Baseline Constructions Pty. Ltd. (Administrators … Baseline Constructions Pty. Ltd. (Administrators Appointed)(Receivers and Managers Appointed) Bettar Holdings Bettar Holdings Pty

© 2015 Grant Thornton | Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) | 12 February 2015

Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers AppointedACN 058 578 662 ("the Company")

Administrators' Section 439A Report

12 February 2015

© 2015 Grant Thornton | Baseline Constructions PL(Administrators Appointed)(Receivers & Managers Appointed) | 12 February 2015 2

Contents

Section Page

1. Executive Summary 4

2. Introduction 8

3. Company History and Reasons for Failure 14

4. Statement about the Company's Business, Property, Affairs and Financial Circumstances 19

5. Historical Performance 23

6. Investigations 26

7. Effect on Employees 39

8. Proposals for a Deed of Company Arrangement 42

9. Estimated Outcome and Administrators' Recommendation 53

10.Remuneration 58

11.Meeting 61

Appendices

A. Notice of Second Meeting of Creditors

B. DIRRI

C. Proposal for Deed of Company Arrangement

D. ASIC Information Sheet - Approving fees: A guide for creditors

E. Grant Thornton Hourly Charge Out Rates

F. Administrators' Remuneration Report

G. Formal Proof of Debt Form

H. Appointment of Proxy Form


Glossary

Act Corporations Act 2001

Administrators Andrew Sallway and Said Jahani

Amelia Street Project at 18-22 Amelia Street, Waterloo

ARITA Australian Restructuring, Insolvency and Turnaround

Association

ASIC Australian Securities and Investments Commission

ATO Australian Taxation Office

Baron Corporation Baron Corporation Pty Ltd (a Secured Creditor)

Baseline Baseline Constructions Pty. Ltd. (Administrators

Appointed)(Receivers and Managers Appointed)

Bettar Holdings Bettar Holdings Pty Ltd

BRI Ferrier BRI Ferrier (NSW) Pty Ltd

c. Circa

CALDB The Companies Auditors and Liquidators Disciplinary Board

Company Baseline Constructions Pty. Ltd. (Administrators

Appointed)(Receivers and Managers Appointed)

DIRRI Declaration of Independence, Relevant Relationships and

Indemnities

Director Nicholas Bettar

DOCA Deed of Company Arrangement

DoE Department of Employment

ERV Estimated Realisable Value

FEG Fair Entitlements Guarantee Scheme

FY14/13/12 Financial Years ended 30 June 2014, 30 June 2013 and 30 June

2012

Grant Thornton Grant Thornton Australia Limited

GST Goods and Services Tax

Management The Director and the Financial Controller

New Bounty New Bounty Pty Ltd (a Secured Creditor)

Non-circulating Fixed charge security interest

PPSR Personal Property Securities Register

Receivers and

Managers

Costa Nicodemou and Peter Krejci of BRI Ferrier (NSW) Pty

Ltd

RATA Report as to Affairs

Secured Creditors Baron Corporation Pty Ltd and New Bounty Pty Ltd

YTD15 Period 1 July 2014 to 31 December 2014


Section 1 Executive Summary

01. Executive Summary

02. Introduction

03. Company History and Reasons for Failure

04. Statement about the Company's Business, Property, Affairs and Financial Circumstances

05. Historical Performance

06. Investigations

07. Effect on Employees

08. Proposals for a Deed of Company Arrangement

09. Estimated Outcome and Administrators' Recommendation

10. Remuneration

11. Meeting


Executive summary

Introduction

Refer to Section 2

� Andrew Sallway and Said Jahani were appointed Administrators of the Company on 15 January 2015 pursuant to Section 436A of the Act.

� The first meeting of creditors was held on Wednesday, 28 January 2015.

� The second meeting of creditors will be held on Friday, 20 February 2015 at 11.00am at the offices of Grant Thornton, Level 17, 383 Kent Street, Sydney, NSW 2000.

Background

Information

Refer to Section 3

� The Company was incorporated on 7 January 1993 in the state of New South Wales. Its principal place of business is Science House, Level 5, 157-161 Gloucester Street, The Rocks, NSW 2000.

� The Company operates within the building and construction industry.

� The Company recorded losses for several periods with their working capital constraints further compounded by difficulties with a project at Amelia Street, Waterloo. The Company had entered a contract with Bettar Holdings (who held the head contract with the principal) to complete the Amelia Street project. A dispute on the final progress claim between Bettar Holdings and the principal resulted in adjudication with only c. $311,000 of the $3.0 million claim being awarded to Bettar Holdings. As a result of this, Bettar Holdings has not paid the Company c. $3.0 million.

� Following the unfavourable adjudication determination being handed down on 6 January 2015, Receivers and Managers were appointed to the Company on 13 January 2015 and the Voluntary Administrators were subsequently appointed on 15 January 2015.

Investigations

Refer to Section 6

� Investigations to date have included a review of the trading history of the Company, transactions conducted and the movement of creditors' accounts. The investigations have focused on issues such as identifying potential voidable transactions and insolvent trading. Our key findings are detailed below:

Insolvent trading

− The Company appears to have been trading insolvent since at least June 2014. The company has had a net liability position and negative working capital since at least this date, suggesting the Company was not able to pay creditors as and when they fell due. Evidence of creditor pressure and the establishment of payment arrangements has also been sighted from around this date.

Voidable transactions

− Further investigations are required into payments made to approximately 43 parties valued between $526,000 and $1.8 million which appear to have the characteristics of preference payments. We are aware that the Company negotiated and entered into agreements with several creditors in return for partial payment of their claims. Pressure was being placed on the Company by many of these creditors via the issuing of demands and final notices, and the commencement of recovery proceedings. In a liquidation scenario, a liquidator would attempt to unwind and recover these unfair preference payments for the benefit of all creditors.

− We have not identified any uncommercial transactions or unfair loans in our preliminary investigations.

Offences

− Based on the date of insolvency, it appears the Director may have traded whilst insolvent. However, we note that defences may also available to the Director and it may be that the Director had a reasonable expectation of the ability to secure further funding noting the secured creditors support (evidenced by an advance of $700,000 in September 2014), and expectations of realising a related party debt in relation to Amelia Street. In any event, we do not believe the Director would have sufficient financial means to pay a judgement awarding damages to the Company for trading whilst insolvent if one were obtained.

� Due to the limited time available to the Administrators, investigations to date have been limited and are considered preliminary. Should the Company be placed into Liquidation, further detailed investigations into the affairs of the Company will be conducted.

Executive Summary


Creditor Class Low (c/$) High (c/$) Low (c/$) High (c/$) Low (c/$) High (c/$)

Secured Creditors - 0.69 - 6.63 - -

Priority Creditors 100.00 100.00 100.00 100.00 100.00 100.00

Unsecured Creditors

Ordinary Unsecured - 0.69 1.78 6.63 2.67 2.98

Related Party Unsecured - 0.69 - 6.63 - -

DOCA Option 1 DOCA Option 2Liquidation

Executive summary

Proposal for a Deed

of Company

Arrangement

("DOCA")

Refer to Section 8

� A DOCA is a mechanism for dealing with creditors claims. A DOCA, if approved by creditors, binds all creditors of the Company arising on or before the date of the appointment of the Administrators, unless otherwise specified.

� Two DOCA proposals have been received from the Director:

� DOCA Option 1 (DOCA and Creditors' Trust) provides that upon execution of the DOCA control of the Company will revert to the Director, and the DOCA will be effectuated (i.e. completed) upon receipt of a contribution from the secured creditor, Baron Corporation, calculated at a maximum of 2 cents in the dollar on unsecured creditor claims up to $4.0 million excluding related parties (i.e. $80,000). A further amount is to be contributed by Baron Corporation to meet employee entitlements in full. Upon completion of the DOCA, a Creditors' Trust deed is to be executed under which creditors will ultimately receive a distribution of the greater of c. 2 cents in the dollar (i.e. the $80,000 contribution), or 50% of net litigation proceeds should the secured creditor successfully pursue litigation with respect to Amelia Street. It is noted that the Amelia Street litigation is not an asset of the Company. The Company will be released from all claims against it except those of the Secured Creditors and related parties.

� DOCA Option 2 (DOCA Only) provides for the control of the Company to return to the Director upon execution of a DOCA, with a distribution to be made to creditors via the DOCA rather than via a Creditors' Trust. DOCA Option 2 proposes that a contribution will be made by the secured creditors calculated at 3 cents in the dollar on a maximum unsecured creditor claims of $4.0 million (i.e. $120,000). A further contribution will be made by Baron Corporation to ensure employee entitlements are paid in full. Upon distribution to the unsecured creditors (excluding related parties) the DOCA will be effectuated. The Company will be released from all claims (except those from the secured creditors and related parties) on completion. Under DOCA Option 2 there is no ability to participate in the potential Amelia Street litigation.

� Both DOCAs provide a higher return than a liquidation, with the certainty of a return guaranteed via the contributions from the secured creditors. While it may be possible to make a distribution to creditors within six months under DOCA Option 2 (DOCA Only), subject to the adjudication of claims, any distribution under DOCA Option 1 (DOCA and Creditors' Trust) is likely to take longer as a result of the need to await the outcome of the potential litigation.

� As discussed on the following page, the Administrators recommend that creditors vote to execute DOCA Option 2 (DOCA Only).

Estimated Outcome

Statement

Refer to Section 9

� The estimated return to creditors in the various scenario on which creditors may vote is summarised below, with further detail set out in Section 9.

� Priority creditors (employees) are estimated to be paid in full in all scenarios with a claim to be made to FEG should the Company enter Liquidation.

� Returns to unsecured creditors range from a low of nil in a liquidation,

up to c. 6.6 cents in the dollar under DOCA Option 1. The high case

estimates under both a liquidation and DOCA Option 1 are highly

variable as they are subject to successfully pursuing litigation and

recovering potential preference payments.

� Please note that this estimate is subject to change.

Executive Summary


Executive Summary (cont'd)

Effect on employees

Refer to Section 7

� Based on the information provided, there were 13 people employed by the Company at the date of our appointment. Employee entitlements at the date of appointment are estimated at $143,000. This excludes redundancy on the basis the employees have continued to be employed by the Receivers and Managers. Should redundancies be necessary, entitlements are estimated to increase by a further $208,000.

� Should the Company be placed in liquidation the Liquidators will liaise with the DoE to ascertain whether funding will be made available for the employees. Please note government funding of employee entitlements is not available if the Company does not enter into Liquidation.

� Under both DOCA proposals, the employee entitlements are to be paid in full.

Administrators

recommendation

Refer to Section 9

� Section 439A(4)(b) of the Act requires the Administrators of the Company to prepare a statement setting out their opinion on the future of the Company.

� In this report we have recommended to creditors that the Company execute DOCA Option 2 (DOCA Only) for the following reasons:

− It provides a greater return to creditors than a liquidation, with greater certainty also provided with respect to timing of a distribution;

− It enables the Company to implement a restructure and continue to trade, being in line with the objective of Part 5.3A of the Act; and

− The Administrators do not support the use of a Creditors' Trust as proposed in DOCA Option 1 (DOCA and Creditors' Trust) on the basis there are no compelling legal or commercial reasons why the Company cannot continue to trade under a DOCA as opposed to a Creditors' Trust. The Administrators do not consider it to be in the public interest to implement a Creditors' Trust as a means to enable the Company to trade without reference to an external administration in public documents.

Remuneration

Refer to Section 10

� The Administrators remuneration is to be approved by creditors at the forthcoming meeting of creditors.

� A Remuneration Report is enclosed at Appendix F, providing details of work performed to date, estimated future remuneration up to the second meeting of creditors and estimated remuneration of the Liquidators/Deed Administrators, depending on the creditors' decision of the outcome of the Company at the second meeting.

Meeting

Refer to Section 11

� The second meeting of creditors is to be held at the office of Grant Thornton, Level 17, 383 Kent Street, Sydney at 11.00 am on Friday, 20 February 2015. Registration will open 30 minutes prior to the meeting.

� The notice in regards to this meeting is enclosed at Appendix A.

� A Proof of Debt and Proxy Form are enclosed at Appendices G and H and are to be returned to our office by 10.00am on 19 February 2015.

Executive Summary


Section 2 Introduction


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Appointment and first meeting of creditors

Appointment of Administrators

� Andrew Sallway and Said Jahani were appointed Joint and Several Administrators

of the Company pursuant to Section 436A of the Act on 15 January 2015 by the

Director.

� The appointment of Administrators follows the earlier appointment of Costa Nicodemou and Peter Krejci of BRI Ferrier as Receivers and Managers of the

Company on 13 January 2015. The Receivers and Managers assumed control of

the Company on their appointment and have continued to trade the business

with the support of the secured creditors.

� The purpose of the appointment of the Administrators is for independent insolvency practitioners to investigate the affairs of the Company and provide

creditors with information and recommendations to assist creditors to decide

upon the Company's future. During the Administration period creditors' claims

are put on hold.

Events leading to the Administrators' Appointment

� As stated in the Declaration of Independence, Relevant Relationships and

Indemnities, the Administrators were approached by Costa Nicodemou of BRI Ferrier on 13 January 2015 to consider the potential appointment as

Administrators. A meeting with the Director, Mr Nicholas Bettar, was

subsequently held on 14 January 2015. The Director proceeded to appoint

Andrew Sallway and Said Jahani as Voluntary Administrators on 15 January 2015.

First Meeting of Creditors

� Pursuant to Section 436E of the Act, the first meeting of the Company's

creditors was held on 28 January 2015.

� A quorum was present and at the meeting it was resolved not to form a

Committee of Creditors. A copy of the minutes of the meeting has been lodged

with the ASIC and can be provided upon request.

Introduction

Second Meeting of Creditors

� The second meeting of creditors will be held at 11.00am on Friday, 20 February

2015 at the offices of Grant Thornton, Level 17, 383 Kent Street, Sydney NSW

2000. A formal notice of this meeting is attached to this report as Appendix A.

� The purpose of the second meeting is to contemplate the Administrators' Section 439A report on the Company's state of affairs and financial position and to

consider the Administrators' investigations of the Company.

� At the meeting creditors will be provided the opportunity to determine the future

of the Company and will resolve one of the three resolutions put forward, these

resolutions being:

− That the Administration will end;

− That the Company executes a DOCA; or

− That the Company be placed into liquidation and wound up.

� The Administrators' recommendation is that the creditors of the Company

resolve to execute a DOCA.


Report to creditors

Report to Creditors

� The purpose of this report is to provide creditors with sufficient information for

them to make an informed decision about the future of the company, including:

− Background information about the Company;

− Information on the Company's state of affairs and financial position;

− The results of our investigations;

− The estimated returns to creditors;

− Details of the proposed Deeds of Company Arrangement; and

− The options available to creditors and our opinion on each of these options.

� In the time available to us, we have undertaken preliminary investigations into the Company's business, property, affairs and financial circumstances. Our

investigations have been limited due to the short period granted pursuant to the

Act which requires us to report to creditors prior to the second meeting of

creditors. The information contained in this report is based on the information

available at the date of this report, however, should further information become available that may assist in our investigations, we will provide a further update at

the second meeting of creditors.

� However, in our opinion the above matters have not prevented us from being

able to provide sufficient, meaningful information in this report or from being

able to form an opinion on what is in the creditors' best interest.

� At the meeting to be held on 20 February 2015, creditors will be asked to make a

decision by passing a resolution in respect of options available to them. The

options presented by the Act with respect to the Company which are to be voted

on by creditors at that meeting are that:

− The Administration be terminated;

− The Company be wound up (liquidation); or

− The Company execute a Deed of Company Arrangement.

� In this report we recommend to creditors that the Company enter a Deed of

Company Arrangement (DOCA Option 2 – DOCA Only) and detail why this

option is, in our opinion, in the creditors' best interests.

� The Administrators have relied on information provided from numerous sources

to prepare this report, including:

− A review of the Company's books and records provided to date;

− Discussions with the Director and Financial Controller of the Company;

− Discussions with the Receivers and Managers of the Company; and

− Information available from public sources, such as Australian Securities and

Investments Commission (ASIC) and the Personal Property Securities

Register (PPSR).

� Whilst we have no reason to doubt the accuracy of any information, we have not

performed an audit and we reserve the right to alter our conclusions should the underlying data prove to be inaccurate or change materially from the date of this

report.

� In the event that the Company proceeds to liquidation, this report will form the

basis of our further investigations. Provided that funding is available, the

investigations will be more extensive than those undertaken to date, particularly due to the time constraints of the voluntary administration process.

� It is the Administrators' view that this report provides sufficient information to

creditors to allow them to make an informed decision as to the Company's

future, and allows the Administrators to make a reasoned and fair

recommendation based on their opinions and the opinions available to creditors.

Introduction


Compliance, Independence and Communications

Compliance with best practice

� We confirm that this report complies with the statements of best practice issued

by the ARITA, with regard to content of the Administrators' report and the Code

of Professional Practice with regard to remuneration (effective 1 January 2014).

Independence

� As disclosed in our First Notice to Creditors dated 16 January 2015, the

Administrators undertook a proper assessment of the risks in relation to their independence prior to accepting the appointment. Our assessment identified no

real or potential risk to our independence.

� We confirm that there have been no changes to the DIRRI as stated in the initial

Notice to Creditors, with a copy of the DIRRI enclosed at Appendix B.

Disclaimer

� In reviewing this report, creditors should note the following:

− This report is based on information from the books, records and other information provided. Whilst the Administrators have reviewed the

information, there has been no independent verification of the information;

− In considering the options available to creditors and formulating their

recommendations, the Administrators have necessarily made forecasts of asset

realisations and total creditors. These forecasts and estimates may change. Whilst the forecasts and estimates are the result of the Administrators' best

assessments in the circumstances, creditors should note that the outcome for

creditors may differ from the information provided in this report;

− This report is not for general circulation, publication, reproduction or any use

other than to assist creditors in evaluating their position as creditors and must not be disclosed without the prior approval of the Administrators;

− The Administrators do not assume or accept any responsibility for any liability

or loss sustained by any creditor or any other party as a result of the

circulation, publication, reproduction or any use beyond that permitted above;

− The statements and opinions given in this report are given in good faith and

in the belief that such statements are not false or misleading. Except where

otherwise stated, we reserve the right to alter any conclusions reached on the basis of any changed or additional information which may be provided to us

between the date of this report and the date of the second meeting;

− Neither the Administrators, nor any member or employee thereof are

responsible in any way whatsoever to any person in respect of any errors in

this report arising from incorrect information; and

− Creditors must seek their own independent legal advice as to their rights and

the options available to them at the second meeting of creditors.

Introduction


Key events in the Administration

Introduction

Preliminary investigations undertaken by the Administrators in relation to voidable transactions and potential insolvent trading.

13 January 2015

Meeting with the Director,

Nicholas Bettar.

Andrew Sallway and Said Jahani were

contacted to potentially act as Voluntary Administrators.

� The timeline below details the key milestones during the Administration.

� Since the date of appointment, we have conducted investigations into the reasons for the Company's failure. The reasons for the Company's failure and outcome of these investigations are discussed in Section 3 and Section 6.

20 February 2015

14 January 2015

The Administrators issued their s.439A report to creditors.

