section Report Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN:

Transcription

1 Advisory Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN:

2 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices To the Creditor as addressed Derrick Vickers Partner Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: ("Company") We refer to our previous correspondence and advise that, in accordance with section 439A of the Corporations Act 2001 (Cth), a meeting of the Company Creditors will be held at the Empire Theatre in Toowoomba on Friday, 1 December 2017, at 10.00am. Enclosed for your attention are the following: Administrators report pursuant to section of the Insolvency Practice Rules (Corporations) 2016 Formal Notice of Meeting (refer to Appendix 7) Form 535 Informal Proof of Debt (refer Appendix 8) Form 532 Appointment of Proxy (refer Appendix 9) Should you have any queries regarding the information provided, please contact the Creditor hotline by telephone (07) Yours faithfully PricewaterhouseCoopers Australia Level 23, 480 Queen Street, Brisbane Qld 4000 T: +61 (0) F: +61 (0) Derrick Vickers Administrator Australia is a partnership fully owned by over 400 partners Australia wide. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 2

3 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Contents Transmittal Letter 2 Introduction 5 1 Overview of Appointment 6 2 Summary of report and recommendation Administrators Independence 10 4 Statutory Information 12 5 Company history and trading activities 13 6 Historical trading activities 14 7 Company s financial position 15 8 Directors report as to affairs 16 9 Reasons for the failure of the Company 18 Strategy Administrators strategy Actions taken by the Administrators to date 22 Investigations Overview Timing of insolvency and insolvent trading Voidable transactions 36 DOCA Deed of Company Arrangement (DOCA) proposal 42 Creditors Estimated Return to Creditors 52 Employees 54 3

4 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Contents 17 Effect on employees 55 Meeting Second meeting of creditors Completion of proof of debt and proxy forms 58 Options Matters to be decided at the second meeting of Creditors 60 Remuneration Administrators' remuneration 62 Appendices 65 1 DOCA Terms Sheet 66 2 DIRRI 67 3 PPSR Searches 69 4 Organisation Chart 70 5 Remuneration Report 71 6 Receipts and Payments 72 7 Formal Notice of Meeting 73 8 Form 535 Proof of Debt 74 9 Form 532 Appointment of Proxy Creditor Information Sheets 76 4

5 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Introduction Introduction 5 1 Overview of Appointment 6 2 Summary of report and recommendation 8 5

6 Contents Introduction 1 Overview of Appointment Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Overview of Appointment Appointment of Administrators On 25 August 2017, Sam Marsden and I were appointed as Joint and Several Administrators of the Company, in accordance with the provisions of Part 5.3A of the Corporations Act 2001 (the Act). Our appointment was made by a resolution passed at a meeting of the Company s directors held on 25 August 2017 pursuant to section 436A of the Act. The purpose of the appointment of Administrators is to allow for independent insolvency practitioners to take control of and investigate the affairs of the company over which they have been appointed. As Administrators of the Company, we are required to provide Creditors with information relevant to making an informed decision on the future of the Company. To that end, this report contains the following information: - information about the Company and their financial affairs - An update of our investigations into possible offences - The estimated return to Creditors in a winding up - The estimated return to Creditors in a Deed scenario - The options available to Creditors, and our opinion on each of those options. Purpose of the Report The purpose of this report is to assist Creditors in their decision about the future of the Company in accordance with Section 439(A) of the Act. At the second meeting Creditors may resolve one of the following: - That the Company execute a Deed of Company Arrangement (DOCA). A DOCA is an arrangement proposed by the Company which will result in Creditors being paid in accordance with a prescribed framework; or - That the administration of the Company end. When an administration ends other than by liquidation of the Company, control of the Company is returned to the Directors; or - That the Company is wound up. Creditors may resolve to wind up the Company whereby Creditors will have the ability to appoint Liquidators to the Company. Creditors may, if desired, resolve to adjourn the meeting for up to 45 business days to allow more time to make a decision. 6

7 Contents Introduction 1 Overview of Appointment Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Overview of appointment Actions taken by the Administrators Since the date of our appointment, we have undertaken the following to prepare this report: - Discussions with the Company's directors and management - Review of staffing requirements - Review of statutory books and records - Review of historical financial records - Review of current trading position - Review of all work in progress and contracts in hand - Review of all assets of the Company - Review of Company processes - Review of the debtors ledger and performed an assessment of its likely collectability - Review of property security registrations and related matters - Assessed the financial position of the business - Traded the business at a reduced capacity through the Administration period - Incurred liabilities with a view to generating further funds for creditors. Due to the time frames imposed by the Act with respect to calling meetings of Creditors, our investigation into possible offences against the Company and voidable transactions has been limited. Should Creditors decide to appoint a Liquidator, these investigations will continue. Administrators Investigations Since the date of our appointment, we have undertaken the following investigations: - Analysis as to whether the Company could continue trading during the VA period - Analysis of staffing requirements over the VA period - Analysis of all work in progress and contracts currently in hand - Analysis of contracts in hand, likely risks associated with completing the contracts and an assessment of the return should they be completed - Determination of profitability of such arrangements and ability of projects to be completed within the VA period. Where necessary, voiding unprofitable arrangements to maximise the cash flow in order to continue trading, albeit at a reduced capacity - Analysis of supplies on hand and critical supplier and service agreements vital to the on-going trading viability of the business - Investigations into the Company financial affairs - Analysis of potentially voidable transactions and preference payments - Investigations into potential actions that could be taken should a Liquidator be appointed to the Company - Analysis around the date the Company may have become insolvent - Identifying key assets owned by the Company. 7

8 Contents Introduction 2 Summary of report and recommendation Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Summary of report and recommendation Recommendation to Creditors At the second meeting, Creditors are required to decide whether: 1. The Company should execute a Deed of Company Arrangement (DOCA); or 2. The Administration of the Company should end; or 3. The Company should be wound up. In accordance with the requirements of section 439(A)(4)(b) of the Act, the Administrators must provide an opinion as to whether the above options are in the best interest of Creditors. Our opinion for the Company is set out as follows: 1. The Company is insolvent and therefore we do not consider it to be in the Creditors interest that the administration end and the Company be returned to the Directors 2. The Directors submitted a DOCA proposal on 23 November This is detailed in the DOCA section of the report. Having regard to the content of that section, it is our recommendation that creditors accept the Deed of Company Arrangement. 3. Given the above, we do not recommend that creditors resolve to wind up the Company. 8

9 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices 9 3 Administrators Independence 10 4 Statutory Information 12 5 Company history and trading activities 13 6 Historical trading activities 14 7 Company s financial position 15 8 Directors report as to affairs 16 9 Reasons for the failure of the Company 18 9

10 Contents Introduction 3 Administrators Independence Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Administrators Independence to independence The conduct of insolvency professionals is governed by the Act and by the standards set by the Australian Restructuring Insolvency and Turnaround Association (ARITA). The Act requires that a person appointed as Administrator of a Company must be a registered Liquidator and must not be a significant debtor or creditor, officer, auditor or partner or employee of an officer or auditor of the Company. The ARITA s Code of Professional Practice for Insolvency Practitioners (COPP) states that the overriding qualifications of persons appointed as Administrators are that they are, and are seen to be, independent and that they have the necessary expertise to deal effectively and efficiently with a Company. In accordance with the ARITA s Code, we have included a statement of independence. This statement, the Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) was provided with our first circular to Creditors. The rationale for independence Independence is critical because of the nature of the role of the Administrator. Tasks such as adjudicating on complex and competing interests, preserving and selling assets and investigating and pursuing claims require a high degree of objectivity and impartiality. Stakeholders are entitled to have confidence in the Administrator s conduct and decision making processes. They need to be able to regard the Administrator as fair, unbiased and not acting from self interest when exercising their professional and commercial judgment. The test of independence As set out in the COPP, there are two aspects to independence. An insolvency practitioner must: - Be independent in fact - Be seen or perceived to be independent. An insolvency practitioner must be independent in fact, that is, they should act and conduct the administration in an independent manner. An insolvency practitioner must be seen to be independent, that is, they must not accept an appointment, or continue to act under an existing appointment, if: - A reasonable and informed third party - On the information available (or which should have been available) at the time might reasonably form the opinion that the Administrator might not bring an independent mind to the administration and thus may not be impartial or may in fact act with bias - Because of a lack of independence, or a perception of a lack of independence. 10

11 Contents Introduction 3 Administrators Independence Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Administrators Independence Copy of DIRRI A copy of our DIRRI is provided at Appendix 2, as provided with our first circular to Creditors and noted at the first Creditors meeting. We do not believe that the relationships noted in the DIRRI compromises our independence, nor our ability to act as Administrators of the Company in an impartial and objective manner. Our assessment regarding our independence and the relevant relationships disclosed in the DIRRI has not changed since the time of our appointment. Compliance with qualifications to act as Administrators With reference to the Act, we confirm that we are: - Registered Liquidators - Are not disqualified to act as Administrators. With reference to the COPP, we confirm that we are: - Members of the ARITA - Have adhered to, and intend to adhere to, the guidelines set out in the COPP with respect to the acceptance of our appointment as Administrators of the Company, and in our continuing role as Administrators of the Company. 11

12 4 Statutory Information Statutory Information The information contained in this section of the report has been extracted from Australian Securities & Investments Commission (ASIC) records as at 24 August Incorporation Strategy ASIC records that the business was registered in Queensland as a Company on 2 November 2005 under the name Ostwald Quarries Pty Ltd. On 5 March 2012 the Company name was changed to be Ostwald Construction Materials Pty Ltd. Registered office and principal place of business The registered office of the Company is located at: King George Central, Level 18, Ann Street, Brisbane Qld 4000 The principal place of business (PPOB) of the Company is Lot 6 Winton Street, Dalby Qld 4405 Investigations DOCA Creditors Employees Shareholders Meeting Contents Introduction Options Remuneration Appendices There are 993,815 ordinary shares issued with the paid up share capital being $17,943,590. The shares are beneficially held as per the below table: Officers The table below provides the names of current and former Directors.. Outstanding winding up applications There are no outstanding winding up actions against the Company. Registered charges A summary of the Personal Property Securities Register (PPSR) records of charges over OCM is attached over the page and it comprises of 46 registered PPSR interests: - 1 All pap with exception - 25 Motor Vehicles - 20 Other Goods To date we have received a number of PPSR claims, of which 1 is not valid. A further 10 have been discharged. We are in discussions with the balance of claimants. 12

13 Contents Introduction 5 Company history and trading activities Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Company history and trading activities Company history The Ostwald Group, encompassing Ostwald Bros. Pty Ltd (Administrators Appointed), Ostwald Bros. Civil Pty Ltd (Administrators Appointed), Ostwald Construction and Materials Pty Ltd (Administrators Appointed) and Ostwald Facilities and Accommodation Pty Ltd (In Liquidation) was established as a civil construction business. The Ostwald Group s operations included contracting, mining services, construction materials, facilities and accommodation, transport and bulk haulage, and rural enterprise. The Ostwald Bros delivered large-scale infrastructure work for regional developments and resource sector projects. The Company operated quarries within Queensland as well as concrete batch plants. The materials sourced the quarries were generally gravel, precoat, general fill, road base, crushed rock and foam bitumen, and were often sold with the Ostwald Group. A list of the quarries in which the Company operated from is provided below: Hustons road quarry and concrete batch plant Crossroads quarry and concrete batch plant Headache hill quarry Mt Bassett quarry Knob hill quarry. With the exception of the Huston's road (discussed further in the report) the Company leased the quarries. The Directors have provided the following summary of the history of the Company and the events leading up to the appointment of Administrators. In 2014 the company sold down 45% of the business. During the Company s peak, it was generating approximately 80% of it s revenue from external business with the remaining 20% of the revenue coming from business within the group structure. In recent years, Ostwald Bros. Pty Ltd (Administrators Appointed) became around 80% of the Company s revenue source. The losses that Ostwald Bros Pty Ltd encountered coincided with a downturn in the mining and quarry industry. This appears to be the cause of the Company s failure. 13

14 6 Historical trading activities Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Historical trading activities Historical financial performance The adjacent profit and loss summarises the financial performance of the Company for the four years to FY16 and YTD May-17. Figures have been obtained from signed statutory company accounts for FY13 through to FY16. Management accounts have been used to prepare FY17 information. We note the following observations: Both revenue and gross profit have declined at similar rates through all review periods. FY15 was a slight exception, with a high level of variable costs driving a significant operating loss for the period. As is similar with the other Companies subject to our appointment, a large decline in revenue over the period was not matched by a similar reduction in the Company s operating cost base. Income Statement Ostwald Construction Materials Pty Ltd $ in 000s FY13 FY14 FY15 FY16 FY17 Revenue 68,024 69,448 29,360 16,213 16,016 Cost of sales (54,413) (52,758) (40,897) (15,522) (16,102) Gross Profit 13,611 16,690 (11,537) 691 (86) Profit on sale of assets (388) 1,070 (87) 3 - Interest received Financial costs (282) (271) (152) (25) - D&A (843) (1,281) (3,274) (2,043) (2,029) Employee benefits (1,575) (2,261) (2,928) (782) (520) Other expenses (3,488) (4,094) (3,242) (882) (842) Trust distribution received Profit/(Loss) from Operations 7,036 9,855 (21,208) (3,037) (3,477) Profit / (loss) before Income Tax 7,036 9,855 (21,208) (3,037) (3,477) Tax Expenses (1,721) (2,854) 6,709 1, Profit / (loss) after Income Tax 5,315 7,002 (14,499) (1,902) (2,798) Comprehensive Income Profit/(loss) 5,315 7,002 (14,499) (1,902) (2,798) Movement on revaluation reserve - (2,068) Total comprehensive income 5,315 4,934 (14,361) (1,902) (2,798) Source: OCM Stats June 14, OCM Final Signed Accounts 2015, and Ostwald Construction Materials Pty Ltd 2016 Note: Upon appointment we were advised that the Company s accounts were three months out of date. Accordingly, we have not included the months June, July and August 2017 as these do not accurately reflect the Company s financial position. 14

15 7 Company s financial position Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Company s financial position Historical financial position The adjacent balance sheet summarises the financial performance of the Company for the four years to FY16 and as at May-17. Figures have been obtained from signed statutory company accounts for FY13 through to FY16. Management accounts have been used to prepare Jun-17 information. We note the following observations: While the Company has maintained a positive Net Asset position throughout all review periods, it has reduced. For the most part this reduction in the Net Asset position has been driven by a reduction in Net Working Capital. While a capital contribution of $17.9m that was made in FY14 has ensured the health of the balance sheet, negative retained earnings booked in each period since FY15 have eroded the Company s equity position. Balance Sheet Ostwald Construction Materials Pty Ltd $ in 000s Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Assets Current Assets Cash and Cash Equivalents 4, Trade and Other Receivables 7,812 22,949 7,929 1, Inventory 4,149 11,586 4,927 3,935 4,049 Assets held for Sale Other Current Assets ,606 WIP Income Tax Refund Total Current Assets 16,213 35,297 13,853 5,892 7,028 Non Current Assets Plant, Property & Equipment 10,932 14,658 10,582 9,068 7,561 Deferred tax asset ,186 4,971 5,668 Total Non Current Assets 11,505 15,449 14,768 14,039 13,229 Total Assets 27,718 50,746 28,620 19,932 20,257 Liabilities Current Liabilities Trade and Other Payables 8,974 15,623 12,731 6,940 9,147 Borrowings 7,417 1, Short Term Provisions 1, Income Tax Payable (4) - Total Current Liabilities 18,484 17,779 13,602 7,153 9,198 Non Current Liabilities Borrowings 1, Deferred Tax Liability 1,829 4,049 1, Long Term Provisions Total Non Current Liabilities 3,801 4,626 1, ,148 Total Liabilities 22,285 22,405 14,911 8,124 10,346 Net Assets 5,433 28,341 13,710 11,808 9,912 Equity Capital 0 17,975 17,705 17,705 17,705 Asset Revaluation Reserve 2, Retained Earnings 3,365 10,366 (4,133) (6,035) (7,985) Total Equity 5,433 28,341 13,710 11,808 9,912 Source: OCM Stats June 14, OCM Final Signed Accounts 2015, and Ostwald Construction Materials Pty Ltd signed 15

16 8 Directors report as to affairs Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Directors report as to affairs Upon appointment we requested that the Directors of the Company provide a statement about the company s business and assets in the form of a Report as to Affairs (RATA), pursuant to section 438B(2) of the Act. We have obtained a RATA from the Directors. The RATA was provided by the Directors on 7 September A summary of the information provided in the RATA is detailed opposite with notes below. Request for report as to affairs Report as to affairs Notes Valuation ($) Realisable ($) Assets Interest in land 1 425,315 Unknown Sundry debtors 2 2,346,851 Unknown Cash on hand and at bank 169,580 29,580 Stock 3,800,000 Unknown Work in progress 167,000 Unknown Plant and equipment 7,029,749 Unknown Other assets Unknown Subtotal 14,366,342 Unknown Assets subject to specific charges 25,000 25,000 Less: amounts owing 25,000 25,000 Add: contingent assets Total assets 25,000 25,000 Total estimated realisable assets Unknown Unknown Less: employee entitlements 3 319, ,500 Less: amounts owing and secured by debenture of floating charge over assets - - Less: preferential claims ranked behind secured creditors Unknown Unknown Less: partly secured creditors Less: unsecured creditors 4 8,738,741 8,738,741 Less: contingent liabilities 190, ,000 Estimated surplus Notes 1. Relates to property at Lot 25 SP159192, Windeyer Rd, Wandoan QLD. 2. Includes $1,592, owed to Ostwald Bros Pty Ltd and $3, owed to Ostwald Bros Civil Pty Ltd 3. Includes $166,175 in unpaid annual leave and $319,500 in employee garnishee liability 4. Comprises trade creditors of $8,605,865 and ATO running balance account of $132,

17 8 Directors report as to affairs Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Directors report as to affairs Debtor Collections A total of $366,766 has been collected from debtors and cash sales across the course of the administration to 21 November Of this, $188,328 related to pre-appointment debtors. Approximately $300k has been invoiced post our appointment as administrators. A summary of outstanding debtors as at 20 November 2017 is tabled below. Notes are contained on the next slide. Outstanding debtors as at 20 November 2017 Category Notes Amount ($) Collectible 1 286,792 Doubtful debt 2 16,519 Disputed claims 3 196,886 Partial offset claims 4 179,044 Related entities 5 1,567,142 Total outstanding debtors 2,246,382 Debtor Collections - Notes 1. Approximately 30% of the total collectible amount falls in the current period, 10% falls within the 30 to 60 day categories and the remainder in 90+ days. Litigation will need to be undertaken in order to recover the debtors in the 90+ day category if payment is not forthcoming. The total collectible amount will increase as jobs are finalised and invoices are prepared. 2. This debtor is bankrupt. A notification has been provided advising that a return is unlikely in this bankrupt estate. 3. These debtors are creditors of other related entities and are attempting to offset their debt against what they are owed by the Company. The debtors are not able to offset against related party debts and therefore these amounts are likely to be collected. 4. These debtors are also creditors of the Company and are attempting to offset their debt against what they are owed. All debts under this category are preappointment. 5. This includes $9,803 owed by Ostwald Rural Trust, $1,553,706 from Ostwald Bros Pty Ltd and $3,631 from Ostwald Bros Civil. 17

18 Contents Introduction 9 Reasons for the failure of the Company Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Reasons for the failure of the Company Directors explanation The Directors have advised that the key factors contributing to the failure of the Company were as follows: A significant downturn in the mining and quarry industry The losses suffered by Ostwald Bros Pty Ltd caused a lack of available working capital to pay debts within the Company. Administrators comments Key factors that contributed to the Company failure include: A downturn in revenue due to a decline in the gas and mining industries that was not mirrored by cost reductions by the Company The appointment of Administrators to Ostwald Bros Pty Ltd (Administrators Appointed), representing a large portion of the Company s revenue and accounts receivable, provided uncertainty to the Company s continuing trading prospects. 18

