Algeri, in the matter of Brown Sugar Australia Pty Ltd (administrators appointed) [2011] FCA 1011

Brown Sugar's financial position 4 The Administrators' preliminary investigations of Brown Sugar reveal that: 1. leading up to their appointment, Brown Sugar suffered financially due to: 1.1 successive management changes since 2009; 1.2 losses generated during the 2009/2010 and 2010/2011 financial years; 1.3 Brown Sugar's inability to service ongoing financial support required from ARL; and 1.4 adverse trading conditions and falling consumer sentiment; 2. Brown Sugar conducted its business from stores and offices either leased or licensed to it (except for one store which was leased to ARL), and does not own any freehold premises; 3. all invoiced rents and outgoings for each of the premises had generally been paid up-to-date by Brown Sugar. (Since the commencement of the administration, two stores have been closed or are about to close and the Administrators have paid the rents); 4. Australia and New Zealand Banking Group Limited (ANZ) holds a registered fixed and floating charge over the whole of the assets and undertaking of Brown Sugar; 5. much of Brown Sugar's plant and equipment, including shop fixtures and fittings, are subject to lease arrangements with ANZ; 6. Brown Sugar owes unsecured creditors (excluding employees) approximately $16 million, of which approximately $13.9 million is owed to ARL; and 7. outstanding entitlements of Brown Sugar's employees (including contingent entitlements) total approximately $712,000. 5 At the first creditors' meeting held on 12 August 2011, the Administrators advised the creditors that an application to extend the convening period of the second meeting creditors for a period of up to 120 days might be made to the Court to: 1. give the Administrators the opportunity to sell the business as a going concern; 2. determine if a Deed of Company Arrangement can be proposed; and 3. enable an investigation to be conducted into the affairs of Brown Sugar. No creditor voiced any objection to this possibility.

Sale process 6 Since their appointment, the Administrators have continued to operate the business of Brown Sugar with a view to securing a purchaser of the business as a going concern, and the Administrators have commenced a sale process for the business. However, the Administrators need more time in order to complete the sale process. 7 As at the date of this application, the Administrators have received a number of expressions of interest in relation to Brown Sugar's business. Under the current sale process timeline, indicative offers are to be lodged by those parties by 1 September 2011, with a due diligence process to commence on 8 September 2011. If the sale process is successful, it is anticipated that a binding sale contract will be executed in late September 2011.

Further investigations required 8 The Administrators submitted that they do not yet have sufficient information to enable them to prepare and circulate a report to creditors that would comply with s 439A(4) of the Act. They submitted that in addition to the ongoing sale process described above, the Administrators are still in the process of completing their investigations into whether there has been any insolvent trading or whether there are any voidable preferences which may be recoverable by a liquidator. 9 As at the date of this application, no proposals for a Deed of Company Arrangement have been received by the Administrators.

Extension of convening period 10 The Administrators submitted that it is in the best interests of Brown Sugar's creditors that the convening period be extended, because: 1. it will allow more time to complete an orderly process for the sale of the business as a going concern; 2. if the sale process is successful and a purchaser buys the business, then it is likely that many of the employees will retain their jobs. If the second creditors meeting is held without giving the Administrators the opportunity to complete the sale process, it is likely that the companies will be wound up, which will result in the employees losing their jobs; 3. the Administrators are continuing to trade the business, and are continuing to acquire goods and services from suppliers who comprise a large part of the ordinary unsecured creditors. If Brown Sugar is wound up, these suppliers will lose Brown Sugar as a customer and source of cash flow; 4. extending the convening period will allow the Administrators to retain the option to recapitalise Brown Sugar by way of a deed of company arrangement, should a proposal for a deed of company arrangement be received at a later date; 5. if the convening period is not extended by the Court and the second meeting of creditors is held, the Administrators would recommend that the meeting be adjourned until the matters referred to above could be completed. This would result in there effectively having to be two meetings, rather than one, with the result that substantial expenditure would be incurred and ultimately wasted in convening the meeting only for it to be adjourned to a further meeting. Furthermore, under s 439E of the Act, the maximum period for which a meeting of creditors can be adjourned once convened is 45 business days, which is unlikely to allow the Administrators sufficient time to complete the tasks required, such that a further application to the Court (to extend the period of the adjournment) would become necessary in any event; and 6. the Administrators have contacted Brown Sugar's two major creditors, ANZ and ARL, and have been informed that both of those creditors support the Administrators' application. 11 The Applicants informed the Court that should the matters referred to above be finalised in a shorter period, such that the Administrators are in a position to convene the second creditors meeting sooner than 16 December 2011, then they will do so.

Should the application be granted? 12 The Court has power to extend the convening period under s 439A(6) on an application made during or after the period. 13 The principles which apply to an application for an extension of time to convene and hold a second meeting of creditors have been considered in a series of cases commencing with Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 at 612. The principle applied in Mann was explained in Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 by Barrett J at [10]: The function of the Court on an application such as this is … to strike an appropriate balance between … the expectation that the administration would be a relatively speedy and summary matter and … the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders. See also Mentha, in the matter of Hans Continental Smallgoods Pty Ltd (Administrators Appointed) [2008] FCA 1933 at [20]; Re Colorado Group Limited [2011] VSC 260 at [24] and Re Riviera Group (2009) 72 ACSR 352 at [13]. 14 The Administrators submitted that 120 days will allow them sufficient time within which to complete the outstanding tasks referred to above and then report to creditors in a meaningful way and in compliance with their obligations under the Act, with a view to maximising the prospects of getting the best result for the creditors (including employees and suppliers). 15 In the circumstances, and given the attitude of Brown Sugar's two major creditors (see [10.6] above), I consider that it is appropriate for the Court to grant an extension of time. I am satisfied that an extension of 120 days strikes the 'appropriate balance' described by Barrett J referred to at [13] above. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.