Second meeting of creditors where creditors will decide on the outcome of the Company, which will determine whether:

1. The Administration ends; 2. The company executes a DOCA; or3. The company is wound up.

30 January 2015 12 February 2015

DOCA (Option 1) proposal received from

the Director

The Administrators have undertaken the following key actions:• Preparation of the s.439A report;• Held discussions with the Director and Receivers and Managers in relation to asset realisations and the DOCA proposal;

• Undertaken a preliminary review of creditor and employee claims; and• Undertaken investigations into the Company's affairs.

Negotiations and discussions with the Secured Creditor and Receivers and Managers in

relation to the DOCA.

15 January 2015

Appointment of Joint and Several Voluntary Administrators of the

Company

First Meeting of Creditors

28 January 2015

DOCA (Option 2) proposal received from the Director

9 February 2015


Actions undertaken to date

Actions Undertaken by the Administrators

� Tasks undertaken by the Administrators include:

− Dealing with creditor matters, including:

− Advising creditors of our appointment;

− Preparing meeting notices, proxies and advertisement;

− Holding the first meeting of creditors;

− Preparing the s439A report including undertaking preliminary

investigations into the Company's affairs;

− Receipting and filing Proofs of Debt; and

− Receiving and following up creditor enquiries via telephone and email.

− Liaising with the Director and Financial Controller of the Company to obtain

the necessary books and records, as well as other information of relevance;

− Conducting investigations, including reviewing books and records of the

Company, reviewing the Company's trading history, conducting and

summarising statutory searches and reviewing specific transactions, from which our findings are summarised in Section 6 of this report.

− Preparing, reviewing and executing the documents of appointment and filing

with the ASIC as necessary.

− Issuing Report as to Affairs and Directors Questionnaire to the Director upon

appointment.

− Notifying appointment to statutory bodies including the Australian Taxation

Office and the NSW Office of State Revenue.

− Liaising with the Receivers and Managers.

� The Administrators have not been involved in the ongoing trading activities of

the Company with control of the Company reverting to the Receivers and Managers upon their appointment.

Introduction

Receivership Overview

� Costa Nicodemou and Peter Krejci of BRI Ferrier were appointed Receivers and

Managers of the Company on 13 January 2015. The Receivers and Managers were

appointed by a secured creditor, New Bounty Pty Ltd.

� The Receivers and Managers have taken control of all assets and operations of the Company and have advised the following with respect to the various projects:

− Amelia Street, Waterloo: The project has been completed and is the subject

of dispute with the principal. The Receivers and Managers are facilitating

defect works during the defect liability period to protect retentions. The

Receivers and Managers and secured creditor are working with solicitors to finalise a recovery strategy for the balance of claim and release of retention.

− Burns bay Road, Lane Cove: This cost plus project is proceeding and is in

the early stages with the principal.

− QVB Refurbishment: There is a dispute with the principal to have the bank

guarantee/retention returned.

− Bellevue Hill: The project has continued with the principal and is close to

completion. The occupation certificate is expected next week, which will

facilitate the release of the bank guarantee.

− Centro Bankstown: Final defects are being finalised to recover retention

money.

− Ashfield: Final defects are being finalised to recover retention money.


Section 3 Company History and Reasons for Failure


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Officeholder Position Appointment Date Cessation Date

Nicholas John Bettar Director 8 January 1993 N/A

Nicholas John Bettar Secretary 8 January 1993 N/A

Paul Bettar Former Director 8 January 1993 5 May 2001

Michael Chahoud Former Director 8 January 1993 9 February 1998

Malcolm Walton Cooper Former Director 7 January 1993 8 January 1993

Janet Cooper Former Director 7 January 1993 8 January 1993

Malcolm Walton Cooper Former Secretary 7 January 1993 8 January 1993

Background

Registered Office and Principal Places of Business

� An ASIC search dated 13 January 2015 indicated that the Company's registered

office is Level 7, 111-117 Devonshire Street, Surry Hills NSW.

� It further lists two principal places of business as:

− Science House, Level 5, 157-161 Gloucester Street, The Rocks NSW; and

− 4 Kent Street, Belmore NSW.

Company Shareholding

� At the date of our appointment, the Company's shareholding consisted of 30,000

fully paid up ordinary shares with a total par value of $30,000. All shares are held

by Nicholas Bettar.

� Given the expected shortfall to unsecured creditors based on the information

available, it is unlikely that there will be a return available to ordinary shareholders if the Company is placed into Liquidation.

� There have not been any changes to shareholdings in the 12 months prior to the

appointment date.

Company Officeholders

� The ASIC search confirmed the current and historical directors and secretaries of

the Company are as follows:

Auditor and External Accountant

� The external accountants of the Company are Parras & Associates. The latest

financial reports prepared by the external accountants were for FY14.

� According to the ASIC, the appointed auditors of the Company are Allworths.

The financial statements were last audited in 2010.

Organisation Structure and Related Entities

� The Company has a simple structure with Nicholas Bettar being the sole shareholder, director and secretary.

� A directors search has revealed that Nicholas Bettar is also the sole director (and

shareholder) of the following companies:

− Baseline Developments Pty Ltd; and

− Baseline Concept Design Pty Ltd.

� Related party loans with the above companies are recorded in the accounts with

the balances not changing materially in the past 12 months. Management have

advised these companies are dormant. The Company owes $358,214 to Baseline

Developments. The Company is owed $12,838 by Baseline Concept Design.

� One other related party has been noted in the Company's accounts. Bettar Holdings Pty Ltd is recorded as a receivable in the accounts, with the receivable

balance reducing from $1.1 million to $503,000 between June 2014 and

December 2014 as a result of contributions having been made by Bettar

Holdings. Nicholas Bettar was previously a director of this entity.

� There is a contract between the Company and Bettar Holdings whereby Bettar Holdings has contracted the Company to undertake the construction of the

project at Amelia Street. The head contract is between Bettar Holdings and

Amelia 1822 Pty Ltd.

Company History and Reasons for Failure


Chargeholder Charge

Access Specialty Hardware Pty Ltd Other Goods - Equipment

Action Access Hire Pty Ltd; Australia Access Hire Pty Limited Motor Vehicle and Other Goods

Coates Hire Operations Pty Limited Motor Vehicles and Other Goods

Energy Power Systems Australia Pty. Limited. 201202020014602, 201202020014813

Force Corp Pty Ltd Other Goods - Equipment

Fuji Xerox Finance Limited; Fuji Xerox Australia Pty Limited Printer and/or Copier Equipment

Peri Australia Pty Limited Other Goods

Toyota Finance Australia Limited Forklift and Motor Vehicles

Waco Kwikform Limited Other Goods - Equipment

Westpac Banking Corporation Intangible Property

Chargeholder Charge Type Date

Baron Corporation Pty Ltd All Present and After Acquired Property 30 January 2012

New Bounty Pty Ltd All Present and After Acquired Property 4 June 2014

Background (cont'd)

Secured Creditor

� The Personal Property Securities Register (PPSR) records the following charges

being recorded against all, or substantially all, of the assets of the Company:


Leased Assets

� The below parties also have registered security interests on the PPSR, primarily in

relation to leased assets, finance agreements and retention of title. Pursuant to

Section 443B of the Act, the Administrators elected not to exercise their rights in

relation to the leased assets.

� In August 2010 Baron Corporation agreed to loan the Company funds and

obtained security by way of a charge over the Company. Funds of up to $3.0

million were drawn down prior to the Company commencing to repay the loan. Under the prior DOCA executed in 2012, Baron Corporation's debt was not

extinguished.

� In August 2014 Deeds of Variation and a Deed of Assignment were entered

whereby Baron Corporation's debt was split and part assigned to their related

party, New Bounty Pty Ltd, who also obtained security over this amount.

� As at the date of appointment, the debts due to the two secured creditors were

advised to be:

− Baron Corporation Pty Ltd: $2,809,745; and

− New Bounty Pty Ltd: $1,677,753

� The amount due on appointment includes $700,000 advanced to the Company as recently as September 2014.

� Pursuant to the New Bounty security, Costa Nicodemou and Peter Krejci were

appointed as Receivers and Managers of the Company on 13 January 2015.

� The Administrators note that the amounts outstanding differ from the

Management accounts with the variance appearing to relate to interest.

� We have not reviewed the charge documentation to confirm the validity.

� Management has advised that some of the securities registered are not current,

however, the register had not been updated to reflect their discharge.


Project/Location Start Date Finish Date Value ($) Profit Margin ($)

18-22 Amelia St, Waterloo 1/02/2013 31/12/2014 14,460,511 -

2 Harnett Ave, Mosman 1/04/2013 31/07/2014 1,126,153 38,270

St Ives Shopping Village 17/05/2013 16/09/2014 1,383,093 225,412

Centro Bankstown 23/08/2013 31/08/2014 3,961,469 (483,488)

Bedford - Surry Hills 6/09/2013 31/12/2014 3,342,334 (181,220)

144-154 Commonwealth St, Surry Hills 1/01/2014 30/11/2014 285,048 (19,488)

QVB Refurbishment 29/01/2014 31/12/2014 1,433,523 (260,721)

MacDonald College 1/02/2014 30/05/2014 366,423 35,729

Maroubra Subdivision 9/05/2014 30/11/2014 506,751 85,433

34 Morley Street, Rosebery 3/09/2014 31/10/2014 63,608 18,884

Subtotal - Completed projects 26,928,913 (541,189)

Bellevue Hill 15/07/2013 28/02/2015 4,386,944 (50,000)

12-16 Burns Bay Road, Lane Cove 1/06/2014 31/07/2015 2,500,000 200,000

Total 33,815,857 (391,189)

Principal Activity

� The previous DOCA is understood to have involved contributions from the

Director estimated to result in a return of between 6.5 and 10 cents in the dollar

to unsecured creditors. Control of the Company returned to the Director upon execution of DOCA.

Project Overview

� Management has provided a summary of the projects worked on over the past 12

months, which is set out below:


Principal Activity

� The Company was registered with ASIC on 7 January 1993.

� The Company operates in the Building and Construction industry, providing

services to the educational, industrial, institutional, commercial, residential and

retail sectors. The services provided include:

− Project Management;

− Construction Management;

− Concept Planning and Programming;

− Project Feasibility Studies;

− Design Management and Facilitation; and

− Construction Advice.

� The Company's projects are within the Sydney CBD and Greater Sydney regions.

� As at the date of the Administrators' appointment, Baseline employed 13

employees. The majority of these employees continue to be employed though

arrangements with the Receivers and Managers.

Previous Administration and DOCA

� It is noted that on 3 July 2012 Brian Silvia and Andrew Cummins of BRI Ferrier were appointed Voluntary Administrators of the Company by the Director

pursuant to Section 436A of the Act.

� It was noted in the prior Administrators' report that the cause of the Company's

failure was due to the lack of adequate working capital following significant

losses, and protracted litigation with respect to a building contract.

� The previous administration came to an end with the execution of a DOCA and

accordingly the Administrators ceased to act on 31 July 2012. The prior

Administrators were appointed Deed Administrators on 31 July 2012 and ceased

to act around 27 February 2013, upon completion of the DOCA.

� A loss of $541,000 has been incurred on the projects completed in the past 12

months.

� There remain two projects on the schedule which have not been completed. The Receivers and Managers assumed control of the Company on their appointment

and their comments with respect to the status of various contracts is set out on

page 13.


Reasons for failure

Director's Reasons for Failure

� Following the appointment of the Administrators, a meeting was held with the

Director wherein he attributed the demise of the Company to the Amelia Street

project. The Director has advised:

− The Amelia Street project was for the development of 53 units and 2 shops for a client that the Company had not previously worked for (Amelia 1822 Pty

Ltd).

− The starting contract value was for $14.6 million (which included a profit

margin of 8%) with the contract construct only (no design risk). As a result of

a number of variations the total increased to $16.9 million with $13.9 million having been paid. Disputes and delays on the project arose.

− The contract was run informally with respect to variations. While many of the

smaller variations were informally approved and paid, the larger value

variations were not approved and delayed.

− Between April 2014 and August 2014 a number of meetings were held with the client in an attempt to resolve the matter and obtain payment of the final

progress claim of c. $3.0 million, including unpaid variations.

− On 15 October 2014 the Company applied for adjudication under the Security

of Payment Act 1999. A determination was not made until 8 December 2014

with only a very small portion of the claim being considered.

− As a result of the delayed adjudication, a further application for adjudication

was lodged in November 2014. This determination was handed down on 5

January 2015 with only c. $311,000 of the $3.0 million claim being awarded.

Administrators' Comments

Amelia Street, Waterloo

� Our preliminary investigations into the affairs of the Company indicate that the

financial difficulties faced by the Company were magnified by the disputed final

progress claim on the Amelia Street project.

� While the Company was not a party to the head contract on Amelia Street, an

agreement was entered between Bettar Holdings (the head contractor on the

development) and the Company. Under the agreement the Company was to

complete the development on behalf of Bettar Holdings.

� Accordingly, the Company has a claim against the related party, Bettar Holdings, which in turn will need to pursue the principal in court should it decide to further

pursue the claim.

Other reasons for failure

� In addition to the Amelia Street claim, our investigations indicate that the

following factors also contributed to the failure of the Company:

− Difficulty in re-establishing the business and securing new projects following

the prior Administration/DOCA;

− A history of trading losses with the Company recording losses of $2.3 million

in FY14 and $2.3 million in YTD15. While a profit was recorded in FY13, this

resulted from the write-off of creditor claims following the 2012 Administration/DOCA, not trading performance; and

− General working capital constraints as a result of the history of losses.

� Further investigation into the reasons for failure of the Company will be

undertaken by the Liquidators should the Company be placed into liquidation.



Section 4 Statement about the Company's Business, Property, Affairs and

Financial Circumstances


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


RATA Summary at 13 January 2015

NotesBook Value

($)

Directors' Estimated

Realisable Value

($)

Assets not specifically charged

Interest in Land - -

Sundry Debtors 1 2,877,019 Unknown

Cash on Hand 2 250 250

Cash at Bank 2 12,405 12,405

Stock - -

Plant and Equipment 3 25,000 25,000

Other Assets - -

Net Assets Subject to Specific Charge 2,914,674 37,655

Assets Subject to Specific Charge 4 63,000 -

Less Amounts Owing 4 (52,194) -

Total Assets 2,925,480

Less: Amount Payable in Advance of Secured Creditor -

Amounts Owing for Employee Entitlements 5 (188,812)

2,736,668

Less: Amount payable to preferential creditors/secured creditor 6 (4,487,497)

(1,750,829)

Amount Owing to Unsecured Creditors 7 (5,110,720)

Surplus / (Deficit) before Realisation and Administration Costs (6,861,549)

Description

Surplus / (Deficit) in Assets before Claims of Preferential and

Unsecured creditors

Surplus / (Deficit) in Assets before Claims of Unsecured Creditors

Director's Report as to Affairs (RATA)

Director's RATA

� Pursuant to Section 438B(2) of the Act, the Director of the Company is required

to submit a statement about the Company's business, property, affairs and

financial circumstances, also known a Report as to Affairs or RATA. The RATA

is a snapshot in time as at the date of our appointment of the assets and liabilities of the Company, disclosing book value and estimated realisable value.

� On 16 January 2015 a written request was issued to the Director to complete the

RATA for the Company.

� The RATA for Mr Bettar was received via the Receivers and Managers on 2

February 2015 and a summary is shown opposite. The RATA has been prepared as at 13 January 2015 (being the date of appointment of the Receivers and

Managers). We do not believe the position would have changed materially as at

the date of the administration on 15 January 2015.

� We comment on the key assets and liabilities in greater detail on the following

pages.

� The RATA will be available for inspection by creditors at the second meeting

should they wish to review it.

Statement about the Company's Business, Property, Affairs and Financial Circumstances

Notes: The above has been reproduced based on the RATA prepared by the Director.


Administrators' notes on the director's RATA

Administrators' Notes on the Director's RATA

Note Assets Commentary

1 Debtors � The schedule to the RATA identifies 4 debtors, with the largest being $2.7 million in relation to Amelia Street, Waterloo. With respect to Amelia Street, it is noted that:

� There have been two adjudications in relation to this final progress payment with the adjudicator only awarding $311,000 against a total claim of $3.0 million;

� The Amelia Street construction contract is between Amelia 1822 Pty Ltd and Bettar Holdings Pty Ltd (a related entity). An agreement is in place between Bettar Holdings and the Company wherein the Company is to perform the construction works on behalf of Bettar Holdings. Accordingly, the related party Bettar Holdings is the Company's debtor, not Amelia 1822 Pty Ltd; and

� Based on a high level review of the financial statement of Bettar Holdings, Bettar Holdings would need to recover the Amelia Street debt and/or related party loans in order to make payment to the Company. To recover the Amelia Street debt, it is necessary for Bettar Holdings to contest the matter in court. We do not have sufficient information or opinions to comment on the likely success should such action be undertaken, however, it would appear based on comments from the Director that Bettar Holdings will seek third party funding should it choose to pursue the action.

� Total debtors in the RATA of $2.9 million compare to $983,000 recorded in the Management accounts as at 31 December 2014. The variance primarily relates to the recorded value of the Amelia Street debt.

� Related party loans have been excluded from the Director's RATA.

2 Cash on Hand and Cash at Bank

� The NAB has confirmed that $3,241 was held in the Company's main trading account as at 15 January 2015. The Receivers and Managers have taken control of the bank account in accordance with the secured creditors' priority.

� In addition to the main trading account, four other accounts have been identified as being held. Management has advised the following in respect to each of the accounts:

� Business Cheque account (nil balance): This was a client specific account held in respect to a project and is no longer being used.

� Two term deposits ($202,709 balance): These term deposits are held by the bank as security for the bank guarantees issued. Letters of Set-Off are held in the amount of $193,000, with management providing a schedule of guarantees issued as at the date of appointment totalling this amount.

� Term deposit ($274,555 balance): A Letter of Set-Off is also held by the bank in relation to the account, with the term deposit being held as security for a bank guarantee issued. Management has advised that this term deposit has been funded by, and is held on behalf of, an individual rather than the Company. We have been provided with documentation in relation to this transaction but have not yet assessed the legal ownership of the account.

3 Plant and Equipment

� A depreciation schedule has been provided with the plant and equipment being identified as primarily office furniture and equipment. We expect such equipment to have minimal realisable value in a liquidation scenario, with the secured creditors' security covering these assets in priority to employee claims and unsecured creditor claims.



Administrators' notes on the director's RATA


Note Liabilities Commentary

5 Employee Entitlements

� Entitlements have been calculated for annual leave and long service leave, with an additional $25,000 general provision included for retrenchment. Also included in the schedule is $74,605 attributed to the Director and his related parties.

� The Administrators' estimate of employee entitlements is set out in Section 7.

6 Preferential Creditors

� The liability of $4.5 million is attributed to the secured creditors, Baron Corporation Pty Ltd and New Bounty Pty Ltd, who appointed the Receivers and Managers on 13 January 2015 pursuant to their securities.

� The liability in the RATA compares to $3.0 million recorded in the management accounts as at 31 December 2014. The variance is attributable to capitalised interest.