19 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Strategy Strategy Administrators strategy Actions taken by the Administrators to date 22 19

20 10 Administrators strategy Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Administrators strategy The Act sets out the objective of Voluntary Administration, which is to maximise the chances of the company, or as much as possible of its business, continuing in existence. Should this not be possible, the objective of the Act is to provide a better return to Creditors than would result from an immediate winding up of the company. Our immediate strategic priority was to: - Review the outstanding position of the construction projects - Engage with the contracts principals and gauge their willingness to support the Administrators adopted strategy to trade the business or invite a DOCA proposal - Secure the co-operation of the workforce to enable continued trading - Trade the business at reduced capacity and complete projects close to completion along with progressing profitable contracts - Settle liabilities incurred during the administration trading period. Concurrent with pursuing the above strategies we continued our investigations into the failure of the Company, with a view to establishing the prospects of pursuing claims that may improve the outcome to Creditors. Decision to trade The Administrators reviewed the contracts on foot for feasibility of completion. With the assistance of key project managers, a project by project assessment was conducted to assess: - The costs to complete (broken down by materials and labour components) - What aspects (if any) of the projects would need to be subcontracted to other parties to complete - The quantum of duress payments (if any) that would be required Where customers were prepared to continue works, terms were agreed and projects were progressed to various extents (depending on the customers requirements). In conjunction with the above an updated cash flow was prepared to determine the overall outcome of proceeding with the works. It was deemed in the financial interest of creditors to trade the business at a limited capacity to complete certain works to realise value of WIP on site. The main objective in trading the Company s business was to retain the value of the Company as much as possible through achieving either a sale of the Company s business or a restructure through a deed of company arrangement. 20

21 Contents Introduction 10 Administrators strategy Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Administrators strategy Trade on - Employees Upon our appointment we stood down the workforce with the exception of a few key personnel while we considered the Company s position with its contracts and cash flow. Select employees have been re-engaged by the Administrators to assist and undertake the following tasks: - Assist review of the contracts - Collect debtors and raise progress claims - Review and advise of project viability - Complete specific works on projects - Assist with the Administrators with regard to provision of Company information and records, preparing employee liability schedule - Assist the Administrators in bringing up to date the Company s books and records which were 3 months out of date at appointment. Trade on Plant & Equipment The majority of the plant and equipment used by the Company, with the exception of the batch plants, were hired from Ostwald Bros Civil Pty Ltd (Administrators Appointed). Trade on - Revenue The Company had multiple external customers, with the major customer being FKG MCE JV (for the Dalby East-West Highway Upgrade). All other materials extracted from quarries were used on projects being undertaken by Ostwald Bros. Pty Ltd (Administrators Appointed), including Beef City, RCR and QGC. The following quarries were operation during our appointment: Knob Hill Quarry (internal and external customers) Dalby Quarry (internal and external customers) Dalby Batch Plant (internal supply to RCR project) Beef City Porta Batch (internal supply to Beef City project) Please refer to the attached account of receipts and payments (Appendix 6). In addition we continue to negotiate with numerous principals with regard to the release of unpaid progress claims and other monies retained by them. Surplus trading funds will be payable to creditors after administration expenses have been paid. Please refer to section Creditors-Estimated return to creditors for dividend prospects. 21

22 Contents Introduction 11 Actions taken by the Administrators to date Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Actions taken by the Administrators to date Summary of actions The actions taken by the Administrators to date fall into four key areas: - Statutory duties and other notifications - Securing assets and management of trading operations including handling employees - Consideration of possible DOCA proposals - Investigations. The key tasks undertaken in each of these areas are summarised below. Further details of tasks undertaken are included in the Administrators remuneration report (refer Section 3/Appendix 4). Statutory duties and other notifications Lodging documentation with ASIC in relation to the appointment of the Administrators and providing notice of the appointment to all known Creditors of the Company. Correspondence and discussions with the Directors outlining the implications of our appointment and their obligations with regard to the VA. Requested the Directors prepare the Reports as to Affairs. Preparing for and attending to calling the first and second meeting of Creditors. Preparing and lodging minutes of the first meeting of Creditors. Preparing and holding weekly meetings of the Committee of Inspection (creditors committee) to keep the committee members updated on the trading position, litigation, DOCA proposals Respond to queries raised by the committee of inspection members on an ad hoc basis. Preparing this report to Creditors. Securing assets and management of trading operations Attending company office to assess: - Current state of work and pipeline - Location and state of property, plant and equipment. Discussions with the Directors and Management to identify any other potentially realisable assets of the Company. Review of Company insurance policies and implementation of Administrators insurance. Correspondence and discussions with PPSR claimants. Review of employee records. Discussions with employees regarding work pipeline. Subsequent redundancies of employees. Preparing a trading cash flow for the VA period. Opening new supplier accounts and negotiating credit terms with the various parties. Opening a new bank account and establishing a purchase order register and process. Analysis of work in progress and what if any could be completed during the VA period. Trading of the business during the VA period. 22

23 Contents Introduction 11 Actions taken by the Administrators to date Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Actions taken by the Administrators to date Investigations Conducting investigations into the financial affairs and circumstances leading to the failure of the Company. Analysis of potentially voidable transactions and investigations into potential actions that could be taken by a Liquidator. Review of the various related party loan accounts. Conduct reconciliation of Company asset register with valuation prepared by valuers. Sale of business as going concern or Company Restructure Our opinion has always been that the greatest return to the creditors was likely to be derived from a sale of the business as a going concern or restructure by way of Deed of Company Arrangement. In order to preserve the value of the assets pending any sale, we conducted as assessment of viable projects and, where those projects were considered viable (at least in the short term) we have continued to conduct work with respect to those projects. This allowed us to seek expressions of interest from potential purchasers of the business and following our appointment, advertisements appeared with: The Courier Mail on 30 August 2017; The Australian on 1 September 2017; We also contacted various parties through the network whom we believed may have been interested in this opportunity. This combined with the media coverage of the Voluntary Administration resulted in 39 confidential expressions of interest being received. These expressions of interest were mixed in respect of: - the acquisition of the whole of the Companies' assets or a Deed of Company Arrangement; - the acquisition of the quarry assets; and - the acquisition of plant and equipment. Of these 39 parties who expressed interest, only 23 were willing to sign confidentially agreements in order to gain access to an online data room, which was being managed by the Company s former advisers (Grant Thornton). Given the quality of books and records on appointment a deadline of 15 September 2017 was communicated to interested parties to submit specific information requests. Following that time, up to date information would be supplied to the bidders and indicative offers were requested by 6 October Based on the indicative offers received, preferred bidders were then granted an additional 5 business days to complete additional due diligence before being asked to submit a binding offer by 5pm Monday the 16th of October This timeline was designed to allow for a process that would enable negotiation for the execution of any formal contract for sale and a settlement of that process which could take a further 4-6 weeks (or longer depending on the terms of any offer). 23

24 Contents Introduction 11 Actions taken by the Administrators to date Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Actions taken by the Administrators to date Sale of business as going concern or Company Restructure (cont.) Unfortunately, despite strong interest no binding offers for a going concern sale of the whole of business were received, but several parties advised of their intention to put forward a Deed of Company arrangement. Since the closure of the formal sale process, we have been facilitating the information requests of several parties in relation to a Deed of Company arrangement. This is discussed further in the DOCA section of this report. 24

25 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Investigations Investigations Overview Timing of insolvency and insolvent trading Voidable transactions 36 25

26 12 Overview Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Overview Upon appointment it was discovered that the Company s accounts were three months out of date. As a result, we have had to allocate additional resources, re-engaging three former accounts staff of the Company to assist in bringing the accounts up to date. The Company accounts were finally completed on 10 November Administrators duties to investigate The Act requires an Administrator to report on whether there are any transactions that appear to the Administrator to be voidable transactions in respect of which money, property or other benefits may be recoverable by a Liquidator under Part 5.7B of the Act. This issue is relevant to Creditors if they are being asked to choose between a DOCA or a liquidation, because voidable transactions are only able to be recovered in liquidation. We are also required to report to ASIC if we consider that past or present officers or shareholders may have been guilty of an offence, or if persons may have misappropriated property or been guilty of negligence or breaches of duty in relation to the affairs of the Company. Summary of our approach We have disclosed in this report details of our investigations to date. In the conduct of our investigations we undertook various tasks, including the following: - Met with and spoke to the Directors of the Company and reviewed completed Directors RATAs - Identified, reviewed and analysed certain financial information - Identified, reviewed and analysed certain supplier and creditor correspondence and information concerning when debts were incurred, due and paid - Reviewed the books and records of the Company, including its computer accounting package, systems and networks. Creditors information sheet Provided at Appendix 9 is an information sheet published by the ARITA to assist Creditors in understanding: - Potential offences under the Act - Recoverable transactions - Insolvent trading. Creditors should read this information in conjunction with our comments in this section of the report. Relevance of insolvency and insolvent trading The majority of recovery provisions under Part 5.7B of the Act are contingent on the Liquidator being able to establish that a company was insolvent at the time it entered into any particular transaction, or that a company became insolvent as a consequence of that transaction. Information about possible insolvent trading is relevant to Creditors when making a decision about the future of a company as directors of a company may generally only be sued for insolvent trading if the company is in liquidation. As with voidable transactions, Creditors have to assess the advantages to them of a DOCA (if one is presented), which cannot include proceeds from insolvent trading actions, compared to the likely return in a liquidation, which could include the proceeds of any successful insolvent trading action. 26

27 Contents Introduction 12 Overview Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Overview We have made enquiries into the financial affairs of the Company. The investigations we have undertaken are only indicative of the actions that may be possible in the event of a liquidation. A Liquidator of a company has the power to pursue certain transactions that took place prior to the date of liquidation with a view to enhancing the pool of funds available to the Creditors. It is important to note that these actions can only be pursued in the event that Creditors resolve to wind the company up and a Liquidator is appointed. Creditors should note that these actions may become very expensive due to the time costs incurred in thoroughly investigating all aspects of potential claims and obtaining legal advice on the merits of the claims. In some cases, Court intervention is necessary to enforce recoveries, which adds to the length of time and costs to pursue the claims. Where Liquidators do not have funds available to pursue recovery actions, or where they do not consider it commercial or in the best interests of Creditors to pursue an action, Creditors prepared to fund such action may choose to do so. Creditors providing such funding should, if sufficient moneys are recovered from the action, be entitled to receive the amount of their contribution in priority to other Creditors. Alternatively, actions may be funded by litigation insurance, which is effectively a fund provided by a third party insurer/funder rather than by a creditor of the company. Litigation insurance tends to be available only for cases where legal advice indicates that the potential success of an action is very strong and outweighs the expense involved. Certain defences may be available in relation to these claims. Creditors should also consider the financial capacity of defendants and their ability to settle any established insolvent trading claim. Books & Records Section 286(1) of the Act requires a company to keep written financial records that correctly record and explain its transactions and financial position and performance, and would enable true and fair financial statements to be prepared and audited. In some circumstances failure to maintain adequate books and records provides a rebuttable presumption of insolvency and can be relied upon by a Liquidator in matters such as insolvent trading claims. A failure to maintain adequate records in accordance with s.286(1) may be an offence. The accounts of the Companies were approximately 3 months out of date as at the date of appointment of the Administrators. As a result: the Administrators were not able to immediately identify all of the debtors and creditors of the Company; the accounts do not reveal all interactions between related entities of the Company leading up to the appointment of the Administrators; and significant work was undertaken in order to better understand the creditor position of the Company; In our view, as at the date of our appointment, the financial records of the Company do not appear to have been maintained in accordance with the Act. Regardless, this has materially impacted the timeliness and efficiency of our ability to investigate the company s affairs and report to creditors. 27

28 12 Overview Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Overview Books & Records (Cont.) The Company s internal accounting and project management software was Pronto. We note the following with regard to the Company s accounting records: - The recorded work-in-progress (WIP) of the Company is not reflective of the true WIP position of the Company. - A number of transactions in Pronto (the Company s internal accounting software) are historically reallocated at year end by the Company s accountant meaning that throughout the year the true financial position is not reflected in Pronto - Costs of repair for dry hire assets and demobilisation are not captured until after the assets are demobilisation - The Directors have advised that related party loans in the balance sheet are not correct and the working capital loans are usually paid out at month end by each entity. Related Party Loans A group structure chart can be found in Appendix 3. Our investigations have revealed a multitude of transactions between related parties and the Company. From our review we have made the following observations: The related party loans include both inter-company loans, loans to the Directors and related companies. Due to the incomplete Company records at appointment, we have been unable to determine or verify any of the loan account balances. Director loan balances were cleared to other related party loan accounts. Related party loan accounts are further complicated by the sale of assets by related parties used to decrease outstanding balances. This is made more complex as it is unknown whether the sale of the assets by related parties were subject to bank guarantees. Based on the above, we are of the opinion that it is a forensic exercise to unwind and accurately calculated the balance of the loan accounts as at the date of our appointment. Should the Company be placed in liquidation, we may need to invest in having the necessary investigations undertaken, aided by public examinations, to determine the nature of the various loans and calculate respective balances. 28

29 Contents Introduction 12 Overview Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Overview Australian Securities Investments Commission (ASIC) Reporting The Administrators are in the process of compiling information and preparing a report to the ASIC. In accordance with s.533 of the Act, a Liquidator must report to the ASIC, during the course of a winding up, if it appears to the Liquidator that a past or present officer or employee of a company may have been guilty of an offence. Upon providing such a report the Liquidator is also required to give ASIC such information that ASIC may require to allow it to investigate the possible offence. That process will be advanced by a Liquidator during the course of the liquidation. On delivery of a report (or of its own volition) the ASIC has broad investigative powers including to require persons to attend for an examination and to allow the inspection of books and records. That process may be separate to or as part of Public Examinations conducted by a Liquidator (See below). The ASIC has the power to prosecute any offence that arises as a result of the investigation and all necessary cooperation will be provided to the ASIC by the Liquidators (if the company is wound up). Public Examinations A Public Examination is a part of the investigation tools held by a Liquidator. The Corporations Act provides that a Liquidator is entitled to issue certain notices (under 596A and 596B of the Act) which have the same effect as summonses to produce documents and to appear to give evidence on oath. Public Examinations are conducted in either a Federal Court or a State Magistrates Court. Liquidators can compel directors and third parties to produce documents and to appear to give evidence on oath before a magistrate or a Federal Court judge. The reasons why a Liquidator would seek to examine someone include: that a Liquidator is able to compel answers to questions on oath in order to give the answers greater veracity; the Liquidator may want to have the answers on oath and recorded in court transcript to be used as evidence in further proceedings against the examiner or some other person; where there may be grounds for taking proceedings against officers, managers or others involved with the company during its life. A Public Examination by its very nature is an inquisitorial proceeding. It allows Liquidators to investigate and inquire in a manner that is not otherwise available in an Administration. Questioning during the examination is not limited to a particular matter, questions can be wide ranging provided they are relevant to the "examinable affairs" of the company. The ambit the power to examine is broad. And the range of questions that can be put to an examinee is very wide. The definition of "examinable affairs" is defined to mean: the promotion, formation, management, administration or winding up of the corporation; any other affairs of the corporation; or the business affairs of the connected entity of the corporation in so far as they are relevant to the corporation or to anything included in its examinable affairs. 29

30 Contents Introduction 12 Overview Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Overview The affairs of a company include the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with another person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with another person or persons and including property held as agent, bailee or trustee) liabilities, profits and other income receipts, losses, outgoings and expenditure of the company. Public Examinations can also be conducted in respect of any third parties who have information which may be relevant to the affairs of the company. That would include any individuals or companies who had dealings with the Company and may have information which is relevant to potential causes of action available to Liquidators including breach of directors' duties, uncommercial transactions, unfair preferences and any other cause of action available to a company. Public Examinations are recorded as part of a transcript of the examination which goes to support potential causes of action which may be brought by a Liquidator. Public Examinations are conducted in order to allow a Liquidator the benefit of determining whether: a cause of action exists; whether potential counterparty to that cause of action has sufficient means to meet any judgment if such a cause of action was successful; to test any defences which may be available to those counterparties including directors. The cost of Public Examinations is funded from the assets of the company or it is also possible that there would be litigation funding available in order to conduct the Public Examinations and any subsequent proceedings. The cost of litigation funding varies but can be anywhere from 25 to 45% of any recovery as a result of actions taken following a Public Examination. A Public Examination allows the Liquidator a forensic advantage over any other litigants or potential plaintiffs as it allows the Liquidator to test in an open forum on oath those matters which are relevant to the company's affairs. One example is the ability for a Liquidator to test the "date of insolvency". Through examinations it is able to determine the evidence which would support a particular date of insolvency as a matter of fact. The date of insolvency is important as it is the primary element to a number of claims which are available to a Liquidator. A Liquidator will have a better opportunity to delve deeper into the affairs of the Companies and will not rely solely on the current books and records of the Companies (which records were prepared as part of a wider group and includes companies outside of those in administration). Those financial records and the inter-relationship between Companies within the group and third parties will be able to be fully investigated during the course of a liquidation. As mentioned above, the Administrators investigations have been hampered due to the state of the company s books and records on appointment. Further, an Administrator does not have the powers of a Liquidator in regard to conducting investigations. If the company is wound up it is our intention to undertake a public examination to further the investigations which may result in further recoveries for the benefit of creditors. 30

31 Contents Introduction 13 Timing of insolvency and insolvent trading Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Timing of insolvency and insolvent trading Timing of insolvency and insolvent trading In the course of our investigation we have endeavoured to ascertain whether the Company was insolvent at any particular point in time prior to our appointment as Administrators, in order to determine a point in time from which the provisions of Part 5.7B may be applied. Solvency is defined in section 95A of the Act as when a company is able to pay all its debts as and when they become due and payable. A company that is not solvent is insolvent. Whether a company is able to meet its debts as they become due is essentially a cash flow test rather than a balance sheet test (although its balance sheet is relevant). We have considered both tests as part of our investigations. Consideration of the entire financial position of a company at any single point in time is required to establish if it is insolvent. This includes factors such as: - the value of a company s assets relative to its liabilities - the nature of these assets and liabilities - the extent to which cash is expected to be generated from future trading activities - the extent that cash is available from alternative sources. In the case of a company, some of the factors that a Liquidator may also consider in determining the solvency position of the company are: - the ability or otherwise of the company to obtain further funding from its financiers - the ability or otherwise of the Shareholders or directors to inject further funds into the company - the ability or otherwise of the Company to attract external investors - the likelihood of success of negotiations with the company s suppliers in relation to extending payment terms - the likelihood of success of negotiations with the company s key customers in relation to increasing sales - any other relevant factors that the directors may assert that they had reasonable grounds to continue trading. Directors who allow a company to continue trading when there are reasonable grounds for suspecting that the company is, or may become, insolvent may be held personally liable for debts incurred. A number of circumstances during FY17 may have indicated that the Company was in financial difficulty, including: - The Company did not have sufficient cash to pay debts as and when they fell due - There was evidence of significant pressure for payment from creditors 31

32 Contents Introduction 13 Timing of insolvency and insolvent trading Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Timing of insolvency and insolvent trading Timing of insolvency and insolvent trading (cont d) - The Company had entered into payment plans with several creditors and was negotiating with the ATO for much of FY17 in relation to a potential payment plan - The balance sheet of the Company was deteriorating throughout the period From our investigations it appears that the Company may have been insolvent throughout FY17. These indicators of insolvency are discussed further over the following pages. Should a Liquidator be appointed to the Company the Liquidator would conduct more detailed investigations to pinpoint the date of insolvency. 32

