provided by Gregsons and Smith Broughton.

Ensure that the secured assets are protected and preserved during the Administration period.

Creditors 76.1 Hours $17,913.90

First Meeting of Creditors Preparation and finalisation of presentation to creditors detailing the conduct of the administration to date. Preparation of first meeting of creditors file.

Liaise with various creditors in relation to the first meeting of creditors including resolutions and voting.


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Preparing facilities for the first meeting of creditors. Attend and conduct first meeting of creditors. Circular to Creditors Draft and finalise the first circular to creditors providing notification of the

appointment of Administrators, the Administration process and details of the first meeting of creditors.

Liaise with creditors in relation to the first circular to creditors. Prepare and maintain a register of creditors for future correspondence. Reports/Attendance on Creditors

Receive and record proof of debt and proxy forms for first meeting of creditors.

Liaise with creditors in relation to the appointment of Administrators, the outcome of the first meeting of creditors, the administration process and general creditor queries.

Amendments to creditor’s information as and when required. Liaise with suppliers concerning the collection of stock recently invoiced. Provide requested information to creditors. Commence report to creditors pursuant to s439A of the Corporations Act 2001 and

undertake the associated financial analysis/investigations. Secured Creditors Provide notification of appointment to secured creditors.

Review of security documents and secured creditors’ respective positions. Review validity of various charges over business and seek legal advice where

required. Liaise with secured creditors in relation to using their equipment during the

administration period. Various discussions with secured creditors: St George, Esanda, Westpac, Capital

Finance and NAB in relation to the sale of the business, trading during the administration period and assets in situ etc.

Liaise with the NAB concerning the potential Deed of Company Arrangement proposed by the director.

Administration 6.4 Hours $1,210.00

Appointment Prepare and execute statutory/standard appointment documentation.

Notification and lodgment of all statutory and/or requisite documentation as required.

Set up of new IPS case. Filing Prepare working files. Reference and file all documentation in relation to the administration. Director Report to the Australian Securities and Investments Commission that a Report as to

Affairs had not been received on time. Lodgement of relevant documents with the ASIC. Liaise with the director in relation to the provision of a RATA. Trade On 42.5 Hours $15,300.00

Billing Raise invoices and realise outstanding debtor amounts.

Appointment Liaise with the director and general manager concerning various trade on issues including debtors, invoicing, staffing, scheduled works and relevant trading information.

Advise utilities of trading during administration period and request setup of administration accounts.

Application to the Court to allow the Administrators to borrow funds to pay wages on appointment.

Cash flow forecasts for determining exposure of the Administrators if trading was undertaken during administration period.

Review all lease obligations and notify respective lessors accordingly.

Meetings with customers to negotiate trading during administration period.


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Assessment of Trading Internal discussions with staff to consider trading during administration period and consideration of Deed of Company Arrangement proposal.

Hold discussions with various suppliers regarding trading during the administration period.

Hold internal discussions regarding the risks associated with continuing to trade the business.

Maintain commitments register during the trade on period and monitor drilling results.

Shut Down Procedures Raise final invoice for White Cliff and liaise with director regarding collection.

Implement standard close down procedures and inform necessary parties of decision to cease trading.

Liaise with director and staff regarding ceasing to trade the company’s business and securing all assets.

Total 224.5 Hours $70,968.40 (ex GST)

H:\CRG\CURRENT ENGAGEMENTS\2. G DORAN JOBS\Grovebrook Drilling VA\P.P.B & Associates Pty Ltd\8. Reports to creditors\Remuneration Report 0210 to 2310 Lightstorm 291009 AD.docx

