FEDERAL COURT OF AUSTRALIA

Gothard, in the matter of Jewel of India Holdings Pty Ltd (Administrators Appointed) [2019] FCA 1289

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 2.13(1) of the Federal Court (Corporations) Rules 2000 (Rules) grant leave to:

(a)    Widjaja Family Trust trading as Eastern Cross Trading Co;

(b)    Sairam Sons Pty Ltd; and

(c)    Raji Foods (Aust) Pty Ltd trading as Sabrini Foods,

to be heard on this application without becoming parties to the proceeding.

2.    Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Act) and/or s 90-15 of the Insolvency Practice Schedule (Corporations) (IPSC), being Schedule 2 to the Act, s 439A of the Act (as modified by the Orders dated 16 May 2019) is to operate as if the convening period for the meeting of creditors of Jewel of India Holdings Pty Ltd and each of the other companies listed in the schedule (Companies) required to be held pursuant to s 439A of the Act (Second Meetings) be extended to 22 November 2019.

3.    Pursuant to s 447A(1) of the Act and/ or s 90-15 of the IPSC, Pt 5.3A of the Act is to operate such that the Second Meetings may be held, together or separately, at any time during, or within five business days after the end of, the convening period as extended by Order 2 above, notwithstanding the provisions of s 439A(2) of the Act.

4.    The plaintiffs, within seven business days after the making of Orders 2 and 3, are to take all reasonable steps to give notice of the Orders to the Companies’ creditors (including the persons claiming to be creditors) in accordance with Order 1 of the Court’s Orders dated 2 May 2019.

5.    Any person who can demonstrate sufficient interest (including any creditor of the Companies) for the purpose of modifying or discharging Orders 2 and 3 above have liberty to apply on giving all other interested parties not less than three business days’ written notice.

6.    The plaintiffs have liberty to apply in respect of these Orders on giving all interested parties not less than three business days’ notice, including (without limitation) for the purpose of seeking any further extension of the convening period as extended by Order 2 above.

7.    Subject to Order 8, the plaintiffs’ costs of and incidental to this application be costs and expenses in the administration of each of the Companies, and be paid out of the assets of the Companies.

8.    Pursuant to r 2.13(2) of the Rules the parties referred to in Order 1, who have been granted leave to be heard in the proceeding, are to pay the additional costs of the plaintiffs as a result of their intervention in the proceeding as agreed or taxed.

9.    List the proceeding for case management hearing on 7 November 2019 at 9.30 am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

MARKOVIC J:

1    The plaintiffs are the voluntary administrators of Jewel of India Holdings Pty Ltd (Administrators Appointed) (Administrators) and eight other companies listed in the schedule to the originating process commencing this proceeding (Companies). The Companies produce ready-to-eat chilled meals sold in supermarkets and other retail outlets.

2    On 16 May 2019, on the application of the Administrators, the Court made orders (May Orders), including an order pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) extending the convening period for the second meeting of creditors (Second Meeting), required to be held for each of the Companies, from 24 May 2019 to 22 August 2019.

3    The Administrators now seek further orders, including, relevantly, an order pursuant to s 447A(1) of the Act and/or s 90-15 of the Insolvency Practice Schedule (Corporations) (IPSC), being Sch 2 to the Act, that s 439A of the Act as modified by the May Orders is to operate as if the convening period for the meeting of creditors of each of the Companies required to be held pursuant to s 439A of the Act be extended to 22 November 2019. When the Administrators’ application first came before me on 8 August 2019, I was informed that it was opposed by 11 creditors. I adjourned the hearing of the application to permit those creditors to consider and articulate for the Court and the Administrators the basis of their opposition.

4    As at today, eight of those creditors have withdrawn their appearances and three of them were granted leave to be heard on the application without becoming a party to the proceeding pursuant to r 2.13(i) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules). They are Widjaja Family Trust trading as Eastern Cross Trading Co, Sairam Sons Pty Ltd and Raji Foods (Aust) Pty Ltd trading as Sabrini Foods. Mr McDonald, who appears for those parties, informed the Court that they do not object to the orders sought but seek that a condition be imposed on any order extending the time for the convening period to the effect that if the Administrators are in a position to convene the Second Meeting before the end of the period as extended, they would do so on reasonable notice to creditors and any other interested parties. In the course of argument, Mr McDonald indicated to the Court that his clients would be satisfied if, instead of imposing a condition, the Court made a notation on any orders to that effect.

background facts

5    The Administrators rely on affidavits sworn by Peter James Gothard, one of the Administrators, on 30 April 2019, 15 May 2019 and 7 August 2019 and a para of an affidavit sworn by Mr Gothard on 13 August 2019. Relevantly, in his affidavit, sworn on 7 August 2019, Mr Gothard sets out the material events which have occurred since the making of the May Orders and why the Administrators now seek a further extension of the convening period.