7 Unsecured Creditors

� Included in the listing of unsecured creditors is the Director/Shareholder in the amount of $1.4 million in respect to loans made to the Company.

Administrators' Notes on the Director's RATA

Note Assets Commentary

4 Assets Subject to Specific Charge

� Three motor vehicles utilised by the Company are subject to finance arrangements. Equity of c. $10,000 has been estimated by the Director, with the secured creditors' priority attaching to this equity.


Section 5 Historical Performance


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Profit & Loss Statement for Comparitive Years

FY12 FY13 FY14 YTD15

Revenue 33,404,638 13,993,895 30,030,111 5,027,639

Cost of Sales (33,564,158) (7,157,861) (30,305,775) (6,607,519)

Gross Profit (159,520) 6,836,034 (275,664) (1,579,880)

Gross Margin -0.48% 48.85% -0.92% -31.42%

Other Operating Income 716,138 111,487 99,546 31,820

Total Income 556,618 6,947,521 (176,118) (1,548,061)

Less Operating Expenses (3,844,412) (2,346,797) (2,149,781) 759,299

NPBT (3,287,794) 4,600,724 (2,325,899) (2,307,360)

Income Tax - - - -

NPAT (3,287,794) 4,600,724 (2,325,899) (2,307,360)

Historical Performance – Profit and Loss

Profit and Loss Overview

� The Company has had mixed performance from a profit and loss perspective. It

is noted that:

− During FY13 the Company was placed into Administration as a result of

working capital deficiencies and protracted litigation. Administrators were appointed on 3 July 2012 and a DOCA was executed on 27 July 2012. Control

of the Company was handed back to the Director during the DOCA period

which was effectuated in February 2013.

− Revenue in FY13 fell significantly compared to FY12 as a result of the

ramifications from the administration. During this administration and post-administration phase, Management has advised that the Company experienced

difficulties in securing new contracts (with some contracts instead completed

via related parties).

− A net profit was recorded in FY13. This was not as a result of trading results

but rather as a result of the accounting practice whereby creditor balances from the prior administration period were written off.

− In FY14 trading conditions normalised and new contracts were secured.

However, a loss was still recorded at the gross profit level indicating the

construction projects entered into were not profitable. This is confirmed upon

review of the schedule of projects completed by the Company, set out on page 17, which shows losses were incurred on many projects.

− YTD15 has seen a decline in revenue with revenue of $5.1 million for the

period being c. 33% of the revenue generated for the same period in FY14.

Operating losses have continued.

� The Company generally entered 'lump sum' contracts rather than 'cost plus' contracts resulting in the Company being at risk should there be performance

issues, including those outside the Company's control such as weather.

Historical Performance

Financial Statements

� The Company maintained monthly management accounts utilising construction

management software, Cheops. The last available management accounts have

been prepared for the month ending 31 December 2014.

� Annual financial statements were prepared by an external accountant, Parras & Associates. We have been provided with accounts for FY12, FY13 and FY14,

which are summarised above together with the YTD15 management accounts.

Sources: FY12 to FY14 – Financial statements prepared by Parras & Associates Certified Practicing Accountants. YTD15 – Management accounts


Balance Sheet

As at 30 June

2012

As at 30 June

2013

As at 30 June

2014

As at 31 December

2014

Current Assets

Cash at Bank - NAB 62,968 291,796 - 154,987

Cash At Bank - Arab GST Acc -

David Hicks A/C - 52,949 - -

NAB A/C - 81 - -

Term Deposit - St George 1,868,664 509,551 - -

Term Deposit - NAB 1,256,336 150,000 193,000 193,000

Receivables 2,484,507 2,148,058 3,267,329 983,133

Other 4,516 876 10,670 3,926

Total Current Assets 5,676,991 3,153,311 3,470,999 1,335,046

Non-Current Assets

Receivables 66,850 172,315 1,107,133

Property, Plant & Equipment 304,107 240,367 182,095 153,635

Intangibles 12,825 8,933 5,039 -

Total Non-Current Assets 383,782 421,615 1,294,267 153,635

Total Assets 6,060,773 3,574,926 4,765,266 1,488,681

Current Liabilities

Accounts Payable 9,439,872 2,104,960 4,814,873 3,733,637

Borrowings 1,429,446 379,399 34,481 2,860,287

Other (357,628) 379,269 600,951 506,834

Total Current Liabilities 10,511,690 2,863,628 5,450,305 7,100,758

Non-Current Liabilities

Accounts Payable 93,163 42,411 32,147 32,147

Borrowings 3,030,409 3,099,975 4,037,899 1,418,222

Total Non-Current Liabilities 3,123,572 3,142,386 4,070,046 1,450,369

Total Liabilities 13,635,262 6,006,014 9,520,351 8,551,127

Total Assets (7,574,489) (2,431,088) (4,755,085) (7,062,446)

Shareholders Equity

Issue Capital 30,000 30,000 30,000 30,000

Reserves (1,276) (509) -

Accumulated Losses (7,603,213) (2,460,579) (4,785,084) (7,092,444)

Total Shareholders Equity (7,574,489) (2,431,088) (4,755,084) (7,062,444)

Historical Performance – Balance Sheet

Balance Sheet Overview

� The Company has had a net liability position since at least 30 June 2012. While

the net liability position improved between FY12 and FY13 as a result of

accounts payable being written off following the compromise under the last

DOCA, the net liability position has remained and has since been increasing as accumulated losses have been incurred.

� During the 6 months to 31 December 2014, net liabilities increased from $4.8

million to $7.1 million. This deterioration is linked to the reported trading losses,

such that receivables have been collected, however, these debtor collections have

not been sufficient to pay its trading liabilities.

� Further, despite having incurred expenses on the Amelia Street project but not

having received the final progress payment, the full $3.0 million claim on that

project is not shown as an asset (neither work in progress, trade debtors or

contingent asset). This is as a result of the Company not recording receivables

until the amount has been certified.

� The Company's main asset is the receivables book. Of the $983,000 of trade

debtors as at 31 December 2014, $806,000 is recorded as being in respect of

Amelia Street and would therefore be encapsulated in the adjudication

determination. As the head contract on Amelia Street is with the related entity

Bettar Holdings, for the Company to recover the debt from Bettar Holdings (via the agreement in which the Company completed the work on behalf of Bettar

Holdings), it appears as though it would be necessary for Bettar Holdings to first

recover this amount under the head contract, which is likely to require legal

action given the adjudications were not in Bettar Holdings' favour.

� During the 6 month period to 31 December 2014 funds were injected by the secured creditor and related parties in an attempt to appease creditors while the

Amelia Street discussions and subsequent adjudication were progressing. Baron

Corporation Pty Ltd loaned the Company $700,000 in September 2014 and

Bettar Holdings repaid the Company in November and December 2014, reducing

its loan from $1.1 million to $503,000. The shareholder/director loan position did not move materially in the last 6 months.

Historical Performance

Sources: 30 June 2012 to 30 June 2014 – Financial statements prepared by Parras & Associates Certified Practicing Accountants. 31 December 2014 – Management accounts


Section 6 Investigations


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Investigations overview

Unfair Preferences

Refer to page 29

� Based on the Administrators' review of Company accounts and transactions, it is the view of the Administrators that

payments of between $526,000 and $1.8 million have been made to selective creditors which appear to display characteristics

of potential unfair preference payments.

� These payments require further investigation to be conducted in order to cross-check all invoices and correspondence to

determine an exact figure paid in preference.

Uncommercial

Transactions

Refer to page 30

� Based on our investigations, the Administrators have not become aware of any uncommercial transactions to third parties or

related entities entered into by the Company.

� Further investigations may be required should the Company be placed in liquidation.

Directors Transactions

Refer to page 30

� Our investigations have identified personal payments in the amount of c. $84,000 made from the Company's bank account.

These payments have correctly been debited from the Director's shareholder loan account.

� Should the Company be placed into liquidation, these payments will be investigated in greater detail.

Breaches of Director

Duties

Refer to page 30

� This brief investigation into the Company's affairs has not identified any material breaches of director duties. Should the

Company proceed into liquidation, the Liquidator will review any potential breaches in greater detail.

� Creditors should note however, that the Director may have breached his duties by trading insolvent. Defences are, however, available to a director which need to be considered.

Insolvent Trading

Refer to page 32

� Based on our review of the Company's books and records, it is clear the Company had been experiencing difficulty in paying

its creditors from at least June 2014 and potentially earlier.

� The cashflow test undertaken highlighted an excess amount of creditors compared with the amount of cash the Company held at bank. Similarly the balance sheet test highlighted the Company's net liability position and poor current ratio.

� On this basis, the Administrators have estimated that the Company was insolvent from at least June 2014.

Books and Records

Refer to page 33

� In accordance with Section 286 of the Act, we note that we have not identified any material concerns with the books and

records prepared and provided by the Company.

� We do however note that the Company did not maintain a cashflow statement in its intended form, nor did it prepare cashflow projections.

Investigations


Investigations overview (cont'd)

Antecedent Transactions Recoverable by a Liquidator.

� In accordance with Regulation 5.3.A.02 of the Act, the Administrator of a

company in setting out his or her opinions in a statement mentioned in paragraph

439A(4) of the Act, must specify whether there are any transactions which appear

to the Administrator to be voidable transactions in respect of money, property or other benefits which may be recoverable by a Liquidator pursuant to Part 5.7B of

the Act.

� The Administration process set down in Part 5.3A of the Act, provides a very

short time within which to conduct investigations into potential recoveries from

voidable transactions. At this stage, due to the short time frame allowed, it is difficult to definitively identify the likely courses of actions and/or recoveries that

may be available to a Liquidator. Such conclusions would usually be made after

more detailed investigations have been undertaken. Such investigations would

normally include:

− A further detailed review of the Company's books and records;

− Discussions with various stakeholders of the Company;

− A detailed review of documentation produced by relevant parties following

enquiry by a Liquidator/Administrator; and

− The public examination under oath, of relevant parties regarding the

transactions concerned.

� Accordingly, whilst we have conducted the necessary enquiries required of an

Administrator, the conclusions drawn herein with respect to our investigations

into the Company's affairs should be viewed as preliminary and may be

confirmed, or otherwise, by way of other sources of investigation should the

Company proceed to liquidation.

� The transactions generally fall into two categories, being insolvent trading and

voidable transactions (comprising unfair preferences, uncommercial transactions

and unfair loans).

� The prospect of recovery of any antecedent transactions will depend on two key

issues:

− Availability of funding to allow the cost of further investigation and litigation

to be met. At this stage, we are unable to quantify the funds estimated to

pursue such actions and a cost benefit analysis would be conducted prior to instigation of actions as well as consultation with the creditors and/or a

Committee of Creditors; and

− The ability of the party (potential defendant) to be able to meet and pay any

successful judgement against it in favour of the Liquidators. A cost benefit

analysis will need to be conducted on each case to determine if there is merit and a net recovery to creditors in pursuing action.

Investigations


Voidable transactions

Unfair Preference Payments

� The payments referred to are generally recoverable under Section 588FA of the

Act if the payments were made during a period of six months prior to the

commencement of the winding up date, or the date the Voluntary Administrators

were appointed (otherwise known as the “relation back date”), which in this case would be the period 14 July 2014 to 14 January 2015.

� To constitute an unfair preference payment, it must be proven that the company

to the transaction was insolvent at the time of the payment and that the creditor

had a suspicion or ought to have had a suspicion that the company was insolvent.

As a general guide, the following factors can be demonstrative of that suspicion: The Company

− Having failed repayment arrangements;

− Making payments to suppliers outside of normal trading terms; and/or

− Seeking additional finance or cash injection.

Creditors

− Resorting to legal actions to recover the debts;

− Receiving post-dated cheques following the commencement of legal

proceedings;

− Entering into cash-on-delivery payment arrangements with suppliers;

− Making demands for clearance of the debt unrelated to a promise to recommence supply; and/or

− Seeking additional security to secure the debt.

� We have undertaken the following procedures in determining whether unfair

preferences occurred:

− Review of the Company's books and records;

− Analysis of ageing of creditors as at the appointment date and over the

relation back period;

− Identification of suppliers at risk of unfair preferences; and

− Review of bank statements produced during the relation-back period,

identifying large, round sum or regular payments.

Unfair Preference Payments – Findings

� From the Administrators' investigations, potential unfair preferences appear to have been made between the period of September 2014 and December 2014. It is

likely that unfair preference payments may have been made prior to this period as

it is the belief of the Administrators that the Company was insolvent prior to

June 2014 as discussed below.

� These payments may have totalled between $526,762 and $1,818,371 and relate to 22 and 43 parties respectively. These payments exclude any potential preference

payments that may have been made to the ATO. We are aware that the Company

made arrangements with some suppliers to make an interim part payment based

on the availability of cash.

� Creditors should note that these payments will require further investigation to confirm their nature, including sourcing back to invoices and creditor

correspondence.

� Further investigations into potential unfair preference payments being made to

the ATO are to be conducted, noting the Company engaged with the ATO on a

payment plan in July 2014. The payment plan was amended in December 2014, expiring in March 2015. Over the period August 2014 to December 2014 a total

of $105,000 was paid to the ATO.

� Creditors should note that whilst unfair preference payments have been

identified, recovery of these payments are subject to the Company being

insolvent at the time the payments were made. An analysis on the Company's solvency is provided on pages 32 to 38.

� Should creditors elect to place the Company into liquidation and the Voluntary

Administrators be appointed Liquidators, a more detailed investigation into unfair

preference payments will be undertaken.

Investigations


Voidable transactions (cont'd)

Investigations

Director Related Transactions

� In accordance with Section 588FD of the Act, payments, the issue of securities,

conveyances or other dispositions of property by the company in favour of a

director, a relative or de facto spouse of a director may constitute an

unreasonable director related transaction.

� In order to determine whether any transactions were made to the Director, the

Administrators reviewed the Company's accounts over the last six months. We

note the following in relation to Director's transactions:

− During the period 1 July 2014 to 14 January 2015, the Director used the

Company bank account to pay personal payments of between $84,000 and $86,000;

− Whilst the Director was utilising the facilities of the Company's bank account,

the transactions were being recorded against his Shareholders Loan account.

Accordingly the Director's Loan account reduced by c. $84,000 during the six

month period with the management accounts as at 31 December 2014 recording the Director as a creditor for $1.4 million.

− Should the Company be placed into liquidation, further investigation will need

to be undertaken, however we note from a personal assets and liabilities

statement prepared by the Director, that he is unlikely to be able to repay any

transactions proven to be voidable as he does not have the financial wherewithal to meet a demand for repayment.

� The Director also drew a wage in support of his role as managing director of the

Company. Preliminary investigations indicate this to be reasonable. The Director

has advised his annual salary was $80,000. Our analysis indicates he was paid c.

$32,000 during the six months to 31 December 2015.

� It should be noted that pursuing recovery of preference payments can be costly,

lengthy and may not be successful. We stress that any party subject to an unfair

preference payment claim may have valid defences preventing a claw back by a Liquidator.

Uncommercial Transactions

� Section 588FB(1) of the Act defines an uncommercial transaction as "a

transaction of the company if, and only if, it may be expected that a reasonable

person in the Company's circumstances would not have entered into the

transaction, having regard to:

− The benefits (if any) to the company of entering into the transaction;

− The detriment to the company of entering into the transaction; and

− The respective benefits to other parties to the transaction."

� Section 588FC of the Act defines an insolvent transaction as one which is an

uncommercial transaction and entered into when the company was insolvent at

the time of the transaction, or would become insolvent as a result of entering into the transaction.

� To date in our preliminary investigations we have not identified any

uncommercial transactions.

Director's Personal Liability for Employee Entitlements

� A director may be ordered to pay compensation if agreements or transactions

were entered into with the intention of avoiding payment of employee

entitlements or reducing the amount of entitlements that can be recovered.

� No transactions or agreements of this nature or intention were discovered during

our investigation.


Entity Type 30-Jun-14 31-Dec-14 Movement ($)

Baseline Concept Designs Asset 12,595 12,838 243

Baseline Developments Liability 358,456 358,214 (242)

Voidable transactions (cont'd)

Investigations

Report Pursuant to Section 438D

� Under Section 438D of the Act, an Administrator is required to lodge a report to

ASIC if he/she becomes aware that:

− A past or present officer, employee or member of a company has been guilty

of an offence in relation to the company; or a person who has taken part in the formation, promotion, Administration, management or winding up of the

company has:

(i) Misapplied or retained, or may have become liable or accountable for

money, or property (in Australia or elsewhere) of the company; or

(ii) Been guilty of negligence, default, breach of duty or breach of trust in relation to the company.

Potential Breaches of Director Duties

� This brief investigation into the Company's affairs has not identified any material

breaches of director duties. Should the Company proceed into Liquidation, the

Liquidator will review any potential breaches in greater detail.

� In the event breaches are identified, we do not believe the Director would have

the ability to meet a judgement if the Liquidators are successful in pursuing a claim.

Related Company Loans and Transactions

� The management accounts record the following loans with related parties, with

the movements in these accounts not being material:

� The loan from Baseline Developments has remained relatively constant throughout the period indicating little material payment made.

� Creditors should note that Baseline Concept Designs is now a dormant entity and

debt is unlikely to be recovered.

� Although not a current director, Nicholas Bettar was formerly a director of Bettar

Holdings. As at 30 June 2014, Bettar Holdings owed the Company $1.1 million. As a result of contributions from Bettar Holdings in November and December

2014, this was reduced to $502,000. Accordingly, we do not consider this to be an

unreasonable director related transaction. The key action point is that the debt

from Bettar Holdings needs to be recovered.

� The above data suggests that the Director has not used available funds to

repay intercompany loans.

Unfair Loans

� Pursuant to Section 588FD of the Act, a Liquidator is able to recover from

directors any unfair loans which are extortionate or have become extortionate.

� We note that the Director loaned funds in his personal capacity to the Company

as an unsecured loan prior to July 2012. The loan only reduced by c. $84,000 in

the relation-back period as a result of director-related transactions being offset against the loan.

� We note the secured creditors were charging default interest rates.


Insolvent trading

Insolvent Trading Overview

� Pursuant to Section 558G of the Act, it is the duty of the director to take actions

to prevent insolvent trading. Directors will be found guilty of the offence of

insolvent trading if they allow a company to occur debt when they are aware that

there were grounds for suspecting that the company was insolvent at the time of entering the transaction.

Personal Financial Position of the Director

� In order to justify an insolvent trading action, the Administrators must be

satisfied that the director will be able to pay any judgement against them. In this

regard, we note:

− An asset and liability statement has been provided by the Director which

shows he has minimal assets, and liabilities of c. $3.0 million; and

− The Administrators have undertaken multiple property searches and have

determined that the Director does not directly hold property in NSW.

� We are not aware of the Director holding a director and officeholders insurance

policy. It should be noted that it is normal for the policy to include an insolvent

trading exclusion clause in any event.

� Accordingly, we do not believe the Director would be able to pay any judgement

against him should one be obtained.

Defence

� There are four distinct statutory defences where a contravention of 588G

occurred. These defences are designed for protecting a director where one of the

following has occurred:

− The director had reasonable grounds to expect solvency (588H(2));

− The director had reasonable grounds to expect solvency based on information

supplied by a subordinate (588H(3));

Investigations

− Illness or other good reason prevented the director from being involved in

management activity(588H(4)); and

− The director took all reasonable steps to prevent the company from incurring the debt (588H(5)).