33 13 Timing of insolvency and insolvent trading Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Timing of insolvency and insolvent trading Solvency assessment Cash flow test The cash flow test involves assessing a company s ability to meet its obligations as and when they fall due. As can be seen in the graph below, at all times from 31 July 2016 through to 31 July 2017 the Company had insufficient cash to pay its due and overdue creditors. The shortfall peaked at $2.7m for April 2017 and was above $2m in all months after 31 March Creditor pressure Based on our review of creditor records and discussions with Management, it appears that the Company did not pay its trade creditors in line with agreed terms. While we understand that payment plans were able to be agreed with some creditors, significant creditor pressure was applied between July 2017 and the appointment of Administrators. This is a further indication that creditors were not able to be paid when debts were due. Creditor pressure increased in both volume and severity in July and August 2017, particularly in relation to statutory demands and intentions to issue winding up proceedings received (0.5) (1.0) (1.5) (2.0) (2.5) (3.0) 2 Ostwald Construction Materials - Cash vs due and overdue creditors (excl related parties) 1 Cash Total due and overdue creditors (excl related parties) Net (excl related parties) 1 2 The financials for June 2017 and July 2017 have been prepared post our appointment as Administrators. The Company was experiencing financial difficulties within the noted areas. Whilst further information would need to be obtained through additional investigations, it appears the Company may have potentially been insolvent during either of these periods and potentially the rest of FY17. 33

34 13 Timing of insolvency and insolvent trading Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Timing of insolvency and insolvent trading Solvency assessment Balance sheet test The balance sheet test is used to determine the ability of the Company to demonstrate sufficient assets to cover its liabilities. Our investigations show that the Company had positive net assets in all months between July 2016 and July 2017, as set out in the table below. It is noted that the June and July 2017 accounts have been prepared post-appointment by the Company s accounts team. The Company s net current asset position deteriorated steadily over FY17, but remained above positive $8.4m. We have been advised that the Ostwald Group s financier (the Financier) does not hold security over the Company s assets. Solvency assessment Other factors In June 2017, the Company appointed Grant Thornton as restructuring advisors. In July 2017, based upon the advice of Grant Thornton, Grant Thornton were engaged to sell the assets or shares of the Company. The Directors have advised that they believed that they had sufficient assets to pay debts if given time to do so. This was based upon assets held by the Company and its related parties and the amount of ongoing work they expected to deliver. On 7 August 2017, the ATO issued Director Penalty Notices (DPNs) to Brendan, Daniel and Matthew Ostwald in relation to $4.2m of debt owed by Ostwald Bros, a related party. The DPNs made the recipients personally liable for the ATO debt after 21 days, unless the debt was paid or the Ostwald Bros was placed in administration or liquidation. The Directors appointed administrators on 25 August 2017, when the DPN 21 day period was about to expire, after being unable to agree a repayment plan with the ATO. The Directors have advised that the Company s business was reliant upon the continuation of Ostwald Bros and accordingly placed the Company into Administration at the same time as Ostwald Bros with the expectation that the Company was likely to become insolvent. Ostwald Construction Materials - Net Current Asset Breakdown $000s Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Current Assets Cash Debtors and prepayments 1,733 3,182 3,542 3,568 1,658 2,002 3,118 4,010 4,839 4,510 3,313 2,777 2,249 Inventory 4,310 3,816 3,856 4,215 4,455 4,615 4,283 4,592 4,794 4,496 4,608 4,049 3,815 PPE 9,072 9,072 9,162 9,172 8,330 8,161 7,991 7,822 7,653 7,628 7,487 7,561 7,393 Net deferred tax 4,056 4,056 4,056 4,203 4,184 4,319 4,447 4,551 4,624 4,735 4,735 4,735 4,735 Total 19,456 20,369 20,802 21,394 18,802 19,247 20,028 21,231 22,106 21,524 20,314 19,324 18,386 Current Liabilities Creditors (7,237) (8,130) (8,821) (9,467) (7,014) (7,523) (8,497) (9,977) (10,912) (9,643) (8,794) (8,604) (9,144) Other trade payables (191) (221) (201) (210) (264) (236) (326) (317) (443) (680) (526) (543) (568) Provisions and other (280) (289) (292) (295) (294) (295) (279) (282) (268) (291) (313) (266) (253) Total (7,708) (8,640) (9,314) (9,972) (7,572) (8,053) (9,102) (10,576) (11,623) (10,614) (9,633) (9,413) (9,964) Net current assets 11,748 11,729 11,488 11,422 11,230 11,194 10,926 10,654 10,483 10,910 10,681 9,912 8,421 34

35 Contents Introduction 13 Timing of insolvency and insolvent trading Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Timing of insolvency and insolvent trading Defences available to the Directors Directors who allow a company to continue trading when there are reasonable grounds for suspecting that the company is, or may become, insolvent may be held personally liable for debts incurred. Section 588H of the Act outlines defences for directors against insolvent trading claims, including where the Directors had reasonable grounds for suspecting that the Company was solvent. The Courts have also drawn a distinction between a severe shortage of liquid assets to meet debts (ie insolvency) and a temporary lack of liquidity. If Directors reasonably believe that it is certain or probable (rather than more likely than not or possible) that a company can return to paying their debts as and when they fall due, then they could be justified in continuing to trade the company while pursuing that outcome. It appears that the Directors believed that the Company would be able to pay its debts if the Company was given time to do so, and also believed that it would be given this time until the Directors received the DPNs. If a claim was to be made against the Directors for insolvent trading, it would be up to the Directors to prove that these beliefs were reasonable. Section 1317S of the Act can also excuse Directors for some or all of their liability for insolvent trading where they acted honestly and reasonably. Factors that could be favourably considered could include: - Pursuing an outcome that is in the best interests of creditors - Negotiating with creditors for extended trading terms that are reasonably likely to return the company to solvency - Remaining informed of the financial position of the company - Obtaining (and following) appropriate advice - Acting in a timely manner - Appointing an Administrator when they no longer believed that the company could reasonably continue to trade. Summary of findings and estimated time of insolvency As a result of our investigation into potential insolvent trading by the Directors, we have concluded that there may be claims that a Liquidator could pursue against Directors in respect to trading the Company while it was insolvent. From Nov/Dec 16 onwards, the Company appears to have been unable to pay its debts as and when they fell due and may therefore have been insolvent. However, as previously advised, there are indications that the Company may have been insolvent as far back as July As discussed earlier in the section above, should the Company be wound up at the meeting of creditor, future investigations will occur including a public examination. A Liquidator will need to investigate all of the matters noted in greater detail and determine precisely when the Company became insolvent. Insolvent trading recoveries have been excluded from the dividend calculation in a potential liquidation due to uncertainties in the recoverability from the Directors. 35

36 Contents Introduction 14 Voidable transactions Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Voidable transactions on voidable transactions For general information explaining voidable transactions refer to Appendix 10. These investigations centre on transactions entered into by a company that a Liquidator may seek to void or challenge where a company is wound up. Investigations of this nature allow an Administrator to inform Creditors of what funds may become available in the event a company is wound up. An Administrator s obligations with respect to investigations of this type is not to the same level as a Liquidator. A Liquidator may take many months to investigate these matters before reaching a conclusion as to any potential claims that may be recoverable. These transactions generally fall into the categories as set out below: - Unfair preference payments - Uncommercial transactions - Unfair loans - Unreasonable director related transactions - Related entity benefits The information provided in this section is based on our investigations to date. We have not yet had the opportunity to consider such matters in detail and more detailed investigations would be required before any final view can be reached. In order for a transaction to be void as against a Liquidator, a company must have been insolvent at the time of the transaction; in this regard we refer to our previous comments with respect to solvency. Preferences Section 588FA of the Act provides that a transaction is an unfair preference if, and only if: - The company and the creditor are parties to the transaction (even if someone else is also a party); and - The transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in the winding up of the company. Even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an Order of an Australian Court or a direction by an agency. Unfair preferences apply to transactions entered into in a period of up to six months leading up to the appointment. Where a transaction is part of a continuing business relationship, the preference payment claim could be reduced to the difference between the maximum amount payable within the six months leading up to the appointment and the amount payable at appointment (a running balance reduction). We have undertaken the following investigations into transactions of this nature: - Review of the Company s transactions for the six month period leading up to the appointment - Prepared a list of payments that may constitute unfair preferences and quantified the value of these transactions 36

37 Contents Introduction 14 Voidable transactions Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Voidable transactions - Reviewed the potential running balance reduction to claims. On the basis of our investigations, we have noted instances of several payments made to suppliers in the six months prior to our Appointment. It is our opinion that these particular transactions may qualify as preference payments. Following an adjustment for a potential running balance reduction, potential preference claims of $5.4m have been identified. Of those payments, we note that only $26k was paid following significant creditor pressure, which would indicate that a good faith defence would be hard for these creditors to establish. On the basis of the facts set out above, we will investigate the recovery of the $26k Unfair loans Section 588FD of the Act notes that a loan to a company is unfair if, and only if: - The interest on the loan was extortionate when the loan was made, or has become extortionate because of a variation - The charges in relation to the loan were extortionate when the loan was made, or have since become extortionate because of a variation. On the basis of our investigations to date, we have not identified any unfair loans to the Company. Uncommercial transactions Section 588FB of the Act provides that a transaction is uncommercial 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 - The respective benefits to other parties to the transaction of entering into it; and - Any other relevant matter. Our investigations to date have included a review of trading terms, the Company payments history and discussions with Management. Based on our review to date we are not aware of any potential uncommercial transactions that would likely result in property being recovered for the benefit of Creditors in a liquidation scenario. 37

38 Contents Introduction 14 Voidable transactions Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Voidable transactions Unreasonable director related transactions Section 588FDA of the Act sets out that a transaction of a company is an unreasonable director-related transaction of the company if the transaction is: - A payment made by the company - A conveyance, transfer or other disposition by the company of property of the company - The issue of securities by the company - The incurring by the company of any obligation to make such a payment, disposition or issue. Our investigations into OCM confirm that it was once the owner of the Hustons Road quarry. The historical title search for the Hustons Road quarry shows: OCM has owned the Quarry since 10 March It was transferred from OCM to Ostwald Bros Equity Pty as trustee on 11 February 2014; Further on 11 January 2016 it was transferred from Ostwald Bros Equity Pty Ltd as trustee to OBSF3 LRBA Pty Ltd as trustee (the current owner) on 11 January We do note that QIC Private Capital Pty Ltd and KTB Korea- Australian Global Private Equity Fund acquired 45% of the shares held in OCM around the time of the original transfer, which indicates the transfer was part of the wider transaction. The quantum of the transaction remains confidential in accordance with the terms of the agreement but we can confirm we have sighted bank statements showing significant funds being deposited at this time. We can also confirm that ANZ, who had a registered mortgage over the Hustons Road quarry released its security on 11 February Our investigations confirm that the Quarry was transferred to Ostwald Bros Equity Pty Ltd as trustee for OBSF3 prior to the share sale transaction. This is evidenced by the fact a new lease and royalty agreement was signed on 23 January The shareholders of Ostwald Bros Equity Pty Ltd are all Ostwald family members. On the following page is a timeline of the quarry transactions under review. We consider a public examination would be required to fully understand the nature and who ultimately benefited from the sale of both the Quarry and OCM s shares. 38

39 Contents Introduction 14 Voidable transactions Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Timeline of significant events March 2006 Acquires Quarry at Hustons Road Dalby April 2009 Lease signed for Crossroads Quarry November 2011 Lease signed on Wallumbilla Quarry March 2012 Name changed from Oswald Quarry Pty Ltd to Ostwald Construction Materials Pty Ltd January 2014 New lease and Royalty deed signed between OCM and Ostwald Bros Equity Pty Ltd as trustee. January 2016 Hustons Road Quarry transferred to OBSF3 LRBA Pty Ltd as trustee November 2005 Incorporation of the Company as Ostwald Quarries Pty Ltd. December 2010 Lease signed for Knob Hill Quarry May 2012 Lease signed on Headache Hill Quarry April 2014 c.49% of OCM shares sold to private equity investors. Hustons Road Quarry is transferred to Ostwald Bros Equity Pty Ltd as trustee. 24 August 2017 Appointment of Administrator 39

40 Contents Introduction 14 Voidable transactions Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Voidable transactions Recovery of related entity benefits Pursuant to Section 588FH of the Act, a Liquidator may recover any benefits received by a related entity resulting from an insolvent transaction of a company. Preference payments to related parties have a relation back period of 4 years rather than 6 months. At this stage we have not found any related entity benefits other than the quarry matter as discussed in the unreasonable director related transactions section of this report. Offences Enclosed in Appendix 7 is a summary of potential offences that may be identified by Administrators. Our investigations to date have revealed potential insolvent trading of the Company and possible breaches by the Company for not maintaining adequate books and records. 40

41 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices DOCA DOCA Deed of Company Arrangement (DOCA) proposal 42 41

42 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal We have received a DOCA proposal. A DOCA is a formal agreement between a company, its Creditors and the proponents of the DOCA. The proponents are interested parties who wish the Creditors to consider their proposal usually involving a compromise of Creditors claims as opposed to either winding up the company (liquidation) or returning the company to its Directors. A DOCA may involve: - Maximising the chance of the company continuing in existence and / or - Result in a better return for the company s Creditors than in a winding up. Where the DOCA proposal involves a creditors trust, information should be provided which enables Creditors to understand the actual and potential implications and specific risks for them of the proposed creditors trust arrangements. Creditors should be able to make a realistic and informed assessment of the proposal and whether they should approve it (including, but not limited to, whether they are likely to receive a better return under the particular DOCA proposal, under a DOCA that does not involve a creditors trust, or under a winding up). The Administrators must comment on the DOCA proposal if one is received and advise Creditors whether, in their professional opinion, Creditors should accept or reject the proposal. Creditors can consider the proposal and the opinion of the Administrators to form their own view as to whether they wish to accept or reject the proposal. A vote is taken at the second meeting of Creditors where by a simple majority in number and value, Creditors as a group decide to accept the proposed DOCA or not. If Creditors accept the proposal and a DOCA is entered into, then generally recovery actions against Directors, officers and other potential parties which would otherwise be available to a Liquidator are not able to be commenced. The powers to commence these actions are usually only available to a Liquidator. The directors submitted a DOCA proposal on 7 November We have identified a number of concerns in relation to the structure and composition of that proposal, in particular the proposal does not identify a clearly demonstrable improvement in the outcome to creditors vs. the projected outcome in Liquidation. In light of these concerns, we received a revised proposal 23 November 2017, which now provides a better estimated return than that expected in a Liquidation (low range). The proposed term sheet submitted by the proponent is attached at Appendix 1. The key features of the proposed Deed are outlined over the page 42

43 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Deed of Company Arrangement (DOCA) proposal A copy of the DOCA proposal received is attached at Appendix 1. Key features of the proposed Deed The proponent of the DOCA is Brendan Ostwald, Matthew Ostwald and Daniel Ostwald or their nominee(s). It is proposed that a contribution of $2,150,000 be made available by way of a Creditors Trust. The key features of the DOCA are as follows: The Company will be the only party to the DOCA The DOCA will require the OCM Creditors Trust to be established. If the Proponent/Company after the DOCA is not otherwise adopting these liabilities, the Proponent will make available sufficient funds to the Deed Administrators to pay any outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees. The making of the Contribution payment and the Employee Contribution payment, if any is conditional on QIC Private Capital Pty Limited, KTB Korea- Australia Global Cooperation Private Equity Fund and M.H. Carnegie & Co Pty Limited (the Minority Shareholders ) agreeing to sell their shares to the Proponent on terms agreed between the parties; or The Deed Administrators obtaining consent from the Minority Shareholders or leave of the Court for the transfer of their shares to the Proponent or its nominee(s) pursuant to subsection 444GA(1) of the Corporations Act. the Deed Administrators distributing the Employee Contribution, if any, to continuing employees. the Deed Administrators will pay all funds held in the Company s Deed Administration bank account to the trustees of the OCM Creditors Trust. Upon payment of the contribution to the OCM Creditors Trust being satisfied, all pre-appointment claims against the Company will be released and creditors (other than Excluded Creditors) who had those claims will be given a corresponding right to claim as a beneficiary of the OCM Creditors Trust and the DOCA will be wholly effectuated and terminate. Immediately prior to the DOCA terminating, any outstanding debtors relating to invoices issued prior to the effectuation of the DOCA will be transferred to the OCM Creditors Trust and form part of the assets of the OCM Creditors Trust available for distribution under the terms of the OCM Creditors Trust deed. The following creditors (Excluded Creditors) will not become a beneficiary of the OCM Creditors Trust despite termination of the DOCA: 1. current employees of the Company who continue to be employees after the DOCA terminates; 2. Ostwald Bros Transport Pty Limited in respect to its intercompany debt of approximately $3.7 million; 3. OBSF3 Pty Limited in respect to unpaid royalties totalling $0.2 million; 4. OBSF3 Pty Limited in respect of estimated make good costs for the Dalby quarry of $0.9 million; and 5. The Deed Administrators are to seek waivers of any defaults that may exist under the terms of the quarry leases. Any landlord who does not provide a waiver to the Deed Administrators will only be entitled to participate in the Creditors Trust such that the distribution equals the amount that they would have received in a liquidation of the Company ( Landlord Claims ). 43

44 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Creditors' trust The DOCA will require the OCM Creditors Trust to be established. The Deed Administrators will be the trustees of the OCM Creditors Trust (Trustees). The Proponent will provide an initial payment of $100 for the establishment of the OCM Creditors Trust. Other than Excluded Creditors, all pre-appointment creditor claims will be assumed by the OCM Creditors Trust and creditors will accept their rights to claim as a beneficiary of the OCM Creditors Trust in full satisfaction of their claims. Distributions made in respect to Landlord Claims will equal what would have been paid in a liquidation of the Company. The Trustees will be liable for any outstanding costs and expenses incurred by the Deed Administrators that have not been paid or otherwise satisfied in full before termination of the DOCA. The assets of OCM Creditors Trust will be distributed to beneficiaries of the OCM Creditors Trust in accordance with the priorities section 556 of the Corporations Act. Refer otherwise to the Key terms and effect of DOCA. Reasons for creditors' trust A creditors' trust is a mechanism used to accelerate a company's exit from administration and enable the company to continue in operation. The DOCA proposal requires the use of a creditors' trust and the trust creditors' claims against the company are extinguished and, instead, they become the beneficiaries of the creditors' trust. Distribution fr0m Creditors Trust The assets held on trust under the OCM Creditors Trust (Trust Assets) will be applied as follows: In payment of any amounts arising under: the Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Administrators of OCM; the Deed Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Deed Administrators of OCM; or the Trustees rights of indemnity against, or lien over, the Trust Assets, in respect to any costs and expenses incurred as Trustees of the OCM Creditors Trust; and The claims of creditor beneficiaries (other than Excluded Creditors) in accordance with section 556 of the Corporations Act. Impact of DOCA on Employees All of the Company s current employees will be retained. Continuing employees will not be beneficiaries of the Creditors Trust. The Proponent will make available sufficient funds to the Deed Administrator to pay any outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees prior to the DOCA effectuating, or otherwise the Proponent/Company will adopt these liabilities become a beneficiary of the creditors trust and will have no rights to claim under the Fair Entitlements Guarantee Scheme (FEG). 44

