Apostolou v VA Corp Aust Pty Ltd

Federal Court of Australia|2020-04-23|Before: Farrell J

The Originating Process be made returnable instanter.
Pursuant to s 90-15 of Sch 2 to the Corporations Act 2001 (Cth) or alternatively s 57 of the Federal Court of Australia Act 1976 (Cth), the plaintiffs be appointed as joint and several receivers without security over the property of the trust fund comprising the MyHouse Partnership business (Trust) constituted by the Bare Trust Deed referred to in the affidavit of Michael Brereton sworn 23 April 2020 at [18] and filed in this proceeding with the powers provided by s 437A of the Corporations Act as if reference therein to "the company" were to the Trust.
The requirement for receivers to file a guarantee under rr 14.21 and 14.22 of the Federal Court Rules 2011 (Cth) be dispensed with.
Pursuant to s 90-15 of Sch 2 to the Corporations Act, the plaintiffs are justified in treating and shall treat: (a) all of the business and assets of MyHouse (Aust) Pty Limited (Administrators Appointed) ACN 000 908 298 (the Company) as assets of the Trust; (b) all of the debts and liabilities which are provable in the external administration of the Company as having been incurred in the conduct of a business as trustee of the Trust; and (c) all of the assets of the Trust, including the proceeds of assets realised or due to be realised by the plaintiffs in the course of the external administration of the Company (Proceeds) as being subject to an indemnity in favour of the Company as to its power to exonerate the debts and liabilities.
The plaintiffs, as receivers, not distribute the assets of the Trust without the direction of the Court.
The costs, expenses and remuneration incurred by the plaintiffs in acting as receivers and managers of the Trust, including the costs of this application, be paid from the assets of the Trust and, if they be insufficient, from the assets of the Company.
Pursuant to s 439A(6) of the Corporations Act, the convening period within which the plaintiffs must convene the second meeting of the creditors of the Company under s 439A(5) of the Corporations Act (Second Meeting) be extended from 27 April 2020 to 27 May 2020.

INTRODUCTION 1 On 19 March 2020, the plaintiffs, Michael Brereton and Sean Wengel of William Buck Restructuring & Insolvency were appointed as voluntary administrators of MyHouse (Aust) Pty Limited (Administrators Appointed) ACN 000 908 298 (Company) pursuant to s 436A of the Corporations Act 2001 (Cth). 2 By originating process filed on 23 April 2020, the administrators sought the following orders: (1) Pursuant to s 57 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), that they be appointed as receivers of the property of the MyHouse Partnership (Trust) (a trading trust pursuant to which the Company carried on its business); (2) Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (which is Sch 2 to the Corporations Act) (Insolvency Practice Schedule), advice that the administrators are justified in treating the assets of the Company as assets of the Trust, together with consequential orders in relation to those Trust assets and the proposed appointment as receivers; (3) Extending the convening period for the second meeting of creditors from 27 April 2020 to 27 May 2020 pursuant to s 439A(6) of the Corporations Act and consequential orders pursuant to s 447A of the Corporations Act; (4) Allowing the issue of notices of meetings of the Company's creditors under ss 75-225(1) and 75-15 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) electronically pursuant to s 90-15 of the Insolvency Practice Schedule and s 447A of the Corporations Act; and (5) Suppressing access to the Confidential Exhibit MB-2 to the affidavit of Michael Brereton sworn on 23 April 2020 pursuant to s 37AF of the Federal Court Act. (6) Granting liberty to any creditor of the Company, or other person with a sufficient interest in the Trust, or who can demonstrate sufficient interest to vary the orders sought to apply to vary these orders upon 3 days' notice to the plaintiffs. 3 These are reasons for making orders on 23 April 2020 substantially in the form of those sought by the administrators and for amending those orders on 1 May 2020. The hearing of the application was conducted by video link. No creditor or beneficiary of the Trust sought to appear at the hearing. 4 What follow relies on the affidavit of Michael Brereton sworn on 23 April 2020, Exhibit MB-1, Confidential Exhibit MB-2 and a bundle of documents comprising Exhibit 1 relating to electronic notification of these proceedings given to creditors of the Company on the morning of 23 April 2020. All exhibits were tendered. Exhibit 1 included evidence of confirmation by the Commonwealth Bank of Australia (CBA) (the Company's major secured creditor) confirming that it did not object to the proposed extension of the convening period.