� The Administrators' review identified the following key factors which may

mitigate the indicators of insolvency mentioned above:

− Prior to the date of the Administrators' appointment the secured creditors

continued to provide financial support to the Company. The Director may have taken on more debt assuming the secured creditor would continue to

provide the necessary funding to pay debts when they fall due; and

− The Director may have reasonably expected that the Company would receive

c. $3.0 million for work completed on the Amelia Street project, however, the

adjudication resulted in the Company only receiving c. $300,000. When this was realised, the Director moved quickly to appoint Voluntary

Administrators.

Key Indicators of Company Insolvency

� Our review identified the following key considerations of insolvency for the

Company:

− A net liability position since 2012 when control of the Company was returned

to the Director upon execution of the prior DOCA;

− A significant trading loss in the financial year ending 30 June 2014 and in the

year to date period to 31 December 2014;

− A current ratio below one for at least the six months prior to the

Administrators' appointment, indicating a lack of liquidity;

− Various creditor demands and claims having been received; and

− An increase in the ageing of creditors.


Insolvent trading (cont'd)

� During this investigation, management were able to provide the majority of the

information required by the Administrators.

� Books are records were kept up to date with reports prepared monthly by the financial controller and by the external accountants at the end of the financial

years. For the current year to date, management accounts were prepared monthly

to 31 December 2014 and ledgers and bank balances were updated sufficiently.

� It is the view of the Administrators that the Company was effective in

maintaining adequate books and records.

Books and Records

� Sections 588E(3) and 588E(4) of the Act describes a presumption of insolvency

should the Company be proved to have not kept proper financial records for the

period of 12 months from the relation back date in accordance with Section 286

of the Act.

� Should the Company proceed into liquidation, a Liquidator would investigate the

adequacy of the maintenance of Company books and records in accordance with

Section 286 of the Act, and the reliability of the reports relating to the monthly

financial position of the Company.

� The adequacy or inadequacy of the records would assist in the decision whether to take action against the Director in accordance with the Act.

� The books and records requested and received by the Administrators included:

− Bank statements;

− Management accounts;

− Employee records and liabilities;

− Creditor listings;

− Creditor letters of demand and adjudication;

− Details of utility and service providers;

− Debtors ledger;

− Financial statements prepared by the external Accountants; and

− Monthly management reports.

Investigations


(20)

0

20

40

60

80

100

120

140

160

30 June 2014 31 August 2014 31 October 2014 31 December 2014

$000's

Bank Account Balance ($)

Bank Account Balance ($)

(1,000)

0

1,000

2,000

3,000

4,000

5,000

6,000

30 June2014

31 July 2014 31 August2014

30September2014

31 October2014

30November2014

31December2014

$000's

Bank Account Balance ($) Trade Creditors Balance ($)


Investigations

Indicators of Insolvency

Indicator Cash Flow Test

Overview � The test for solvency and consequently insolvency is prescribed by Section 95A of the Act which states that:

"(1) a company is solvent if, and only if, the company is able to pay all the company's debts, as and when they become due and payable; and

(2) a company who is not solvent is insolvent."

� This translates into the "cashflow test", however analysis of the balance sheet is also important in forming a view as to solvency.

Administrators findings

� The Administrators conducted a review of the Company's financial positon for the period FY12 to YTD15, with particular emphasis on the

period of June 2014 to 14 January 2015. In conducting the cash flow test to determine company solvency, the Administrators analysed the

Company's monthly bank balance, and compared the cash at bank with the total monthly creditors balance to determine if the Company could pay its debts when they fall due.

� The chart below on the left presents the Company's cash balance over the period of June 2014 to December 2014 , compared with the

Company's trade creditor balance over the same period.

� Over the period of review, the creditor balance was relatively stable. Trade creditors decreased 20% during the period. One reason for the

reduction in trade creditors was the injection of $700,000 from the Secured Creditor on 22 September 2014, which was subsequently used to

pay outstanding creditors the Company deemed urgent.

� The chart on the right is a magnified snapshot of the Company's cash balance as monthly intervals. The spikes in the chart represent loans

made to the Company from the Secured Creditor and a related party.



Investigations

Table heading

Indicator Cash Flow Test


� Baseline's cash balance was variable during the period. The Company's cash balance increased to a high at July month end of c. $137,000 and

was overdrawn by c. $9,000 at the end of October 2014. The cash at bank balance averaged c. $59,000 over the period of review. It is noted

that our analysis to date has focused on month end accounts and therefore does not consider inter-month movements.

� As the Company did not prepare cashflow forecasts, we have not been able to assess whether there was a reasonable expectation that funds

would be received to apply towards creditors.

� Over the period the Company's cash balance was insufficient to discharge its aged creditors. The cash balance was below 3% of total aged

creditors at any point in time during the period.

� On a cashflow basis, it is the opinion of the Administrators that the Company was insolvent and unable to discharge its debts

since at least June 2014.


as at 31 July 2014 as at 31 Aug 2014 as at 30 Sept 2014 as at 31 Oct 2014 as at 30 Nov 2014 as at 31 Dec 2014

Current Ratio (Working Capital Ratio) 47.51% 38.01% 29.23% 24.71% 21.21% 18.80%

Net Working Capital (3,742,868) (4,349,378) (4,908,590) (5,342,214) (5,808,415) (5,765,710)

Net Working Capital (excl secured creditors loans) (1,441,132) (2,047,642) (1,906,854) (2,340,478) (2,806,679) (3,303,974)

Net Assets (5,013,315) (5,627,400) (6,182,836) (6,613,719) (7,078,273) (7,062,444)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

(8,000)

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

31 July 2014 31 August2014

30 September2014

31 October2014

30 November2014

31 December2014

Current Ratio (%

)

Net Assets ($000's)

Net Assets

Current Ratio


Investigations


Indicator Balance Sheet Test

Overview � The balance sheet test considers whether a company may be insolvent if the total liabilities exceed the value of the assets and there are

insufficient assets to discharge the liabilities.


� The Administrators carried out investigations of the balance sheet from 31 July 2014 to 31 December 2014.

� The period of investigation revealed the following findings:

− Net Assets were negative prior to the period and further decreased 40.8% during the 6 month period. The Company has had a net liability

position since at least 30 June 2012 with the position deteriorating prior to the appointment of Administrators.

− The Company recorded a current ratio of below one for the entire period. A ratio below one indicates that a Company holds insufficient

current assets to meet its current liabilities. From the above table Baseline could not meet its current obligations prior to July 2014.

− Baseline's net working capital position continued to decrease throughout the period with the exception of a slight increase in December. Net working capital declined to a deficiency of c.$5.0 million, or $3.3 million excluding secured creditors loans..

� On a balance sheet basis it is the opinion of the Administrators that due to the Company's negative net asset position and current

ratio of less than one, the Company has insufficient assets to discharge its liabilities. Accordingly, the Company has been insolvent

since at least July 2014.


0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

$000's

Retention

120 Days +

90 Days

60 Days

30 Days

Current

Secured CreditorBalance

Insolvent trading

Investigations


Indicator Other tests/investigations

Aged Creditors � The following graph represents aged creditor balances of the Company between 30 June 2014 and 31 December 2014.

� The books and records of the Company present a decrease in the balance of creditors by 21% from c.$4.7 million to c.$3.7 million as a result of an advance of funds from the Secured Creditor and related party.

� Whilst the Company had a creditor balance of c.$4.7 million at the end of June 2014, only 17% of money owed related to creditors aged

90 days or over. Throughout the period this percentage increased from 17% to 45% of creditors being aged 90 days or over, indicating that creditors were not being paid within their contractual terms.

� The aged creditor balance as at 30 September 2014 was lowermost at c.$3.5 million due to an injection of funds by the Secured Creditor in

the amount of $700,000.

� The graph highlights the reduction in creditors and creditor turnover, which indicates that Baseline was failing to meet its liabilities prior

to 30 June 2014, however, from August onwards the Company began accumulating mature creditors. This is consistent with at least 25

creditor issuing letters of demand, final notices, or instigating recovery proceedings.

Relationship with Financier

� We note the Secured Creditor continued to fund the Company as recently as September 2014. However, the Secured Creditor has since

appointed Receivers and Managers on 13 January 2015.

Outstanding/overdue Commonwealth and State Taxes

� The Company has been on a payment plan with the ATO since June 2014 and has had the original payment plan amended due to an

inability by the Company to meet the repayment plan. At the date of the Administrators' appointment the Company owed c. $209,000 to

the ATO.



Investigations


Indicator Other tests/investigations

Legal Proceedings and Trade Creditors

� At the request of the Administrators, the Company provided a list of all demands and proceedings currently being undertaken against the

Company.

� The Director advised through the Receivers and Managers questionnaire that the Company began to receive demands in October 2014.

� It should be noted that some creditors who have issued demands have been identified as also receiving potential preference payments.

� Based on the ASIC search there have been no winding up applications filed against the Company since 3 April 2013. This application was

subsequently removed.


Section 7 Effect on Employees


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Outstanding Employee Entitlements

Entitlement

Amount Outstanding

($)

Unpaid Superannuation 12,000

Annual Leave 56,509

Long Service Leave 74,587

Total 143,096

Effects on employees

Effect on Employees

Overview

� Prior to the appointment of the Administrators, the Company employed 13 full

time employees.

� To date the majority of employees of the Company have been retained by the

Receivers and Managers. The Receivers and Managers are continuing to meet the obligations of all employees with the Administrators are accepting no liability.

� The below table highlights the total amounts owed in entitlements to employees

calculated by the Administrators. This amount is based on preliminary

calculations using the books and records of the Company.

� Creditors should note that these amounts calculated are estimates and each employee claim will require formal adjudication. Should the Company proceed

into liquidation, all employee contracts and payroll records will be reviewed so as

to determine an exact entitlement figure.

Excluded Employees

� Pursuant to Section 556(2) of the Act, any employee classified as a director for

the preceding 12 months, or any relative of the Director is considered an

excluded employee.

� Creditors should note that any claim by excluded employees for outstanding entitlements is capped as follows:

− $2,000 for unpaid wages and superannuation; and

− $1,500 for outstanding leave entitlements.

� Should there be any amounts which exceed the capped bracket, the excess will

rank as an unsecured claim in the Administration. This will be continued into the Liquidation.

DOCA Proposal

� The DOCA proposal put forward by the Director resolves to pay employee

claims in full. Should creditors resolve to execute the DOCA, employees will

continue to be employed and can expect to have all entitlements, including

superannuation, paid in full.

Payment to Employees

� In the case there are insufficient funds to pay any outstanding claims, employees

will be able to claim under the Government's Fair Entitlements Guarantee ("FEG") scheme (discussed on the following page) for payment of the amounts

in a liquidation.

� Should the Company proceed into liquidation, employees may be paid the

amounts owing to them by FEG. The future Liquidators would communicate

and correspond with employees to correctly ascertain their entitlements, and would then relay this information to FEG.

� Pursuant to the Act, an employees claim on outstanding entitlements will rank as

a priority debt in the Administration.

� Should the Company be placed into liquidation, employees will receive our initial assessment of entitlements in writing. Should employees believe our assessment is

incorrect, they are advised to contact the Administrators.

� Further, the above estimates exclude termination and redundancy. Should

redundancies be made, we estimated entitlement may increase by a further

$208,000.


Fair Entitlements Guarantee ("FEG")

Effect on Employees

Fair Entitlements Guarantee Overview

� In the event the Company is placed into liquidation following the second meeting

of creditors, any priority creditors will be referred to FEG. It may be unlikely that

the Company will be able to pay all employee entitlements in full.

� The FEG scheme covers outstanding entitlements owed to employees with the exception of superannuation. Further information in regards to the FEG scheme

can be found at: https://employment.gov.au/fair-entitlements-guarantee-feg.

� Under FEG, where employees have a legal entitlement derived from legislation,

an award, a statutory agreement or a written contract of employment, they are

eligible to receive the following (based on earnings capped at $127,452):

− Unpaid wages (for up to 13 weeks);

− All long service leave;

− All annual leave;

− Payments in lieu of notice (up to a maximum of 5 weeks); and

− Up to four (4) weeks redundancy pay per completed year of service.

� Should the Company be placed into liquidation, the Liquidators would liaise with

FEG in order to assist employees with the provision of their entitlements.

� Employees should note that FEG is only available to Australian citizens. Any

non-Australian citizen, and employees with 457 Visas will not be eligible to claim

from FEG.

� Should a payment to employees be made by FEG, these funds are recoverable

from the Company, by FEG, pursuant to Section 560 of the Act. FEG will take

over the employee's priority claim as a creditor of the Company to the extent of

amounts paid by FEG.

� Accordingly, the payment of employee entitlements by FEG does not improve

the quantum of potential recoveries available for distribution to ordinary

unsecured creditors.

� Should creditors resolve to accept either of the DOCA proposals put forward by

the Director, FEG will not be available to priority creditors. As previously

discussed, priority creditors will be paid in full under the DOCA proposal.


Section 8 Proposals for a Deed of Company Arrangement


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Proposals for a Deed of Company ArrangementOverview

� The Administrators have received two DOCA proposals for the Company as at

the date of this report. A DOCA aims to maximise the chances of a company

continuing, or to provide a better return for creditors than an immediate winding

up of the company, or both, by entering an agreement binding a company and its creditors and governing how the company’s affairs will be dealt with.

� More information on both proposals is set out on the following pages and in the

proposal attached as Appendix C. In summary:

− DOCA Option 1 (DOCA and Creditors' Trust): proposes that the DOCA

will be effectuated and creditor claims convert to a Creditors' Trust upon receipt of contributions funded by the secured creditor. Creditors are to

receive a distribution being the greater of c. 2 cents in the dollar (from the

contributions/trust fund) or the Net Proceeds from litigation. As a result of

needing to wait on the outcome of litigation prior to making a distribution, it

is estimated that a distribution will not be made for at least 12 months.

− DOCA Option 2 (DOCA Only): proposes a DOCA where contributions are

to be received from the secured creditor to facilitate a distribution of c. 3

cents in the dollar to ordinary unsecured creditors. It is estimated that a

distribution will be made in six months (subject to the adjudication of claims).

� Under both DOCA proposals, control of the Company is to return to Mr Bettar on execution of the DOCA, and the Company will be released from all claims

(excluding related party and secured creditor claims) upon the DOCA being

effectuated.

� Our financial modelling with respect to the estimated returns available to the

various classes of creditors under the DOCA proposals is set out in Section 9, with ordinary unsecured creditors estimated to receive:

− DOCA Option 1 (DOCA and Creditors' Trust): 1.8 to 7.38 cents in the dollar;

− DOCA Option 2 (DOCA Only): 2.7 to 3.0 cents in the dollar.

� The analysis compares to an estimated return to unsecured creditors of between

nil and 0.7 cents in the dollar in a liquidation scenario.

� While further information is provided on the following pages, it is the

Administrators' opinion that creditors should vote to execute DOCA

Option 2 (DOCA Only) as:

− The Administrators do not support DOCA Option 1 (DOCA and Creditors'

Trust) on the basis that we do not believe it meets the public interest test in

that it seeks to circumvent the requirement to note the external administration

in public documents, and that there are no valid commercial reasons why the

proposal could not be executed under a DOCA without the use of a Creditors' Trust;

− DOCA Option 2 provides a greater return than liquidation;

− There is greater certainty on timing of a distribution compared to DOCA

Option 1 and a Liquidation, both of which are dependant on litigation.

− DOCA Option 2 provides an opportunity for the company to restructure and continue in existence, being consistent with the objective of Part 5.3A of Act.

Important Information

� Employees should note that if creditors vote to execute a DOCA they will be

unable to make a claim to DoE under the FEG scheme for their outstanding

employee entitlements. Employees should refer to Section 7 for further details on

the FEG scheme.

� Employees and creditors should also note that actions available to a Liquidator to recover funds in relation to antecedent transactions are not available to a Deed

Administrator. Further, a Deed Administrator does not have reporting

obligations to ASIC in relation to the conduct of the Company prior to the

Administration. Employees and creditors should refer to Section 6 for further

details on potential antecedent transactions.

� A DOCA involving a creditors' trust creates special risks for creditors, with

further detail provided in pages 44 to 50. ASIC recommends creditors have the

opportunity to obtain independent professional advice in relation to a proposed

creditors' trust.

Proposals for a Deed of Company Arrangement


DOCA Option 1: DOCA and Creditors' Trust


− Should Baron Corporation pursue the claim, they will fund the claim in return

for 50% of the balance of proceeds should the matter be successful. The

remaining 50% of proceeds is to be paid to the Creditors' Trust and made available for a distribution to all creditors.

− Subject to the outcome from the litigation, a distribution will then be made,

being the greater of:

− The trust funds of $80,000 to be distributed between unsecured creditors

(excluding related parties). Based on creditor claims of $4.0 million, this is estimated at a return of 2 cents in the dollar; or

− The 50% of the balance of proceeds from litigation (after costs), to be

distributed among all creditors, including related parties and the secured

creditors (who rank equally with unsecured creditors with respect to this

amount).

� Completion of the Creditors' Trust is to occur upon making the distribution.

� It is noted that the Amelia Street litigation is an asset of Bettar Holdings given

they were the party to the contract, not the Company. Accordingly, Bettar

Holdings will need to be a party to the Trust deed and agree to assign 50% of the

net proceeds of the claim to the creditors' trust.

Creditors' Trust Arrangement

� The DOCA Option 1 involves a Creditors' Trust. Upon receipt of the contribution from Baron Corporation, the DOCA is fully effectuated (i.e.

concluded) and the funds and claims are transferred to a Creditors' Trust.

� A Creditors' Trust is a mechanism that is utilised to accelerate a company's exit

from external administration. A Creditors' Trust is established by the creation of

a legal trust and the creditor claims are transferred to the trust. Creditors become beneficiaries of the trust and thus are subject to special risk for creditors as they

no longer receive the statutory protection of the Act but are merely beneficiaries

under a trust.

Key features of the proposed DOCA Option 1 (DOCA and Creditors' Trust)

� The key terms of the proposal received for DOCA Option 1 include:

− A contribution of 2 cents in the dollar, capped on unsecured creditors claims

up to $4.0 million, is to be contributed by the secured creditor (Baron

Corporation or their related entity). Accordingly, the maximum contribution is to be $80,000.

− Baron Corporation or their related entity is to contribute an amount for

outstanding employee claims to be paid in in full.

− Control of the Company (and its assets) is to return to Mr Nicholas Bettar on

execution of the DOCA. There is no requirement for further contributions to be made to the DOCA from future trading profits.

− The Administrators, Said Jahani and Andrew Sallway, are to be Deed

Administrators.

− The DOCA is to bind all persons having a claim that arose before the date of

appointment of the Receivers and Managers, or out of events or circumstances which occurred before this date. Accordingly, during the

DOCA period creditors cannot commence or proceed with court proceedings

or enforcement processes against the Company.

− On completion of the DOCA, the Company will be released from all claims,

with the exception of claims from Baron Corporation, New Bounty and related parties.

