The circumstances of the present case
18 There is no suggestion in the present matter that the administrators have failed to carry out their obligations diligently, or purported to seek the extension on anything other than genuine grounds. Indeed, the material reveals that there are good and substantive reasons to extend the convening period for the holding of the second meeting in respect of each of the eleven companies.
19 The first is, of course, that the present administrations are closely interrelated, in that they concern a group of companies through which a complex business arrangement has been operated. That necessarily renders the administrations vastly more intricate than might have been the case if a single company controlled and operated the whole of the business. Even then, a considerable amount of time would have been required to gain an understanding of the business. As a consequence of the corporate structure put in place, the administrators have been required to analyse issues relating to overlapping creditors and employees, as well as related transactions.
20 The second reason is that the administrators are presently attempting to negotiate and pursue a campaign for the sale of the business as a whole. As that business is spread across numerous companies, the sale process is necessarily complex, with the result that a substantial due diligence period is required. The period necessary to allow prospective purchasers sufficient time to examine the business will not conclude prior to the expiration of the current convening period on 20 April 2023.
21 Thirdly, the evidence indicates that the sale of the whole business as a going concern would likely provide the best possible outcome, not only for creditors but also for employees. In particular, employees may achieve continuity of employment if the business can be transferred to a new owner. Similarly, if a sale is achieved, existing lessors may well be advantaged by the new owner assuming the obligations of the existing companies under current leases, or entering into new leases. Further, the current trade creditors may form a relationship with the new owner so as to maintain an ongoing source of business.
22 If the business is sold as a going concern, or the companies are recapitalised, it can be expected that a better outcome will have been achieved for the creditors generally than if a liquidation were to have occurred.
23 The fourth reason supporting the grant of the extension is that the additional time will allow the administrators to properly investigate the companies' affairs and to provide a meaningful report to creditors (which the administrators estimate will take approximately three weeks to prepare). That will allow those creditors to make a fully informed decision as to the future of the companies. See Re Foodora Australia Pty Ltd (Administrators Appointed) [2018] NSWSC 1426, [12] - [13] (Black J); Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) (No 2) [2020] FCA 618, 31 (Farrell J). Mr Rose, one of the administrators, has deposed that, as of now, the administrators have not received sufficient of the books and records of the companies to facilitate an accurate assessment of the companies' asset and liability positions, and to enable them to adjudicate on proofs of debt and to seek proposals as to the possible entry of the companies into a deed of company arrangement. Although the lack of books and records provides some justification for an extension, it ought not to be forgotten that administrators have powers under the Corporations Act to require directors to comply with requests for the provision of documents. If the directors refuse to provide the requested documents, then the administrators ought to take appropriate measures to ensure compliance.
24 A further reason to extend the convening period is that, if no extension is granted, the administrators will be required to recommend the companies' liquidation, simply because no person has yet acquired sufficient information to be in a position to propose a deed of company arrangement. If the sale campaign was to continue and conclude, there is a real possibility that a sale of the business, in the context of a deed of company arrangement, could occur. This would result in a greater amount of money being made available to the creditors than there would be if the companies were placed into liquidation. Further, liquidation would deprive the employees of the opportunity to continue their employment, and would bring an end to existing lease arrangements between the companies and a number of landlords.
25 The sixth reason is that the three month extension is relatively brief, given the size and complexity of the business of the eleven companies, and that extensions for that period of time are regularly granted. It was submitted that, in other matters, longer extensions have been granted. Specifically, it was submitted that, in Re Harrisons Pharmacy Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 458 [44] - [46], Farrell J noted the trend towards applications for lengthier convening periods and referred to six-month extensions being granted in a series of cases such as Re Chemeq Ltd (Administrators Appointed) (Receivers and Managers Appointed), ex parte McMaster [2007] WASC 154; Re an application by Horne & Vrsecky [2010] VSC 657; Strawbridge (Administrator) v Retail Holdings Pty Ltd (Administrators Appointed), In the Matter of Retail Adventures Holdings Pty Ltd (Administrators Appointed) [2013] FCA 151. It was further submitted that, more recently, O'Bryan J granted a 12-month extension to the convening period in Rathner, in the matter of Citius Property Pty Ltd (Administrator Appointed) [2023] FCA 26 to allow the company in administration to continue trading in order to extract the maximum possible revenue that could be earned under a project management agreement, and therefore maximise the funds available for distribution to creditors. Whilst these decisions are not irrelevant, there is, in general, not a great deal of value to be derived from comparing the lengths of extensions in different cases to one another, given the infinite variety of circumstances that come before the courts. Nevertheless, the authorities can be taken to indicate that three months is well within an acceptable period for an extension to the convening period in what might be considered a complex administration.
26 Seventhly, there will be no substantial prejudice to creditors from the extension of the administrations. The administrators are continuing to operate the businesses so as to maintain their value for any future sale. Employee entitlements are being met while the businesses continue. Whilst the moratoria in the administrations have the effect of staying legal proceedings currently on foot, there is no evidence that any particular legal proceedings are liable to be impaired. Moreover, there is some prospect that ongoing trading will assist the companies in meeting the claims of trade creditors.
27 Further, and as has already been mentioned, none of the creditors at the first meeting expressed any opposition to the administrators' intention to seek an extension. Indeed, the major creditors were specifically asked for their views as to the appropriateness of the current application, and none opposed it. Importantly, there has been no opposition from the first-ranking secured creditor, Judo Bank, which expressly indicated that it does not object to the application.