BACKGROUND 5 The first meeting of creditors of the Company was held on 27 March 2020. At that meeting, the administrators' appointment was confirmed but no committee of creditors was formed. 6 Since their appointment, the administrators have commenced orthodox investigations into the Company's affairs. The directors have provided reports as to the affairs of the Company (ROCAPs). There is a balance sheet for the Company as at 18 March 2020, and that is the most recently completed management account available to the administrators at the date of their appointment. 7 The Company was incorporated in 1971, and was originally known as "Mansours of Fairfield Pty Ltd". 8 The Company operates a retail homewares and furnishings business trading as "MyHouse", which Mr Brereton describes as a well-established brand in the Australian homewares market. It had a national footprint of 36 stores, as well as an online retail platform (Business). Products sold by the Company include bed linens, bath towels and home décor. Its key assets include its inventory and the Business as a going concern (including property, plant and equipment and intellectual property including its domain name, customer data base and its membership rewards program). 9 As at the date of the administrators' appointment, the Company: (1) Traded 36 stores and one online retail shop; (2) Imported stock both locally and internationally; (3) Co-ordinated the warehouse operations at the Company's head office; and (4) Employed approximately 280 permanent and casual employees. (5) The stores and head office operated out of leased premises, 34 stores and the head office in New South Wales, 1 store in the Australian Capital Territory and one in Victoria. 10 The directors' ROCAPs reveal that as at the date the administrators were appointed, the Company had total assets of $5,098,670 (including inventory to a value of $5,104,878, although the value of inventory is subject to discounting through clearances), three secured creditors owed $1,543,311 (with the largest being the CBA for approximately $695,236) and employee creditors owed $656,075, approximately 250 unsecured creditors owed $5,042,511 and statutory creditors owed $356,174, with total liabilities amounting to $7,598,070. There was therefore a deficiency of $2,499,400. 11 As Mr Brereton explains, based on the administrators' review of the Company's books and records and discussions with the Company's directors and management, it appears that: (1) In recent times the Company experienced a decline in revenue, attributed to a challenging retail environment over the last 12 months and pressures in the form of higher fixed costs and increased competition in the online shopping space; (2) Before entering administration, the Company pursued options to address its worsening financial position, appointing David Winterbottom of Winterbottom Advisory to provide advice on options for the Business; and (3) From July 2019 onwards, certain cost-cutting measures were implemented but they proved unsuccessful. This, together with the impact of the public health measure taken to abate the spread of the continuing COVID-19 pandemic, led to the decision to appoint administrators to the Company. 12 In conducting the administration, the administrators assessed the ongoing viability of individual stores and elected to cease trading in 13 stores deemed unviable with a managed wind down to eventual cessation, leaving 23 stores remaining in New South Wales. That process involved notifying staff members and issuing approximately 69 termination notices, undertaking a final stocktake and transportation of stock to the warehouse, and liaising with landlords with regard to the Company's exit from those stores. Rental abatements have been received in relation 10 of the continuing stores. Five head office employees' employment has been terminated and seven employees voluntarily resigned. 13 It is Mr Brereton's evidence that, during his investigations into the Company's affairs, on 15 April 2020 he became aware of: (1) The existence of a document titled "MyHouse Partnership Deed" establishing the MyHouse Partnership dated 16 October 2002, together with financial statements dated 30 June 2019 for the Company and the MyHouse Partnership; and (2) A document entitled "Bare Trust Deed" dated 16 October 2002. Mr Brereton says that this document was provided to Mr Brereton after he made enquiries with the Company's directors. Consistent with the duty imposed on parties seeking relief ex parte, counsel for the administrators explained that one or more of the directors of the Company say that Mr Brereton was informed of these arrangements at the time of his appointment, but Mr Brereton does not recall that occurring. 14 Following his review of the Bare Trust Deed and the MyHouse Partnership Deed (together, Trust Documents), and his discussions with the directors of the Company, Mr Brereton understands that: (1) The Company is, by operation of the Bare Trust Deed, the trustee of the MyHouse Partnership. The Company was appointed to that role by the "Owners" (as described in the Bare Trust Deed). The Owners are also shareholders in the Company with interests in the partnership in the same proportions as their shareholdings; (2) Pursuant to the Trust Documents, a "Fund" was established, which comprised the assets of the MyHouse Partnership and the Business; (3) On and from 16 October 2002, the operations of the Company were limited to the activities of the Business; and (4) There is nothing contained in the books and records to show that the Company conducted any other activities in its own right, or in any other capacity. 