� Upon receipt of the contribution of $80,000, the DOCA will be considered to

have been effectuated and the Company, the Director and the Deed

Administrators will execute a Creditors' Trust Deed.

� The key terms for the Creditors' Trust include:

− The deed funds of $80,000 are to constitute the trust funds.

− Baron Corporation will review the litigation claim in relation to Amelia Street

and at it sole discretion determine whether to pursue the claim.



� Secured creditors and related parties will only participate in a distribution with

unsecured creditors should the litigation be successful. As with all litigation, there

is a risk the claim may not be successful, in which case the secured creditors and related parties would not receive a distribution. It is noted that under the

proposal the secured creditor and related party claims against the Company will

not be released upon completion of the DOCA or creditors' trust.

� The distribution to the secured creditor from the litigation proceeds via the

creditors' trust is separate to the success fee due in return for funding the litigation.

� Further information on estimated returns to the various classes of creditors is set

out in Section 9. As set out in Section 9, a greater return to creditors is expected

under DOCA Option 1 compared to a liquidation as a result of the contribution

from Baron Corporation.

� For the distribution to exceed the return to creditors compared to DOCA

Option 2 (DOCA Only), it would be necessary for litigation to be successful.

There is also greater certainty of return in DOCA Option 1 compared to a

liquidation which is dependant on recovering antecedent transactions.

Monitoring and reporting arrangements

� The Administrators will request it be a term of the Trust Deed that annual

reporting be provided to the creditors, and that creditors have the power to request a meeting should this be supported by a majority.

Remuneration

� Baron Corporation has agreed to provide an indemnity to the Deed

Administrators/Trustee for their fees in the amount of $12,500, plus GST, plus

$5,000 (plus GST) per annum on a pro rata basis should the trust period exceed

12 months.

� In the case of the Company, following transfer of the creditor claims and the

Deed Fund, the Company will exit external administration with control to have

already passed to Mr Nicholas Bettar upon execution of the DOCA.

� It is important that creditors are fully informed in respect of the terms of the

Creditors' Trusts and the risks that a Creditors' Trust pose for creditors. ASIC

has issued a regulatory guide in respect of creditors' trusts and we have followed

their guidelines in respect of disclosures made in this report. ASIC recommends

that creditors have the opportunity to obtain independent professional advice in relation to a proposed Creditors' Trust, if they wish.

� In accordance with ASIC's Regulatory Guide 82 'External Administration: Deeds

of company arrangements involving a creditors trust', we have set out on the

following pages material information creditors should be aware of in relation to a

Creditors' Trust.

Estimated return to creditors under the Deed and Creditors' Trust

� The estimated return to unsecured creditors is between 2 and 7 cents in the dollar, with the variance being subject to the success of the litigation. As a result

of being subject to litigation, the timeframe for a distribution is likely to exceed

12 months.

� The low case estimate is based on the capped contribution of $80,000 being

distributed among $4.0 million of unsecured creditor claims (excluding related parties). Should creditor claims exceed $4.0 million, the low scenario return to

creditors will reduce.

� The administrators have not yet adjudicated on creditor claims, however, note the

books and records of the Company recorded creditor claims at c. $3.7 million on

appointment.

� Employee claims are to be paid in full.





Disadvantages of a DOCA Option 1

� In accordance with Section 445F of the Act, the Deed Administrators may call a

meeting of creditors to vary or terminate the DOCA. In the event that the terms

of the DOCA are not complied with the DOCA will terminate and the company

will go into liquidation. However, once the DOCA transitions to a creditors trust, creditors lose their statutory rights to recovery from the Company should the

creditors trust not be effectuated.

� If the proposed DOCA and Creditors' Trust is approved by creditors, then the

recovery actions that the Administrators have identified, primarily in relation to

the recovery of preference payments and insolvent trading claims, would no longer be available. Section 6 refers to the amounts that may be recovered from

these potential actions, together with the further investigations required by the

Liquidators, should they be appointed.

� Employees will be unable to make a claim to DoE under the FEG scheme.

� Aside from the contribution, the key asset proposed for the creditors trust is the litigation. The litigation claim is an asset of Bettar Holdings rather than the

Company. While an assignment of 50% of the net proceeds will be a term of the

DOCA and trust deed, there are risks involved.

Payment by a third party

� As mentioned above the contribution to the Deed, capped at a maximum of

$80,000, is to be made by the secured creditor, Baron Corporation or their related

entity.

� Baron Corporation (and related entities) have previously advanced $3.0 million to the Company pursuant to a loan agreement, are funding the Receivership and the

Administrators fees (capped at $25,000 plus GST for the Administration), and are

understood to have the capacity to make the proposed payment.

• As receipt of the funds is a condition for the DOCA to end (and before the

Creditors' Trust commences), should the contribution not be received, the DOCA will terminate and the Company will proceed to liquidation.

Guarantees

� We have been advised by the Director that a number of personal guarantees have

been provided to creditors. As the Director proposes to retain control of the

business pursuant to the proposed DOCA, we request creditors holding

guarantees provide us with details of the quantum of the debt secured by the

guarantees.

Advantages of DOCA Option 1

� DOCA Option 1 is likely to result in a higher return to creditors than in a liquidation scenario. There is also a higher level of certainty on the minimum

return as a result of the contribution.

� Of all of the options, DOCA Option 1 has the potential for the highest return,

however, this is highly contingent on the litigation being successful. As with all

litigation, there is risk that the action may not be successful.

.

The Administrators recommend that creditors resolve NOT to execute

DOCA Option 1 (DOCA and Creditors' Trust) as the Administrators

consider the reasons for the DOCA Option 1 (DOCA and Creditors Trust)

are not sufficiently appropriate to justify the used of a creditors trust, as:

− The underlying reason for using a creditors trust appears to be to

circumvent the requirement of the Company to note the external

administration in all public documents, and therefore is not in the

public interest; and

− There does not appear to be any compelling reason why the

continued existence of the Company could not be achieved under a

DOCA.


Secured Creditors Priority Creditors Ordinary Unsecured Creditiors Unsecured Creditors

Low (c/$) - 100.00 1.78 -

High (c/$) 6.63 100.00 6.63 6.63

Creditors' Trust – Material Information

Items Explanation

Reasons for Proposing Creditors' Trusts

� The Creditors' Trust has been proposed to enable the Company (under the control of the Director) to recommence trading without the “external administration” status which is claimed will limit the Company's ability to secure work, engage subcontractors and obtain project financier approval. It is argued that while subject to DOCA, the Company may also struggle to secure new projects and this will impact the ability of the Company to continue to trade.

� The Administrators do not consider the reasons sufficiently appropriate to justify the use of a Creditors' Trust in the circumstances as:

� A DOCA without a creditors' trust would achieve the same purpose of allowing the Company to continue in existence, an objective of Part 5.3A of the Act. Even though there is the requirement for a company subject to a DOCA to set out in every public document the expression 'subject to deed of company arrangement' after its name, which is not required in a Creditor'sTrust, any party looking to into the history and creditworthiness of the Company will be able to see that the company was subject to external administration. Accordingly, re-establishing the Company under a DOCA should not be any more detrimental than attempting to re-establishing the Company via a creditors' trust.

� It is not in the public interest to use a creditors trust to try and circumvent the requirement of the Section 450E of the Act which requires notice of the external administration to be set out in public document, via the notation 'subject to deed of companyarrangement' appearing after the company name.

Key Events � The key events in the DOCA and Creditors Trust are:

� Execution of the DOCA (within 15 business days of the second meeting of creditors);

� Payment of the contribution into the DOCA fund (within 21 days of executing the DOCA);

� DOCA effectuated (i.e. completed) and Creditors Trust deed executed (on receipt of contribution)

� Distribution of the greater of the contribution (c. 2 cents in the dollar) or net litigation proceeds (estimated to be at least 12 months after commencement of the Creditors' Trust due to the need to litigate).

Estimated Return to Creditors � The estimated return to the various classes of creditors is summarised below (with further detail including the assumptions set out in Section 9):

� The return to creditors will be dependant on both the total value of claims admitted and the success of the litigation should it be pursued.

� It is also highlighted that the litigation is an asset of Bettar Holdings, not the Company, as a result of the contractual relationships. Should adequate security not be obtained over this asset/claim, there is a risk that litigation proceeds may not be paid to the trust.

� Section 9 also details the estimated return available to creditors from DOCA Option 2 (DOCA Only) and in a liquidation scenario.



Items Explanation

Trustee Particulars � The trustees of the proposed Creditors' Trusts will be the current Administrators, Andrew Sallway and Said Jahani. A copy of the proposed Trustees' profiles can be found at our website: http://www.grantthornton.com.au/About-us/Our-people/index.asp.

� Both Andrew Sallway and Said Jahani are registered liquidators and have the relevant experience to accept the appointment as Trustees of the Creditors' Trust.

� Both ASIC and the CALDB have certain supervisory powers over the conduct of the Trustees under Part 9.2 of the Act.

� We have undertaken a proper assessment and determined that there is no actual or perceived threat to our independence that wouldprevent us from accepting the appointment. We refer creditors to our DIRRI attached to our report dated 16 January 2015.

� Grant Thornton has current professional indemnity insurance that will cover us in our capacity as Trustees of the Creditors' Trusts.

Trustees' Remuneration � If creditors vote for DOCA Option 1, at the upcoming meeting of creditors on 20 February 2015, we will be seeking approval for the prospective remuneration of the administrators/trustees' for the DOCA and Creditors' Trust as follows:

� Deed Administrators: $1,500 (plus GST and disbursements); and

� Trustee: $11,000 (plus GST and disbursements) plus $5,000 (plus GST and disbursements) per annum on a pro rata basis should the trust extend beyond 12 months.

� The fee approval sought under the Creditors' Trust will be by way of vote at the meeting. However, if any beneficiary wishes to challenge those fees, it would be necessary to make an application to the Supreme Court under the relevant Trustee Act for the purposes ofchallenging those fees. Whilst a challenge to administrators'/deed administrators' remuneration is also generally by way of Court application, the basis of challenge under the Act is relatively simpler.

Indemnities � The proposal for DOCA Option 1 provides that the Trustees will receive priority to the trust funds for their costs, fees and expenses.

� Baron Corporation has provided an indemnity for the Deed Administrators' and Trustee's remuneration to a total of $12,500 plus GST, plus $5,000 plus GST per annum on a pro rata basis after the first 12 months. Baron Corporation will fund the $12,500 in addition to their contributions to the trust fund.

� This indemnity ensures that the Trustees are paid in accordance with the statutory priorities that would ordinarily be afforded to the Deed Administrators.

Powers and Responsibilities � In a DOCA scenario, the Deed Administrators have a number of responsibilities, powers and functions conferred on them by the Act. The key powers include:

� The supervision and administration of the Deed;

� Administering the assets available for the payment of claims;

� To make interim or other distributions of the proceeds of the realisation of the assets available for the payment of claims of creditors; and

� To do anything else that is necessary or convenient for the purpose of administering the deed.




Items Explanation

Powers and Responsibilities (continued)

� As a Creditors' Trust is not specifically governed by the Act, the powers and responsibilities of the Trustees are expressly set out in the Trust Deed. We have not yet received a copy of the trust deed, however, note that it is proposed that the powers and responsibilities will be modelled on Schedule 8A of the Corporations Regulations and the Trustees Act 1925. These duties and responsibilities include:

� Administering the Trust Fund;

� Adjudicating and admitting creditor/beneficiary claims; and

� Distributing the Trust Fund to eligible and admitted creditors;

� One key difference is that under the Creditors' Trust, the Trustees would not have the power that the Deed Administrators would have under section 445F of the Act to convene a meeting of the beneficiaries to consider the termination of the Creditors' Trust. Such termination is not contemplated by the Trust Deed and would more than likely require a Court application. Whilst that power is absent, given that the Creditors' Trusts will only come into operation once the initial contribution of $80,000 has been received, we do not consider this to be of major significance.

Creditors' Claims � Upon execution of the Trust Deeds, all creditors will become beneficiaries and their claims (once adjudicated upon by the Trustees) will become claims against the Trust Fund. At that point, creditors claims will be released as against the Company.

� The Trustees will be required to call for proofs of debt and advertise their intention to declare a dividend. The Beneficiaries (i.e. former Creditors) will have 21 days to submit a formal proof of debt and support for their claim and the Trustees will follow the adjudication process established by the Act. Those Beneficiaries will have 21 days to appeal to Court if they do not agree with the Trustees' adjudication.

� The Company must provide the Trustees with reasonable access to the books and records for the purpose of the Trustees adjudicating proofs of debt and fulfilling any reporting statutory obligations imposed upon them.

FEG Scheme � In a DOCA scenario, if the DOCA is terminated and the company is placed into liquidation, priority creditors will be able to lodge a claim under the FEG scheme.

� If creditor claims are transferred to a Creditors' Trust, priority creditors will no longer have recourse to the FEG scheme if the Trust is terminated or there are insufficient funds to allow for a full return to priority creditors in accordance with the FEG rules. However, it should be noted that the Trust Fund is required to be paid in full at the execution of the Trust Fund reducing the risk to creditors of their claims being transferred to the Creditors' Trust without sufficient funds.

Compliance Opinion � In the Administrators' opinion, Baron Corporation (or its related entity) is capable of complying with the terms of the proposed DOCA and Creditors Trust, primarily being the payment of $80,000 to the deed/trust fund. Baron Corporation has previously provided loans to the Company, indemnified the Receivers and Managers and the Administrators, and is part of a group understood to have sufficient financial resources.




Items Explanation

Solvency Statement � At the time of effectuation of the DOCA, creditor claims are to be transferred to a Creditors' Trust. The Company is to be released from all claims with the exception of claims from Baron Corporation, New Bounty and related parties.

� With these liabilities, the Administrators do not believe the Company will be solvent at the date of the effectuation of the DOCA unless the Company continues to receive financial support from the Secured Creditor and repayment of the existing liabilities are deferred.

Tax (company/trust) � The Trustees will need to consider the potential tax implications of establishing the trusts, transferring liabilities and other property of the Companies to the Trusts and distributing trust assets to the beneficiaries.

� If it is determined that there is a tax liability, this will be funded from the Deed Fund. The Administrators' initial view is that the establishment of the trust is not likely to give rise to a tax liability, however, professional tax advice will be sought in this regard.

Tax (creditor/beneficiary) � Creditors should note that there may be tax implications as a result of receiving a distribution as a beneficiary of a trust, rather than receiving a payment in the capacity of a creditor.

� We recommend that creditors seek their professional tax advice in relation to the treatment of the distribution and the possible tax implications.




DOCA Option 2: DOCA Only


Estimated return to creditors under the Deed

� The estimated return to unsecured creditors is between 2.7 and 3.0 cents in the

dollar and is estimated to distributed within six months, subject to the

adjudication process. As the contribution is capped based on creditor claims of

$4.0 million, should creditor claims exceed $4.0 million, the return to creditors will reduce. In the event admitted claims were to total $5.0 million, the return to

creditors would reduce to 2.4 cents in the dollar.

� The administrators have not yet adjudicated on creditor claims, however, note the

books and records of the Company recorded creditor claims at $3.7 million on

appointment.

� Employee claims are to be paid in full.

� Secured creditors and related parties are to receive no return, however, their claim

against the Company will not be released upon completion of the DOCA.

� Further information on estimated returns to the various classes of creditors is set

out in Section 9.

� As set out in Section 9, a greater return to creditors is expected under DOCA

Option 2 compared to a liquidation as a result of the contribution from Baron

Corporation. There is also greater certainty of return in DOCA Option 2

compared to a liquidation which is dependant on recovering antecedent

transactions.

Monitoring and reporting arrangements

� As it is anticipated that DOCA Option 2 can be effectuated within six months, a formal reporting mechanism is not proposed.

Remuneration

� Baron Corporation has agreed to provide an indemnity to the Deed

Administrators for their fees in the amount of $12,500, plus GST. This is in

addition to their contribution to the deed fund.

� No further funds are expected to be available to fund the Deed Administrators

should fees exceed this amount.

Key features of the proposed DOCA Option 2 (DOCA Only)

� The key terms of the proposal received for DOCA Option 2 include:

− A contribution of 3 cents in the dollar, capped on unsecured creditors claims

up to $4.0 million, is to be contributed by the secured creditors (Baron

Corporation or their related entity). Accordingly, the maximum contribution is to be $120,000.

− A distribution, estimated at 3 cents in the dollar, is to be made to creditors

(excluding Baron Corporation, New Bounty and related parties).

− Baron Corporation or a related entity is to contribute an amount for

outstanding employee claims to be paid in in full.

− Control of the Company (and its assets) is to return to Mr Nicholas Bettar on

execution of the DOCA. There is no requirement for further contributions to

be made to the DOCA from future trading profits.

− The Administrators, Said Jahani and Andrew Sallway, are to be Deed

Administrators.

− The DOCA is to bind all persons having a claim that arose before the date of

appointment of the Receivers and Managers, or out of events or

circumstances which occurred before this date. Accordingly, during the

DOCA period creditors cannot commence or proceed with court proceedings

or enforcement processes against the Company.

− On completion of the DOCA, the Company will be released from all claims,

with the exception of claims from Baron Corporation, New Bounty and

related parties.

− The DOCA will be effected and terminated upon payment of distributions.

Subject to the adjudication process, it is estimated the timeframe for effectuating the DOCA will be within 6 months.

� For the avoidance of doubt, creditors will not participate in the litigation, unlike

DOCA Option 1.


DOCA Option 2: DOCA Only


Disadvantages of a DOCA

� If the proposed DOCA is approved by creditors, then the recovery actions that

the Liquidators have identified, primarily in relation to the recovery of preference

payments and insolvent trading claims, would no longer be available.

� Section 6 refers to the amounts that may be recovered from these potential actions, together with the further investigations required by the Liquidators,

should they be appointed. Given the uncertainty and costs involved with

pursuing recoveries of this nature, the DOCA represents the greatest and most

certain return to unsecured creditors.

� Employees will be unable to make a claim to DoE under the FEG scheme.

Payment by a third party

� As mentioned above, the contribution to the Deed, capped at a maximum of

$120,000, is to be made by the secured creditor, Baron Corporation or their

related entity.

� Baron Corporation (and related entities) have previously advance $3.0 million to the Company pursuant to a loan agreement, are funding Receivership and the

Administrators fees (capped at $25,000 plus GST for the Administration), and are

understood to have the capacity to make the proposed payment.

• Should the contribution not be made the DOCA will fail.

Failure of the proposed DOCA

� In accordance with Section 445F of the Act, the Deed Administrators may call a

meeting of creditors to vary or terminate the DOCA. In the event that the terms of the DOCA are not complied with (e.g. if the contribution of $120,000 is not

made), the Deed Administrators will call a meeting of creditors and creditors can

resolve to terminate the DOCA and place the Company into liquidation.

Guarantees

� We have been advised by the Director that a number of personal guarantees have

been provided to creditors. As the Director proposes to retain control of the

business pursuant to the proposed DOCA, we request creditors holding guarantees provide us with details of the quantum of the debt secured by the

guarantees.

Advantages of a DOCA

� DOCA Option 2 is likely to result in a more timely resolution and distribution to

creditors than in a liquidation scenario, which would be dependant on pursuing

recovery of antecedent transactions.

