Hayes, in the matter of Dick Smith Holdings Limited (Administrators Appointed) (Receivers and Managers Appointed) [2016] FCA 24

YATES J: 1 This is an application brought under s 439A(6) of the Corporations Act 2001 (Cth) (the Act) for an order extending the convening period for the second meetings of creditors of each of a number of companies which constitute the Dick Smith Group of companies (the Dick Smith Group or the Group) and for consequential relief under s 447A of the Act. Unless extended, the convening period for each meeting will expire on 2 February 2016. The extension sought in each case is to midnight on 2 August 2016. 2 The relevant companies are Dick Smith Holdings Limited (Administrators Appointed) (Receivers and Managers Appointed) (Dick Smith Holdings), which is the holding company of the Group, and nine other companies identified in a schedule to the originating process commencing this proceeding. These include Dick Smith Electronics Pty Limited (Administrators Appointed) (Receivers and Managers Appointed), (Dick Smith Electronics) Dick Smith Electronics Staff Superannuation Fund Pty Limited (Administrators Appointed) (DESS), and Mac 1 Pty Limited (Administrators Appointed) (Mac 1).

background 3 On 4 January 2016, Joseph David Hayes, Jason Preston, William James Harris and Matthew Wayne Caddy (the Administrators) were appointed as joint and several voluntary administrators pursuant to resolutions of the directors of the relevant companies under s 436A of the Act. The Administrators are partners in the corporate advisory and insolvency firm, McGrathNicol. 4 On 4 January 2016, following the appointment of the Administrators, receivers and managers were appointed to the relevant companies, other than DESS and Mac1, by a syndicate of lenders holding security interests registered in the Personal Property Securities Register. 5 On 5 January 2016, Messrs Preston and Hayes, and Andrew John Grenfell and Kare Johnstone, were appointed as joint and several administrators of DSE (NZ) Limited (DSE (NZ)), a company incorporated in New Zealand. The appointment was made with leave of the High Court of New Zealand, pursuant to ss 239F and 280 of the Companies Act 1993 (NZ). An application to extend the convening period in relation to DSE (NZ) was granted by Courtney J on 28 January 2015. The extension was to midnight on 2 August 2016. That matter is of some significance, having regard to the fact that, as I will later explain, steps are presently being undertaken to sell the business and assets of the Dick Smith Group. DSE (NZ) is a member of that group and it would be desirable that the position in Australia be aligned with the position in New Zealand so far as possible, so as to facilitate the sales process.

The Dick Smith Group 6 The Dick Smith Group operates under what has been described as four physical store banners: "Dick Smith", "Move", "Move by Dick Smith", and "David Jones Electronics Powered by Dick Smith". The purpose behind operating under four physical store banners is to target different consumer segments within the market. Stores under the "Dick Smith" banner operate from around 289 locations in Australia and 62 locations in New Zealand. Stores under the "Move" banner operate from around 12 stores throughout Australia. The "Move by Dick Smith" banner is used in relation to four duty-free stores at Sydney International Airport under arrangements expiring in August 2021. The "David Jones Electronics Powered by Dick Smith" banner is used in around 27 David Jones stores, pursuant to a three-year exclusive retail brand management agreement. 7 The Dick Smith Group also operates a commercial division which is aimed at corporate customers wishing to purchase consumer electronics in bulk quantities. 8 The Dick Smith Group complements its large physical store network with an omni-channel platform consisting of eight websites, mobile sites, mobile apps, and in-store online portals. The Group also offers a click-and-collect service from 363 stores and has commenced delivering direct from store to customer from 348 locations. 9 The Group offers approximately 24,000 products across five product categories which have been identified as "office", "mobility", "accessories", "entertainment" and "other products and services".

