Clubb (administrator), in the matter of Town Tavern Blacktown Pty Limited (administrators appointed) (receivers and managers appointed) [2024] FCA 405

A. Introduction 1 On 5 April 2024, I made an order as the Commercial and Corporations Duty Judge, at the request of the joint and several administrators (Administrators) of Town Tavern Blacktown Pty Limited (Administrators appointed) (Receivers and Managers appointed) (Company), pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) extending the convening period of the second meeting of creditors of the Company for a period of six months until 9 October 2024 (Extension Order). 2 If an order was not made, the convening period in respect of the Company would have expired on 11 April 2024. 3 The Administrators' application was supported by the receivers and managers of the Company, Liam Healey and Quentin Olde (Receivers). 4 The Administrators relied upon an affidavit of Duncan Clubb, one of the Administrators, affirmed on 4 April 2024, and an affidavit of Liam Healey, one of the Receivers, sworn on 4 April 2024. 5 These are my reasons for making the Extension Order.

B. Background 6 The following background to the application for the Extension Order was provided by Mr Clubb and Mr Healey in their affidavits. 7 The Company, together with five related entities, Phoenix Land Operations Pty Limited (Receivers and Managers appointed) (Phoenix Land), Phoenix Hotel Investments Pty Limited (Receivers and Managers appointed) (Phoenix Hotel), 48 Flushcombe Pty Limited (Receivers and Managers appointed) (48 Flushcombe), Paterson International Pty Limited (Receivers and Managers appointed) (Paterson International), Robin Hood Blacktown Pty Limited (Receivers and Managers appointed) (Robin Hood Blacktown), comprise a corporate group (Group) that carried on a licensed hotel business in Western Sydney known as the Phoenix Town Tavern Blacktown (Business). 8 The Company leases premises from QIC Limited at Central Plaza, Alpha Street Blacktown and holds assets necessary to conduct the Business, including poker machines, gaming machine entitlements and licenses, financed motor vehicles, and bar equipment. 9 Robin Hood Blacktown operates as a management services entity for the Company. It employs the seven staff who operate the Business and otherwise receives revenue from sales and pays the taxation liabilities, rent, payroll, utilities, and lease expenses arising from the conduct of the Business. Robin Hood Blacktown pays a service fee to the Company for the utilisation of the Company's assets. As at the date of Mr Healey's affidavit, Robin Hood Blacktown owed just under $70,000 in employee entitlements to its staff. 10 The assets of the companies comprising the Group are intertwined. The Company leases the premises on which the Business is operated but Robin Hood Blacktown conducts its operations. The Company has a liquor licence, poker machine permit and is the lessee pursuant to equipment lease agreements. The real property assets of the group are owned by 48 Flushcombe and the Company. 11 To raise funds, members of the Group (including the Company) entered into various agreements, including a subscription agreement on or about 8 March 2023 and a further subscription agreement on 29 September 2023 with Nomura Special Investments Singapore Pte Limited (Nomura). Members of the Group granted various securities, include a Security Trust Deed, a General Security Deed and mortgages over interests in real property. Nomura advanced funds to Phoenix Hotel and Phoenix Land pursuant to the subscription agreements, and pursuant to the Security Trust Deed, the parties appointed Global Loan Agency Services Australia Specialist Activities Pty Limited (GLAS) as Security Trustee. 12 On 5 January 2024, Nomura issued notices of default and a demand to the Group in respect of unpaid amounts in relation to the subscription agreements. 13 On 6 March 2024, GLAS appointed the Receivers as receivers and managers of all of the assets and undertakings of the Company. On the same day, GLAS appointed the Receivers as receivers and managers of the assets and undertakings of Robin Hood Blacktown. The Receivers were subsequently appointed as receivers and managers to the other companies comprising the Group. 14 On 6 March 2024, GLAS also appointed the Administrators as administrators of the Company. Neither GLAS, nor any other creditor, has appointed administrators to the balance of the companies comprising the Group. 15 The Receivers currently control all of the property of the Group and continue to conduct the Business as a going concern. 16 The Receivers have caused the companies comprising the Group to continue to operate in accordance with their statutory and contractual obligations. Since their appointment, the Receivers have, amongst other things, (a) secured the Company's assets including cash, real property and plant and equipment for the purposes of continued trading, and preparing for sale, (b) attended to statutory obligations including ASIC lodgements, (c) obtained some books and records of the Group, including access to the Group's online accounting software, gaming reports, payroll software and billing software, (d) met and interviewed the Company's director and his advisors, (e) arranged for an independent risk assessment review, including work health and safety, responsible service of alcohol, and responsible conduct of gambling compliance and (f) held discussions with the Group's external accountant. In particular, the Receivers have caused the Company to meet all of its commitments to QIC Limited arising from its lease of the premises on which the Business is conducted. 17 The Receivers have commenced the steps necessary to sell the Group's assets, including engaging valuers, notifying the lessor of the site on which the Robin Hood Blacktown conducts the Business and briefing sales agents. 18 In order to maximise marketing exposure, the Receivers intend to commence a sale campaign after the conclusion of the autumn school holiday break, which ends on 26 April 2024. The Receivers expect that the initial campaign will run for 4 to 5 weeks, and the period of negotiating a transaction will take between 6 to 12 weeks. It is possible that the sale campaign will be delayed, so a further 4 weeks may be necessary as a buffer. 19 On 2 and 3 April 2024, Mr Clubb caused a circular to be sent by email to the creditors of the Business. The circular foreshadowed the application for the Extension Order and sought objections from creditors. 20 Mr Clubb, with the assistance of the Receivers, prepared the list of creditors by reference to a list of creditors of the Business (which included creditors of the Company). 21 Only one creditor, GLAS (as Security Trustee) responded, and that response was in the nature of approval.