45 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Comments on DOCA proposal The effect of the proposed DOCA is that it allows the Ostwald family members who are existing shareholders of OCM or their nominee to take back 100% control of the OCM business for the sum of $2,150,000. This will enable them to continue trading the business and will result in existing staff retaining their jobs and avoiding redundancy payments. It will also avoid potential termination of existing quarry leases by their owners. Contribution for DOCA In order to provide creditors with more certainty regarding the completion of the DOCA, we have asked the Proponents to provide proof of funding in relation to the cash contribution of $2,150,00. In this regard the Proponents have agreed to deposit the funds to their solicitor s trust account prior to the 2 nd meeting of Creditors being held on 1 December ASIC guidelines for creditors' trusts In May 2005, ASIC issued Regulatory Guide 82 which relates to Creditors' Trusts. The Regulatory Guide is titled "External Administrations: Deeds of company arrangement involving a creditors trust' and a copy of the guide can be downloaded from the ASIC website at the following address: In accordance with the ASIC Regulatory Guide, we set out below the information required to be supplied to creditors where a Deed of company arrangement provides for the use of a creditors' trust. The reason why the DOCA proposal involves a creditors' trust. The Proponents of the DOCA require the use of the Creditor's Trust in order that they can take control and operate the company without a deed administrator. The anticipated sequence of key events if the DOCA proposal is approved, and the implications for creditors. The following are the key events arising from the approval and creation of the creditors' trust: Creditor approval at the second meeting of creditors that the company execute the DOCA; execution of the DOCA by the company; Performance of the conditions precedent (ie. transfer by the minority shareholders of their interest in the company to the proponents by agreement or as a result of a Court Order); 45

46 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Creation of the creditors' trust by payment of the contribution into trust along with any funds held by the Deed Administrator; Termination of the DOCA following payment of $2,150,000 contribution by the proponent; Creditors will be transferred to the Trust and become beneficiaries there in. Distribution of the trust fund to creditors / beneficiaries of the trust, subject to adjudication of claims. The implications for the Trust creditors on approval of execution of the DOCA are that: the terms of the deed are binding on all trust creditors with respect to their claim against the company; the moratorium on creditors rights to commence or continue legal action against the company remain in force during the DOCA; claims against the company will be extinguished upon creation of the creditor's trust and instead be converted to a claim on the trust. The implications for excluded creditors is that the company will remain liable for debts owed or obligations arising from the contracts with them and they will not be entitled to make claim on the Creditors' Trust. The anticipated return to creditors/beneficiaries. We estimate the dividend to be 29.7 cents in the dollar: We anticipate that the first and final dividend should be payable within 4 months of the termination of the DOCA / receipt of the contribution to the creditors' trust. Trustee particulars The proposed Deed Administrators and Trustees of the OCM Creditors Trust are the existing Administrators, Derrick Vickers and Sam Marsden. Both Existing Administrators have the qualifications, skills and relevant experience to perform the duties and functions they will have to undertake as trustee of the creditors trust. We can confirm we have appropriate civil liability insurance (including professional indemnity and fidelity) that will cover the conduct as trustee of the creditors trust. The proposed remuneration and expenses of the Deed Administrator and Creditors Trustee The remuneration and costs of the deed administrations will be paid from the capital contribution. The deed administrators' remuneration will be based on the hours spent by them and their staff, calculated in accordance with the schedule of their rates provided in the remuneration section of this report. The creditors' trust provides for the payment of the remuneration and costs of the trustees form the trust funds in priority to any distribution to beneficiaries. Remuneration will be based on the hours spent by them and their staff, calculated in accordance with the schedule of their rates provided to in the remuneration section of this report. We do not consider that additional professional fees will be incurred as a result of the use of the creditors' trust, compared with the position if the company remains subject to a DOCA because the role that the creditors trustee performs in receiving and distributing the creditors' trust fund is the same as a deed administrators' role in receiving and distributing the deed fund. 46

47 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Details of any indemnities for fees or liabilities The trustee will be entitled to be indemnified from the trust fund if required. The difference between the powers of a deed administrator under the Act and the trustee under the DOCA proposal The trustee will have a wide range of powers, including but not limited to those contained in the Trusts Act 1973 (Qld), as follows: to administer the trust; report to trust creditors and call a meeting of the trust creditors to consider any variation or termination of the trust deed; adjudicate on trust creditors' claims; pay dividends to trust creditors in respect of admitted claims; and more generally to take any action necessary in respect of the trust fund or claims to it. There is no material difference between the powers of a deed administrator under the Act and the trustee under the creditors trust. How creditors' claims will be dealt with under the DOCA proposal and in what priority. The claims of creditors participating in the creditors' trust will be determined pursuant to section 556 of the Act as if the company was in liquidation. The trustee must declare and distribute the Trust funds as soon as practicable to the admitted claims of the beneficiaries of the trust. All dividends to trust creditors on their admitted claims will be in full and final satisfaction of all claims against the company. The order of priority of payment will be: In payment of any amounts arising under: the Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Administrators of OCM; the Deed Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Deed Administrators of OCM; or the Trustees rights of indemnity against, or lien over, the Trust Assets, in respect to any costs and expenses incurred as Trustees of the OCM Creditors Trust; and The claims of creditor beneficiaries (other than Excluded Creditors) in accordance with section 556 of the Corporations Act. 47

48 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal A Comparison of the protections and rights of creditors under the Act and of beneficiaries under the DOCA proposal. There are no differences between the rights of creditors under the Act to that of other creditors or beneficiaries in the DOCA proposal / creditors trust. Any effect on employee entitlements under FEG As the company will not be placed into liquidation, the employees will not be able to access FEG. Non-continuing employees retain priority status in the creditors' trust before any dividend to unsecured creditors. Outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees will be paid prior to the creation of the trust as a condition precedent. An opinion on the capability of the company (and relevant third parties) to comply with obligations to the trustee. There is nothing to indicate that the Proponents of the creditors' trust will be unable to comply with the obligations under the proposal. Importantly, participating creditors' claims against the company are not extinguished until the funds to satisfy claims are received. In addition, we believe the following supports our opinion that the obligations should be complied with: The proponent is working with a non-related party investor and they have undertaken to deposit funds into a solicitor s trust account prior to the second meeting of creditors on 1 December The basis for an opinion that the company will be solvent at the date of effectuation of the DOCA The terms of the proposed DOCA provide that: All trust creditors, with the exception of the excluded creditors, will be bound by the DOCA and claims released upon distribution of monies from the creditors' trust. Thereafter there will be no unsecured or subordinate creditors carried forward by the company. Therefore, it is our opinion that the Group will be balance sheet and cash flow solvent on completion of the DOCA. Details of the taxation and stamp duty implications for the company and the trust The creation of the Creditors' Trust creates the potential for some taxation issues to arise, as compared to an ordinary DOCA proposal (where the claims of participating creditors are dealt with by the company). These may mean that the funds available to creditors are reduced in order to account for any taxation liabilities associated with the administration of the distribution process under a trust structure. The deed administrator / trustee will address this matter at the appropriate time and participating creditors will be informed of any changes to the funds available for distribution. 48

49 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Potential differences in taxation implications for creditor and beneficiaries. There may be some implications for participating creditors as a result of receiving a distribution from a trust in respect of a bad or doubtful debt, rather than from the debtor company being administered under a DOCA. Creditors are advised to seek their own tax advice as to their particular tax position - the Administrators are unable to provide advice on this issue. Any other material aspect or implication We note that an Australian Financial Services Licence is not required by the trustee. No other material aspects or implications have been identified at this stage. The involvement of a creditors' trust creates some complexities for the Administrators (who will be required to act in a trustee capacity) and for creditors. Although, many of the operative provisions of the Act are incorporated in the Trust Deed (so as to minimise the effect of the change in legal structure being utilised), participating creditors' rights under the creditors' trust will not be "statutory rights" under the Act, but will instead be rights under the Trustees Act 1973 Qld and in equity. We note that creditors' rights are being fundamentally transformed as a result of the DOCA and creditors' trust and, as result, creditors should consider this in assessing the merits of the DOCA proposal put forward. Creditors should seek their own independent legal advice prior to the second meeting of creditors if they are in any doubt as to what the proposed creditors' trust means to them. Adjudication of creditor claims The trustees under the creditors' trust, and not the deed administrators, will adjudicate upon proofs of debt received from participating creditors who become beneficiaries under the creditors' trust. The creditors' trust will incorporate the relevant provisions of the Act to reflect the creditors' proof and dividend procedures under the Act. The trustees will have access to the books and records of the company necessary to determine claims. For the purpose of admitting creditors' proofs, the creditors' trust deed will stipulate that section 556 of the Act apply to claims made under the deed, with certain modifications as are necessary. Proofs submitted by creditors will be adjudicated as if they were proofs submitted in a liquidation of the company. Non-participation in creditors' trust The DOCA proposal requires that the following persons not participate or make a claim on the trust: - current employees of the Company who continue to be employees after the DOCA terminates; - Ostwald Bros Transport Pty Limited in respect of its intercompany debt of approximately $3.7 million; - OBSF3 Pty Limited in respect to unpaid royalties totalling $0.2 million; and - OBSF3 Pty Limited in respect of estimated make good costs for the Dalby quarry of $0.9 million; and Further information If required, creditors should seek their own legal advice as to their rights and the effect of the DOCA and creditors' trust on their position. 49

50 Contents Introduction 15 Deed of Company Arrangement (DOCA) proposal Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Deed of Company Arrangement (DOCA) proposal Administrators Opinion on DOCA The estimated return to creditors on page 52 shows that that the low return in a DOCA is greater than the low return in a liquidation. The DOCA proposal also provides more certainty to creditors as it is solely dependent on the receipt of funds from the proponent, whilst under a liquidation multiple asset sales need to occur which creates uncertainty as to the financial outcome. Although our investigations detailed earlier in this report have identified possible unreasonable director related transactions, there is significant uncertainty around: (a) if a recovery action does exist; (b) and if so, does the relevant defendant have the ability to pay a Liquidator should they be successful. Additionally under the DOCA proposal creditors will receive a dividend sooner than in liquidation due to the timing of funds. Under the DOCA funds will be immediately available where as an auction of assets will not likely take place until February The object of a Voluntary Administration is to maximise the chances of the Company, or as much as possible of its business continuing in existence. In part this is achieved be reference to the ongoing benefit of retaining jobs and allowing the business to continue trading for the benefit of customers and suppliers. It is not possible for the Company or its business to continue in existence, to seek to result in a better return for the Company s creditors and members then would result from an immediate winding up. Having regard to the above, it is our recommendation that creditors accept the Deed of Company Arrangement submitted by the proponent. 50

51 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Creditors Creditors Estimated Return to Creditors 52 51

52 16 Estimated Return to Creditors Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Estimated Return to Creditors Ostwald Construction Materials Pty Ltd Ostwald Construction Materials Pty Ltd Ostwald Construction Materials Pty Ltd Ostwald Construction Materials Pty Ltd $ Notes LIQ - High LIQ - Low DOCA - Low DOCA - High Non-circulating Assets Plant and equipment 1 5,265,000 3,412, Estimated value of property 2 430, , Less: Valuation costs 3 (10,000) (10,000) (10,000) (10,000) Less: Insurance 4 (100,000) (100,000) (100,000) (100,000) Less: Legal Fees 5 (100,000) (100,000) (100,000) (100,000) Less: Equipment Finance 6 (25,000) (25,000) (25,000) (25,000) Less: Realisation costs 7 (427,000) (272,000) - - Less: VA Fees 8 (250,000) (250,000) (250,000) (250,000) Unencumbered value of assets 4,783,000 2,870,000 (485,000) (485,000) Circulating assets Cash at bank on appointment Pre-appointment Debtors 9 286, , , ,000 Stock 10 2,000, ,000 Trading Position , , , ,000 Total Circulating assets 2,556, , , ,000 Estimated administration costs Legal fees 12 (50,000) (50,000) - - DOCA Fees (200,000) (200,000) Liquidation Fees 14 (250,000) (250,000) - - Total realisation costs (300,000) (300,000) (200,000) (200,000) Circulating assets available to priority creditors 2,256, , , ,000 Antecedent transaction recoveries Employee Entitlements 16 (650,000) (650,000) (435,000) (435,000) Estimated surplus / (shortfall) following priority creditors 1,606,000 (12,000) (197,000) (79,000) Assets available to secured creditor Non-circulating assets available to secured creditor 4,783,000 2,870, Less: debt owing Surplus / (shortfall) to secured creditor 6,389,000 2,870, Collective surplus / (shortfall) position - - Assets not available under Security DOCA Contribution - - 2,150,000 2,150,000 Surplus assets available to unsecured creditors 6,389,000 2,870,000 Shortfall to priority creditors - (12,000) (682,000) (564,000) Net Proceeds available to unsecured creditors 6,389,000 2,858,000 1,468,000 1,586,000 Unsecured Creditor Claims Unsecured Creditors 18 (9,268,339) (9,726,633) (9,726,633) (8,375,738) Related party claims 19 4,790,835 3,898,185 Make good claims 20 (1,500,000) (1,500,000) Total Unsecured Creditor Claims (10,768,339) (11,226,633) (4,935,798) (4,477,553) Return to Creditors

53 16 Estimated Return to Creditors Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Estimated Return to Creditors Estimated Return to Creditors - Notes Notes The asset values presented are consistent with the draft valuation report provided by Grayson line on 15th September 2017 of The amount disclosed in books and records of the Company. We have discounted the value by 50% in Liquidation. The cost of obtaining asset valuation advice from GraysOnline. This represents the estimated cost of insuring various assets throughout the appointment An estimation of the legal fees incurred with relation to specific administration issues. The estimated balance of outstanding claims by equipment financiers. An estimation of an auctioneers fees should the assets be sold. This estimation has been made at 7.5% of the gross value of assets. An estimation of the Administrators' professional fees. We have discounted external debtors on appoinment of VA by writing off debts older than 90 days. An estimation of existing stock piles at quarry sites. In lquidation this has been discounted by 75%. The estimated trading position, which is based on known sales and costs to date. An estimation of Legal fees in a Liquidation. An estimation of a Deed Administrator's professional fees should the Company enter a DOCA. An estimation of a Liquidator's professional fees should the company be placed into Liquidation. As identified earlier in the report, it is likely that a Liquidator would investigate various antecedent transactions. An estimate of the employee entitlements outstanding. Under a DOCA some employees will be retained lowering the amount payable. ANZ have confirmed their debt in this entity is cash backed and isolated to OCM. An estimation of the creditors able to claim in Liquidation. In both high scenarios we have reduced related party claims. The value of related party claims lodged to date, which will not participate in a DOCA. These have been discounted in the high scenario. An estimation of make good claims from quarry operations. 53

54 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Employees Employees Effect on employees 55 54

55 Contents Introduction 17 Effect on employees Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Effect on employees The following commentary considers the impact on employees under a liquidation. Position of employees in a liquidation Employees are afforded a priority in the winding up of a company compared to ordinary unsecured Creditors. The order of priority for typical employee claims is as follows: - Amounts due in respect of wages, superannuation and superannuation guarantee charge outstanding as at the date of the appointment of Administrators, followed by - Amounts due in respect of leave of absence and other amounts due under the terms of an industrial instrument, followed by - Retrenchment payments. If there are insufficient funds available from the realisable assets of the company to meet the above priority payments, then proceeds from the realisation of the assets secured by a circulating charge will need to be set aside in advance of payments to the secured charge holder. Typically, assets considered as circulating charge assets are inventory, debtors and cash at bank. However, the determination of the category of assets is subject to the terms of the financing and security arrangements between the company and its financier. Return to employees in a winding up Please refer to section Creditors-Estimated return to creditors for dividend prospects. The FEG scheme only applies if the company is placed into liquidation. Government assistance available In the event that the Company is wound up and there are insufficient surplus funds available to employees from the Company s property, then eligible employees may be entitled to lodge a claim for unpaid entitlements under the FEG scheme. The specific details of eligibility criteria and claims available to employees can be found on the FEG website: Eligible claims may include: - Up to thirteen weeks unpaid wages accruing in the period prior to the appointment of Administrators - Unpaid annual leave and long service leave - Up to five weeks unpaid pay in lieu of notice of termination - Up to four weeks unpaid redundancy entitlement for each year of completed service. Employees should note that FEG will make an assessment of each claim based on the employee s legal entitlement to such claims under their terms of employment. 55

56 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Meeting Meeting Second meeting of creditors Completion of proof of debt and proxy forms 58 56

57 18 Second meeting of creditors Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Second meeting of creditors Instructions for the meeting The second meeting of Creditors of the Company to decide the future of the Company will be held as follows: Date: Friday, 1 December 2017 Time: Place: AM (QLD time) Empire Theatre 56 Neil Street TOOWOOMBA QLD 4350 Satellite venue: Christie Conference Centre Level 2, 320 Adelaide Street BRISBANE QLD 4000 A copy of the formal notice of the meeting is attached as Appendix 4. Also included in Appendices 5 & 6 are informal proof of debt and proxy forms for the purpose of voting at the meeting. Returning proof of debt and proxy forms Proxy forms completed for the first meeting of Creditors are not valid for the second meeting of Creditors. A new form needs to be completed if you intend on voting at the upcoming meeting. A Proxy form is to be completed by a creditor who is unable to attend the meeting in person, but wishing to vote; or by each creditor that is a Company. Proof of debt and proxy forms should be completed and submitted to this office on or before 5pm on Wednesday 29 November If you have already submitted a proof of debt form in this administration, a new form does not need to be submitted, unless the details of your claim have changed since completion of the original proof of debt form. Completed forms may be faxed to my office (07) or sent via to OB-POD@au.pwc.com or sent via post to: The Administrators Ostwald Construction Materials Pty Ltd (Administrators Appointed) C/- GPO Box 150 Brisbane Qld 4001 Any enquiries regarding the forms or the meeting of Creditors should be directed to our Creditor hotline on telephone +61 (7)

58 Contents Introduction 19 Completion of proof of debt and proxy forms Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Completion of proof of debt and proxy forms Form of proof of debt You should submit a proof of debt for the following reasons: To ensure that the Administrators are aware of your debt To allow you to vote on the value of your debt at the meeting of creditors The proof of debt submitted during an administration is informal. It does not mean that the Administrators have agreed to your proof for the purpose of making a dividend distribution. In the vent that a dividend distribution is to be made to Creditors, you will be asked to submit a formal proof of debt. If you do not submit a proof of debt, you may (at the discretion of the Administrators) be admitted to a meeting of Creditors, but you may only be able to vote for a nominal amount (i.e. $1). Form of proxy You must complete a form of proxy if either: You wish to vote at the meeting but you are unable to attend; or The creditor is a company or a firm. If the creditor is a company or a firm, you must obtain a proxy from the company or firm appointing you as a representative, to vote on behalf of the company or firm at the meeting. The proxy is valid only for the meeting indicated and any adjournment of that meeting. You may appoint either a general proxy (a person who may vote at their discretion on motions at the meeting) or a special proxy (who must vote according to your directions). If you appoint a special proxy, you should indicate on the form what directions you have given. Should you hold a power of attorney for the creditor, evidence of that power of attorney or alternatively, a signed proxy form, must be provided. 58

59 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Options Options Matters to be decided at the second meeting of Creditors 60 59

60 20 Matters to be decided at the second meeting of Contents Introduction Creditors Appendices Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Matters to be decided at the second meeting of Creditors What Creditors can decide at the meeting At the second meeting of Creditors, Creditors are required to decide whether: 1. The Company should execute a DOCA 2. The administration of the Company should end 3. The Company should be wound up. 2. The Administration comes to an end The Company is insolvent and therefore we do not consider it to be in the Creditors interest that the administration end and the Company be returned to the Directors 3. The company is wound up Given the above, we do not recommend that creditors resolve to wind up the Company. In accordance with the requirements of section 439A(4)(b) of the Corporations Act, the Administrators must provide an opinion on each of the above options and whether the options is in the Creditors interests. Note that the opinions stated below refer to the Company only (and not all companies in administration). Administrators opinions on the options available to Creditors 1. Execution of a deed of company arrangement (DOCA) Having regard to the content of the DOCA section of this report, it is our recommendation that creditors accept the Deed of Company Arrangement. Dated: Derrick Vickers Administrator 60