15 Based on his review of the financial statements for the Company and the MyHouse Partnership to which he has had access, it is Mr Brereton's evidence that: (1) The treatment of the assets and liabilities of the Company accords with with the financial records of the MyHouse Partnership; (2) There is no activity of the Company disclosed in any profit or loss or assets and liabilities statement that is not referable to the activities of the MyHouse Partnership; (3) The Company's financial statements state that "[t]he company acts solely as Nominee/Bare Trustee for the MyHouse Partnership"; and (4) The Company's financial statements also state that "… liabilities have been incurred on behalf of that partnership in the company's capacity as nominee/bare trustee". 16 It is Mr Brereton's view that, at this point, it appears that the Company traded solely as trustee of the Trust and it had no activities or assets in its own name. However, in his view, there is nothing in the Trust Documents which expressly authorises the Company as trustee to sell the assets of the Trust. Mr Brereton notes the following provisions of the Bare Trust Deed: (1) Clause 2.5 provides: The Owners must in their Respective Proportions indemnify the Nominee against any loss suffered as a result of any actions or claims arising out of the Nominee acting as a bare trustee of the Fund; (2) Clause 2.7 provides: If the Fund or any part of it is ever disposed of, the Nominee must: (i) receive the sale proceeds; and (ii) after payment of all outgoing and expenses in respect of the disposal hold such proceeds on behalf of the Owners in accordance with this Deed; (3) Clause 7.1 provides: The Owners may by instrument signed by them and delivered to the Nominee remove and appoint another person as Nominee provided that the new Nominee is not and cannot become an Owner. 17 From these provisions, Mr Brereton observes that: (a) the Company (as Nominee) has a right of indemnity out of the Trust's assets; (b) while the power of sale might be inferred from the operation of cl 2.7, none exists explicitly; and (c) the Company may be removed as trustee at any time. 18 Again, having regard to the ex parte nature of the application, counsel for the administrators explained that the Owners have suggested that cl 5 of the Bare Trust Deed is sufficient to provide a power of sale, but the administrators are not satisfied that that is correct. Clause 5 provides as follows: 5. NOMINEE MAY ACT In the absence of instructions from the Owners the Nominee may act as the Nominee sees fit and the Owners will be bound by the acts of the Nominee in this regard. 19 It is Mr Brereton's evidence that, given the operation of cll 2.7 and 7.1 of the Bare Trust Deed, he understands that a Court order is required to enable the administrators to realise the assets of the MyHouse Partnership and to distribute proceeds according to statutory priorities. 20 Mr Brereton then goes on to note that, on 19 April 2020, the administrators sought and obtained consent from the Owners to allow the administrators to do all things necessary with respect to trading the Business. His evidence for this is a document dated 17 April 2020 between the Owners, the administrators and the Company headed "Consent of Owners". 21 The Consent of Owners contained the following recitals: Introduction A. The Owners have executed the MyHouse Partnership Deed for the purposes of regulating their interests in the partnership and the Business conducted by the partnership. B. The Owners and the Company have executed the Bare Trust Deed for the purposes of appointing the Company to and regulating its operation of the Business. C. On 19 March 2020, the directors of the Company resolved to appoint Michael Brereton and Sean Wengel as joint and several Administrators of the Company. D. The Administrators have sought and the Owners by this document will give their approval to the Administrators to do all things necessary in respect of the Business to maximise the return for creditors of the Company and for the purposes of discharging their statutory obligations under the Corporations Act 2001 (Cth), on the terms contained in this document. 22 At cl 2.1 of the Consent of Owners, the Owners acknowledged and agreed with the administrators that: (1) they have the capacity to execute this document; (2) the matters set out in the Introduction to this document are true and correct in every particular; (3) the Administrators were validly appointed to the Company on 19 March 2920; (4) the appointment of the Administrators to the Company was for the purposes of, amongst other things, operating and disposing of the Business and considering and, if appropriate, causing the creditors of the Company to approve and the Company to enter into a Deed of Company Arrangement; (5) prior to the appointment of the Administrators to the Company, the sole business of the Company was its operation of the Business; (6) they have not and will not give instructions to the Company which might fetter the discretion of the Administrators, or otherwise prevent or limit the Company from acting, through the Administrators, as it sees fit subject to the obligations and duties of the Administrators pursuant to the Corporations Act or at law; (7) if any purchaser of the Business or its assets requires the written consent of the owners to a transfer of the Business or its assets, that written consent will be promptly provided by the Owners subject to the Administrators having prior to any such transfer (that is other than in the ordinary course of business} having held a meeting of creditors convened in accordance with Part 5.3A of the Corporations Act; and (8) they will not exercise rights under clause 7.1 to remove the Company from its position as provided for in the Bare Trust Deed during the course of the Administration or the term of any Deed of Company Arrangement. 