6    In summary, the first application for an extension of the convening period was made to enable the Administrators to complete an expression of interest campaign to test the market and identify any offers which may result in the preservation of the business of the Companies and provide a higher return to creditors than may be available in a liquidation. Since that time, the Administrators have concluded an expression of interest process, received and accepted a binding offer and have negotiated a business and asset sale and purchase agreement (Business Sale Agreement) with a prospective purchaser, B & J City Kitchen Pty Ltd (B & J). That agreement was executed on 24 July 2019.

7    The Australian Competition and Consumer Commission (ACCC) had, prior to execution of the Business Sale Agreement, raised concerns about the acquisition of the Companies’ business and assets by B & J and potential contraventions of the Competition and Consumer Act 2010 (Cth). As a result, following discussions with the ACCC, the Administrators provided an undertaking as sought by the ACCC and confirmed they would give five days’ notice of completion under any contract to sell the business and assets of the Companies to B & J.

8    The ACCC is undertaking a public review of the proposed sale. Because of that review, the Business Sale Agreement includes as conditions precedent to completion, completion of the ACCC review and receipt of clearance from the ACCC. Under the terms of the Business Sale Agreement, the parties have 10 weeks from its date, ending on 2 October 2019, to obtain clearance from the ACCC. Failing that, the Business Sale Agreement will automatically terminate unless otherwise agreed by the parties.

9    Having regard to the current circumstances of the Companies and depending on the time it takes for the ACCC to finalise its review, Mr Gothard estimates that it may take approximately 10 to 14 weeks from 7 August 2019 for the ACCC to conclude its review and to obtain ACCC clearance, to complete the Business Sale Agreement with B & J and to finalise the Administrators’ report to creditors in accordance with r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth). In Mr Gothard’s opinion, seeking a further extension of less than three months would risk the extension period ending before the ACCC’s review is complete, the Business Sale Agreement completes and the Administrators can finalise their report to creditors. If a second extension period is obtained and expires prior to those events occurring, a third application would need to be made to extend the convening period, which would result in wasted costs.

10    Importantly, Mr Gothard gives evidence that notwithstanding the further extension that is now sought by the Administrators, “if the Administrators are in a position to convene the second meetings of creditors before the end of the convening period (as extended), the Administrators will do so on reasonable notice to creditors and any other interested parties”. That is, despite an extension of the convening period the Administrators will, if they are able, convene the Second Meeting prior to the expiry of that period.

11    Mr Gothard also gave evidence about two further relevant matters. Firstly, the Administrators’ current cashflow forecast indicates that the Companies will have sufficient funds to trade the business until the conclusion of the proposed further extension, provided that the current customer contracts remain on foot and the current levels of customer orders and production continue as they are. In the event that there is a cash shortfall, Mr Gothard anticipates that either B & J, the Commonwealth Bank of Australia or a third-party lender could be approached to provide necessary funding. He notes, however, that if funding cannot be obtained to meet any cash shortfall that arises, the Administrators would likely be forced to terminate the operations of the business.

12    Secondly, Mr Gothard sets out the notice that has been given to all creditors and other stakeholders in relation to this application. I am satisfied that that notice has been extensively and indeed properly given, and extends not only to notice of the application, which was first returnable before this Court on 8 August 2019, but to the adjourned hearing today.

legal principles

13    Section 439A of the Act requires the administrator of a company under administration to convene a meeting of the companies’ creditors within the convening period as fixed by subs (5) or extended under subs (6). However, s 439A does not allow for a further extension of time after the initial extension: see Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (Administrators Appointed) (No 2) [2010] FCA 499 at [35], and the authorities cited therein. The requisite power to amend s 439A instead resides in s 447A: see Re Henry Walker Eltin Group Ltd (2005) 54 ACSR 383; [2005] FCA 984 at [1]; Chamberlain, in the matter of South Wagga Sports and Bowling Club Ltd (Administrators Appointed) [2009] FCA 25 (Chamberlain).