61 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Remuneration Remuneration Administrators' remuneration 62 61

62 21 Administrators' remuneration Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Administrators remuneration Summary of Administrators remuneration Pursuant to section 449E of the Corporations Act, the remuneration of the Administrators can be fixed by resolution of the company s Creditors. During the first meeting of the Creditors, we indicated our intention to claim remuneration on a time basis, calculated by the number of hours spent by us and our staff in accordance with the discounted schedule of hourly rates charged by PricewaterhouseCoopers on matters involving ANZ Bank. Details of the hourly rates were tabled at the first meeting of Creditors. The applicable hourly rates are provided below: Position Rate Partner $ Managing Director $ Director $ Senior Manager $ Manager $ Senior Consultant $ Consultant $ Support $ Remuneration will be sought based on the rates for the Administrators and if applicable, any subsequent appointment as Deed Administrators or, if the Company is wound up, our appointment as Liquidators. These details are included in the Initial Remuneration Notice provided with the Remuneration Approval Request. Information supporting Administrators remuneration disclosures We have enclosed by Appendix 4 our Remuneration Approval Request which includes the following: Administrator Schedule of tasks performed and matters attended to in each of the elements of the Administration for the period 25 August 2017 to 15 November Schedule of anticipated tasks and estimated remuneration by the Administrators and their staff for the period 16 November 2017 to 30 November Schedule of anticipated tasks and estimated remuneration by the Administrators and their staff for the period 1 December 2017 to the date of the reconvened creditors meeting or the execution of the DOCA (assuming either scenario will require 2 weeks to complete). Liquidator Schedule of anticipated tasks and estimated remuneration by the Liquidators and their staff for the period of the liquidation. Deed Administrator Schedule of anticipated tasks and estimated remuneration by the Deed Administrators and their staff for the duration of the Deed, should one be approved. 62

63 Contents Introduction 21 Administrators' remuneration Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Administrators remuneration Information supporting Administrators remuneration disclosures (cont.) Fee resolutions At the meeting of Creditors to be held on Friday, 1 December 2017, creditors will be asked to approve the following resolutions: Administrators fees Resolution #2 from 25 August 2017 to 15 November 2017 That the remuneration of the Administrators, their partners and staff for the period 25 August 2017 to 15 November 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $205, plus GST of $20, total $226, and that the Administrator can draw the remuneration immediately or as required. Resolution #3 from 16 November 2017 to 1 December 2017 That the remuneration of the Administrators, their partners and staff for the period 16 November to 1 December 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $45, plus GST of $4, total $49, and that the Administrator can draw the remuneration immediately or as required. Resolution #4 from Commencement of DOCA to Completion That the remuneration of the Administrators, their partners and staff for the period from Commencement of DOCA to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $200, plus GST of $20, total $220, Liquidators fees (should the company be wound up) Resolution #5 from Commencement of Liquidation to completion That the remuneration of the Administrators, their partners and staff for the period from Commencement of Liquidation to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $250, plus GST of $25, total $275,

64 Contents Introduction 21 Administrators' remuneration Strategy Investigations DOCA Appendices Creditors Employees Meeting Options Remuneration Administrators remuneration Information supporting Administrators remuneration disclosures (cont.) Disbursements The Remuneration Report provides details about the various categories of disbursements. Administrators disbursements Resolution #6 from 25 August 2017 to 31 October 2017 That the disbursements of the Administrators, their partners and staff for the period 25 August 2017 to 31 October 2017 and approved in the sum of $1, plus GST of $ total $1, and that the Administrator can draw the disbursements immediately or as required. 64

65 Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Appendices Appendices 65 1 DOCA Terms Sheet 66 2 DIRRI 67 3 PPSR Searches 69 4 Organisation Chart 70 5 Remuneration Report 71 6 Receipts and Payments 72 7 Formal Notice of Meeting 73 8 Form 535 Proof of Debt 74 9 Form 532 Appointment of Proxy Creditor Information Sheets 76 65

66 Contents Introduction 1 DOCA Terms Sheet Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 1 DOCA Terms Sheet 66

67 Appendix A Summary of proposed terms for Deed of Company Arrangement 1. Company Ostwald Construction Materials Pty Limited (Administrators Appointed) ACN Proponent and Purchaser Brendan Ostwald, Matthew Ostwald and Daniel Ostwald or their nominee(s). 3. Key terms and effect of DOCA 1. The Company will be the only party to the DOCA 2. The DOCA will require the OCM Creditors Trust to be established. 3. Upon the conditions precedent set out in clause 6 below being met: a. if [the Proponent/Company] is not otherwise adopting these liabilities, the Proponent will make available sufficient funds to the Deed Administrators to pay any outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees (Employee Contribution); and b. the Proponent will pay the Contribution of $2,150,000 into the OCM Creditors Trust. 4. Upon: a. the Proponent making the Contribution payment and the Employee Contribution payment, if any; and b. the Deed Administrators distributing the Employee Contribution, if any, to continuing employees, the Deed Administrators will pay all funds held in the Company s Deed Administration bank account to the trustees of the OCM Creditors Trust. 5. Upon the matters in paragraph 4 above being satisfied, all preappointment claims against the Company will be released and creditors (other than Excluded Creditors) who had those claims will be given a corresponding right to claim as a beneficiary of the OCM Creditors Trust and the DOCA will be wholly effectuated and terminate. 6. Immediately prior to the DOCA terminating, any outstanding debtors relating to invoices issued prior to the effectuation of the DOCA will be transferred to the OCM Creditors Trust and form part of the assets of the OCM Creditors Trust available for distribution under the terms of the OCM Creditors Trust deed. 7. The following creditors (Excluded Creditors) will not become a beneficiary of the OCM Creditors Trust despite termination of the DOCA: a. current employees of the Company who continue to be employees after the DOCA terminates; b. Ostwald Bros Transport Pty Limited in respect to its intercompany debt of approximately $3.7 million; c. OBSF3 Pty Limited in respect to unpaid royalties totalling $0.2 million; d. OBSF3 Pty Limited in respect of estimated makegood costs for the Dalby quarry of $0.9 million; and e.

68 8. The Deed Administrators are to seek waivers of any defaults that may exist under the terms of the quarry leases. Any landlord who does not provide a waiver to the Deed Administrators will only be entitled to participate in the Creditors Trust such that the distribution equals the amount that they would have received in a liquidation of the Company ( Landlord Claims ). 4. Commencement date The date that the DOCA is executed 5. Deed Administrators and Trustees of the OCM Creditors Trust Derrick Vickers and Sam Marsden 6. Conditions Precedent to payment of the Contribution and effectuation of the DOCA The payment of: a. the Contribution by the Proponent; and b. if the Proponent is not otherwise adopting these liabilities, of sufficient funds by the Proponent to the Deed Administrators to pay any outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees, is conditional upon either of the following occurring: c. QIC Private Capital Pty Limited, KTB Korea-Australia Global Cooperation Private Equity Fund and M.H. Carnegie & Co Pty Limited (the Minority Shareholders ) agreeing to sell their shares to the Proponent on terms agreed between the parties; or d. The Deed Administrators obtaining consent from the Minority Shareholders or leave of the Court for the transfer of their shares to the Proponent or its nominee(s) pursuant to subsection 444GA(1) of the Corporations Act 7. Contribution $2,150, Employees 1. All of the Company s current employees will be retained. 2. Continuing employees will not be beneficiaries of the Creditors Trust. 3. The Proponent will make available sufficient funds to the Deed Administrator to pay any outstanding superannuation and superannuation guarantee charge amounts owing to continuing employees prior to the DOCA effectuating, or otherwise the [Proponent/Company] will adopt these liabilities 9. Reasonable assistance The Proponent will provide reasonable assistance to the trustees of the OCM Creditor Trust necessary for the proper operation and administration of the OCM Creditor Trust 10. Creditors Trust 1. The DOCA will require the OCM Creditors Trust to be established. 2. The Deed Administrators will be the trustees of the OCM Creditors Trust (Trustees). 3. The Proponent will provide an initial payment of $100 for the establishment of the OCM Creditors Trust. 4. Other than Excluded Creditors, all pre-appointment creditor claims will be assumed by the OCM Creditors Trust and creditors will accept their rights to claim as a beneficiary of the OCM Creditors Trust in full satisfaction of their claims. 5. Distributions made in respect to Landlord Claims will equal what would have been paid in a liquidation of the Company.

69 6. The Trustees will be liable for any outstanding costs and expenses incurred by the Deed Administrators that have not been paid or otherwise satisfied in full before termination of the DOCA. 7. The assets of OCM Creditors Trust will be distributed to beneficiaries of the OCM Creditors Trust in accordance with the priorities section 556 of the Corporations Act. 8. Refer otherwise to the Key terms and effect of DOCA in clause 3 above. 11. Distribution of trust assets The assets held on trust under the OCM Creditors Trust (Trust Assets) will be applied as follows: 1. In payment of any amounts arising under: a. the Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Administrators of OCM; b. the Deed Administrators rights of indemnity against, or lien over, OCM s assets, in respect to any costs and expenses incurred as Deed Administrators of OCM; or c. the Trustees rights of indemnity against, or lien over, the Trust Assets, in respect to any costs and expenses incurred as Trustees of the OCM Creditors Trust; and 2. The claims of creditor beneficiaries (other than Excluded Creditors) in accordance with section 556 of the Corporations Act. 12. Binding effect of DOCA 13. Termination of DOCA 1. The DOCA will bind all creditors in accordance with section 444D of the Act 2. The DOCA will also be binding on the Deed Administrators, the Company and its officers and members pursuant to section 444G of the Act 1. Upon: a. the Proponent making the Contribution payment and the Employee Contribution payment, if any; b. the Deed Administrators distributing the Employee Contribution, if any, to continuing employees; and c. the Deed Administrators paying any funds held by the Deed Administrators in the administration bank account for the Company into the Trustees bank account, the DOCA will be wholly effectuated and terminate. 2. The DOCA will also terminate if one of the following occurs: a. The Court so orders under section 445D of the Corporations Act b. By a resolution of creditors at a meeting properly convened under section 445F of the Corporations Act

70 Ostwald Family 204/2A Herries St Toowoomba Qld November 2017 Mr Derrick Vickers Voluntary Administrator PricewaterhouseCoopers 480 Queen Street Brisbane Qld 4000 Dear Derrick OSTWALD CONSTRUCTION MATERIALS PTY LTD (ADMINISTRATORS APPOINTED) DEED OF COMPANY ARRANGEMENT I confirm that we are currently finalising our discussions with a third party non-related investor with the intention of depositing the proposed DOCA Contribution of $2,150,000 to a nominated trust account by 5pm Thursday 30 November Please contact me should you wish to discuss this matter further. Regards, Matthew Ostwald On behalf of the Ostwald Family

71 Contents Introduction 2 DIRRI Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 2 - DIRRI 67

72 Contents Introduction 2 DIRRI Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 2 - DIRRI 68

73 Contents Introduction 3 PPSR Searches Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 3 - PPSR Searches 69

74 Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: Secured Party Group # of registrations Type of security AGGREKO GENERATOR RENTALS PTY. LIMITED ACN Other goods ATCO STRUCTURES & LOGISTICS PTY LTD ACN Other goods AUSCO MODULAR PTY LIMITED ACN Other goods CATHAY INDUSTRIES AUSTRALASIA PTY LTD ACN Other goods CENTRAL COMBINED GROUP PTY LTD ACN ; NEUMANN PETROLEUM PTY LTD ACN ; PUMA ENERGY (AUSTRALIA) HOLDINGS PTY LTD ACN ; AUSTRALIAN FUEL DISTRIBUTORS PTY. LTD. ACN Other goods COATES HIRE OPERATIONS PTY LIMITED ACN Other goods and motor vehicle ENERGY POWER SYSTEMS AUSTRALIA PTY. LIMITED. ACN Other goods and motor vehicle ESCO AUSTRALIA HOLDINGS PTY LIMITED ACN Other goods FINLAY SCREENING & CRUSHING SYSTEMS PTY LTD ACN Other goods and motor vehicle FUELFIX PTY LTD ACN Other goods GE COMMERCIAL PTY LTD ACN Motor vehicle HASTINGS DEERING (AUSTRALIA) LIMITED ACN Other goods and motor vehicle INVESTEC ASSET FINANCE & LEASING PTY LTD ABN Motor vehicle JEMBEL PTY LTD ACN Motor vehicle MASTER HIRE PTY. LTD. ACN Other goods METSO MINERALS (AUSTRALIA) LIMITED ACN Other goods NOEL E & DAWN F ROBINSON ABN All PAP with exception and other goods PLANTRENT PTY LTD ACN Motor vehicle PORTER HIRE PTY LTD ACN Other goods and motor vehicle REDSTAR EQUIPMENT PTY LTD ACN ; ONSITE RENTAL GROUP OPERATIONS PTY LTD ACN Other goods ROYAL WOLF TRADING AUSTRALIA PTY LIMITED ACN Other goods VITAL CHEMICAL PTY. LTD. ACN Other goods Total 47

75 4 Organisation Chart Strategy Investigations DOCA Creditors Employees Meeting Contents Introduction Options Remuneration Appendices Appendix 4 - Organisation chart Brendan Ostwald Daniel Ostwald Matthew Ostwald 169,846 ORD shares 169,847 ORD shares 169,846 ORD shares Ostwald Construction Materials Pty Ltd (Administrators Appointed) 225,000 ORD shares 225,000 ORD shares 13,548 ORD shares 10,364 ORD shares 10,364 ORD shares QIC Private Capital Pty Ltd KTB Korea-Australia Global Cooperation Private Equity Fund M.H. Carnegie & Co. Pty Ltd A & W Richardson No 2 Trustee: AWR Investments No 2 Pty Ltd (Anthony Richardson) The Abson Family Trust Trustee: Ronmona Holdings Pty Ltd (Steve Abson) Source: Grant Thornton,

76 Contents Introduction 5 Remuneration Report Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 5 - Remuneration Report 71

77 Initial Remuneration Notice Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: The purpose of the Initial Remuneration Notice is to provide you with information about how I propose my remuneration for undertaking the Administration will be set. 1 Remuneration Methods There are four basic methods that can be used to calculate the remuneration charged by an insolvency practitioner. They are: A. 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. B. 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. C. Percentage: The total fee charged is based on a percentage of a particular variable, such as the gross proceeds of assets realisations. D. Contingency: The practitioner s fee is structured to be contingent on a particular outcome being achieved. 2 Method chosen Given the nature of this administration I propose that my remuneration be calculated on a time basis which will be recorded and charged in six minute increments. Details of the hourly rates for different levels of staff are included below. We have chosen the time based method because: This method ensures that creditors are only charged for work that is performed. It can be difficult to estimate with certainty the total amount of time necessary to complete all tasks required in the Administration. The time based method ensures that creditors are only charged for work actually performed in the administration. The Practitioner is required to perform a number of tasks which do not relate to the realisation of assets, for example responding to creditor enquiries, reporting to ASIC, distributing funds in accordance with the provisions of the Corporations Act The practitioner has a time recording system that can produce a detailed analysis of time spent on each type of task by each individual staff member utilised in the administration; Time based remuneration calculates fees upon a basis of time spent at the level appropriate to the work performed; The method provides full accountability in the method of calculation. Page 1 of 3

78 3 Explanation of Hourly Rates The rates for my remuneration calculation are set out in the following table together with a general guide showing the qualifications and experience of staff engaged in the administration and the role they take in the liquidation. The hourly rates charged encompass the total cost of providing professional services and should not be compared to an hourly wage. Title Appointee / Partner Principal / Managing Director Director Senior Manager Manager Senior Consultant Consultant Accounting Support Description Registered liquidator, Chartered Accountant or equivalent and generally degree qualified with more than twelve years of experience. Leads assignments with full accountability for strategy and execution. Generally Chartered Accountant or comparable qualification and degree qualified with more than ten years of experience, including four years of Director or equivalent experience. Autonomously leads complex insolvency appointments reporting to Appointee/Partner Generally Chartered Accountant or comparable relevant qualification and degree qualified with more than nine years of experience. Autonomously leads insolvency appointments reporting to Appointee/Partner. Generally Chartered Accountant or comparable relevant qualification and degree qualified with more than seven years of experience. Self-sufficiently conducts small to medium insolvency appointments and leads major work streams in larger matters. Generally Chartered Accountant or comparable relevant qualification and degree qualified with more than five years of experience. Self-sufficiently conducts small insolvency appointments and takes a supervisory role on work streams in larger matters. Generally degree qualified and undertaking Chartered Accountant s qualification or comparable relevant qualification with more than two years of experience. Completes tasks within work streams and appointments under supervision. Generally degree qualified and undertaking or about to undertake Chartered Accountant s qualification or comparable relevant qualification with less than two years experience. Assists with tasks within work streams and appointments under supervision. Appropriately experienced and undertakes administrative support activities such as processing of payments and receipts, banking administration and preparation of statutory forms. Hourly Rate (excl GST) $525 $525 $450 $410 $370 $275 $205 $160 Page 2 of 3

79 4 Estimated remuneration At this stage I estimate that this administration will cost between $495, and $550, (incl. GST) to complete. 5 Disbursements Disbursements are divided into three types: Externally provided professional services - these are recovered at cost. An example of an externally provided professional service disbursement is legal fees. Externally provided non-professional costs such as travel, accommodation and search fees - these are recovered at cost. Internal disbursements such as photocopying, printing and postage. These 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. The recovery of these costs must be on a reasonable commercial basis. I am not required to seek creditor approval for disbursements paid to third parties, but must account to creditors. However, I must be satisfied that these disbursements are appropriate, justified and reasonable. I am required to obtain creditor s consent for the payment of internal disbursements where there may be a profit or advantage. Creditors will be asked to approve my internal disbursements where there is a profit or advantage prior to these disbursements being paid from the administration. Details of the disbursements in this administration are provided in the attached Remuneration Approval Request. Page 3 of 3

80 Remuneration Approval Request Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: This remuneration report provides you with the information you need to be able to make an informed decision regarding the approval of my remuneration for undertaking the Voluntary Administration of Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: This report has the following information included: Part 1: Declaration... 1 Part 2: Executive Summary... 2 Part 3. Remuneration Remuneration claim resolutions Total remuneration reconciliation Likely impact on dividends Part 4: Disbursements Part 5: Report on Progress of the Administration Part 6: Summary of Receipts and Payments Part 7: Queries Part 8: Approval of remuneration You should read this report and the other documentation contained in this report to Creditors. If you attend the meeting of creditors you can cast your vote on the resolutions put to the meeting. Alternatively, you are also able to appoint a representative to attend on your behalf by lodging a proxy form. Lodging a specific proxy form allows you to specify how your proxy must vote. Lodging a general proxy form allows your representative to choose how your vote is exercised. Information about the meeting of creditors is contained in the Report to Creditors dated 24 November If you have any questions or need any assistance, please contact or Creditor hotline on (07) or OB-POD@au.pwc.com. Part 1: Declaration I, Derrick Vickers have undertaken a proper assessment of this remuneration claim for my appointment as Joint and Several Administrator of Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: in accordance with the law and applicable professional standards. I am satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the Voluntary Administration. 1

81 Part 2: Executive Summary An Administrator s remuneration can only be fixed by the Company s creditors or by application to the Court. Enclosed is an Initial Remuneration Notice setting out a schedule of remuneration methods and hourly rates. My remuneration to date has been calculated based on the time spent by the Administrator and my staff for the period 25 August 2017 to 15 November In addition, I am also seeking creditor approval for remuneration incurred and (expected) to be incurred for the period from 16 November 2017 to the end of the administration. 2