23 Clause 2.2 of the Consent of Owners provides as follows: The Owners each authorise, consent to and approve the Administrators carrying on the administration of the Company in accordance with, and subject to, the provisions of Part 5.3A of the Corporations Act and the obligations of the Administrators generally at law to the Company, including, without limitation: (1) operating the Business at their discretion; (2) disposing of the Business including any of its assets; and (3) application of the Fund to meet the debts of the Company, including, without limitation, the costs of the administration of the Company being the Administrators' remuneration, internal and third party disbursements. 24 The Court notes that none of the creditors or beneficiaries of the Trust gave notice of objection to the orders being made and none appeared to make any objection, albeit that notice of the hearing was only given on the day of the hearing. The Courts note that the draft orders made provision for an aggrieved person to approach the Court to vary the orders made.

TRUST APPLICATION 25 Sections 437A to 473D of the Corporations Act relevantly provide as follows: Division 3 Administrator assumes control of company's affairs 437A Role of administrator (1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. (2) Nothing in subsection (1) limits the generality of anything else in it. Note: A PPSA security interest in property of a company that is unperfected (within the meaning of the Personal Property Securities Act 2009) immediately before an administrator of the company is appointed vests in the company at the time of appointment, subject to certain exceptions (see section 267 of that Act). 437B Administrator acts as company's agent When performing a function, or exercising a power, as administrator of a company under administration, the administrator is taken to be acting as the company's agent. 437D Only administrator can deal with company's property (1) This section applies where: (a) a company under administration purports to enter into; or (b) a person purports to enter into, on behalf of a company under administration; a transaction or dealing affecting property of the company. (2) The transaction or dealing is void unless: (a) the administrator entered into it on the company's behalf; or (b) the administrator consented to it in writing before it was entered into; or (c) it was entered into under an order of the Court. (3) … (4) Subsection (2) has effect subject to an order that the Court makes after the purported transaction or dealing. (5) If, because of subsection (2), the transaction or dealing is void, or would be void apart from subsection (4), an officer or employee of the company who: (a) purported to enter into the transaction or dealing on the company's behalf; or (b) was in any other way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the transaction or dealing; contravenes this subsection. 26 Section 90-15 of the Insolvency Practice Schedule (Corporations) relevantly provides as follows: 90-15 Court may make orders in relation to external administration Court may make orders (1) The Court may make such orders as it thinks fit in relation to the external administration of a company. Orders on own initiative or on application (2) The Court may exercise the power under subsection (1): (a) on its own initiative, during proceedings before the Court; or (b) on application under section 90-20. … 27 Section 57 of the Federal Court Act provides as follows: 57 Receivers (1) The Court may, at any stage of a proceeding on such terms and conditions as the Court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do. (2) A receiver of any property appointed by the Court may, without the previous leave of the Court, be sued in respect of an act or transaction done or entered into by him or her in carrying on the business connected with the property. (3) When in any cause pending in the Court a receiver appointed by the Court is in possession of property, the receiver shall manage and deal with the property according to the requirements of the laws of the State or Territory in which the property is situated, in the same manner as that in which the owner or possessor of the property would be bound to do if in possession of the property. 28 Mr Brereton's evidence is compelling that the Company's only business was to act as bare trustee of the Trust in operating the Business under the Bare Trust Deed for the benefit of the MyHouse Partnership and the Court is satisfied that he is justified in treating the assets and liabilities of the Company on that basis. 29 The administrators correctly submitted that, as a bare trustee, the Company's duties, powers and rights are limited to protecting the trust assets and it has limited powers to deal with the assets of the Trust: see Caterpillar Financial Australia Limited v Ovens Nominees Pty Ltd [2011] FCA 677 at [26] (Gordon J). 30 A bare trustee may exercise its right of indemnity without judicial intervention where property is not required to be sold (Jennings v Mather [1902] 1 KB 1 at 6; Apostolou v VA Corp Aust Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84 at 92-93 [38]-[39] (Finkelstein J)). But the lien does not confer a power of sale, and if sale be necessary a court order or the appointment of a receiver to sell is required (Apostolou v VA Corp Aust Pty Ltd [2011] FCAFC 103 at [45] (Perram, Nicholas and Yates JJ)): see Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 (Allsop CJ at [44], Farrell J agreeing at [196]). Once the sale has been effected, the proceeds may be appropriated by way of exoneration as part of the conduct of the administration: see Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 at [55]-[58] (Kiefel CJ, Keane and Edelman JJ), [95]-[97] (Bell, Gageler and Nettle JJ), [171] (Gordon J). 