2. Calculation of Remuneration between 2 October to 23 October 2009

Employee Position Rate $/ph

Total Actual Hours

Total ($) Hours $ Hours $ Hours $ Hours $

Doran, Gary Partner 520 4.8 2,470.00 0.0 0.00 2.5 1,300.00 1.0 520.00 1.3 650.00Colan, Bob Partner 520 1.0 520.00 0.0 0.00 0.0 0.00 0.0 0.00 1.0 520.00Mcveigh, Dermott Partner 520 66.8 34,710.00 42.5 22,100.00 8.0 4,160.00 0.0 0.00 16.3 8,450.00Edwards, David Director 385 12.5 4,812.50 12.5 4,812.50 0.0 0.00 0.0 0.00 0.0 0.00Ravlich, Natalee Manager 260 38.4 9,984.00 0.0 0.00 19.7 5,109.00 1.0 260.00 17.8 4,615.00Sia, Shaun Manager 260 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00Ling, Nathan Manager 260 19.0 4,940.00 19.0 4,940.00 0.0 0.00 0.0 0.00 0.0 0.00D'monte, Adam Senior Analyst 184 50.9 9,356.40 25.5 4,692.00 21.6 3,974.40 0.0 0.00 3.8 690.00Sekhon, Gursharan Analyst 150 20.2 3,022.50 0.0 0.00 17.7 2,647.50 0.0 0.00 2.5 375.00Meemeduma, Kusal Analyst 150 1.3 187.50 0.0 0.00 1.3 187.50 0.0 0.00 0.0 0.00Peel, Charlotte Administration 125 0.3 31.25 0.0 0.00 0.3 31.25 0.0 0.00 0.0 0.00Perakovic, Anita Administration 125 0.4 50.00 0.0 0.00 0.0 0.00 0.4 50.00 0.0 0.00Gillespie, Donna Administration 125 0.5 62.50 0.0 0.00 0.5 62.50 0.0 0.00 0.0 0.00Langmead, Jade Administration 95 0.3 23.75 0.0 0.00 0.3 23.75 0.0 0.00 0.0 0.00Cassidy, Talia Administration 95 8.4 798.00 0.0 0.00 4.4 418.00 4.0 380.00 0.0 0.00

TOTAL 224.5 70,968.40 99.5 36,544.50 76.1 17,913.90 6.4 1,210.00 42.5 15,300.00 GST 7,096.84 TOTAL (incl GST) 78,065.24 Average hourly rate 367.3 235.6 189.1 360.0

Task Area Assets Creditors Trade OnAdministration


AD.docx

3. Disbursements

Disbursements are divided into three types: A, B1, B2.

A disbursements are all externally provided professional services and are recovered at cost. An example of an A disbursement is legal fees.

B1 disbursements are externally provided non-professional costs such as travel, accommodation and search fees. B1 disbursements are recovered at cost.

B2 disbursements are internally provided non-professional costs such as room hire and document storage. B2 disbursements are charged at cost except for photocopying, telephones and faxes which are charged at 5% of standard time costs. This rate has been formulated to recoup both variable and fixed costs.

A schedule of disbursements charged during the period 2 October 2009 to 23 October 2009 will be provided to creditors at a subsequent meeting.

4. Statement of Remuneration Claim

The following resolutions will be proposed to the forthcoming meeting:

“That the remuneration of the Joint and Several Voluntary Administrators, their partners and staff, as calculated on a time basis in accordance with the hourly rates of Deloitte, as tabled at the meeting of creditors on 14 October 2009, for the period 2 October 2009 to 23 October 2009 be approved in the sum of $70,968.40 plus GST”.

I confirm that I have not received any previous approvals for my outstanding fees.

5. Queries

Should committee members have any queries regarding the remuneration report, or any other aspect of the Voluntary Administration please contact Adam D’Monte of this office on (08) 9365 7049.

6. Information Sheet

Creditors are referred to the information sheet attached to this report for further information regarding the approval of Insolvency Practitioners’ remuneration.

Creditors should read the information sheet carefully.


Gary Doran Joint and Several Administrator

Creditor Information Sheet

Approving remuneration in external administrations

If company is in financial difficulty, it can be put under the control of an independent insolvency administrator. Such a person is called a ‘liquidator’ or a ‘voluntary administrator’ or an ‘administrator of a deed of company arrangement’ depending on the type of administration involved. For the purposes of this guide, we use the collective word ‘administrator’.

This information sheet gives general information for creditors on the approval of an administrator’s fees in a liquidation, a voluntary administration or a deed of company arrangement (other forms of insolvency administration are beyond the scope of this information sheet). It outlines the rights that creditors have in the approval process.

Work undertaken by administrators

The work undertaken by administrators depends on the type of administration concerned and the issues that need to be resolved. Some issues are straightforward, while others are more complex.

However, what is common amongst all administration types is that an administrator is, by law, required to undertake a number of tasks which may not directly benefit creditors (for example, the preparation of reports to the Australian Securities and Investments Commission or the preparation of six monthly receipts and payments). An administrator is still entitled to remuneration for undertaking these statutory tasks.

For more information on the tasks involved in different administrations, see ASIC’s information sheets: ‘Liquidation: a guide for creditors’ and ‘Voluntary administration: a guide for creditors’.