82 The total remuneration for this appointment is estimated to be between $495, (in a DOCA scenario) and $550, (in a Liquidation scenario). Remuneration currently claimed is summarised below: Period Current Remuneration sought: Voluntary Administration Resolution #2: 25 August 2017 to 15 November 2017 Report Reference Part 3 below and s Report Amount (incl GST) $226, Resolution #3: 16 November 2017 to 1 December 2017 Part 3 below $49, Total Voluntary Administration Future Remuneration claim: Deed of Company Arrangement (if applicable) $275, Resolution #4: Commencement of DOCA to completion* Part 3 below $220, Total Deed of Company Arrangement $220, Liquidation (if applicable) Resolution #5: Commencement of Liquidation to completion* Part 3 below $275, Total Liquidation $275, TOTAL remuneration claimed and approved $770, * Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the administration. Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors. Internal disbursements currently claimed are summarised below: Period Current internal disbursements claim: Voluntary Administration Resolution #6: 25 August 2017 to 31 October 2017 Report Reference Part 3 below and s Report Amount (incl GST) $1, Total Voluntary Administration $1, Please refer to report section references detailed in the above table for full details of the calculation and composition of the remuneration approval sought. 3

83 Part 3. Remuneration 3.1 Remuneration claim resolutions I will be seeking approval of the following resolutions to approve my remuneration. Details to support these resolutions are included in section 3.2 and in the attached Schedules. Resolution #2 from 25 August 2017 to 15 November 2017 That the remuneration of the Administrators, their partners and staff for the period 25 August 2017 to 15 November 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $205, plus GST of $20, total $226, and that the Administrator can draw the remuneration immediately or as required. Resolution #3 from 16 November 2017 to 1 December 2017 That the remuneration of the Administrators, their partners and staff for the period 16 November to 1 December 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $45, plus GST of $4, total $49, and that the Administrator can draw the remuneration immediately or as required. Resolution #4 from Commencement of DOCA to Completion That the remuneration of the Administrators, their partners and staff for the period from Commencement of DOCA to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $200, plus GST of $20, total $220, Resolution #5 from Commencement of Liquidation to completion That the remuneration of the Administrators, their partners and staff for the period from Commencement of Liquidation to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $250, plus GST of $25, total $275, Details of remuneration The basis of calculating the remuneration claims are summarised below and the details of the major tasks performed and the costs associated with each of those major tasks are also set out below. Resolution #2: 25 August 2017 to 15 November 2017 The below table sets out time charged to each major task area by staff members working on the Voluntary Administration for the period 25 August 2017 to 15 November 2017 which is the basis of the Resolution #2 claim. More detailed descriptions of the tasks performed within each task area, matching the amounts below, are contained in the second table below. 4

84 Employee Position $/hour (ex GST) Total actual hours Total ($) Task Area Assets $ Derrick Vickers Appointee $ $ 15, $ $ 3, $ 5, $ 5, $ - $ - $ 1, Kevin Holzapfel Director $ $ 11, $ 10, $ 1, $ - $ - $ - $ - $ - Claire Pell Director $ $ 12, $ $ 3, $ 2, $ 1, $ - $ - $ 3, Wil Honner Director $ $ 9, $ $ $ - $ - $ 8, $ - $ Aine O Rahilly Senior Manager $ $ 23, $ 6, $ 8, $ - $ 5, $ 1, $ - $ 2, James Munday Senior Manager $ $ $ - $ $ - $ - $ - $ - $ Johnathan Ingold Manager $ $ 1, $ - $ $ - $ - $ - $ - $ Walter Lomax Manager $ $ 19, $ 7, $ 5, $ - $ 1, $ 2, $ - $ 3, Jennifer Smith Manager $ $ 5, $ $ 3, $ - $ - $ - $ - $ 1, Yvette Wirken Manager $ $ 3, $ - $ 3, $ - $ - $ - $ - $ James Fowler Manager $ $ 4, $ - $ - $ 4, $ - $ - $ - $ - Rob Brown Manager $ $ 4, $ - $ - $ - $ - $ 4, $ - $ - Bevan Forbes Manager $ $ 2, $ - $ - $ - $ - $ 2, $ - $ - Jack Bentick Senior Consultant $ $ 2, $ 2, $ $ - $ - $ - $ - $ - Sam Hargreaves Senior Consultant $ $ 1, $ - $ $ - $ - $ - $ - $ Jade Weller Senior Consultant $ $ 10, $ - $ 8, $ 1, $ - $ $ - $ 1, Duncan Scott Senior Consultant $ $ 1, $ - $ 1, $ $ - $ - $ - $ - Melissa Rekowski Senior Consultant $ $ 1, $ - $ $ $ - $ - $ - $ Carli Harford Senior Consultant $ $ $ - $ $ - $ - $ - $ - $ - Dimity Dwyer Senior Consultant $ $ 20, $ $ 2, $ 11, $ 2, $ - $ - $ 3, Lydiah Njagi Consultant $ $ 15, $ $ $ 14, $ - $ - $ - $ Ameet Nand Consultant $ $ 9, $ $ 7, $ - $ - $ $ - $ Tom Trowse Consultant $ $ 5, $ $ $ - $ 3, $ - $ - $ 1, Justin Teruya Consultant $ $ 2, $ $ 1, $ - $ $ - $ - $ Sam Murray Consultant $ $ 2, $ 1, $ 1, $ - $ - $ - $ - $ Likai Tan Consultant $ $ $ - $ $ - $ - $ - $ - $ - Dylan Jaya Consultant $ $ 6, $ - $ 4, $ - $ - $ 1, $ - $ Sara Shulman Consultant $ $ 2, $ - $ - $ 2, $ - $ - $ - $ - Nicki Archer Support $ $ $ - $ $ - $ - $ - $ - $ Elena Saikova Support $ $ $ - $ - $ - $ - $ - $ - $ Jane Stewart Support $ $ 2, $ $ $ - $ $ - $ - $ Jaie Lilburne Support $ $ 1, $ - $ - $ $ $ - $ - $ Asha Miles Support $ $ 1, $ $ $ - $ $ - $ - $ Total $ 205, $ 33, $ 61, $ 42, $ 23, $ 21, $ - $ 23, GST $ 20, $ 3, $ 6, $ 4, $ 2, $ 2, $ - $ 2, Total (Incl GST) $ 226, $ 36, $ 67, $ 47, $ 25, $ 23, $ - $ 26, Average hourly rate $ $ $ $ $ $ $ - $ Creditors $ Employees $ Trade on $ Investigation $ Dividend $ Administration $ Task Area General Description Includes Assets 92 hours and $33, plus GST Sale of Business as a Going Concern and DOCA Preparing an information memorandum and target list Liaising with interested parties Preparing a register for interested parties Reviewing EOI forms and confidentiality agreements Arranging data room access for interested parties Providing information to interested parties Meeting with interested parties Arranging advertisements for the sale of the business Liaising with directors to update them on the sale process Updating interesting parties on the sale process Internal meetings to discuss/review offers received Preparing and reviewing affidavit for the extension of the sale campaign Liaising with parties in relation to DOCA proposals Providing information to parties preparing DOCA proposals 5

85 Task Area General Description Includes Reviewing DOCA proposals and meeting with Committee of Inspection to discuss DOCA proposals Plant and Equipment Liaising with valuers, auctioneers, agents and interested parties regarding valuations of equipment Reviewing asset listings and comparing books and records lists of assets against valuations Reviewing finance leases to determine ongoing commitment amounts Locating assets which were missing from registers Requesting motor vehicle searches Preparing and ongoing maintenance of a dry hire and wet hire schedules Preparing and ongoing maintenance of a master asset lists Walking around the business sites to inspect assets Liaising with project staff to confirm location of assets on projects, asset position for ongoing jobs Co-ordinating collection of assets which have been disclaimed Reviewing valuations and having strategy discussions to determine whether assets will be used or disclaimed Co-ordinating collection of assets which have been disclaimed Obtaining quotes to repair assets which are broken Obtaining g asset master spread sheet against notice of intention to not exercise property right letters Reviewing payout figures for assets on finance and determining whether to exercise property rights or not Investigate location of IT assets and equipment Obtaining equipment back from staff who either resigned or were made redundant Debtors Correspondence with debtors to obtain payment for outstanding accounts and answering queries Reviewing, assessing & maintaining debtors ledgers Reviewing related party loan accounts Receipting monies from debtors Preparing bulk mail outs to debtors 6 Stock Reviewing stock values for ongoing trading and ordering stock where required Conducting sell out of perishable items Insurance Review of correspondence received from insurance brokers regarding information being sought Review of P&E listing obtained from preappointment insurance advisors which listed all assets being insured by the Companies now in administration. Updated listing to reflect vehicles that were owed by related parties and therefore no longer to be insured, assets that have been sighted by valuers, assets that have been disclaimed / held for sale / continued to be used for jobs.

86 Task Area General Description Includes Creditors 211 hours $61, plus GST Conducted full audit of listing to match with companies' books and records, valuations and previous listings provided by management then update insurance brokers Updated figures in the insurance docs to reflect that of valuation Preparing Workcover assessment and sending to Workcover Leasing Reviewing leasing documents for accommodation and offices Liaising with owners/lessors in relation to the moratorium period Tasks associated with disclaiming leases Creditor Enquiries, Requests & Receive and respond to creditor enquiries Directions Maintaining creditor hotline and inbox Review and prepare initial correspondence to creditors and their representatives Documenting conversations with creditors into database Considering reasonableness of creditor requests Obtaining legal advice on requests from creditors Documenting reasons for complying or not complying with requests or directions Compiling information requested by creditors reviewing contractor charges, statutory demands and other demands received Retention of Title and PPS Registrations Internal meetings to discuss strategy for bulk mail outs and PPSR review Search on the PPSR register to determine if they hold a PPS registration Contacting all secured parties numerous times requesting copies of security documents Receive initial notification of creditor s intention to claim Monitoring PPSR creditor s and voic s and responding to all enquiries Meeting secured parties on site to identify goods Reviewing security documents and preparing file note of findings Sending internal reviews of PPSR to lawyers for their advice Adjudicate retention of title and PPSR claims Drafting and reviewing correspondence to secured parties in relation to the lawyers advice about security position Forward correspondence to claimant notifying outcome of adjudication Liaising with secured parties to advise whether their registration is valid or invalid Corresponding with secured parties who challenge the Administrators position about the validity of their registrations Maintaining a master spreadsheet of all registrations Creditor reports Preparing Statutory Report by Voluntary Administrator s for first and second meeting for creditors, 7

87 Task Area General Description Includes Meeting internally to discuss strategy for preparing the report to creditors for the second meeting Requesting information from company staff and collating information received for inclusion in the report for the first and second meetings Dealing with proofs of debt Receipting and filing POD received for the first meeting of creditors Corresponding with OSR and ATO regarding POD Monitoring creditor hotlines for voice messages and s and responding accordingly Entering POD s into IPS 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 Arranging location for first and second creditors meetings Travelling to and from first meeting of creditors Attending first meeting of creditors, signing in creditors and admitting POD for voting purposes Preparation and lodgement of minutes of meetings with ASIC Responding to stakeholder queries and questions immediately following meeting Legals Seeking advice in relation to queries from creditors Seeking advice in relation to extending the moratorium period and the convening period Seeking advice on subcontractor charges Creating spreadsheets to track subcontractor charges Reviewing application for the court extensions to the moratorium and convening periods Drafting affidavits to support applications Meeting with lawyers Committee of Inspection Sending initial correspondence to the committee once formed Updating website with committee members details Preparing for and attending meetings of COI Preparing minutes of meetings Calls with the committee Employees enquiries Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to creditors and their representatives via facsimile, and post Preparation of letters to employees advising of their entitlements and options available Receive and prepare correspondence in response to employee s objections to leave entitlements 8

88 Task Area General Description Includes Employees hours $42, plus GST Calculation of entitlements Calculating employee entitlements Reviewing employee files and company s books and records Reconciling superannuation accounts Reviewing awards and reviewing Liaising with solicitors regarding entitlements Preparing and sending s to all employees with their entitlement calculations Workers compensation claims Review insurance policies Receipt of claim Liaising with claimant Liaising with insurers and solicitors regarding claims Identification of potential issues requiring attention of insurance specialists Correspondence with insurer regarding initial and ongoing workers compensation insurance requirements Correspondence with previous brokers Other employee issues Correspondence with Child Support and Centrelink Corresponding and meeting with support services for employees Meeting with staff to stand down upon appointment Phoning every staff member to advise whether they will be retained or made redundant Monitoring inbox and voice messages and responding to all calls and enquiries Preparing FAQ and Q&A for employee packs Processing employee resignations and final payrolls Maintaining employee lists and redundancy lists Answering various queries on site from employees Seeking legal advice on employee disputes 9

89 Task Area General Description Includes Trade On 75.5 hours and $23, plus GST Trade On Management Liaising with suppliers to set up accounts and pay accounts Liaising with management and staff to determine which projects to continue to trade Weekly attendance on sites Reviewing and authorising purchase orders Maintaining purchase order registry Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax issues Booking weekly flights for company staff to travel out to job sites Preparing trade on expense reimbursements Preparing listing of all projects currently trading and new projects being taken on. Negotiating contracts for ongoing trading Preparing location of projects, project managers in charge and potential revenue and costs. Weekly resourcing meetings for staff allocations and site visits Downloading bank statements and sending to accounts receivable and payable teams Liaised with payroll team re preparation of payroll. Reviewed payroll and prepared payment form for each payroll. Liaised with and payroll team regarding various queries. Calculating post appointment entitlements and updating the systems to reflect outstanding liabilities Traveling out to site Opening utility accounts including Origin and Telstra Requesting progress claims for trading jobs Processing receipts and payments Entering receipts and payments into accounting system Preparing and authorising receipt vouchers Preparing and authorising payment vouchers and payment over the phone for expenses Reconciling payments and receipts Budgeting and financial reporting Reviewing company s budgets and financial statements Preparing budgets and cash flows Preparing weekly financial reports Finalising trading profit or loss Meetings to discuss trading position 10

90 Task Area General Description Includes Investigations 58.3 hours and $21, plus GST Administration 80.3 hours and $23, plus GST Conducting investigation Collection of company books and records Correspondence with ASIC to receive assistance in obtaining reconstruction of financial statements, company s books and records and Report as to Affairs Reviewing company s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of comparative financial statements Preparation of deficiency statement Review of specific transactions and liaising with directors regarding certain transactions Liaising with directors regarding certain transactions Preparation of investigation file Lodgement of investigation with the ASIC Preparation and lodgement of supplementary report if required Litigation / Recoveries Internal meetings to discuss status of litigation Preparing brief to solicitors Liaising with solicitors regarding recovery actions Attending to negotiations Attending to settlement matters Correspondence Sending, receiving and reviewing correspondence Listening to voice mails to clear mailbox Forensic Imaging Liaising with Ostwald IT staff to understand current assets, network configuration, and the locations of information, information backups and archives Obtaining access to physical assets and information storage locations across the Ostwald network. Coordinating access to information with Ostwald IT staff. Forensic imaging of information assets including servers, cloud assets (O365), file servers, database servers, time sheet server, project servers, and finance servers, across multiple locations including South Brisbane, Dalby, and Next DC (Brisbane). Approximately 35TB Travel between locations to conduct preservation activities with Ostwald IT staff. Reporting, tracking, and documenting forensic imaging activities including status updates Conducting backups of information preserved. Secure storage of preserved information. Appointment tasks Preparing, reviewing and sending notification to various parties advising of the appointment Attending meeting with directors regarding appointment and strategy Preparing, issuing and lodging RATA s Setting up IPS & opening database Setting up hotlines for phone and and recording voice messages Conducting bank sweeps Filing advertisements notifying of appointment 11

91 Task Area General Description Includes Document maintenance/file Monthly administration reviews review/checklist Scanning and filing of documents Updating checklists Scanning in mail received and saving into AMS Maintaining filing within AMS database Insurance Identification of potential issues requiring attention of insurance specialists Correspondence with insurer regarding initial and ongoing insurance requirements Reviewing insurance policies Correspondence with previous brokers Bank account administration Preparing correspondence opening and closing accounts Requesting bank statements, downloading bank statements to send to accounts receivable at Ostwald Bank account reconciliations Correspondence with bank regarding specific transfers ASIC Form 505 and other forms Preparing and lodging ASIC forms including 505, DIRRI etc. Correspondence with ASIC regarding statutory forms ATO and other statutory Notification of appointment reporting Preparing BAS Employee documentation Planning / Review Discussions regarding status of administration Job planning for staff allocation each week Books and records / storage Arranging for recall boxes to be delivered to site offices Co-ordination of packing up files in site offices Uploading company books & records to AMS database Saving s into AMS Downloading company books and records from Ostwald s data room online 12

92 Resolution #3: 16 November 2017 to 2 December 2017 The below table sets out the expected costs for the major tasks likely to be performed by the Administrators and their staff for the period 16 November 2017 to 2 December 2017 which is the basis of the Resolution #3 claim. More detailed descriptions of the tasks likely to be performed within each task area, matching the amounts below, are contained in the second table below. Task Area Employee Position $/hour Total actual hours Total Assets $ Creditors $ Employees $ Trade on $ Investigation $ Dividend $ Administration $ Derrick Vickers Appointee $ $ 4, $ 1, $ 1, $ $ 1, $ - $ - $ Kevin Holzapfel Director $ $ 5, $ $ $ $ 3, $ - $ - $ Claire Pell Director $ $ 1, $ $ - $ $ $ - $ - $ - Johnathan Ingold Manager $ $ $ - $ $ - $ - $ - $ - $ - Walter Lomax Manager $ $ 8, $ - $ 1, $ - $ 5, $ - $ - $ 1, Jennifer Smith Manager $ $ $ - $ $ - $ - $ - $ - $ - Yvette Wirken Manager $ $ 3, $ - $ 2, $ - $ - $ - $ - $ James Fowler Manager $ $ $ - $ - $ $ - $ - $ - $ - Jack Bentick Senior Consultant $ $ 1, $ - $ - $ $ $ - $ - $ Dimity Dwyer Senior Consultant $ $ 2, $ - $ $ $ 1, $ - $ - $ Sam Hargreaves Senior Consultant $ $ 1, $ - $ 1, $ - $ - $ - $ - $ - Jade Weller Senior Consultant $ $ 2, $ - $ 1, $ - $ 1, $ - $ - $ Duncan Scott Senior Consultant $ $ $ - $ $ - $ - $ - $ - $ - Melissa Rekowski Senior Consultant $ $ 2, $ - $ $ 1, $ $ - $ - $ Lydiah Njagi Consultant $ $ 1, $ - $ $ $ $ - $ - $ Ameet Nand Consultant $ $ $ - $ $ - $ - $ - $ - $ - Tom Trowse Consultant $ $ 1, $ - $ $ 1, $ $ - $ - $ - Sam Murray Consultant $ $ - $ - $ - $ - $ - $ - $ - $ - Dylan Jaya Consultant $ $ 1, $ - $ 1, $ - $ - $ - $ - $ - Jane Stewart Support $ $ 1, $ - $ $ $ $ - $ - $ Jaie Lilburne Support $ $ $ - $ $ - $ $ - $ - $ Asha Miles Support $ $ $ - $ $ - $ $ - $ - $ Total , $ 15, $ 6, , $ - $ - $ 5, $ 2, $ $ GST $ 4, $ $ 1, $ $ 1, $ - $ - $ Total GST) $ 49, $ 3, $ 16, $ 7, $ 16, $ - $ - $ 5, (Incl Average hourly rate$ $ $ $ $ $ - $ - $ Task Area General Description Includes Assets 6 hours $2,925 plus GST Creditors 55 hours $15,295 Plant and Equipment Reviewing asset listings and continuing to monitor the use of equipment on finance or lease Debtors Continuing to correspond with debtors Reviewing and assessing debtors ledgers Other Assets Tasks associated with realising other assets Creditor Enquiries, Requests & Receive and respond to creditor enquiries Directions Maintaining creditor request log Prepare and review correspondence to creditors and their representatives Documenting phone calls with creditors Considering reasonableness of creditor requests Obtaining legal advice on requests Documenting reasons for complying or not complying with requests or directions Compiling information requested by creditors 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 13

93 Task Area General Description Includes Employees 24 hours $6, plus GST Trade On 44 hours $15,365 plus GST 14 creditors, reports to creditors, advertisement of meeting and draft minutes of meeting. Preparation of minutes draft of meetings Responding to stakeholder queries and questions immediately following meeting Retention of Title and PPSR Claims Monitoring PPSR creditor s and voic s and responding to all enquiries Meeting secured parties on site to identify goods Reviewing security documents and preparing file note of findings Sending internal reviews of PPSR to lawyers for their advice Adjudicate retention of title and PPSR claims Drafting and reviewing correspondence to secured parties in relation to the lawyers advice about security position Forward correspondence to claimant notifying outcome of adjudication Liaising with secured parties to advise whether their registration is valid or invalid Corresponding with secured parties who challenge the Administrators position about the validity of their registrations Maintaining a master spreadsheet of all registrations Creditor reports Preparing Statutory Report by Voluntary Administrator for the second meeting of creditors Review report and update with changes Issue the report to creditors Dealing with proofs of debt Receipting and filing POD for the second creditors meeting Monitoring creditor hotlines and inbox Saving POD into IPS and AMS Employees enquiries Correspondence with Child Support and Centrelink Monitoring inbox and voice messages and responding to all calls and enquiries Processing employee resignations and final payrolls Maintaining employee lists and redundancy lists Answering various queries on site from employees Seeking legal advice on employee disputes Receipting and filing POD for the second creditors meeting Trade On Management Liaising with suppliers Weekly attendance on sites Reviewing and authorising purchase orders Maintaining purchase order registry Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax Booking weekly flights for company staff to travel out to job sites Preparing trade on expense reimbursements Weekly resourcing meetings for staff allocations and site visits Downloading bank statements and sending to accounts receivable and payable teams Liaised with payroll team re preparation of payroll.

