Hancock, in the matter of Tarleton & Peters Pty Limited (Administrator Appointed) [2015] FCA 1058

REASONS FOR JUDGMENT (REVISED FROM TRANSCRIPT) 1 The plaintiff, Geoffrey Trent Hancock, is the voluntary administrator of Tarleton & Peters Pty Limited (Administrator Appointed) (the company). Mr Hancock applies, under s 439A(6) of the Corporations Act 2001 (Cth) (the Act), for an extension of the convening period of the second meeting of creditors. Unless extended, the convening period will expire on 30 September 2015. The extension sought is to 11 November 2015 - a period of six weeks. 2 The first meeting of creditors was held on 14 September 2015. A committee of creditors was appointed at that meeting. Mr Hancock has made an affidavit in support of the application, in which he has set out the current position of the company and summarised the activities he has undertaken as administrator since his appointment. 3 The company operates a chain of retail butcher stores in Sydney and regional areas trading as Peters Meats. The business has been in operation for over 52 years, although the current owner of the company's shares only acquired those shares in January 2014. At the time of Mr Hancock's appointment, the company operated 31 stores. Since his appointment, Mr Hancock has closed four non-performing, unprofitable stores. 4 The company has debts of just under $20 million. It has one secured creditor, N&M Investments/Properties Pty Ltd (N&M), which is owed approximately $13 million. N&M was previously the major shareholder of the company, and the predecessor in title of all shares but one, transferred to the current owner in January 2014. Trade creditors of the company are owed approximately $4 million. Contingent creditors are owed approximately $3 million. 5 Mr Hancock has taken steps to offer the company's business for sale. He has had discussions with various prospective purchasers of various stores. He is currently entering into business sale agreements to sell eight standalone stores. These stores are operated from leased premises. The purchaser will take over the leases. Mr Hancock has deposed that the purchase price for each store reflects the auction realisation value of the plant and equipment in each store. The 19 remaining stores are still being offered for sale. Mr Hancock has deposed that he has received 25 applications from prospective purchasers for further information about them. He has requested that all final offers for purchase be received in writing by 29 September 2015, with a planned settlement date of 7 October 2015. 6 At the time of Mr Hancock's appointment, the company employed 178 permanent employees, and 98 casual employees. Some of the employees have since resigned. Most of the employees are still employed because the company has continued to trade. Mr Hancock has deposed that he is having discussions with prospective purchasers as to the possibility of the employment of the company's current employees being taken over. Employees who were working in the stores that were closed following Mr Hancock's appointment have been allocated to the other stores that remain in operation. 7 Although Mr Hancock initially formed the view that a deed of company arrangement (DOCA) proposal was not likely, he has since had discussions with a third party regarding the possibility of a DOCA proposal that would see the shares in the company being purchased by the deed propounder, with employee entitlements paid in full. I have been informed in the course of submissions made in support of the application today that, in fact, a DOCA proposal will be forthcoming. One reason that Mr Hancock seeks an extension of the convening period is that he wishes to consider such a proposal when made, so that he can properly report to creditors at the second meeting. 8 Mr Hancock has expressed the view that a sale of the remaining stores, or a DOCA proposal, cannot be made or completed by 30 September 2015 and, I infer, by 8 October, which is the latest date by which the second meeting can take place. Mr Hancock says that more time is required to complete the sale process and to consider any DOCA proposal. This can only be done if the stores continue to trade and the leases remain on foot under the protection of the voluntary administration provisions of the Act. Mr Hancock has deposed that if the company were to be placed into liquidation at the second meeting of creditors, all stores unsold at that time would have to be closed, and the employment of all employees terminated, as liquidation would trigger the relevant termination clauses in the company's leases, and it is unlikely that suppliers would continue to supply without his (Mr Hancock's) personal liability. 9 Mr Hancock has expressed the view that, if the company were to be placed in liquidation, the opportunity of maximising a return to creditors would be lost, as a sale on a going concern basis or a DOCA would not be possible. 10 There is one significant matter to note, and that is that, at the first meeting of creditors, Mr Hancock sought approval to make an application to the Court to extend the convening period for a period of up to six weeks. A resolution to that effect was passed. 11 Mr Hancock has submitted that the significant factors in favour of the proposed extension of the convening period are as follows: First, the creditors are in favour of the extension. Secondly, he has continued to operate the 27 retail stores at his own risk, in the belief and expectation that purchasers will be found for those stores, or for the business as a whole, or that an acceptable DOCA will be proposed. Thirdly, the business is effectively 27 separate business operations at each store, each of which must be assessed separately because of the possibility that individual stores will be sold. However, the overall business must be assessed against the possibility that it is sold as a whole. Fourthly, the employment of the company's present employees is likely to be terminated if the company goes into liquidation, whereas many of them might be expected to retain employment with a new purchaser, or purchasers, or if a DOCA is entered into. Fifthly, the only secured creditor of the company was in favour of the resolution to apply for an extension of the convening period that passed at the first creditors meeting. Indeed, it was the creditor who proposed that resolution. Sixthly, there is a committee of creditors which will be able to monitor the actions of the administrator in the intervening period. 12 In considering an application of this kind, the Court must strike a balance between the expectation that an administration will be relatively speedy and, on the other hand, the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return of creditors and shareholders. 13 I am satisfied, for the reasons advanced by Mr Hancock in his affidavit, and as advanced in submissions made on his behalf, that the present application should be granted and that the convening period should be extended as sought. 14 For these reasons, orders substantially as sought by Mr Hancock should be made. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.