Entitlement to fees and costs

An administrator is entitled:

• to be paid reasonable fees, or remuneration, for the work they perform, once these fees have been approved by a creditors’ committee, creditors or a court, and

• to be reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need creditors’ committee, creditor or court approval).

Administrators are entitled to an amount of fees for the necessary work that they and their staff properly perform in the administration.

Out-of-pocket costs that are commonly reimbursed include:

• legal fees

• valuer’s, real estate agent’s and auctioneer’s fees

• trading costs involved in running the company’s business during the administration (e.g. for the purchase of stock)

• stationery, photocopying, telephone and postage costs

• retrieval costs for recovering the company’s computer records, and

• storage costs for the company’s books and records.

Creditors have a direct interest in the level of fees and costs, as the administrator will, generally, be paid from the company’s available assets before any payments to creditors are made. If there are not enough assets, the

administrator may arrange for a third party, for example another creditor, to pay any shortfall. As a creditor, you should receive details of such arrangements.

If there are not enough assets to pay the fees and costs, and there is no third party payment arrangement, any shortfall is not paid and the administrator is in effect ‘out of pocket’.

Calculation of fees

Fees of an administrator may be calculated using one of a number of different methods, such as:

• on the basis of time spent by the administrator and their staff, according to hourly rates,

• a quoted fixed fee, based on an estimate of the costs, or

• a percentage, usually of asset realisations.

Charging on the basis of time spent is the most common method. Administrators have a scale of hourly rates, with different rates for each category of staff working on the administration, including the administrator.

If the administrator intends to charge on a time basis, you should receive a copy of these hourly rates before the administrator requests approval of their fees.

The administrator and their staff will record the time taken for the various tasks involved, and a record will be kept of the nature of the work performed.

It is important to realise that administrators are professionals who are required to have accounting qualifications and maintain up-to-date knowledge of accounting, business and legal issues. They have serious responsibilities under the law. Their hourly rates and those of their qualified staff reflect this.

The hourly rates do not represent an hourly wage for the administrator and their staff. The administrator is running a business—an insolvency practice—and the hourly rates will be based on the cost of running the business, including overheads such as rent for business premises, utilities, wages and superannuation for staff who are not charged out at an hourly rate (such as personal assistants), information technology support, office equipment and supplies, insurances, and taxes with allowance then made for profit.

Many of the costs of running an insolvency practice are fixed costs that must be paid, even if there are insufficient assets available to pay the administrator for their services.

These are all matters that committee members or creditors should be aware of when considering the fees presented. However, regardless of these matters, creditors have a right to question the administrator about the fees and whether the rates are negotiable.

It is up to the administrator to justify why the method chosen for calculating fees is an appropriate method for the particular administration. As a creditor, you also have a right to question the administrator about the calculation method used and how the calculation was made.

Report on proposed fees

In order to seek approval of fees, the administrator must hold a meeting of the members of any committee of creditors, or, if there is no committee, the creditors themselves. A report must be sent, with the notice of meeting, setting out:

information that will enable the committee members/creditors to make an informed assessment of whether the proposed fees are reasonable

a summary description of the major tasks performed, or to be performed, and

the costs associated with each of these tasks.

The report should also provide a summary of out-of-pocket costs incurred or expected to be incurred.

Committee members/creditors may be asked to approve fees for work already performed or fees based on an estimate of work yet to be carried out.

If the work is yet to be carried out, it is advisable for creditors to set a maximum limit (‘cap’) on the amount that the administrator may receive. For example, ‘future fees are approved calculated on hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X’. If the work involved then exceeds this figure, the administrator will have to ask the creditors’ committee/creditors to approve a further amount of fees, after accounting for the fees already incurred.

Who may approve fees

Who may approve fees depends on the type of external administration: see Table 1. The administrator must provide sufficient information to enable the creditors’ committee, the creditors or the court to make an informed assessment as to whether the fees are reasonable.

Table 1: Who may approve fees

Creditors’ committee

Creditors Court

Administrator in a voluntary administration 1 2 3

Administrator of a deed of company arrangement

1 2 3

Creditors’ voluntary liquidator 1 4 r5

Court-appointed liquidator 1, 6 2, 6 3

1 If there is one. 2 If there is no creditors’ committee or the committee fails to approve the fees. 3 If there is no approval by creditors. 4 If there is no creditors’ committee. 5 Unless an application is made for a fee review. 6 If insufficient creditors turn up to the meeting called by the liquidator to approve fees, the liquidator is entitled to

be paid up to a maximum of $5,000, or more if specified in the Corporations Regulations 2001.