94 Task Area General Description Includes Processing receipts and payments Budgeting and financial reporting Reviewed payroll and prepared payment form for each payroll. Liaised with and payroll team regarding various queries. Calculating post appointment entitlements and updating the systems to reflect outstanding liabilities Traveling out to site Requesting progress claims for trading jobs Preparing and entering receipts and payments into accounting system Downloading bank statements and providing to accounts payable/receivable Reviewing company s budgets and financial statements Meetings to discuss trading position Administration 16.5 hours $5, plus GST Bank account administration Preparing correspondence opening and closing accounts Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers Document maintenance/file Weekly reviews review/checklist Filing of documents File reviews Updating checklists Insurance Correspondence with insurer regarding ongoing insurance requirements Reviewing insurance policies Correspondence with brokers to advise of assets we no longer require insurance over ATO and other statutory Preparing BAS reporting Completing group certificates for employees who resign Planning / Review Discussions regarding status of administration Job planning for staff allocation each week Books and records / storage Uploading company books & records to AMS database Saving s into AMS 15

95 Resolution #4: From Commencement of DOCA to Completion The below table sets out the expected costs for the major tasks likely to be performed by the Administrators and their staff for the period from the commencement of a DOCA to its completion which is the basis of the Resolution #4 claim. More detailed descriptions of the tasks likely to be performed within each task area, matching the amounts below, are contained in the second table below. Task Area Employee Position $/hour Total actual hours Total Assets $ Creditors $ Employees $ Trade on $ Investigation $ Dividend $ Administration $ Derrick Vickers Appointee $ $ 19, $ 5, $ 4, $ $ 2, $ - $ 3, $ 2, Kevin Holzapfel Director $ $ 49, $ 14, $ 8, $ $ 13, $ - $ 7, $ 4, Claire Pell Director $ $ 7, $ 1, $ 1, $ - $ 2, $ - $ $ 1, Walter Lomax Manager $ $ 70, $ 24, $ 11, $ 5, $ 18, $ - $ 11, $ - Dimity Dwyer Jade Weller Duncan Scott Senior $ $ 28, $ 1, $ 8, $ 8, $ 1, $ - $ 8, $ 1, Consultant Senior $ $ 5, $ 2, $ $ - $ $ - $ - $ 1, Consultant Senior $ $ 2, $ - $ - $ - $ - $ - $ - $ 2, Consultant Melissa Rekowski Senior $ $ 3, $ - $ 1, $ - $ - $ - $ 1, $ Consultant Lydiah Njagi Consultant $ $ 2, $ - $ 1, $ - $ - $ - $ 1, $ Tom Trowse Consultant $ $ 7, $ - $ 1, $ - $ 2, $ - $ 1, $ 3, Jane Stewart Support $ $ 2, $ - $ - $ - $ $ - $ - $ 1, Jaie Lilburne Support $ $ $ - $ - $ - $ - $ - $ - $ Asha Miles Support $ $ $ - $ - $ - $ - $ - $ - $ Total $ 200, $ 50, $ 36, $ 14, $ 41, $ - $ 35, $ 21, GST $ 20, $ 5, $ 3, $ 1, $ 4, $ - $ 3, $ 2, Total (Incl GST) $ 220, $ 55, $ 40, $ 16, $ 45, $ - $ 38, $ 23, Average hourly $ $ $ $ $ $ - $ $ rate Task Area General Description Includes Assets 128 hours $50, plus GST Creditors 106 hours $36, plus GST Plant and Equipment Reviewing asset listings and continuing to monitor the use of equipment on finance or lease Debtors Continuing to correspond with debtors Reviewing and assessing debtors ledgers Liaising with debt collectors and solicitors Other Assets Tasks associated with realising other assets Creditor Enquiries, Requests & Directions Receive and respond to creditor enquiries Maintaining creditor request log Prepare and review correspondence to creditors and their representatives Documenting phone calls with creditors Considering reasonableness of creditor requests Obtaining legal advice on requests Documenting reasons for complying or not complying with requests or directions Compiling information requested by creditors 16

96 Task Area General Description Includes PPSR Claims Monitoring PPSR creditor s and voic s and responding to all enquiries Dealing with proofs of debt Receipting and filing POD as received Monitoring creditor hotlines and inbox Employees 47 hours $14, plus GST Trade On 112 hours $41,650 plus GST Employees enquiries Correspondence with Child Support and Centrelink Monitoring inbox and voice messages and responding to all calls and enquiries Processing employee resignations and final payrolls Maintaining employee lists and redundancy lists Answering various queries on site from employees Seeking legal advice on employee disputes Receipting and filing POD for as received Entitlements Preparation for DOCA period including calculation of entitlements and strategy regarding communication of entitlement position to employees Arrange, as appropriate, payment of entitlements for voluntary administration period Trade On Management Weekly attendance on sites Reviewing and authorising purchase orders Maintaining purchase order registry Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax issues Booking weekly flights for company staff to travel out to job sites Preparing trade on expense reimbursements Preparing listing of all projects currently trading and new projects being taken on. Negotiating contracts for ongoing trading Preparing location of projects, project managers in charge and potential revenue and costs. Weekly resourcing meetings for staff allocations and site visits Downloading bank statements and sending to accounts receivable and payable teams Liaised with payroll team re preparation of payroll. Reviewed payroll and prepared payment form for each payroll. Liaised with and payroll team regarding various queries. Calculating post appointment entitlements and updating the systems to reflect outstanding liabilities Traveling out to site Managing the trading of the café within the Brisbane office including stocktakes, staffing, ordering of supplies, banking of proceeds etc. Processing receipts and payments Requesting progress claims for trading jobs Preparing and entering receipts and payments into accounting system Downloading bank statements and providing to accounts payable/receivable 17

97 Task Area General Description Includes Budgeting and financial reporting Reviewing company s budgets and financial statements Meetings to discuss trading position Dividend 101 hours $35, plus GST Administration 101 hours $35, plus GST Processing prods of debt Preparation of correspondence to potential creditors inviting lodgement of POD Receipt of POD Maintain POD register Adjudicating POD Request further information from claimants regarding POD Preparation of correspondence to claimant advising outcome of adjudication Dividend procedures Preparation of correspondence to creditors advising of intention to declare dividend Advertisement of intention to declare dividend Obtain clearance from ATO to allow distribution of company s assets Preparation of dividend calculation Preparation of correspondence to creditors announcing declaration of dividend Advertise announcement of dividend Preparation of distribution Preparation of dividend file Preparation of payment vouchers to pay dividend Preparation of correspondence to creditors enclosing payment of dividend Bank account administration Preparing correspondence opening and closing accounts Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers Document maintenance/file First month, then six monthly administration review/checklist reviews Filing of documents File reviews Updating checklists Insurance Identification of potential issues requiring attention of insurance specialists Correspondence with insurer regarding ongoing insurance requirements Reviewing insurance policies Correspondence with brokers to advise of assets we no longer require insurance over ATO and other statutory Notification of appointment reporting Preparing BAS Completing group certificates for employees who resign Planning / Review Discussions regarding status of administration Job planning for staff allocation each week Books and records / storage Uploading company books & records to AMS database Saving s into AMS 18

98 Resolution #5: from Commencement of Liquidation to completion The below table sets out the expected costs for the major tasks likely to be performed by the Liquidator and their staff for the period from Commencement of liquidation to completion which is the basis of the Resolution #5 claim. More detailed descriptions of the tasks likely to be performed within each task area, matching the amounts below, are contained in the second table below. Task Area Employee Position $/hour Total actual hours Total Assets $ Derrick Vickers Appointee $ $ 12, $ 2, $ 2, $ $ 1, $ 5, $ - $ Kevin Holzapfel Director $ $ 27, $ 11, $ 4, $ $ 3, $ 6, $ - $ 1, Claire Pell Director $ $ 19, $ 4, $ 4, $ $ 6, $ 1, $ - $ 1, Walter Lomax Manager $ $ 39, $ 14, $ 2, $ - $ 9, $ 7, $ - $ 5, Creditors $ Employees $ Trade on $ Investigation $ Dividend $ Administration $ Yvette Wirken Manager $ $ 18, $ 1, $ 1, $ - $ - $ 9, $ - $ 5, Jack Bentick Senior Consultant $ $ 20, $ 11, $ - $ - $ 4, $ - $ - $ 5, Jade Weller Senior Consultant $ $ 11, $ 2, $ 2, $ - $ 2, $ 2, $ - $ 1, Dimity Dwyer Senior Consultant $ $ 24, $ 8, $ 5, $ 2, $ 3, $ 2, $ - $ 1, Duncan Scott Senior Consultant $ $ 1, $ - $ - $ - $ $ $ - $ Melissa Rekowski Senior Consultant $ $ 14, $ 2, $ 2, $ - $ 1, $ 6, $ - $ 1, Lydiah Njagi Consultant $ $ 18, $ 3, $ 3, $ 2, $ 1, $ 7, $ - $ 1, Ameet Nand Consultant $ $ - $ - $ - $ - $ - $ - $ - $ - Tom Trowse Consultant $ $ 23, $ 6, $ 2, $ $ 5, $ 9, $ - $ 1, Sam Murray Consultant $ $ 1, $ - $ - $ - $ 1, $ - $ - $ - Dylan Jaya Consultant $ $ 1, $ 1, $ - $ - $ - $ - $ - $ - Jane Stewart Support $ $ 6, $ 1, $ 3, $ $ 1, $ - $ - $ Jaie Lilburne Support $ $ 3, $ $ 1, $ $ 1, $ - $ - $ Asha Miles Support $ $ 3, $ $ 1, $ $ 1, $ - $ - $ Total $ 250, $ 71, $ 38, $ 7, $ 45, $ 59, $ - $ 27, GST $ 25, $ 7, $ 3, $ $ 4, $ 5, $ - $ 2, Total (Incl GST) $ 275, $ 78, $ 42, $ 7, $ 50, $ 65, $ - $ 30, Average hourly rate $ $ $ $ 9.03 $ $ $ - $ Task Area General Description Includes Assets 236 hours $71, plus GST Creditors 140 hours $38, plus GST Plant and Equipment Liaising with valuers, auctioneers and interested parties for the sale of assets Reviewing asset listings and master spread sheets Arranging for auctioneers to hold auctions Receipting sale proceeds into IPS and distributing proceeds to secured creditors Debtors Correspondence with debtors requesting payment Reviewing and assessing debtors ledgers Liaising with debt collectors Advising solicitors regarding debtor disputes Other Assets Tasks associated with realising other assets Leasing Reviewing leasing documents Liaising with owners/lessors Tasks associated with disclaiming leases Creditor Enquiries, Requests & Receive and respond to creditor enquiries Directions Maintaining creditor request log Review and prepare initial correspondence to creditors and their representatives Documenting phone calls with creditors in the data base Considering reasonableness of creditor requests Obtaining legal advice on requests Documenting reasons for complying or not complying with requests or directions Compiling information requested by creditors 19

99 Task Area General Description Includes Employees 28.5 hours $7, plus GST 20 PPSR Claims Monitoring PPSR creditor s and voic s and responding to all enquiries Creditor reports Preparing Statutory Report by Liquidator, investigation, meeting and general reports to creditors Dealing with proofs of debt Receipting and filing POD when not related to a dividend Corresponding with OSR and ATO regarding POD when not related to a dividend Meeting of Creditors Preparation of meeting notices, proxies and advertisements Forward notice of meeting to all known creditors Preparation of meeting file, including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting. Preparation and lodgement of minutes of meetings with ASIC Responding to stakeholder queries and questions immediately following meeting Proposals to Creditors Preparing proposal notices and voting forms Forward notice of proposal to all known creditors Reviewing votes and determining outcome of proposal Preparation and lodgement of proposal outcome with ASIC Employees enquiries Correspondence with Child Support and Centrelink Monitoring inbox and voice messages and responding to all calls and enquiries Processing employee resignations and final payrolls Maintaining employee lists and redundancy lists Answering various queries on site from employees Seeking legal advice on employee disputes Receipting and filing POD for the second creditors meeting FEG Correspondence with FEG Preparing notification spreadsheet Preparing FEG quotations Completing FEG questionnaires Adjudicating on FEG claims Calculation of entitlements Calculating employee entitlements Reviewing employee files and company s books and records Reconciling superannuation accounts Reviewing awards Liaising with solicitors regarding entitlements Employee dividend Correspondence with employees regarding dividend Correspondence with ATO regarding SGC proof of debt Calculating dividend rate Preparing dividend file Advertising dividend notice Preparing distribution Receipting POD Adjudicating POD Ensuring PAYG is remitted to ATO Workers compensation claims Review insurance policies

100 Task Area General Description Includes Trade On 162 hours $45, plus GST Investigation 200 hours $59,570 plus GST Receipt of claim Liaising with claimant Liaising with insurers and solicitors regarding claims Identification of potential issues requiring attention of insurance specialists Correspondence with insurer regarding initial and ongoing workers compensation insurance requirements Correspondence with previous brokers Other employee issues Correspondence with Child Support Correspondence with Centrelink Trade On Management Liaising with suppliers Liaising with management and staff Attendance on site Authorising purchase orders Maintaining purchase order registry Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax issues Processing receipts and Entering receipts and payments into accounting payments system Budgeting and financial Reviewing company s budgets and financial reporting statements Preparing budgets Preparing weekly financial reports Finalising trading profit or loss Meetings to discuss trading position Conducting investigation Collection of company books and records Correspondence with ASIC to receive assistance in obtaining reconstruction of financial statements, company s books and records and Report as to Affairs Reviewing company s books and records Review and preparation of company nature and history Conducting and summarising statutory searches Preparation of comparative financial statements Preparation of deficiency statement Review of specific transactions and liaising with directors regarding certain transactions Liaising with directors regarding certain transactions Preparation of investigation file Lodgement of investigation with the ASIC Preparation and lodgement of supplementary report if required Examinations Preparing brief to solicitor Liaising with solicitor(s) regarding examinations Attendance at examination Reviewing examination transcripts Liaising with solicitor(s) regarding outcome of examinations and further actions available 21

101 Task Area General Description Includes Litigation / Recoveries Internal meetings to discuss status of litigation Preparing brief to solicitors Liaising with solicitors regarding recovery actions Attending to negotiations Attending to settlement matters ASIC reporting Preparing statutory investigation reports Preparing affidavits seeking non-lodgement assistance Liaising with ASIC Bank account administration Preparing correspondence opening and closing accounts Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers Administration 93 hours $27, ASIC Form 524 and other forms Preparing and lodging ASIC forms including 505, 524, etc. Correspondence with ASIC regarding statutory forms ATO and other statutory Notification of appointment reporting Preparing BAS Completing group certificates Finalisation Notifying ATO of finalisation Cancelling ABN / GST / PAYG registration Completing checklists Finalising WIP Planning / Review Discussions regarding status of administration Books and records / storage Dealing with records in storage Sending job files to storage 3.3 Total remuneration reconciliation At this point in time I estimate that the total remuneration for this administration and liquidation will be $495, (incl GST) in the event a DOCA is voted upon and executed. If the Company enters liquidation, I estimate that the total remuneration for the administration and liquidation will be $550, (incl GST). In preparing this remuneration approval report, I have made my best estimate at what I believe the administration will cost to complete. I do not anticipate that I will have to ask creditors to approve any further remuneration. However, should the administration / liquidation not proceed as expected, I will advise creditors and I may seek approval of further remuneration and provide details on why the remuneration has changed. Matters that may affect the progress and the cost of the liquidation, include: 22 Determining a strategy to sell assets of the Company and liaise with interested parties Calculation of employee entitlements and liaising with FEG regarding the verification and distribution of entitlements. Liaising with suppliers regarding the ongoing trading and winding down of operations of the Company.