31 In In the matter of Mecfab Holdings Pty Ltd [2015] NSWSC 46 (Mecfab Holdings) at [9] (Brereton J); Griffiths (Administrator) v The Trustee for Chrisamanda Trust trading as Chrisamanda Trust [2017] FCA 1222 (Trustee of Chrisamanda Trust) at [11] (Gleeson J); and Derrington J in Trenfield, In the matter of Crusaders Managers Pty Ltd (Administrators Appointed) [2018] FCA 876 (Crusader Managers) at [16] (Derrington J) the Court found that appointing the administrator/s of a corporate trustee as receiver/s of a trust's assets facilitates and simplifies the administration of the corporate trustee by providing for the trust's business and assets to be under the same control as the corporate trustee while it is in administration, and that aids in the vindication of the trustee company's right of indemnity out of the trust's assets. 32 In their written submissions and at the hearing on 23 April 2020, as justification for their appointment as receivers over the property of the trust fund comprising the MyHouse Partnership's Business, the administrators relied on there being no clear power of sale in the Bare Trust Deed and the facts that (a) all of the assets held by the Company are assets of the Trust, and (b) the Company could be removed as trustee at any time. No reference was made in written or oral submissions to the Consent of Owners document, relevant terms of which are set out at [21] to [23] above. Further, the authorities on which the administrators relied related to liquidators of a corporate trustee; none related to situations where administrators sought to be appointed as receivers of a corporate trustee. 33 Following the hearing, the Court drew the matters referred to at [29] above to the administrators' attention and sought submissions as to whether the orders made on 23 April 2020 should be amended having regard to the terms of the Consent of Owners document, and the nature of the relief granted in Mecfab Holdings at [9]; Trustee for Chrisamanda Trust at [11] and Crusaders Managers at [16]. 34 In written submissions filed on 27 April 2020, the administrators submitted that: (1) The existence of Consent of Owners document does not speak against an order that the administrators be appointed as receivers of the property of the Trust and it is appropriate that the administrators be appointed as receivers of the Trust's property because: (a) On a practical level, that appointment puts beyond doubt the administrators' right to deal with the property of the Trust. It would remove any risk that, despite the terms of cl 2.1(8) of the Consent of Owners, the Company would be removed as "Nominee" pursuant to clause 7.1 of the Bare Trust Deed. (b) The need for that appointment is heightened where: (i) The consent in cl 2.1(8) of the Consent of Owners document is only for the period of any administration or a deed of company arrangement. It does not deal with the circumstance where, for example, a liquidator is appointed; (ii) Nothing in the Consent of Owners document purports to amend the Bare Trust Deed, or to confer on the Company a power of sale in respect of the assets of the Company held on trust. To the extent approval was provided, it was confined by the terms of cl 2.2 to the "Administrators", and not "the Company". As the assets held on Trust were and are held by the Company, it is the Company which would have required a power of sale; and (iii) On its face, the Consent of Owners document appears not to be expressed as having been executed as a deed, nor does it appear that consideration has passed from the Company or the administrators to the Owners. A third party looking at that document might hold concerns about its enforceability. (2) In light of the authorities referred to at [30] above, and having regard to their appointment as administrators, not liquidators: (a) It would be appropriate to amend the order with respect to their powers as receivers so that, in relation to the Trust, they have the same powers as the powers conferred on an administrator in relation to a company by s 437A of the Corporations Act instead of the powers conferred by s 420 of the Corporations Act; and (b) Any powers granted be limited such that the administrators not distribute the assets of the Trust without leave of the Court. In this regard, it may be appropriate that this restriction applied to any proceeds of sale of assets of the Trust. 35 The Court accepts the administrators' submission that the terms of the Bare Trust Deed are arguably not sufficient to empower the administrators to sell the Business without the express consent of the Owners. However, it is less clear that that proposition holds in light of the terms of the Consent of Owners document. It is true that the Consent of Owners does not in terms amend the Bare Trust Deed, however, cl 2.2 of the Consent of Owners does contain an express consent to the administrators, in their discretion, disposing of the Business including any of its assets, and application of the Fund to meet the debts of the Company, including, without limitation, the costs of the administration of the Company. While it is true that the Consent of Owners document is not expressed to be a deed nor is there any reference to the administrators providing consideration for the authorities and consents in the Consent of Owners document such that those consents and authorities arguably could be withdrawn, until they are withdrawn, those consents and authorities would remain in place. 