� Under the DOCA Option 2, there is also greater certainty as to the return available to creditors, and the return is likely to be a greater than in a liquidation

scenario.

The Administrators recommend that creditors resolve to execute DOCA

Option 2 (DOCA Only) as it:

� Provides a greater return to creditors than in a liquidation;

� Reduces the uncertainty of return with respect to quantum and timing

compared to a liquidation in which is a return is dependant on

pursuing potential preference and insolvent trading actions (which can

be a timely and costly process);

� Is a DOCA which provides mechanisms to protect creditors should the

DOCA fail, in comparison to a creditors trust where there are greater

risks to creditors; and

� The Administrators consider the reasons for DOCA Option 1 (DOCA

and Creditors Trust) are not appropriate to justify the use of a

creditors' trust given the risks to creditors.


Section 9 Estimated Outcome and Administrators' Recommendation


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Estimate Return for Classes of Creditors

Creditors Low (c/$) High (c/$) Low (c/$) High (c/$) Low (c/$) High (c/$)

Secured Creditors

Baron Corporation Pty Ltd & New Bounty Pty Ltd - 0.69 - 6.63 - -

Priority Creditors

Employee Entitlements and Superannuation 100.00 100.00 100.00 100.00 100.00 100.00

Unsecured Creditors

Ordinary Unsecured Creditiors - 0.69 1.78 6.63 2.67 2.98

Related Party Unsecured Creditors - 0.69 - 6.63 - -

DOCA Option 2Liquidation DOCA Option 1

Estimate Outcome Statement

Overview

� We have conducted comparisons of the likely return available to the various

classes of creditors under the various options available, being:

− Liquidation;

− DOCA Option 1 (DOCA and Creditors' Trust); and

− DOCA Option 2 (DOCA Only).

� The table opposite summaries the estimated return available for each class of

creditor under each option, with further detail on the key assumption set out on

the following pages.

� Based on our analysis, it appears that ordinary unsecured creditors may receive a distribution of between nil and 6.6 cents in the dollar.

� The estimates are subject to change. Key factors which may impact the estimated

return include:

− The total value of creditor claims (with creditor claims yet to be adjudicated);

− The value and recoverability of potential preference claims in a liquidation; and

− The success of litigation in DOCA Option 1.

� In calculating the estimated returns:

− Values have not been attributed to assets such as debtors or plant and

equipment on the basis that any realisations from these assets would be applied towards the secured creditors debt and the Receivers and Managers

costs pursuant to the security; and

− Administrators fees have been excluded from the assessment on the basis that

an indemnity has been provided by the secured creditor and will therefore not

expected to impact upon the return to creditors.

Estimated Outcome and Administrators' Recommendation


Estimated Outcome Statement - Liquidation

Notes Low ($) High ($)

Contribution for outstanding employee claims 1 351,377 351,377

Priority Creditors (employee claims) 1 (351,377) (351,377)

Net Surplus/(Shortfall) to Priority Creditors - -

Assets of the Company 2 - -

Potential Preference Recoveries (net of costs) 3 420,000

Total Asset Available for all creditors - 420,000

Priority Creditors (FEG reimbursement) 1 (351,377) (351,377)

(351,377) 68,623

Ordinary Unsecured Creditors 4 (4,500,000) (4,021,824)

Related Party Unsecured Creditors 4 (1,409,409) (1,409,409)

Secured Creditors 2/4 (4,480,832) (4,480,832)

Total Shortfall (10,741,618) (9,843,442)

Returns

Secured Creditors (cents per $) - 0.69

Priority Creditors (employee claims) (cents per $) 100.00 100.00

Ordinary Unsecured Creditors (cents per $) - 0.69

Related Party Unsecured Creditors (cents per $) - 0.69

Liquidation

Estimated Outcome Statement - Liquidation

� Pursuing preferences is a timely and costly process and there is a risk that should

a judgement be awarded, the party pursued may be unable to pay. Accordingly, a

liquidator would need to assess the commerciality of pursuing claims and we expect is to take in excess of 12 months to determine whether there would

ultimately be any returns available for distribution.

Notes/Assumptions

1. In a liquidation outstanding employee entitlements are to be paid in full via

FEG. Should preferences be recoverable, FEG will assume the priority of

the employees for the funds they have advanced.

Priority claims are an estimate only based on the annual and long service leave entitlement recorded by the Company, together with an estimate for

termination/redundancy for modelling purposes only.

2. Analysis excludes any realisable value for plant and equipment and debtors

on the basis that these assets would be realised by the Receivers and

Managers with the secured creditor obtaining priority to these realisations (together with priority creditors with respect to debtors). Any returns to the

secured creditor would reduce their claim, however, no adjustment has been

included in this analysis. It is important to note that due to the structuring of

the Amelia Street project, the Company's only avenue for realising any value

from successful litigation against the owner rests with the payment of this debtor amount, which employees and secured creditors receive priority over.

3. Preliminary investigations have identified potential preference payments of

between $500,000 and $1.8 million. Estimated net recoveries of $420,000

have been assumed, allowing for litigation risk, settlement discounts, legal

recovery costs and Liquidators remuneration.

4. All classes of creditors (except priority creditors) are to rank equally with

respect to recoveries from preference actions.


Overview

� Unsecured creditors are estimated to receive a distribution of between nil and 0.6

cents in the dollar in a liquidation scenario.

� The variable return is driven by assumptions with respect to the value and

recoverability of potential preference claims and is therefore volatile.


Estimated Outcome Statement - DOCA Option 1 and Option 2

Notes Low ($) High ($) Low ($) High ($)

Assets

Contribution for outstanding employee claims 1 143,096 143,096 143,096 143,096

Priority Creditors (employee claims) 1 (143,096) (143,096) (143,096) (143,096)

Net Surplus/(Shortfall) to Priority Creditors - - - -

DOCA Contribution (DOCA Fund) 2 80,000 - 120,000 120,000

Ordinary Unsecured Creditors (4,500,000) (4,021,824) (4,500,000) (4,021,824)

Surplus/(Shortfall) to Ordinary Unsecured Creditors (4,420,000) (4,021,824) (4,380,000) (3,901,824)

50% of net Litigation Proceeds 3 - 656,900 - -

Residual Ordinary Unsecured Creditors 4 (4,420,000) (4,021,824) (4,380,000) (3,901,824)

Related Party Unsecured Creditors 4 (1,409,409) (1,409,409) (1,409,409) (1,409,409)

Secured Creditors 4 (4,480,832) (4,480,832) (4,480,832) (4,480,832)

Total Shortfall (10,310,241) (9,255,165) (10,270,241) (9,792,065)

Returns

Secured Creditors (cents per $) - 6.63 - -

Priority Creditors (employee claims) (cents per $) 100.00 100.00 100.00 100.00

Ordinary Unsecured Creditors (cents per $) 1.78 6.63 2.67 2.98

Related Party Unsecured Creditors (cents per $) - 6.63 - -

DOCA Option 1 (DOCA and

Creditors Trust) DOCA Option 2 (DOCA Only)

Estimate Outcome Statement – DOCA Option 1 and Option 2

� Although the contributions to the DOCAs are based on a fixed return to

creditors, i.e. 2 cents in the dollar in DOCA Option 1 and 3 cents in the dollar in

DOCA Option 2, the contribution is capped on claims up to $4.0 million. Although we have not yet adjudicated on claims, based on the books and records

of the Company and proofs of debt received to date, total unsecured creditor

claims may exceed this amount. Accordingly, the distribution to creditors may be

less than the 2 or 3 cent estimated provided.

� The timing of distributions is expected to be at least 12 months under DOCA Option 1 as a result of the time required to conduct litigation.

Notes/Assumptions

1. Outstanding employee entitlements are to be paid in full via contribution

from Baron Corporation. The estimate assumes leave entitlements only with

no termination/redundancy payments payable for modelling purposes only.

2. The contributions are to be capped based on claims up to $4.0 million.

Accordingly, should creditor claims exceed $4.0 million, the distribution to ordinary unsecured creditors will be less.

3. We have not assessed the merits of the litigation nor received any legal advice

as to the chances of success or likely quantum of recovery. So as not to

prejudice any potential actions, our detailed assumptions have not been

disclosed, however the net litigation proceeds incorporate:

− The headline claim based on the final progress claim per the adjudication;

− A discount applied to the headline claim for litigation risk;

− Estimated costs to pursue the action have been deducted; and

− The funder (being the secured creditor) is to receive 50% of the net

proceeds as success fee.

4. Should litigation proceeds be available, related parties (being Mr Bettar) and

unsecured creditors are to rank equally in the distribution. Should only the

contribution be available for distribution, related parties and unsecured

creditors will not participate in the distribution.


Overview

� Unsecured creditor returns are estimated to range between 1.8 cents and 6.6 cents

in the dollar under DOCA Option 1, and between 2.7 and 3.0 cents in DOCA

Option 2. The key variance between the two scenarios is driven by DOCA

Option 1 potentially sharing in the litigation proceeds.


Administrator's recommendation


� Accordingly, we recommend DOCA Option 2 (DOCA Only).

The administration end

� Should creditors resolve to end the Administration, the Company would be

placed in a similar position to that which existed prior to our appointment (i.e. as

if the Administration did not occur). Creditors would then have the option of pursuing their usual recovery actions against the Company such as court actions

to obtain judgments, warrants of execution or even winding up the Company.

� As the Company is insolvent, we do not believe there would be any benefit to

creditors in ending the administration. The return of control of the Companies

to the current Director would not be a satisfactory solution for creditors

and is therefore not recommended.

The company be wound up

� Creditors may resolve to wind up the Company which would result in Andrew

Sallway and Said Jahani being appointed Joint and Several Liquidators of the

Company.

� A winding-up would allow time for more detailed investigations into the

Company's affairs to be conducted and to prepare a report on the affairs and conduct of the Company officers to ASIC.

� In a liquidation eligible employees would be entitled to apply to FEG for

payment of their outstanding employee entitlements (subject to limited and

conditions).

� The DOCA proposals received provides a higher and more certain return

to creditors than a liquidation and we therefore do not recommend

liquidation.

Administrator's recommendation

� The following options are available to creditors to decide pursuant to s439C of

the Corporations Act, being that:

− The company execute the proposed Deed;

− The administration should end; or

− The company be wound up.

� Our opinion on each option and the reasons for our opinion are set out in the

following:

The company execute the proposed Deed

DOCA Option 1 (DOCA and Creditors' Trust)

� DOCA Option 1 involves the use of a Creditors Trust which we do not believe is

appropriate or necessary in the circumstances. There do not appear to be any compelling reasons why the proposal (whereby creditors share in potential

litigation upside) cannot be achieved without a Creditors' Trust, nor why the

Company cannot continue to trade during a DOCA. Further, the use of a

Creditors Trust appears to circumvent the requirement for the Company to note

the external administration in all public documents, which we do not consider to be in the public interest.

� Despite resulting in a higher return to creditors than a liquidation, we do

support the use of a Creditors Trust and therefore do not recommend

DOCA Option 1.

DOCA Option 2 (DOCA Only)

� DOCA Options provides a return higher than in a liquidation scenario, with

greater certainty as to the amount of the return and the timing (as a result of the

distribution not being subject to the outcome of litigation).

� DOCA Option 2 also enables the Company to continue to trade with control

reverting to the Director upon execution of the DOCA, while not imposing special risks on creditors via the use of a Creditors Trust.

Recommendation− The Administrators recommend that creditors resolve to execute

DOCA Option 2 (DOCA Only).


Section 10 Remuneration


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Remuneration

Remuneration

Administrators' Remuneration

� The Voluntary Administrators' remuneration is to be approved by the Company's

creditors.

� Creditors should note that all work has, and will be, performed by the

appropriate level of staff in order to optimise any potential realisations which may be available to unsecured creditors.

Costs Approved to Date

� At the date of this report, no remuneration has been approved by creditors. At

the forthcoming meeting of creditors we will be requesting creditors to approve

remuneration.

� A copy of the ASIC creditor information sheet providing information on

approval of remuneration has been attached in Appendix D.

Staffing of Administration

� The Administrators' staff team is structured such that tasks are completed by staff with the appropriate level of experience. Grant Thornton hourly charge out

rates are included in Appendix E. � Detailed information on the calculation of remuneration and the Administrators'

request for remuneration is provided in the attached Remuneration Report at

Appendix F.

� In our initial remuneration report dated 16 January 2015, we estimated that the

total remuneration for the Company to the completion of the Voluntary

Administration would be in the range of $37,500 to $50,000 (excl of GST and

disbursements). The remuneration we are seeking approval for exceeds this initial

estimates, primarily as a result of receiving multiple DOCA proposals for consideration,

� It is noted that Baron Corporation has provided an indemnity for the

Administrators fees in the amount of $25,000 plus GST.

Voluntary Administrators' Remuneration (excl of GST and Disbursements)

Description Amount ($)

Joint and Several Administrators' remuneration for the

period 15 January 2015 to 11 February 2015

$54,799.50


period 12 February 2015 to 20 February 2015

$7,000.00

Remuneration to be Approved – Voluntary Administration

� The Administrators remuneration has been split between :

− Actual time incurred for the period 15 January 2015 to 11 February 2015; and

− The estimated future fees to be incurred for the period 12 February 2015 to

20 February 2015, being the date the of the second meeting of creditors.

� At the forthcoming meeting of creditors on 20 February 2015, creditors will be

requested to approve our remuneration as follows:


Remuneration

Remuneration to be Approved - DOCA

� It will be necessary for creditors to approve the drawing of remuneration for the

Deed of Company Arrangement should creditors vote that the Company

executes a DOCA. The remuneration approved will be calculated on a time basis

by applying the hours worked by the applicable charge out rate for the person involved. The remuneration is split between the following periods:

− 20 February 2015 to the date the DOCA is executed; and

− The date of the execution of the DOCA to the termination of the DOCA.

� Our estimates are based on the calculations as detailed in Appendix F.

� It is noted that Baron Corporation has provided an indemnity for the Deed Administrators' fees up to $12,500, plus GST.

� Should creditors vote to approve a DOCA, we will request creditors approve the

following remuneration, subject to the DOCA proposal approved:

Remuneration to be Approved - Liquidation

� It will be necessary for creditors to approve the future remuneration of the

Liquidators, should creditors vote that the Company be placed in liquidation. The

remuneration to be approved will be calculated on a time basis by applying the

hours worked by the applicable charge out rate for the person involved. Our estimates are based on the calculations as detailed in Appendix F.

� Should creditors vote to place the Company into Liquidation we will request

creditors approve the following remuneration:

Remuneration

DOCA Option 2: Deed Administrators' Remuneration (excl of GST and

Disbursements



period 20 February 2015 to the execution of the DOCA.

1,000.00

Joint and Several Deed Administrators' remuneration for

the period from the execution of the DOCA to the

termination of the DOCA.

12,500.00

Liquidators' Estimated Future Remuneration (excl of GST and

Disbursements


Joint and Several Liquidators' remuneration for the period

20 February 2015 to the conclusion of the liquidation.

12,500.00

DOCA Option 1: Deed Administrators/Trustees' Remuneration (excl of

GST and Disbursements



period 20 February 2015 to the execution of the DOCA.

1,000.00

Joint and Several Deed Administrators' remuneration for

the period from the execution of the DOCA to the

termination of the DOCA.

1,500.00

Trustee's remuneration for the period from the execution

of the Creditors' Trust to termination of the Creditors'

Trust, plus annual fee to be pro rated should the trust period exceed 12 months

11,000.00

5,000.00 p.a.


Section 11 Meeting


02. Introduction




06. Investigations




10. Remuneration

11. Meeting


Second meeting of creditors

Meeting

− In Person: by person with a person attending the meeting; or

− Email: by email to [email protected] no later than 10:00 AM on the

business day prior to the meeting, being 19 February 2015.

� If proxies are lodged by facsimile or email, the law requires that the original proxy must be lodged with the Voluntary Administrators within 72 hours of lodging the

faxed or emailed copy.

Contact details

� Should you have any queries in relation to any matter raised in this report then

please do not hesitate to contact Dale Slater on (02) 8297 2598 or Danielle

Franjic on (02) 8297 2558.

Yours faithfully

Andrew Sallway

Joint and Several Administrator

Second meeting of creditors

� The second meetings of creditors is to be held at the office of Grant Thornton,

Level 17, 383 Kent Street, Sydney, NSW 2000 at 11:00 on Friday, 20 February 2015. Please arrive 15 minutes before hand to allow sufficient time for

registration.

� The notice in regards to the meeting is enclosed as Appendix A.

� We advise the Directors' RATA will be available for the creditors to inspect 30

minutes prior to commencement of the creditors meeting.

� The meeting will be open to creditors for questions and general discussion.

Should you wish to have us address any issue in detail please advise us prior to

the meeting date. This will allow sufficient time to prepare a detailed response to

your question.

� Please note that attendance at the meeting is not compulsory.

Lodging of proofs of debt

� Should you not have already lodged a proof of debt, you are required to complete

the proof of debt as attached a as Appendix G.

Lodging of proxies

� Proxies lodged for the previous meeting are not valid for this meeting and therefore, new proxies need to be lodged to enable voting at the second meeting.

Please ensure that the proxies are signed under seal, where appropriate (if you are

a company) and if the proxy is executed by a power of attorney, that a copy of

the power of attorney is enclosed with the proxy form. The proxy form is

enclosed as Appendix H.

� Proxies for the meeting can be lodged in the following ways:

− Post: to arrive no later than 10:00 AM on the business day prior to the

meeting, being 19 February 2015;

− Facsimile: to (02) 9299 4533 no later than 10:00 AM on the business day

prior to the meeting, being 18 February 2015;


Appendices

A. Notice of second meeting of creditors

B. DIRRI

C. Proposed for Deed of Company Arrangement

D. ASIC Information Sheet – Approving Fees: a guide for creditors



G. Proof of Debt formG. Formal Proof of Debt Form

H. Proxy form


A. Notice of Meeting

Appendices


B. DIRRI

Appendices


C. Proposed Deed of Company Arrangement

Appendices

Proposal for Deed of Company Arrangement

Baseline Constructions Pty Limited (Voluntary Administrators Appointed)(Receivers and Managers Appointed)

Mr Nicholas Bettar has made the following proposals to creditors of Baseline Constructions Pty Limited

(Administrators Appointed)(Receivers and Managers Appointed) (Company):

• Option 1 (All Creditors participate in the litigation)- Deed of Company Arrangement (DOCA)

and Creditors Trust (Creditors Trust); or

• Option 2 (Secured Creditor only participates in the litigation)- Deed of Company

Arrangement (DOCA) only.

Subject to the approval of the creditors of the Company at a meeting of creditors held pursuant to section

439A of the Corporations Act 2001 (Cth), the Company will execute a DOCA and Creditors Trust, the

material terms of which will be to the following effect:

1 Material terms under Option 1 and 2

1.1 Execution and control of the Company

a. The DOCA will be executed by the Administrators, the Company, and Mr Bettar.

b. The Deed Administrators of the DOCA will be the Voluntary Administrators.

c. In exercising the powers conferred by the DOCA and carrying out their duties under the

DOCA, the Deed Administrators are taken to act as agents for and on behalf of the

Company.

d. The Deed Administrators will return control of the Company to Mr Bettar on execution of the

DOCA.