C. Relevant principles 22 Part 5.3A of the Act concerns the administration of a company's affairs with a view to executing a deed of company arrangement. 23 The object of Pt 5.3A is to maximise the chance of a company continuing in existence, or, if that is not possible, obtain a better return for the company's creditors and members than would result from an immediate winding up: s 435A of the Act. 24 Section 439A(2) of the Act provides that a subsequent meeting of the creditors must be held within 5 business days before, or within 5 business days after, the end of the convening period. The convening period is 20 business days beginning on the day the administration commences (assuming it is a business day, if not, the next business day) unless the administration begins in December or less than 25 days before Good Friday, in which case it is 25 business days: s 439A(5) of the Act. 25 The Court has power to extend the convening period: s 439A(6) of the Act. In exercising that power the Court is to have regard to the objects set out in s 435A of the Act: Algeri, in the matter of WBHO Australia Pty Limited (Administrators Appointed) (No 2) [2022] FCA 234 at [16] (Beach J). 26 I recently summarised the relevant principles for making orders extending convening periods in Mableson (administrator), in the matter of Salena Estate Wines Pty Limited (administrators appointed) [2024] FCA 316 in the following terms: 29 It is well established that in exercising the jurisdiction to extend the convening period pursuant to s 439A(6), (a) the Court is required to balance the interests of creditors in a timely administration and (b) the need to allow sufficient time to administrators to carry out their functions properly and maximise the benefits to creditors through a proper administration: Re Diamond Press Australian Pty Ltd [2001] NSWSC 313 at [10] (Barrett J); Blundell (Administrator), in the matter of MG Gold Pty Ltd (administrators appointed) [2023] FCA 282 at [2] (Jackman J). 30 As explained by Austin J in Re Riviera Group Pty Limited (2009) 72 ACSR 352; [2009] NSWSC 585 at [16]: If the approach is to "balance" the expectation of speedy administration against the risk of prejudice, there cannot be any predisposition in favour of speedy administration, for that would skew the balancing process. Rather, the cases suggest that where the administrator proves a substantial ground in any of the categories that I've set out, and there is no specific evidence of prejudice, an extension commensurate with the administrator's task will be granted, notwithstanding that the explanatory memorandum suggested that extensions would not be granted frequently. 31 His Honour identified the following factors as constituting substantial grounds at [13], which relevantly included: (a) the size and scope of the business; (b) the large number of employees with complex entitlements; (c) a complex corporate structure; (d) the nature of the business transactions; (e) the time required to dispose of the assets; and (f) whether the extension will assist the sale as a going concern. 32 In Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No. 2) (2020) 144 ACSR 347; [2020] FCA 717 at [65]-[66], Middleton J analysed the factors identified by Austin J in Re Riviera in the context of the administration of a large business, and concluded that an extension is appropriate to facilitate the sale of a business as a going concern, or to assist the progression of a deed of company administration. 33 Extensions of six months or more have been granted to administrators of large retail or wholesale businesses to allow a business to continue to trade to maximise the funds available for creditors and to facilitate a sale of the business as a going concern, particularly against the background of a likely winding up scenario: Rathner, In the matter of Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 at [39] (O'Bryan J); Strawbridge, in the matter of Sara Lee Holdings Pty Ltd (administrators appointed) [2023] FCA 1408 at [21], [24]-[25] (Halley J). 34 It is also relevant to take into account whether any objection to an extension has been raised at a first meeting of creditors where notice of a proposed extension has been given: In the matter of Henry Walker, Elton Group Limited (Administrators Appointed) [2005] FCA 316 at [2] (Healey J). 35 Finally, I note that s 447A(1) of the Act enables the Court to make what has been described as a "Daisytek" order: Re Daisytek Australia Pty Ltd (Administrators Appointed) (2003) 45 ACSR 446; [2003] FCA 575 at [10]-[14] (Lindgren J). A Daisytek order enables administrators, if they see fit, to hold a second meeting of creditors at any time during or within five business days after the end of the convening period extended by orders of the Court pursuant to s 439A(6) of the Act. 27 Further as McKerracher J stated in Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 30 at [16]: In order for the administrators to carry out their function properly, it is necessary that they should have sufficient time to investigate the affairs of the companies under administration and to provide sensible information and advice to creditors: Hayes, in the matter of Estate Property Group Limited (Administrators Appointed) [2007] FCA 935 at [1]. That includes sufficient time to investigate and carry out a sale process in which structured 'due diligence' procedures are adopted: Re Diamond Press at [11], Re Hans Continental Smallgoods Pty Ltd [2008] FCA 1933 at [21]. It also includes time to pursue possible recapitalisation. In Re Chemeq Ltd; ex parte McMaster [2007] WASC 154 an extension of six months was allowed for this purpose. 28 In Mableson, I granted a six month extension in respect of a group of companies that as a group operated a business. That was because I concluded that the sale of assets of the companies as a whole (and as a going concern) would likely realise a far greater value than the sale of the assets on a break-up basis in a liquidation scenario, which I was satisfied was the most likely alternative if the convening period was not extended.