36 Having said that, the Court accepts that there may be some ambiguity in relation to the consent and authority given to the administrators in relation to the disposition of the Business or any part of it in the Consent of Owners, as cl 2.1 expresses a more limited consent to the administrators disposing of the Business because it is subject to the requirement that there first been a second meeting of creditors. 37 Further, the Court accepts that administrators and any relevant purchasers would have more confidence in their negotiation of an ultimate sale if it is clear that the administrators have unambiguous power to sell the Business or any part of it. That is likely to facilitate the sale process and possibly achieve a better return for the Trust's assets for the benefit of the Trust's creditors and beneficiaries, who are also the shareholders of the Company. That is consistent with the object of Part 5.3A as set out in s 435A of the Corporations Act. There is therefore utility in appointing the administrators as receivers under s 57 of the Federal Court Act and providing the advice to the administrators under s 95-15 of the Insolvency Practice Schedule. Further, the Court accepts that the cost of making the application for these orders, in the context of the need to approach the Court for orders extending the convening period, is likely small. 38 The Court considered it appropriate to dispense with the requirement for the administrators to provide security. This course has been adopted previously by the Courts, not least in the cases cited at [33] above. 39 The Court considered that any proceeds of sale of the Business or any part of it would be assets of the Trust so that there was no need to refer expressly to proceeds of sale in the order limiting the power to distribute assets of the Trust. 40 The Court accepted the administrators' submission that it would not be appropriate now to make an order requiring the receivers to pass final accounts and the form of those accounts. It will be necessary for the administrators to seek the Court's approval to their remuneration as receivers and leave to distribute assets. It would be appropriate to address the question of the utility for preparation of accounts and their form at that time or at a time after the second creditors' meeting. The Court notes that the requirement to prepare such accounts has been dispensed with previously where the cost of complying with a formal procedure for passing accounts exceeds any likely benefit that may accrue: see Tonks, in the matter of PWG Holdings Pty Ltd (No 2) [2017] FCA 893 at [21] (Yates J).

EXTENSION OF CONVENING PERIOD 41 It is Mr Brereton's evidence that, since the administrators' appointment, they have continued to trade all elements of Business on a "business as usual" basis, within the constraints of the Federal and State Governments' responses to the COVID-19 pandemic. Those measures include social distancing restrictions and "stay at home" requirements. Mr Brereton further explained that, similarly with all other non-grocery-related stores, the retail sector has been affected by the restrictions designed to suppress spread of the COVID-19 virus. It is Mr Brereton's opinion that the uncertainty attendant on the current economic environment will affect the timing of the sale process and prospective purchasers are likely to be cautious. He says that the sale process is unlikely to be concluded in the short term, and certainly not by the end of the convening period on 27 April 2020. 42 Mr Brereton's evidence is that an extension of the convening period would provide an appropriate amount of time to negotiate the sale process, having regard the nature and value of the assets involved. 43 In continuing to trade on a "business as usual" basis, the administrators commenced a discounting and stock clearance program from 20 March 2020. Since then, the Business has traded favourably, generating sales of $3.1 million with cash at bank currently in the order of $2.7 million (after payment of salaries but before payment of expenses). The period of favourable trading has informed their decision to keep retail stores open, notwithstanding the COVID-19 restrictions and prevailing general economic uncertainty. 44 Mr Brereton says that, should additional time not be available to properly complete a sale process for the Business and were employees to be terminated, he estimates that total employee entitlements will be approximately $1,647,311 including notice, redundancy entitlements and superannuation obligations. 45 The administrators' sale process was announced through advertisements placed in the Australian Financial Review during the week ended 29 March 2020, with simultaneous targeted invitations to 28 parties, being private equity firms with interests in real estate and turnaround, competitors and suppliers to the Business, certain clients of William Buck and parties identified by the Company's directors as having previously expressed interest in the Business. In short: (1) 23 parties expressed interest and were issued with confidentiality deeds; (2) 16 parties returned signed deeds (and two parties were not required to sign a deed due to their status as related parties); (3) An Information Memorandum was issued to a total of 18 parties; (4) As at 22 April 2020, the administrators have received nine non-binding indicative offers, of which five have been assessed by the administrators as being acceptable both as to their terms and the financial wherewithal of the proponent and they are in advanced discussions with one party; and (5) Whilst the administrators' timetable for this process has generally been met, to date no final offers have been made, which Mr Brereton considers may be attributable to the Easter period and the COVID-19 restrictions. 