102 Conducting statutory investigations and reporting to ASIC. Continuing investigations as per our report. Answering creditor queries as required. Creditors will have an opportunity to ask any questions they may have in respect of the cost of the Voluntary Administration, Deed of Company Arrangement or Liquidation at the meeting. 3.4 Likely impact on dividends It is both reasonable and appropriate for a professional service provider to be remunerated for their services. An administrator and liquidator is entitled to be remunerated for necessary work that is reasonably performed. That work is also the source of any funds that may be recovered for the benefit of creditors and other stakeholders. The impact of the approval of the administrator s remuneration is that the remuneration will be paid to the Administrator / Liquidator if sufficient funds are generated to enable it to be paid. The remuneration will be paid from those funds that are generated prior to the payment of most other stakeholders in the Liquidation. It is noted that no funds would be available for any stakeholder without the work necessarily undertaken by the Liquidator. 23

103 Part 4: Disbursements Disbursements are divided into three categories: 1. Externally provided professional services these are recovered at cost. An example of externally provided professional service disbursement is legal fees. 2. Externally provided non-professional costs such as travel, accommodation and search fees these are recovered at cost. 3. Internal disbursements such as photocopying, printing and postage. These 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. The recovery of these costs must be on a reasonable commercial basis. I have undertaken a proper assessment of disbursements claimed for Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: , in accordance with the law and applicable professional standards. I am satisfied that the disbursements claimed are necessary and proper. I will be seeking approval of the following resolution to approve my disbursements. Resolution #6 from 25 August 2017 to 31 October 2017 That the disbursements of the Administrators, their partners and staff for the period 25 August 2017 to 31 October 2017 and approved in the sum of $1, plus GST of $ total $1, and that the Administrator can draw the remuneration immediately or as required. The following disbursements have been paid by the Administration to my firm for the period from 25 August 2017 to 31 October Where amounts have been paid to my firm for externally provided services and costs, those payments are in reimbursement of cost previously paid by my firm, either due to lack of funds in the Administration at the time the payment was due, or the direct invoicing of my firm by the supplier. All of the below transactions will appear in the final receipts and payments listed but may not be included in the current receipts and payments listing as they were paid by myself or my staff directly. Only payments to third parties directly from the Administration bank account are included in the attached listing of receipts and payments. 24

104 Expenses for the period 25 August to 31 October The below table sets out the expenses incurred by staff in relation to tasks performed by the Administrator and their staff for the period 25 August 2017 to 31 October Category Amount Description Meals Staff meals incurred while on site or in attendance of critical meeting $95.67 (i.e. creditors' meeting) Travel Travel between client site and home office, including vehicle mileage $ and relevant parking expenses Airfare $ Airfare and airfare booking fees to and from client Accommodation $92.92 Accommodation for work while on site Data/ Hardware $ Hardware required for data preservation Statutory/ Lodgements, filing, stationery and all other expenses related to $ Administration general administration Total $1, GST $ Total (incl. GST) $1, Part 5: Report on Progress of the Administration Refer to the report to creditors dated. Part 6: Summary of Receipts and Payments A summary of the receipts and payments for the Voluntary Administration to 9 November 2017 is attached to this report. Part 7: Queries If you have any queries in relation to the information in this report, please contact our creditors hotline on (07) or OB-POD@au.pwc.com. You can also access information which may assist you on the following websites: ARITA at ASIC at (search for insolvency information sheets ). Part 8: Approval of remuneration Please refer to the information sheets found in Appendix

105 Contents Introduction 6 Receipts and Payments Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 6 Receipts and Payments 72

106 Summarised Receipts & Payments Ostwald Construction Materials Pty Ltd (Administrators Appointed) Transactions From 25 August 2017 To 21 November 2017 Receipts Account Net ($) GST ($) Gross ($) Sales (Taxable) 178, , , Sundry Debtors (B) 188, , Cash at Bank 19, , Interest received Withholding Tax (PAYG) Suspense Account 3, , Total Receipts (inc GST) 390, , , Payments Account Net ($) GST ($) Gross ($) Purchases (Taxable) 2, , Purchases (Taxable) - Purchases Salary sacrifice (Payment a/c) 2, , Wages - Wages 111, , Wages - Taxable allowance 1, , Wages - Non taxable allowance 2, , Superannuation Guarantee 7, , Employee deductions - post appointment - Child Salary sacrifice (Accrual - Pre Tax) - Pre-tax sup - 1, , Payroll Tax 4, , Sub-contractors (Taxable) 20, , , Commissions paid (Taxable) 7, , Duress payments (Taxable) Freight (Taxable) 4, , Licence, permit fees (Non taxable) 11, , Repairs & Maintenance (Taxable) 1, , Subscriptions (Taxable) 1, , Utilities (Taxable) - Electricity 13, , , Vehicle expenses (Taxable) - Fuel 11, , , Cash at Bank Bank charges Insurance Premium (Taxable) - Workers Compe 1, , Insurance - Stamp Duty Valuation Fees (Taxable) Valuation Fees (Non taxable) Superannuation Clearing Account - 5, , Withholding Tax (PAYG) - Total tax withheld - 32, , Suspense Account 4, , Total Payments (inc GST) 171, , , Balance in Hand - By Bank Account Cheque Account 230,809.21

107 Contents Introduction 7 Formal Notice of Meeting Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 7 Formal Notice of Meeting 73

108 Form 529 Notice of Meeting.lVotice of Meeting of &editors Corporations Act zoot Sub regulation 5.6. t z ( z) Compang Details Company: ACN: Status: Appointed: Ostwald Construction Materials Pty Ltd (Administrators Appointed) tt Administrators Appointed 25 August 2017 Meeting Detsils Notice is given that a meeting of the creditors of the Company will be held: Location: Empire Theatre Church Theatre S6 Neil Street TOOWOOMBA QLD +gso Meeting date: Meeting time: Friday, r December zort ro.oo AM (QLD time) To facilitate creditors who may be based in Brisbane, the meeting will also have a satellite venue at the following location: Satellite Location r Christie Conference Centre Level z, 3zo Adelaide Street BRISBANE QLD 4ooo Agendo Agenda items are: 1. To receive the report by the Administrator pursuant to S75-zz5 2. To consider the future of the company 3. To consider and approve the remuneration of the Administrator to date 4. To consider and approve the future remuneration of the Deed Administrator or Liquidator, as appropriate S. Any other business Proof of debt o;nd. proxies Creditors wishing to attend are advised proofs and proxies should be submitted to the Administrator by:

109 Time: Date: 5:oo PM Wednesday z9 November 2ot7 Date of notice: Friday z4 November 2or7 Derrick Vickers Administrator Address: Contact person: Contact number: Facsimile: C/- PricewaterhouseCoopers Level 23, 48o Queen Street Brisbane QLD +ooo Creditor Hotline: ot g2s7 SLLI

110 Contents Introduction 8 Form 535 Proof of Debt Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 8 - Form 535 Proof of Debt 74

111 Form 535 Corporations Regulations (2) Corporations Act 2001 INFORMAL FORM OF PROOF OF DEBT OR CLAIM FOR THE PURPOSE OF VOTING AT A MEETING OF CREDITORS To the Administrators of Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: This is to state that the above named Company was on 25 August 2017 and still is, justly and truly indebted to (insert name of creditor) for an amount of (insert amount of debt) $... Particulars of the debt are: Date Consideration Amount ($) Remarks (state how debt arose) (include details of vouchers 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 ($) Due Date *3. I am employed by the creditor and authorised in writing by the creditor to make this statement. *3. I am the creditor's agent authorised in writing to make this statement in writing. * Delete if not applicable 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:... Name:... Address:... I nominate to receive electronic notification of notices or documents in accordance with Section 600G of the Corporations Act at the following address: address:...

112 Contents Introduction 9 Form 532 Appointment of Proxy Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 9 - Form 532 Appointment of Proxy 75

113 Form 532 Corporations Act 2001 Corporations Regulations APPOINTMENT OF PROXY Ostwald Construction Materials Pty Ltd (Administrators Appointed) ACN: ABN: *I/*We (1)... of... a creditor of the Company indicated above, appoint (2)... or in his/her absence... as *my/our *general/special proxy to vote at the meeting of creditors to be held on Friday, 1 December 2017 at 10:00am, or at any adjournment of that meeting (3). Manner of Voting Resolution (Please specify by tick) For Against Abstain 1. For creditors to resolve whether or not: - that the meeting be adjourned; or - the Company should execute a DOCA - the Administration of the Company should end; or - the Company should be wound up. 2. That the remuneration of the Administrators, their partners and staff for the period 25 August 2017 to 15 November 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated 24 November 2017) and approved in the sum of $205, plus GST of $20, total $226, and that the Administrator can draw the remuneration immediately or as required. 3. That the remuneration of the Administrators, their partners and staff for the period 16 November to 1 December 2017 be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated 24 November 2017) and approved in the sum of $45, plus GST of $4, total $49, and that the Administrator can draw the remuneration immediately or as required. 4. That the remuneration of the Administrators, their partners and staff for the period from Commencement of DOCA to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated 24

114 November 2017) and approved in the sum of $200, plus GST of $20, total $220, That the remuneration of the Administrators, their partners and staff for the period from Commencement of Liquidation to completion be calculated on a time basis, at the scale of rates charged (as set out in the report to creditors dated ) and approved in the sum of $250, plus GST of $25, total $275, That the disbursements of the Administrators, their partners and staff for the period 25 August 2017 to 31 October 2017 and approved in the sum of $1, plus GST of $ total $1, and that the Administrator can draw the remuneration immediately or as required. 7. Should the Company proceed into Liquidation, appoint a Committee of Inspection. 8. That the Liquidators (if appointed) be authorised to destroy the Company s books and records upon finalisation of the liquidation, and subject to obtaining consent from the Australian Securities and Investments Commission. 9. Other matters arising at the meeting. As proxy deems appropriate DATED:... Signature... Name and position CERTIFICATE OF WITNESS This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy. I,... of... certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him before he attached his signature or mark to the instrument. Dated: Signature of witness: Description: Place of residence: * Omit if inapplicable (1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular resolution.

115 Contents Introduction 10 Creditor Information Sheets Strategy Investigations DOCA Creditors Employees Meeting Options Remuneration Appendices Appendix 10 - Creditor Information Sheets 76

116 Information sheet: Approving remuneration of an external administrator If you are a creditor in a liquidation, voluntary administration or deed of company arrangement you may be asked to approve the external administrator s remuneration. An external administrator can be a liquidator, voluntary administrator or deed administrator. The process for approving the remuneration for each of these is the same. This information sheet gives general information to help you understand the process of approving an external administrator s remuneration and your rights in this process. The following topics are covered in this information sheet: About external administrations External administrator s remuneration and costs Calculating remuneration Information you will receive Approving remuneration Who may approve remuneration Deciding if remuneration is reasonable What can you do if you decide the remuneration is unreasonable? Reimbursement of out of pocket costs Queries and complaints More information. About external administrations If a company goes into liquidation, voluntary administration or enters into a deed of company arrangement, an independent person is appointed to oversee the administration. They are called an external administrator and include a liquidator, voluntary administrator and deed administrator, depending on the type of administration involved. In this information sheet they are simply referred to as an external administrator. The duties of an external administrator are specified in legislation and they must adhere to certain standards while conducting the administration. All external administrators are required by law to undertake certain tasks which may not benefit creditors directly (e.g. investigating whether any offences have been committed and reporting to the Australian Securities and Investments Commission (ASIC)). External administrator s remuneration and costs External administrators are entitled to be paid for the necessary work they properly perform in the administration. An external administrator is entitled: to be paid reasonable remuneration, for the work they perform, once this remuneration has been approved, to be paid for internal disbursements they incur in performing their role (these costs do need approval), and to be reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need approval). ARITA ACN Level 5, 191 Clarence Street, Sydney NSW 2000 Australia GPO Box 4340, Sydney NSW 2001 t e admin@arita.com.au arita.com.au AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION

117 Common internal disbursements are stationery, photocopying and telephone costs. Commonly reimbursed out-of-pocket costs include: legal fees a valuer s, real administration agent s and auctioneer s fees 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 amount of an external administrator s remuneration and costs, as these will generally be paid from the administration before any payments are made to creditors. Remuneration and internal disbursements must be approved in accordance with the Corporations Act and Insolvency Practice Rules (Corporations) before it can be paid. If there is a shortfall between the external administrator s remuneration and the assets available from the administration, in certain circumstances the external administrator may arrange for a third party to pay the shortfall. As a creditor, you will be provided details of any such arrangement. If there are not enough assets to pay the external administrator s remuneration and costs, and there is no third party payment arrangement, the external administrator remains unpaid. Calculating remuneration An external administrator may calculate their remuneration using one (or a combination) of a number of methods, such as: on the basis of time spent working on the administration, according to hourly rates a quoted fixed fee, based on an estimate of the costs a percentage (usually of asset realisations), or a contingent basis on a particular outcome being achieved. Charging on the basis of time spent is the most common method used. External administrators have a set of hourly rates that they will seek to charge. These rates are set to reflect the seniority, skills and experience of staff and, where applicable, the complexity and risks of the bankruptcy. They cover staff costs and overheads. If remuneration is being charged on a time basis, the external administrator must keep time sheets noting the number of hours spent on the tasks performed. Creditors have a right to question the external administrator about the remuneration and the rates to be charged. They also have a right to question the external administrator about the fee calculation method used and how the calculation was made. The external administrator must justify why the chosen fee calculation method is appropriate for the administration. Information you will receive There are different types of remuneration reports that you may receive during the course of an external administration. The following table details the reports and when you might receive them. Version: August 2017 INFO remuneration external administrator.docx AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 2

118 Document Information it contains When you will receive it Initial Remuneration Notice (IRN) Remuneration Approval Report (RAR) A brief explanation of the types of methods that may be used to calculate fees. The external administrator s chosen fee calculation method(s) and why it is appropriate. Details of the external administrator s rates, including hourly rates if time spent basis is used. An estimate of the external administrator s remuneration. The method that will be used to calculate disbursements. A summary description of the major tasks performed, or likely to be performed. The costs associated with each of those major tasks and the method of calculation. The periods at which the external administrator proposes to withdraw funds from the administration for remuneration. An estimated total amount, or range of total amounts, of the external administrator s remuneration. An explanation of the likely impact of that remuneration on the dividends (if any) to creditors. Where internal disbursements are being claimed, the external administrator will report to creditors on the amount and method of calculation of these disbursements. Voluntary Administration with the notice of first meeting. Creditors voluntary liquidation within 10 business days of appointment. Court liquidation within 20 business days of appointment. Sent at the same time as: the notice to creditors of the meeting at which approval of remuneration will be sought; or the notice to creditors of the proposal without a meeting by which approval of remuneration will be sought If approval of remuneration is not being sought, a RAR will not be provided. Approving remuneration The meeting of creditors (or committee of inspection) gives a chance for those participating to ask questions about the external administrator s remuneration. Fees are then approved by a vote of the creditors. Alternatively, the external administrator may seek approval of remuneration via a proposal without a meeting. Whichever method is used, the external administrator must provide the same report to creditors about their remuneration (Remuneration Approval Report). Creditors may be asked to approve remuneration for work already performed and/or remuneration estimate for work not yet carried out. If the work is yet to be carried out, the external administrator must set a maximum limit (cap) on the future remuneration approval. For example, future remuneration is approved, calculated on hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X. Version: August 2017 INFO remuneration external administrator.docx AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 3

119 If the remuneration for work done then exceeds this figure, the external administrator will have to ask the creditors to approve a further amount of remuneration, after accounting for the amount already incurred. If an external administrator can t get the creditors approval, an application can be made to the Court to determine their remuneration. When there are limited funds available in the administration, or the external administrator s remuneration is below a statutory threshold, an external administrator is entitled to draw a oneoff amount of up to that threshold plus GST, without creditor approval. This amount is currently $5,000 (indexed). Who may approve remuneration? Committee of inspection approval A committee of inspection will generally only be established where there are a large number of creditors and/or complex matters which make having a committee desirable. Committee members are chosen by a vote of all creditors and work with the external administrator to represent the creditors interests. If there is a committee, the external administrator will ask it to approve the remuneration. A committee makes its decision by a majority in number of its members present in person at a meeting, but it can only vote if a majority of its members attend. In approving the remuneration, it is important that committee members understand that they represent all the creditors, not just their own individual interests. Creditors approval Creditors approve remuneration by passing a resolution at a creditors meeting. Creditors may vote according to their individual interests. To approve an external administrator s remuneration, a resolution is put to the meeting to be decided on the voices or by a poll (if requested by the external administrator or a person participating and entitled to vote at the meeting). A poll requires a count of each vote and its value to be taken and recorded for each creditor present and voting. A proxy is a document whereby a creditor appoints someone else to represent them at a creditors meeting and to vote on their behalf. A proxy can be either a general proxy or a special proxy. A general proxy allows the person holding the proxy to vote how they want on a resolution, while a special proxy directs the proxy holder to vote in a particular way. A creditor will sometimes appoint the external administrator as a proxy to vote on the creditor s behalf. An external administrator is only able to vote on remuneration if they hold a special proxy. There are provisions for a resolution to be passed by creditors without a meeting. This still requires a majority in value and number of creditors voting to vote in favour of the resolution. Creditors representing at least 25% in value of those responding to the external administrator s proposal can object to the proposal being resolved without a meeting of creditors. Version: August 2017 INFO remuneration external administrator.docx AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 4

120 Deciding if remuneration is reasonable If you are asked to approve an external administrator s remuneration, your task is to decide if the amount of remuneration is reasonable, given the work carried out in the administration and the results of that work. You may find the following information from the external administrator useful in deciding if the remuneration claimed is reasonable: the method used to calculate remuneration the major tasks that have been performed, or are likely to be performed, for the remuneration the remuneration/estimated remuneration (as applicable) for each of the major tasks the size and complexity (or otherwise) of the administration the amount of remuneration (if any) that has previously been approved if the remuneration is 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 remuneration is 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 remuneration is for work that is yet to be carried out, whether the remuneration is capped. ARITA s Code of Professional Practice ( the Code ) outlines the steps external administrators should take to make sure they fulfil their responsibilities to creditors when asking creditors to approve remuneration, including when those creditors are acting in their capacity as committee members. The Code is available on the ARITA website at If you need more information about remuneration than is provided in the external administrator s report, you should let them know before the meeting at which remuneration will be voted on. What can you do if you think the remuneration is unreasonable? If you think the remuneration being claimed is unreasonable, 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 remuneration. You may also choose to not vote on the resolution (abstain). You also have the power to put a resolution to the meeting. For example, you could put forward a resolution to change the way the external administrator charges for remuneration, or the periods at which the external administrator may withdraw funds. Any amending resolution must occur before the vote being taken on the resolution to approve remuneration. If the amended proposal is passed, the resolution is binding on the external administrator. However, such an amendment may result in the external administrator seeking to be replaced by another external administrator. If the external administrator is seeking approval of remuneration via a resolution without a meeting and more than 25% in value of the creditors responding object using the form provided by the external administrator, the proposal will not pass. If the external administrator wants the proposal passed, a meeting will need to be convened and any creditor entitled to participate in the meeting has the right, before the vote is taken, to put a resolution to the meeting as mentioned above. Version: August 2017 INFO remuneration external administrator.docx AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 5

121 A creditor may apply to Court for a review of an external administrator s remuneration. Creditors also have the power to appoint, by resolution, a reviewing liquidator to review any remuneration approved within the six months and any disbursements incurred in the 12 months before the reviewing liquidator s appointment. The cost of a reviewing liquidator is paid from the assets of the external administration. An individual creditor may also appoint a reviewing liquidator with the external administrator s consent. An individual creditor seeking the appointment of a reviewing liquidator must pay the cost of the reviewing liquidator. Reimbursement of out-of-pocket costs An external administrator should be very careful incurring costs that must be paid from the administration; as careful as if they were incurring the expenses on their own behalf. Their report on remuneration sent to creditors must also include information on the out-of-pocket costs of the administration (disbursements). Where these out-of-pocket costs are internal disbursements paid to the external administrator s firm (for example photocopying and phone calls) the external administrator must request creditor approval of these amounts. The external administrator may also ask for approval of internal disbursements in advance. If they do so, they will set the rates for those disbursements and a cap on the maximum amount that can be drawn. If you have questions about any of these costs, you should ask the external administrator and, if necessary, bring it up at a creditors or committee meeting. If you are still concerned, you have the right to seek the appointment of a reviewing liquidator (refer above). Queries and complaints You should first raise any queries or complaints with the external administrator or their firm. If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with ARITA at or with ASIC at ARITA is only able to deal with complaints in respect of their members. More information The ARITA website contains the ARITA Code of Professional Practice which is applicable to all its members. ARITA also provides general information to assist creditors at ASIC includes information on its website which may assist creditors. Go to and search for insolvency information sheets. Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. Version: August 2017 INFO remuneration external administrator.docx AUSTRALIAN RESTRUCTURING INSOLVENCY & TURNAROUND ASSOCIATION PAGE 6

122 INFORMATION SHEET 85 Approving fees: a guide for creditors If 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: Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. 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