1.2 Claims and moratorium

a. The DOCA will bind all persons having a Claim (as defined herein). For the purposes of the

DOCA, a Claim is a debt payable by, or claim against, the Company (whether present or

future, certain or contingent, ascertained or sounding only in damages or by way of fine or

penalty) being a debt or claim that arose before the date of the appointment of the

Receivers and Managers to the Company (Appointment Date) or out of events or

circumstances which occurred before the Appointment Date, and irrespective of whether the

debt or claim arose by virtue of contract, at law, by statute, in equity, or otherwise.

b. A person having a Claim must not during the period up until the completion of the DOCA:

i. Make or proceed with any application to wind up the Company;

ii. Begin or continue any court proceedings or enforcement process against the

Company or in relation to its property; or

iii. Exercise any rights of set-off or cross claim against the Company.

1.3 Summary of terms- Option 1

Events prior to and at completion:

a. Baron Corporation Pty Ltd (Baron) (or related entity) to place $80,000 into a separate bank

account, these funds represent Mr Bettar’s contribution and is reflective of an estimate of 2

cents in the dollar on creditors’ claims capped at $4 million (the Minimum Amount 1).

b. Baron (or related entity) to contribute an amount to pay outstanding employee claims

(amount TBC).

At completion under the DOCA:

a. The Deed Administrators, the Company, Mr Bettar and Bettar Holdings Pty Ltd will execute

a Creditors Trust Deed.

b. The Trustees of the Creditors Trust will be the Deed Administrators.

c. The Director’s Minimum Amount 1 will constitute the Trust Fund (Trust Fund).

d. The Company will be released from all Claims (excluding related partied and Baron and

New Bounty Pty Ltd (New Bounty)), which will be extinguished, and all persons having a

Claim may lodge a proof of debt with the Creditors Trust.

e. The DOCA will be immediately effectuated and will terminate.

The Litigation against Amelia Pty Ltd:

a. Baron (or related entity) will review the litigation claim and pursue it at its sole discretion and

cost. If Baron (or related entity) decides at any time to discontinue the proceedings they are

within their rights to cease the proceedings.

b. If Baron (or related entity) pursues the litigation claim they agree to finance, subject to a

commercially acceptable litigation funding agreement, the litigation against the Amelia Pty

Ltd including all costs and any adverse costs orders.

c. If successful after repaying all of its costs for funding the litigation the balance of the

proceeds will the split equally between Baron (or related entity) and the Creditors Trust.

d. Bettar Holdings Pty Ltd will agree to assign 50% of the balance of the proceeds (after costs)

to the Creditors Trust.

Timing of completion of Creditors Trust

a. Creditors will receive the higher of:

• The distribution of Minimum Amount 1 (excluding related parties, Baron and New

Bounty); or

• The net proceeds of the litigation where all creditors will participate on a pro-rated basis

(i.e. Baron and New Bounty will not have priority).

b. Completion is to occur immediately once the Trustee determines that the greater of the

distribution of Minimum Amount 1 or the funds from the litigation have been received to

enable them to make a distribution.

Distributions from Creditors Trust

a. The Trust Fund will be available for distribution in the following priority:

i. From the Trust Fund:

First, to the Creditors Trustees for their costs and expenses, to be capped at A.

$12,500 (plus GST) for the first year plus $5,000 (plus GST) per annum on a

pro rata basis thereafter should the litigation not be resolved within 12 months;

Next, rateably, to those persons having a Claim that is admitted by the B.

Creditors Trustees in accordance with the terms of the Creditors Trust

(Admitted Creditors); and

Next, in the event of any surplus remaining after all Admitted Creditors have C.

been paid 100 cents in the dollar (excluding interest), to the Company.

1.4 Summary of Terms- Option 2

Events prior to and at completion

a. Baron Corporation Pty Ltd (Baron) (or related entity) to place $120,000 into a separate bank

account, these funds represent Mr Bettar’s contribution and is reflective of an estimate of 3

cents in the dollar on creditors’ claims capped at $4 million (the Minimum Amount 2) which

will be distributed to unsecured creditors.

b. Baron (or related entity) to contribute an amount to pay outstanding employee claims

(amount TBC).

At completion under the DOCA:

a. The Deed Administrators will adjudicate on all claims.

b. The Director’s Minimum Amount 2 of 3 cents in the dollar of creditors’ claims will be

distributed.

c. The Company will be released from all Claims (excluding related parties, Baron and New

Bounty Pty Ltd (New Bounty)), which will be extinguished.

d. The DOCA will be immediately effectuated and will terminate.

e. For clarity purposes in Option 2 the creditors will not participate in the above litigation.

Distributions from the DOCA

a. The Fund will be available for distribution in the following priority:

First, to the Deed Administrators for their costs, and expenses; A.

Next, rateably, to those persons having a Claim that is admitted by the Deed B.

Administrators in accordance with the terms of the DOCA (Admitted

Creditors); and

b. The Deed Administrators will adjudicate Claims in accordance with the manner of

adjudication of claims in a liquidation, to which end the relevant provisions of the

Corporations Regulations 2001 (Cth) will be incorporated into the DOCA.

c. All persons with Claims must accept that their right to prove under the DOCA in full

satisfaction and complete discharge of their Claims.

1.5 Powers and entitlements of Deed Administrators and Creditors Trustees

a. The Deed Administrators and or Creditors Trustees will have the powers set out in Schedule

8A of the Corporations Regulations 2001 (Cth), except as set out at rr 3(c), 4, and 11.

b. The Creditors Trustees will have all of the powers of trustees under the Trustees Act 1925

(Cth) and all other powers necessary or convenient for the Creditors Trustees to administer

the Creditors Trust and do all things a deed administrator is empowered to do under a deed

of company arrangement which incorporates the prescribed provisions in schedule 8A of the

Corporations Regulations 2001 (Cth).

1.6 Other provisions

a. The DOCA and the Creditors Trust Deed will contain other provisions that are necessary to

give effect to this proposal or that are usually included in such documents.


D. ASIC Information Sheet – Approving Fees: A guide for creditors

Appendices

Important note: This information sheet contains a summary of basic information on the topic. It is not

INFORMATION SHEET 85

Approving fees: a guide for creditorsIf a company is in financial difficulty, it can be put under the control of an independent external administrator.

This information sheet gives general information for creditors on the approval of an external administrator’s fees in a liquidation of an insolvent company, voluntary administration or deed of company arrangement (other forms of external administration are not discussed in this information sheet). It outlines the rights that creditors have in the approval process.

Entitlement to fees and costs A liquidator, voluntary administrator or deed administrator (i.e. an ‘external 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

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

External administrators are only entitled to an amount of fees that is reasonable for the work that they and their staff properly perform in the external administration. What is reasonable will depend on the type of external administration and the issues that need to be resolved. Some are straightforward, while others are more complex.

External administrators must undertake some tasks that may not directly benefit creditors. These include reporting potential breaches of the law and lodging a detailed listing of receipts and payments with ASIC every six months. The external administrator is entitled to be paid for completing these statutory tasks.

For more on the tasks involved, see ASIC’s information sheets INFO 45 Liquidation: a guide for

creditors and INFO 74 Voluntary administration: a guide for creditors.

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

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. You will need a qualified professional adviser to take into account your particular circumstances and to tell you how the law applies to you.

© Australian Securities & Investments Commission, December 2008 Page 1 of 5

APPROVING FEES: A GUIDE FOR CREDITORS

legal fees

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

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 external administrator will, generally, be paid from the company’s available assets before any payments to creditors. If there are not enough assets, the external administrator may have arranged for a third party to pay any shortfall. As a creditor, you should receive details of such an arrangement. 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.

Who may approve fees Who may approve fees depends on the type of external administration: see Table 1. The external administrator must provide sufficient information to enable the relevant decision-making body to assess whether the fees are reasonable.

Table 1: Who may approve fees

Creditors’committee

Creditors Court

Administrator in a voluntary administration

1

Administrator of a deed of company arrangement

1

Creditors’ voluntary liquidator

1 5 3

Court-appointed liquidator 1 4, 5 2

1 If there is one. 2 If there is no approval by the committee or the creditors. 3 Unless an application is made for a fee review. 4 If there is no creditors’ committee or the committee fails to approve the fees.5 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 $5000, 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, the members represent the interests of all the creditors, not just their own individual interests.

There is not a creditors’ committee in every external administration. A creditors’ committee makes its decision by a majority in number of its members present at a meeting, but it can only act if a majority of its members attend.

To find out more about creditors’ committees and how they are formed, see ASIC’s information sheets INFO 45 Liquidation: a guide for creditors, INFO 74 Voluntary administration: a guide for creditors

and INFO 41 Insolvency: a glossary of terms.

Creditors’ approval

Creditors approve fees by passing a resolution at a creditors’ meeting. Unless creditors call for a poll, the resolution is passed if a simple majority of creditors present and voting, in person or by proxy,

© Australian Securities & Investments Commission, December 2008 Visit our website: www.asic.gov.au

Page 2 of 5


indicate that they agree to the resolution. Unlike where acting as committee members, creditors may vote according to their individual interests.

If a poll is taken, rather than a vote being decided on the voices or by a show of hands, 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 separate resolution of creditors is required for approving fees for an administrator in a voluntary administration and an administrator of a deed of company arrangement, even if the administrator is the same person in both administrations.

A proxy is where 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 as they wish on a resolution, while a special proxy directs the proxy holder to vote in a particular way.

A creditor will sometimes appoint the external administrator as a proxy to vote on the creditor’s behalf. An external 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.

Calculation of fees Fees may be calculated using one of a number of different methods, such as:

on the basis of time spent by the external administrator and their staff

a quoted fixed fee, based on an upfront estimate, or

a percentage of asset realisations.

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

If the external administrator intends to charge on a time basis, you should receive a copy of these hourly rates soon after their appointment and before you are asked to approve the fees.

The external 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 note that the hourly rates do not represent an hourly wage for the external administrator and their staff. The external 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, taxes, and a profit.

External administrators are professionals who are required to have qualifications and experience, be independent and maintain up-to-date skills. 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 external administrator for their services. External administrators compete for work and their rates should reflect this.

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 external administrator about the fees and whether the rates are negotiable.

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


Page 3 of 5


Report on proposed fees When seeking approval of fees, the external administrator must send committee members/creditors a report 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.

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

If the work is yet to be carried out, it is advisable to set a maximum limit (‘cap’) on the amount that the external administrator may receive. For example, future fees calculated according to time spent may be approved on the basis of the number of 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 external administrator will have to ask the creditors’ committee/creditors to approve a further amount of fees, after accounting for the fees already incurred.

Deciding if fees are reasonable If 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 external administration and the results of that work.

You may find the following information from the external administrator useful in deciding if the fees claimed are reasonable:

the method used to calculate fees

the major tasks that have been performed, or are likely to be performed, for the fees

the fees/estimated fees (as applicable) for each of the major tasks

the size and complexity (or otherwise) of the external administration

the amount of fees (if any) that have previously been approved

if the fees are calculated, in whole or in part, on a time basis:

o the period over which the work was, or is likely to be performed

o if the fees are for work that has already been carried out, the time spent by each level of staff on each of the major tasks

o if the fees are for work that is yet to be carried out, whether the fees are capped.

If you need more information about fees than is provided in the external 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 external 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.


Page 4 of 5



Page 5 of 5

Reimbursement of out-of-pocket costs An external administrator should be very careful incurring costs that must be paid from the external administration—as careful as if they were dealing with their own money. Their report on fees should also include information on the out-of-pocket costs of the external administration.

If you have questions about any of these costs, you should ask the external 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 external administrator. If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with ASIC at www.asic.gov.au/complain, or write to:

ASIC Complaints PO Box 9149 TRARALGON VIC 3844

ASIC will usually not become involved in matters of commercial judgement by an external administrator. 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 information sheet INFO 41 Insolvency: a glossary of terms. For more on external administration, see ASIC’s related information sheets at www.asic.gov.au/insolvencyinfosheets:

INFO 74 Voluntary administration: a guide for creditors

INFO 75 Voluntary administration: a guide for employees

INFO 45 Liquidation: a guide for creditors

INFO 46 Liquidation: a guide for employees

INFO 54 Receivership: a guide for creditors

INFO 55 Receivership: a guide for employees

INFO 43 Insolvency: a guide for shareholders

INFO 42 Insolvency: a guide for directors

INFO 84 Independence of external administrators: a guide for creditors

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 for Insolvency Professionals, which applies to IPA members.



Appendices



Appendices

Grant Thornton Charge out Rates as at 1 July 2014

Title Description of Title Hourly Rate

(ex GST) (NSW)

Partner Registered Liquidator / Trustee. Partner bringing specialist skills to Administrations and Insolvency matters.

Controlling all matters relating to the assignment.

$650

Associate Director Qualified accountant (CA/CPA) and may be a registered Liquidator/Trustee. Minimum 7/8+ years’ experience. Likely

to be appointed as a director in due course. Highly advanced technical and commercial skills. Planning and control of

all Administration and Insolvency tasks. Controlling substantial matters relating to the assignment and reporting to the

appointee.

$560

Senior Manager Qualified accountant (CA/CPA). 7/8+ years’ experience. Well developed technical and commercial skills. Planning

and control of all Administration and Insolvency tasks. Controlling substantial matters relating to the assignment and

reporting to the appointee.

$520

Manager Typically CA/CPA Qualified. 5-8 years’ experience. Well developed technical and commercial skills. Planning and

control of Administration and Insolvency tasks with the assistance of the appointee.

$470

Supervisor / Assistant Manager Typically CA/CPA Qualified. 4+ years’ experience. Co-ordinates planning and control of small to medium

Administrations and Insolvency tasks. Conducts certain aspects of larger Administrations.

$420

Senior Typically CA/CPA Qualified. 3-5 years’ experience. Required to control the fieldwork on Administrations and

Insolvency tasks.

$380

Intermediate Typically undertaking CA/CPA Qualifications. Up to 3 years’ experience. Required to conduct the fieldwork on

smaller Administrations and Insolvency tasks and assist with fieldwork on medium to large Administrations and

Insolvency tasks.

$320

Graduate Typically less than 1 years’ experience. Required to assist with the day to day fieldwork on Administrations and

Insolvency tasks under the supervision of intermediate and senior staff.

$260

Undergraduate Typically less than 1 years’ experience, usually working part time whilst studying a university undergraduate

qualification. Required to assist with the day to day fieldwork on Administrations and Insolvency tasks under the

supervision of intermediate and senior staff.

$210

Secretary Carries out all secretarial functions relating to an Administration. $200

Administrator Conducts all aspects relating to administering the accounts function. $210

Junior Typically a school leaver with limited experience. Provides general administrative support. $140



Appendices

Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed)

Remuneration Request Approval Report

Page 1 of 22

Part 1: Declaration We, Andrew Sallway and Said Jahani, of Grant Thornton Australia Limited have undertaken a proper assessment of this remuneration claim for our appointment as Administrators of Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed), in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the Administration.

Part 2: Executive Summary To date, no remuneration has been approved and paid in this administration. This remuneration report details approval sought for the following fees:

Period Amount

(excl GST) ($)

Current remuneration approval sought:

Voluntary Administration Resolution 1: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 15 January 2015 to 11 February 2015 be fixed at $54,799.50 (excluding GST) plus any out of pocket expenses occurred.

$54,799.50

Resolution 2: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 12 February 2015 to 20 February 2015 be fixed at $7,000 (excluding GST) plus any out of pocket expenses occurred.

$7,000

Total – Voluntary Administration* $61,799.50 Deed of Company Arrangement (if applicable) Resolution 3: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 20 February 2015 to the date the DOCA

$1,000



Page 2 of 22

is executed, to be fixed at $1,000 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis. Resolution 4 (In the event DOCA option 2 (DOCA Only) is approved): The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $12,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.

$12,500

Resolution 5 (In the event DOCA option 1 (DOCA and Creditors Trust) is approved): The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $1,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.

$1,500

Resolution 6 (In the event DOCA option 1 (DOCA and Creditors Trust) is approved): The remuneration of the Trustees, once executed, and any of the Trustees’ partners or employees performance of services performed from the date the Creditors Trust is executed to the completion of the Creditors Trust to be fixed at $11,000 plus $5,000 pro-rata for each year after the 12 month anniversary of the execution of the Trust (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.

$11,000

Plus $5,000 pro-rated per annum after 12 months.

Liquidation (if applicable)



Page 3 of 22

Resolution 7: The remuneration of the Liquidators and any of the Liquidators’ partners or employees in performance of services performed from 20 February 2015 to the completion of the Liquidation to be fixed at $12,500 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis.

$12,500

* Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the Administration. Should any additional work be necessary beyond what is contemplated, further approval may be sought from creditors.



Page 4 of 22

Part 3: Description of work completed/to be completed Resolution 1: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 15 January 2015 to 11 February 2015 be fixed at $54,799.50 (excluding GST) plus any out of pocket expenses occurred.

Company Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed)

Practitioner(s) Andrew Sallway and Said Jahani Firm Grant Thornton Australia Limited

Administration Type

Voluntary Administration

Period From: 15 January 2015 To: 11 February 2015

Task Area General Description Includes

Assets (1.5 hours) $408

Plant and Equipment • Reviewing asset listings.

Debtors • Reviewing and assessing debtors’ ledgers.

Leasing • Reviewing leasing documents;

• Liaising with owners/lessors; and

• Tasks associated with disclaiming leases.

Creditors (100.6 hours) $33,906

Creditor Enquiries • Receive and follow up creditor enquiries via telephone;

• Maintaining creditor enquiry register; and

• Review and prepare correspondence to creditors and their representatives via, email and post.

Secured creditor reporting

• Search to the PPSR;

• Notifying PPSR registered creditors of appointment; and

• Correspondence with secured creditor and the Receivers and Managers.



Page 5 of 22


Creditor reports • Preparing 439A report, including undertaking detailed investigations into the Company’s affairs; and

Dealing with proofs of debt

• Receipting and filing Proofs of Debt; and

• Corresponding with OSR and ATO regarding Proofs of Debt.

Meeting of Creditors • Preparation of meeting notices, proxies and advertisements;

• Forward notice of meeting to all known creditors;

• Preparation of meeting file, including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting;

• Receipting and filing all Proxy forms for the meeting;

• Holding the first meeting of creditors;

• Preparation and lodgement minutes of meetings with ASIC; and

• Responding to stakeholder queries and questions immediately following meeting

Employees 4.4 hours) $1,141

Employees enquiries

• Preparation of letters to employees advising of the Administrators appointment.

Calculation of entitlements

• Calculating employee entitlements;

Investigation (36.8 hours) $9,250

Conducting investigation

• Collection of company books and records;

• Reviewing company’s books and records and Report as to Affairs;

• Review and preparation of company nature and history;

• Conducting and summarising statutory searches;

• Preparation of comparative financial statements;

• Review of specific transactions;

• Preparation of investigation file; and



Page 6 of 22


• Preparation of outcome statement.

Administration (16.9 hours) $6,110.50

Document maintenance/file review/checklist

• Filing of documents; and

• Updating checklists.