D. Consideration 29 I was satisfied that the Extension Order sought by the Administrators should be made for the following reasons. 30 First, it will enable an orderly and comprehensive sales campaign to be undertaken consistently with the sale program developed by the Receivers. This will maximise the potential return to creditors and avoid the value destruction which would likely result in an immediate liquidation of the Company (which would have occurred if the convening period was not extended). 31 Second, it will preserve the ability of the Administrators to structure the sale of the Group, including by way of a deed of company arrangement, which cannot be utilised without the Company remaining in administration. 32 Third, it will enable the Administrators to take advantage of the regime provided by Pt 5.3A of the Act, in particular the moratorium on the enforcement of debts, the avoidance of liabilities that crystallise upon the Company entering into liquidation and thereby allowing the Administrators to retain its assets necessary to conduct the Business, including its lease of the Business' premises, and trade the Business into a position that it may achieve the best possible outcome from a sale. The Receivers and the Administrators have not received any indicative or binding offer to purchase the Business of the Group. The Administrators should be given time to work through the complexities associated with the sale of a group of companies and execute the proposed sale campaign. 33 Fourth, the creditors of the Business, including all known creditors of the Company, were notified of the application for the Extension Order and no objection was received by the Administrators. 34 The orders sought by the Administrators also included (a) an order that the second meeting may be convened at any time during the convening period or within five business days after the end of the convening period as extended (a "Daisytek" order), (b) notification of creditors by electronic means if those means are available, and otherwise by post, together with causing the notice to be published on the Administrators' website, and (c) an order that any person who can demonstrate sufficient interest be granted liberty to apply to the Court for an order varying the Extension Order on a day's notice. 35 I was satisfied that each of those orders should also be made. Each was an order that is typically made in applications of this character to provide flexibility to administrators for fixing the second meeting of creditors, the most efficient means to provide notifications to creditors, and to permit any person who is negatively affected by the orders to approach the Court as expeditiously as possible.

E. Disposition 36 For these reasons, I made orders substantially in the form sought by the Administrators. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.