46 In this context, Mr Brereton says that he is unable to estimate a date for completion of any sale which may eventuate from the sale campaign. In his experience, it may be necessary for the successful purchaser to negotiate separately with each of the landlords and other third parties to obtain either consent to assignment or novation or grant of replacement leases and other agreements, and also to negotiate with any continuing employees. 47 During the time allowed with the proposed extension to the convening period, it is the administrators' intention to: (1) Provide the four shortlisted non-related interested parties with sufficient time to complete their due diligence and to make final offers; (2) Assess the financial bona fides of the potential successful purchaser and to consider whether the proposed sale will result in the best return to creditors; (3) Negotiate the structure and terms of any sale as well; and (4) Cause the assignment of any leases and the transfer of employees. 48 One of the potential purchasers has also submitted proposal which includes a deed of company arrangement (DOCA). A summary of the proposal is in Confidential Exhibit MB-2. The administrators need to assess that DOCA, together with the proposal of which it forms part. 49 Mr Brereton says that the Company's affairs are complex, with the operation of a number of stores being affected by the COVID-19 restrictions, and where the Trust and the documents associated with it have only recently come to the administrators' attention. He considers that further time is required for the administrators to carry out their investigations, including in relation to: (1) Holding discussions with interested parties and facilitating the conduct of due diligence by those parties; (2) Quantifying and assessing the recoverability of any claims the Company might have; (3) Obtaining and assessing valuations of the Business and its assets; (4) Determining employee entitlements; and (5) Carrying out further investigations including with respect to the Trust Documents. 50 So far as concerns any detriment which could be occasioned by those affected by the statutory moratoria, Mr Brereton notes that: (1) The Company's major secured creditor (the CBA) supports the administrators' making of this application. (2) An extension of the convening period allows the potential for a recapitalisation of the Business, which will maximise the chances of that business continuing in existence and allow for a potential of continued employment for the remaining employees. (3) Landlords have been, and will continue to be, paid rent and other amounts due under the leases attributable to the period specified in section 443B(2) of the Corporations Act. The administrators are negotiating with a number of landlords in relation to the continuation of certain leases. (4) The administrators have not identified any specific prejudice which might be suffered by unsecured creditors. An extension of the convening period provides an opportunity to provide a greater return to unsecured creditors should any sale of the Business be effected, or a suitable DOCA proposal be made. 51 Mr Brereton considers that an extension of the convening period for 30 days is required for the administrators to complete their investigations and advance the sale process.

Legal principles 52 The statutory framework and legal principles governing the grant of extensions of the convening period are well established. 53 In exercising the jurisdiction to extend time under s 439A(6) the Court must have regard to the object of Part 5.3A of the Corporations Act as set out in s 435A. The object is to maximise the chances of the company, or as much as possible of its business, continuing in existence. If that is not possible, the object is to achieve a better return for the companies' creditors and members than would result from an immediate winding-up of the company. 54 The power to extend the time for convening the second creditors' meeting is one that should not be exercised as a matter of course. Rather, the Court must strike an appropriate balance between the expectation that administration will be a relatively speedy 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 In the matter of Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 at [11] and the authorities there cited. 55 Other relevant factors include: (1) A consideration against the too ready grant of an extension of the convening period is the fact that, while the voluntary administration continues, there is an embargo or moratorium on the enforcement of remedies by secured creditors, lessors and others; (2) The application is to be assessed by reference to whether an extension is necessary to enable the administrators to prepare and provide the report and statements, and, in particular, to arrive at the opinion referred to in s 75-225(3)(b) of the Insolvency Practice Rules , in order to inform creditors adequately so that they will be in a position to decide whether to terminate the administration, execute a deed of company arrangement or place the Company in liquidation; and (3) It is often desirable that any extension be accompanied by an order under s 447A, permitting the meeting to be held at any time during the convening period as extended. See Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18] (Lindgren J) and the cases there cited.