14    Since the introduction of s 90-15 of the IPSC, it has been observed that an application for a further extension to the convening period may be made pursuant to s 447A of the Act, and/or s 90-15 of the IPSC: see Re Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] NSWSC 1219 at [31].

15    The Court’s discretionary power to further extend the convening period pursuant to s  447A of the Act is subject to the same principles as an application brought under s  439A of the Act: see Chamberlain at [10]. Those principles are well established and have been summarised in a number of cases. In White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) [2018] FCA 21, at [11]-[13], Rangiah J summarised them as follows:

11    It is well established that the Court is to have regard to and balance the interests of the creditors in a reasonably speedy administration with the need to ensure that the speed with which it is dealt does not prejudice sensible and constructive actions directed towards maximising the return for creditors and shareholders: Diamond Press Australia Pty Limited [2001] NSWSC 313 (Barrett J) at [10]; Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 (Lindgren J) at [18]; Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) [2010] FCA 30 at [15]-[16]; Strawbridge, in the matter of Custom Coaches (Sales) Pty Ltd (Administrators Appointed) [2014] FCA 683 (Jacobson J) at [22]; In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777 (Black J) at [12]; Park (Administrator), in the matter of Surfstitch Group Limited [2017] FCA 1221 (Gleeson J) at [29]-[30].

12    In Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (ACN 102 298 279) (2009) 72 ACSR 352; [2009] NSWSC 585, Austin J identified at [13] various factors that had led to extensions being granted, including: the size and scope of the business; lack of access to corporate financial records; the time needed to execute an orderly process of disposal of assets; whether the extension would allow sale of the business as a going concern; and, more generally, that additional time is likely to enhance the return for unsecured creditors. His Honour said at [14]:

The cases show that where a substantial issue in any of these categories is established (and a fortiori, where the facts fit into more than one category), the court tends to grant an extension, and the extension tends to be for the time sought by the administrator provided that the evidentiary case has been properly prepared, there is no evidence of material prejudice to those affected by the moratorium imposed by an administration, and the court is satisfied that the administrator’s estimate of time has a reasonable basis.

13    It is also relevant to take into account that no objection to an extension of the convening period has been raised by creditors when notice of a proposed extension was given: see In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 316 (Hely J) at [2].

consideration

16    I am satisfied in this case, having considered the Administrators’ evidence, that the convening period should be further extended. The further extension will allow the Administrators sufficient time to complete the Business Sale Agreement. It is apparent that in order for that to happen, it is necessary for the ACCC to complete its review, and for the parties to that agreement to obtain ACCC clearance, matters which will take time. It is also clear from the evidence before me that the Administrators have formed the view that the granting of a further extension is in the interests of the creditors of the Companies, and that they are not aware of any specific or material prejudice which would be suffered by any creditor or group of creditors as a result of the further extension that is sought.

17    Another factor supporting the making of the order sought is that while some disquiet had originally been expressed by some of the creditors, when the matter came on for hearing today any objection to the making of the order for an extension of the convening period had been withdrawn, and there is no current objection to the making of the orders by any creditor.

18    The Administrators submit, and I accept, that the following additional factors favour the granting of the extension. First, any person who can demonstrate sufficient interest may apply to the Court for modification of the proposed orders. Secondly, the evidence about the Companies’ current cashflow forecast indicates that they will have sufficient funds to trade the business until the conclusion of the further extension. Thirdly, there is no winding up application on foot in respect of any of the Companies.

19    I propose to make orders in the form sought by the Administrators. I do not propose to accede to the request made by Mr McDonald on behalf of the three creditors upon whose behalf he appears to add a notation to those orders in the form of Mr Gothard’s evidence at [26] of his affidavit sworn on 7 August 2019, which I have set out at [10] above. Mr Gothard has given that evidence to the Court. It is clear that he and his fellow Administrators are aware of their obligations and duties, and I have no reason to believe that, if the opportunity arises, and the Administrators are in a position to convene the Second Meeting before the end of the convening period, they would not do so.

conclusion

20    For those reasons, I will make the orders sought by the Administrators in the form of the short minutes provided to the Court.

Associate:

Dated:    20 August 2019

Schedule of Companies

No: NSD 642 of 2019

Federal Court of Australia

District Registry: New South Wales

Division: General