Creditors’ committee approval

If there is a creditors’ committee, members are chosen by a vote of creditors as a whole. In approving the fees, it is important that the members realise that they represent all the creditors, not just their own individual interests.

A creditors’ committee will generally only be set up where there are a large number of creditors. If there is one, then they will ask the committee to approve their fees.

A creditors’ committee makes its decision by a majority in number of its members present in person at a meeting, but it can only act if a majority of its members attend.

If you would like to know more about creditors’ committees and how they are formed, see ASIC’s information sheets: ‘Liquidation: a guide for creditors’, ‘Voluntary administration: a guide for creditors’ and ‘Insolvency: a glossary of terms’.

Creditors’ approval

Creditors approve fees by passing a resolution at a creditors’ meeting. The vote requires a simple majority of creditors present and voting, in person or by proxy, indicating that they agree to the resolution. Unlike committee members, creditors may vote according to their individual interests.

If a ‘poll’ is taken at the meeting (that is, rather than a vote being decided on the voices or by a show of hands, a count of each vote and its value is taken), a majority in number and value of creditors present and voting must agree. A poll requires the votes of each creditor to be recorded.

A proxy is a document whereby a creditor appoints someone else to represent them at a creditors’ meeting and to vote on their behalf. A proxy can be either a general proxy or a special proxy. A general proxy allows the person holding the proxy to vote how they want on a resolution, while a special proxy directs the proxy holder to vote in a particular way.

A creditor will sometimes appoint the administrator as a proxy to vote on the creditor’s behalf. An administrator, their partners or staff must not use a general proxy to vote on approval of their fees; they must hold a special proxy in order to do this. They must vote all special proxies as directed, even those against approval of their fees.

Deciding if fees are reasonable

If you are asked to approve an amount of fees either as a committee member or by resolution at a creditors’ meeting, your task is to decide if that amount of fees is reasonable, given the work carried out in the administration and the results of that work.

The IPA’s Code of Professional Practice: Remuneration outlines the steps administrators should take to make sure they fulfil their responsibilities to creditors when asking creditors to approve fees, including when those creditors are acting in their capacity as committee members. This guide is available on the IPA website at www.ipaa.com.au

If you need more information about fees than is provided in the administrator’s report, you should let them know before the meeting at which fees will be voted on.

What can you do if you think the fees are not reasonable?

If you do not think the fees being claimed are reasonable, you should raise your concerns with the administrator. It is your decision whether to vote in favour of, or against, a resolution to approve fees.

Generally, if fees are approved by a creditors’ committee/creditors and you wish to challenge this decision, you may apply to the court and ask the court to review the fees. Special rules apply to court liquidations.

You may wish to seek your own legal advice if you are considering applying for a court review of the fees.

Reimbursement of out-of-pocket costs

An administrator should be very careful incurring costs that must be paid from the administration—as careful as if they were incurring the expenses on their own behalf. Their report on fees sent to creditors should also include information on the out-of-pocket costs of the administration.

If you have questions about any of these costs, you should ask the administrator and, if necessary, bring it up at a creditors’ committee/creditors’ meeting. If you are still concerned, you have the right to ask the court to review the costs.

Queries and complaints

You should first raise any queries or complaints with the administrator. If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with the IPA at www.ipaa.com.au or write to:

Complaints Manager IPA GPO Box 3921 SYDNEY NSW 2001

You can also contact ASIC at www.asic.gov.au, or write to:

Manager National Assessment & Action ASIC GPO Box 9827 IN YOUR CAPITAL CITY

Complaints against companies and their officers can also be made to ASIC. For other enquiries, email ASIC through [email protected], or call ASIC’s Infoline on 1300 300 630 for the cost of a local call.

To find out more

For an explanation of terms used in this information sheet, see ASIC’s ‘Insolvency: a glossary of terms’.

For more on insolvency administration, see ASIC’s related information sheets at www.asic.gov.au/insolvencyinfosheets:

• Voluntary administration: a guide for creditors

• Voluntary administration: a guide for employees

• Liquidation: a guide for creditors

• Liquidation: a guide for employees

• Receivership: a guide for creditors

• Receivership: a guide for employees

• Insolvency: a guide for shareholders

• Insolvency: a guide for directors

These are also available from the Insolvency Practitioners Association (IPA) website at www.ipaa.com.au.

The IPA website also contains the IPA’s Code of Professional Practice that is applicable to its members.

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.

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