Insurance • Identification of potential issues requiring attention of insurance specialists; and

• Correspondence with Blue Broking regarding initial insurance requirements.

Planning/Review • Discussions regarding status of administration.

Statutory (9.9 hours) $3,984

Deed of Company Arrangement

• Correspondence relating to Deed preparation;

• Preparation of an Estimated Outcome Statement (DOCA v Liquidation) to establish the best scenario for all creditors; and

• Discussions with the Receivers and Managers regarding the DOCA and potential points of issue.

Documents of appointment

• Preparation, review and execution of the documents of appointment; and

• Filing with ASIC all documents of appointment.

Report as to Affairs • Issuing RATA and Directors Questionnaire to the Director upon appointment;

• Reviewing completed RATA and Directors Questionnaire; and

• Correspondence with the Director and Receivers and Managers in relation to only requiring the Receivers and Managers RATA to be completed.

ASIC Forms • Preparing and lodging ASIC forms 505.

ATO & other statutory reporting

• Notification of appointment



Page 7 of 22

Resolution 2: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 12 February 2015 to 20 February 2015 be fixed at $7,000 (excluding GST) plus any out of pocket expenses occurred.



Administration Type


Period From: 12 February 2015 To: 20 February 2015





• Review and prepare correspondence to creditors and their representatives via facsimile, email and post.


• Correspondence with secured creditor, and the Receivers and Managers.

Creditor reports • Printing and issuing s439A report to creditors; and

• Receiving and following up creditor enquiries in response to the s439A report to creditors.



Meeting of Creditors • Preparation of meeting file, including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting;

• Receipting and filing all Proxy forms for the meeting;

• Holding the second meeting of creditors; and



Page 8 of 22




• Reviewing and responding to queries in relation to the s439A report brought to our attention by creditors, and any outstanding investigations from the s439A.

Administration (2.6 hours) $687





Employees (0.5 hours) $105

Employees enquiries • Preparation of letters to employees advising of the Administrators appointment.


• Calculating employee entitlements.

Statutory (1.7 hours) $679

ASIC Forms • Preparation and lodging ASIC advertisements.

Resolution 3: The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 20 February 2015 to the date the DOCA is executed, to be fixed at $1,000 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis.



Administration Type




Page 9 of 22

Period From: 20 February 2015 To: The execution of the DOCA


Creditors (1.2 hours) $314

Creditor Enquiries • Receive and follow up creditor enquiries via telephone; and



• Correspondence with secured creditor, and the Receivers and Managers.

Creditor reports • Receiving and following up creditor enquiries in response to the s439A report to creditors and second meeting of creditors.

Meeting of Creditors • Preparation and lodgement minutes of meetings with ASIC.








Deed of Company Arrangement

• Correspondence relating to Deed execution; and

• Reviewing and finalising the DOCA drafting.

ASIC Forms • Preparing and lodging ASIC forms. Resolution 4 (In the event DOCA option 2 (DOCA Only) is approved): The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $12,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.



Page 10 of 22



Administration Type


Period From: The execution of the DOCA To: The completion of the DOCA







• Correspondence with secured creditor, their legal advisors, and the Receivers and Managers.

Dividend • Calculating dividend rate;

• Preparing dividend file;

• Advertising dividend notice;

• Preparing distribution;

• Receipting Proofs of Debt; and

• Adjudicating Proofs of Debt.

Employees (3.8 hours) $1,390

Employees enquiries

• Receive and follow up employee enquiries;

• Review and prepare correspondence to employees and their representatives via facsimile, email and post; and

• Review and adjudicate on creditor claims and excluded employee claims.

Administration Document • Filing of documents; and



Page 11 of 22


(4.7 hours) $1,086

maintenance/file review/checklist

• Updating checklists;

• File reviews; and

• First month, then 6 monthly Administrators reviews.

Finalisation • Notifying ATO of finalisation;

• Cancelling ABN/GST registration; and

• Completing checklists;



ASIC Forms • Preparing and lodging ASIC forms.

Resolution 5 (In the event DOCA option 1 (DOCA and Creditors Trust) is approved): The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $1,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.



Administration Type


Period From: The execution of the DOCA To: The completion of the DOCA



Page 12 of 22


Creditors (1.6 hours) $507






Creditors’ Trust • Agreeing Creditors’ Trust deed; and

• Liaise with the Director, Receivers and Managers and other parties regarding the Creditors’ Trust.

Employees (1.2 hours) $402

Employees enquiries

• Receive and follow up employee enquiries; and

• Review and prepare correspondence to employees and their representatives via facsimile, email and post.




• Updating checklists; and

• File reviews.









Page 13 of 22

Resolution 6 (In the event DOCA option 1 (DOCA and Creditors Trust) is approved): The remuneration of the Trustees, once executed, and any of the Trustees’ partners or employees performance of services performed from the date the Creditors Trust is executed to the completion of the Creditors Trust to be fixed at $11,000 plus $5,000 pro-rata for each year after the 12 month anniversary of the execution of the Trust (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.



Administration Type


Period From: The execution of the Trust To: The completion of the Trust


Creditors (24.1 hours) $8,027 plus Annual fee (pro-rated after 12 months) (8.6 hours) $3,030






Dividend • Calculating dividend rate;




• Receipting Proofs of Debt; and

• Adjudicating Proofs of Debt.

Employees Employees enquiries • Receive and follow up employee enquiries;



Page 14 of 22


(4.4 hours) $1,653 plus Annual fee (pro-rated after 12 months) (3.2 hours) $1,070

• Review and prepare correspondence to employees and their representatives via facsimile, email and post; and

• Review and adjudicate on creditor claims and excluded employee claims.

Administration (2.5 hours) $680 plus Annual fee (pro-rated after 12 months) (2.5 hours) $900





• First month, then 6 monthly Administrators reviews.







Resolution 7: The remuneration of the Liquidators and any of the Liquidators’ partners or employees in performance of services performed from 20 February 2015 to the completion of the Liquidation to be fixed at $12,500 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis.



Page 15 of 22



Administration Type


Period From: 20 February 2015 To: The completion of the Liquidation








Creditor reports • Preparing investigation, meeting and general reports to creditors.



Meeting of Creditors • Preparation of Annual General Meeting notices, proxies and advertisements;

• Forward notice of meeting to all known creditors;

• Preparation of meeting file, including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting;

• Preparation and lodgement minutes of meetings with ASIC; and


Employees (4.0 hours)

Employees enquiries

• Receive and following up employee enquiries via telephone;

• Review and prepare correspondence to employees and their representatives via facsimile, email and post;



Page 16 of 22


$1,370 and

• Receive and prepare correspondence in response to employees’ objections to leave entitlements.

FEG • Correspondence with FEG;

• Preparing notification spreadsheet;

• Preparing FEG quotations; and

• Preparing FEG distributions.


• Calculating employee entitlements;

• Reviewing employee files and company’s books and records;

• Reconciling superannuation accounts; and

• Reviewing awards. Employee dividend • Correspondence with employees regarding dividend;

• Correspondence with ATO regarding SGC proof of debt;

• Calculating dividend rate;




• Receipting Proofs of Debt;

• Adjudicating Proofs of Debt and

• Ensuring PAYG is remitted to ATO.



Page 17 of 22




• Collection of company books and records;

• Reviewing company’s books and records;

• Preparation and completion of investigation file;

• Lodgement of s533 report with the ASIC;

• Preparation and lodgement of supplementary report if required;

• Review of insolvent trading claim;

• Review of antecedent transactions; and

• Pursue potential claims and seek recovery (if applicable).

ASIC reporting • Preparing statutory investigation reports; and

• Liaising with ASIC.



• Filing of documents;



• First month, then 6 monthly Administration review.


• Cancelling ABN / GST / registration; and




ASIC Forms • Preparing and lodging ASIC forms 505, 524, 911 etc.

ATO & other statutory reporting

• Lodgement of BAS returns.



Page 18 of 22

Part 4: Calculation of Remuneration Please find attached a calculation of remuneration by staff and task area. Part 4A: Schedule of remuneration methods and hourly rates Remuneration Methods There are four basic methods that can be used to calculate the remuneration charged by an Insolvency Practitioner. They are: Time based / Hourly rates This is the most common method. The total fee charged is based on the hourly rate charged for each person who carried out the work multiplied by the number of hours spent by each person on each of the tasks performed. Fixed Fee The total fee charged is normally quoted at the commencement of the administration and is the total cost for the administration. Sometimes a Practitioner will finalise an administration for a fixed fee. Percentage The total fee charged is based on a percentage of a particular variable, such as the gross proceeds of assets realisations. Contingency The practitioner’s fee is structured to be contingent on a particular outcome being achieved. Method Chosen Given the nature of this administration, we propose that our remuneration be calculated on the time based/hourly rates method. In our opinion, this is the fairest method for the following reasons:

• We will only be paid for work done, subject to sufficient realisations of the Company assets. Or, if there are insufficient assets realised, to the indemnity provided to us (please refer to our Declaration of Independence, Relevant Relationship and Indemnities).

• It ensures creditors are only charged for work that is performed. Our time is recorded and charged in six minute increments and staff are allocated to duties according to their relevant experience and qualifications.



Page 19 of 22

• We are required to perform a number of tasks which do not relate to the realisation of assets, e.g. responding to creditor enquiries, reporting to the ASIC, distributing funds in accordance with the provisions of the Corporations Act 2001.

Explanation of Hourly Rates The rates for our remuneration calculation are set out in Appendix E of the Administrators’ Section 439A report, together with a general guide showing the qualifications and experience of staff engaged in the administration and the role they take in the administration. The hourly rates charged encompass the total cost of providing professional services and should not be compared to an hourly wage. Part 5: Statement of Remuneration Claim Resolution 1 In respect of remuneration sought for the performance of services performed from 15 January 2015 to 11 February 2015 be capped at $54,799.50(excluding GST) plus any out of pocket expenses incurred. No additional remuneration will be sought for this period. Resolution 2 In respect of remuneration sought for the performance of services performed from 12 February 2015 to 20 February 2015 be capped at $7,000 (excluding GST) plus any out of pocket expenses incurred. No additional remuneration will be sought for this period. Resolution 3 In respect of remuneration sought for the performance of services performed from 20 February 2014 to the date the DOCA is executed to be fixed at $1,000 (excluding GST) plus any out of pocket expenses incurred. The Voluntary Administrators may seek further remuneration for this period once final costs have been quantified should costs exceed the amount anticipated, further approval will be sought should this situation arise. Approval has been sought for amounts to be drawn on a monthly basis until the approved amount has been drawn. Resolution 4



Page 20 of 22

The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA and to be fixed at $12,500 (excluding GST) plus any out of pocket expenses incurred. The Deed Administrators may seek further remuneration for this period once final costs have been quantified should costs exceed the amount anticipated, further approval will be sought should this situation arise. Approval has been sought for amounts to be drawn on a monthly basis until the approved amount has been drawn. Resolution 5 In the event DOCA option 1 (DOCA and Creditors Trust) is approved: The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $1,500 (excluding GST) plus any out of pocket expenses occurred. The Deed Administrators may seek further remuneration for this period once final costs have been quantified should costs exceed the amount anticipated, further approval will be sought should the situation arise. Approval has been sought for amounts to be drawn on a monthly basis until the approved amount has been drawn. Resolution 6 In the event DOCA option 1 (DOCA and Creditors Trust) is approved: The remuneration of the Trustees, once executed, and any of the Trustees’ partners or employees performance of services performed from the date the Creditors Trust is executed to the completion of the Creditors Trust to be fixed at $11,000 plus $5,000 pro-rata for each year after the 12 month anniversary of the execution of the Trust (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis. The Trustees may seek further remuneration for this period once final costs have been quantified should costs exceed the amount anticipated, further approval will be sought should the situation arise. Approval has been sought for amounts to be drawn on a monthly basis until the approved amount has been drawn. Resolution 7 In respect of remuneration sought for the performance of services to be performed from 20 December 2014 to the completion of the Liquidation to be fixed at $12,500 (excluding GST) plus any out of pocket expenses incurred. The Liquidators may seek further remuneration for this period once final costs have been quantified should costs exceed the amount anticipated, further approval will be sought should this situation arise. Approval has been sought for amounts to be drawn on a monthly basis until the approved amount has been drawn.



Page 21 of 22

Part 6: Remuneration Recoverable from External Sources Remuneration payments received in relation to the Fair Entitlements Guarantee Act 2012 or predecessor scheme are considered a separate arrangement involving a limited or partial funding agreement. We are yet to contact FEG with respect to performing a distribution on their behalf as we are yet to receive confirmation as to whether the Company will be placed into liquidation. Should the Administrators assist FEG in the distribution of employee entitlements this will be detailed in future creditor correspondence. Baron Corporation has agreed to fund the Administrators remuneration to a total of $37,500 (plus GST) for both the Voluntary Administration and the DOCA. Part 7: Disbursements Disbursements are divided into three types: A, B1, B2.

A disbursements are all externally provided professional services. These 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 photocopying, printing and postage. B2 disbursements, if charged to the Administration, would generally be charged at cost; though some expenses such as telephone calls, photocopying and printing may be charged at a rate which recoups both variable and fixed costs.

I have undertaken a proper assessment of disbursements claimed for the Company, in accordance with the law and applicable professional standards. I am satisfied that the disbursements claimed are necessary and proper.



Page 22 of 22

Disbursements Total (excl GST)

Printing $799.80 ASIC searches and filing fees $329.42 Staff travel $8.18 Total $1,137.40

Part 8: Report on Progress of the Administration The progress of the administration has been discussed in body of the Section 439A report, to which this remuneration report has been attached. Part 9: Queries Arrangements can be made to inspect the time and costs records which give greater detail of the work performed by contacting Dale Slater of this office on (02) 8297 2598 or [email protected]. Part 11: Information Sheet The ASIC Creditors Information Sheet (INFO 85) that outlines further information regarding the remuneration approval and payment process is attached.


G. Formal Proof of Debt form

Appendices

*Do not complete if this proof is made by the creditor personally.

ACN 058 578 662

FORM 535 Subregulation 5.6.49(2)

Corporations Act (2001)

FORMAL PROOF OF DEBT OR CLAIM

(GENERAL FORM)

To the Administrators of Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed)

1. This is to state that the company was on 15 January 2015 (date of court order in winding up by the

Court, or date of resolution to wind up, if a voluntary winding up), and still is, justly and truly indebted to:

_________________________________________________________ (full name and address of the creditor and, if applicable, the creditor's partners. If prepared by

an employee or agent of the creditor, also insert a description of the occupation of the creditor)

for $_______________and______cents.

Date Consideration (state how the Debt arose)

Amount $ c

Remarks (include details of voucher substantiating payment

2. To my knowledge or belief the creditor has not, nor has any person by the creditor's order, had or received any satisfaction or security for the sum or any part of it except for the following: (insert

particulars of all securities held. If the securities are on the property of the company, assess the value

of those securities. If any bills or other negotiable securities are held, show them in a schedule in the

following form).

Date Drawer Acceptor Amount $c Due Date

*3. I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

*3. I am the creditor's agent authorised in writing to make this statement in writing. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

........................................... Dated Signature Occupation: Address

Proof of Debt Reference: «Reference»


H. Proxy form

Appendices

FORM 532 Corporations Act 2001

Regulation 5.6.29


ACN: 058 578 62 (the Company)

APPOINTMENT OF PROXY

I/We (1) _____________________________________________________________________________ of

______________________________________________________________________________________

a creditor/member of Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed) appoint

(2)_____________________________________________ or in his/her absence

(3) _____________________________________________as my/our general/special proxy to vote at the meeting of creditors to be held on 20 February 2015 at 11:00 AM or at any adjournment of that meeting. Resolution Type For Against Abstain

The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 15 January 2015 to 11 February 2015 be fixed at $54,799.50 (excluding GST) plus any out of pocket expenses occurred.

Ordinary □ □ □

The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 12 February 2015 to 20 February 2015 be fixed at $7,000 (excluding GST) plus any out of pocket expenses occurred.


a. That the Administration should end; or Ordinary □ □ □ b. That the Company execute one of the following Deeds of Company Arrangement (“DOCA”); or

(i) DOCA Option 2: DOCA Only; or Ordinary □ □ □ (ii) DOCA Option 1: DOCA and Creditors’ Trust; or Ordinary □ □ □

c. That the Company be wound up. Ordinary □ □ □ DOCA Options 1 and 2 (if applicable) The remuneration of the Administrators and any of the Administrators’ partners or employees in performance of services performed from 20 February 2015 to the date the DOCA is executed, to be fixed at $1,000 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis.


DOCA Option 2: DOCA Only (if applicable) The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $12,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.


DOCA Option 1: DOCA and Creditors Trust (if applicable) The remuneration of the Deed Administrators, once executed, and any of the Deed Administrators’ partners or employees performance of services performed from the date the DOCA is executed to the completion of the DOCA to be fixed at $1,500 (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.


The remuneration of the Trustees, once executed, and any of the Trustees’ partners or employees performance of services performed from the date the Creditors Trust is executed to the completion of the Creditors Trust to be fixed at $11,000 plus $5,000 pro-rata for each year after the 12 month anniversary of the execution of the Trust (excluding GST) plus any out of pocket expenses occurred. Approval is given for such amounts approved to be drawn on a monthly basis.


Liquidation (if applicable) The remuneration of the Liquidators and any of the Liquidators’ partners or employees in performance of services performed from 20 February 2015 to the completion of the Liquidation to be fixed at $12,500 (excluding GST) plus any out of pocket expenses incurred. Approval is given for such amounts approved to be drawn on a monthly basis.


That should the Company be wound up to consider appointing a Committee of Inspection.


If no Committee of Inspection is appointed and the Company is wound up, the Liquidator be permitted to apply to the Australian Securities and Investments Commission for approval to destroy the books and records of the Company six (6) months following deregistration of the Company.


DATED this ___________ day of ________________________ 20

(4) Signature ___________________________________

CERTIFICATE OF WITNESS - only complete if the person given the proxy is blind or incapable of writing.

I, ____________________________________________ of _______________________________________________

certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him before he attached his signature or mark to the instrument.

DATED this ___________ day of ________________________ 20

Signature of witness ___________________________________

Description ___________________________________

Place of residence ___________________________________

Notes:

(1) If a firm strike out "I" and set out the full name of the firm.

(2) Insert the name 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”.

(4) If the creditor is a sole trader , sign in accordance with the following example: “A.B., proprietor”.

If the creditor is a partnership, sign in accordance with the following example: “A.B., a partner of the said firm.”

If the creditor is a company, then the form of proxy must be under its Common Seal or under the hand of some officer duly authorised in that capacity, and the fact that the officer is so authorised must be stated in accordance with the following example: “for the company, A.B.” (duly authorised under the Seal of the Company).

Proxy forms should have been completed and returned by no later than 10:00 AM on 19 February 2015 to be eligible to vote at the meeting.

RETURN TO: Baseline Constructions Pty. Ltd. (Administrators Appointed) (Receivers and Managers Appointed) care of Grant Thornton Australia Limited

Address: Locked Bag Q800, QVB Post Office, Sydney NSW 1230 Phone: +61 2 8297 2400 Fax: +61 2 9299 4533