Consideration 56 The Court was satisfied, having regard to these principles, that it was appropriate to make orders extending the convening period until to 27 May 2020 having regard to these factors: (1) This is the first application for an extension of the convening period and the application was made before the convening period expired. (2) The administration is complex, having regard to the scope of the Trust's Business, the stage of the sale process and the practical and economic constraints concomitant on the "stay at home" and physical distancing requirements designed to limit the spread of the COVID-19 virus. (3) The period of the extension requested, being 30 days, is a relatively short period and it is Mr Brereton's evidence that that period is necessary in order to further negotiate the sale of the Business and/or the provision of a deed of company arrangement proposal which might be put before creditors. (4) The CBA is the Company's major secured creditor and it supports the extension of the convening period. (5) It is Mr Brereton's view that an extension of the convening period for 30 days is unlikely to affect adversely the interests of unsecured creditors. It is likely in their best interests that the Company continues to trade with a view to realising a maximum value for the Business either in whole or in part or as part of the DOCA. (6) The legal representative for the Company's shareholders has been contacted and does not oppose the extension of the convening period. (7) Mr Brereton's evidence would indicate that the administrators have been diligent in their conduct of the administration up to the time of their application. The administrators need more time to advance the sale of the Business or a deed of company arrangement proposal, to investigate the affairs of the Company and to prepare the report to creditors required under s 75-225(3)(b) of the Insolvency Practice Rules.

ORDERS RELATING TO NOTIFICATIONS TO CREDITORS 57 The administrators sought orders permitting modifying the requirements of ss 75-225(1) and 75-15 of the Insolvency Practice Rules to permit electronic notification of meetings to creditors. There are many decisions in which the courts have made orders permitting notice of creditors' meetings to be given by electronic means to those for whom e-mail addresses are available and otherwise by notice, for example on an administrators' website or by newspaper advertisement. This saves costs and time and so conserves limited assets for the benefit of creditors: see In the matter of BBY Ltd [2015] NSWSC 974 at [7] (Brereton J) and the cases there cited; see also Quinlan, in the matter of Halifax Investment Services Pty Ltd (Administrators Appointed) [2018] FCA 1891 at [12]-[14] (Yates J) and Jahani, in the matter of The Ralan Group Pty Ltd (administrators appointed) [2019] FCA 1446 at [23] (Gleeson J). Further, as I noted in Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) [2020] FCA 542 at [33], such orders facilitate the efficient continuation of the administration of the Company at a time when limits have been imposed on gatherings of people designed to suppress the spread of the COVID-19 virus to protect the health and welfare of the Australian community.

CONFIDENTIALITY ORDER 58 The Court was satisfied that it was necessary to prevent prejudice to the proper administration of justice to make an order under s 37AF of the Federal Court Act suppressing access to Confidential Exhibit MB-2 to Mr Brereton's affidavit until after the second creditors' meeting (or any adjourned second creditors' meeting) or other order of the Court. Confidential Exhibit MB-2 contains a proposal for a DOCA which has not yet been fully considered by the administrators. Mr Brereton was concerned that if that proposal were to be disclosed at this stage, it might affect the value able to be obtained for the assets of the Business. It is his evidence that, based on his experience, early disclosure of offers for the assets of the Business or proposals for a DOCA remove competitive tension among bidders or proponents which may also affect the price able to be obtained for the assets of the Business. The Court accepts that that would prejudice the achievement of the objects of Part 5.3A. 59 The short minutes of order originally proposed that the confidentiality order should be for a period of four months from the date the order was made. However the proposed extension of the convening period is only for 30 days. The Court was not satisfied that a four months period would be necessary to prevent prejudice to the proper administration of justice. The current confidentiality order accommodates any further extension of the convening period, since it only ends after the second creditors meeting, including any adjourned second creditors meeting. It is open to the administrators to seek a further order of the Court should circumstances so require. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.

Corporations Act 2001(Cth)ss 420, 437A, 437B, 437D, 439A(6), 447A

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