RECeivership 10 On their appointment, the receivers and managers took possession of all the books and records of the companies covered by their appointment. They have operated the Group business as a going concern. 11 On 12 January 2016, the receivers and managers commenced a sales campaign for the business and assets owned and operated by the Group. The sales campaign and timeline in relation to that campaign are discussed in a letter from the receivers and managers which forms part of the documents tendered in this application. It is hoped that the sales campaign will provide a purchaser or purchasers for the business and assets that will achieve an outcome for creditors that is far more beneficial than companies within the Group being immediately placed in liquidation. 12 The receivers and managers have expressed the view that if a sale of the business is able to be achieved, it is likely that a majority of the employees in the Group will continue in employment rather than having their employment immediately terminated on the ground of redundancy. Even if a buyer for the business is unable to be found, the receivers and managers say that extensions of the convening periods will provide employees with time within which to seek alternative employment. 13 I have mentioned that Mac1 is not part of the receivership. The Administrators intend to sell this business and/or its assets and have been compiling the information necessary to draft an Information Memorandum for that purpose. It is entirely possible that the sale of this business and/or the assets related to the business may form part of an overall sale made through the receivers and managers.

evidence in support of the application 14 The present application is supported by an affidavit made by Mr Hayes and an affidavit made by Jonathan Philip Henry who assists the Administrators in the conduct of the administration. 15 Mr Hayes has given an account of the work undertaken by the Administrators following their appointment. It is not necessary for me to detail that work. However, I will record that the first meetings of creditors under s 436E of the Act were held on 14 January 2016. The meetings were held concurrently. Mr Hayes was the chairman of each meeting. 16 At the first meetings of creditors, committees of creditors were appointed for Dick Smith Holdings, Dick Smith Electronics and Mac1. These companies have been referred to by Mr Hayes as "the operating entities" within the Group. The committees include representatives of employees, landlords, trade financiers, and general trade and other creditors. 17 At the first meetings, Mr Hayes informed the creditors of the possibility that the Administrators would approach the Court seeking an extension of up to six months for the convening period of each second meeting of creditors. Mr Hayes says that the creditors did not raise any objection to that prospect. 18 On 21 January 2016, the Administrators placed a notice on the section of the McGrathNicol website relating to the administration of the Dick Smith Group to the effect that the present application would be made. On 25 January 2016, a further notice was placed on the website giving the date and time at which the present application would be heard. 19 Similarly, on 21 January 2016, the Administrators caused Dick Smith Holdings to make an announcement under the continuous disclosure rules of the Australian Securities Exchange that the present application would be made. On 25 January 2016, a further announcement was made advising on the date and time at which the present application would be heard. 20 There is evidence before the Court that the receivers and managers support the extensions that are sought. Mr Hayes says that the receivers and managers have informed the Administrators that they (the receivers and managers) will continue to meet employee entitlements and rental obligations while the business continues to be operated by them.

Reasons for the extensions 21 Mr Hayes has advanced the following reasons for the extensions that are sought. 22 First, the extensions are required to allow the sale of the Dick Smith Group business and assets by the receivers and managers and the sale of the Mac1 business and assets by the Administrators. Mr Hayes says that, due to the number of stores and concessions throughout various locations, there are a large number of stakeholders who need to be involved in the sales process to make it successful and produce the best possible return for creditors. Mr Hayes says that once any contracts for sale have been entered into, it may take a significant period of time for the sale(s) to complete, particularly given that there are a large number of leases and supply contracts that may need to be transferred or novated to a purchaser or purchasers. He has expressed the view that these factors will add to the time required to complete the sales process. 23 Secondly, Mr Hayes says that there is a prospect that a deed of company arrangement proposal will be made, although it does not seem that any such proposal is in immediate prospect. Nevertheless, Mr Hayes says that if any such proposal is made, further time will be required for it be developed, negotiated and considered by the Administrators, and put to creditors. Mr Hayes says that given the size and complexity of the Group business, it is likely that a period of time of up to six months will be required to allow for any deed of company arrangement to be finalised and, if necessary, integrated into the sales process. 24 Thirdly, and importantly, Mr Hayes says that, at this stage in the administrations, the Administrators are unable to provide a meaningful recommendation or proposal to creditors as required by s 439A of the Act. The directors of the companies have not provided a report as to the affairs of each company. The Administrators have granted an extension to the directors until 29 January 2016 to do so. The directors have submitted a request for a further extension until 19 February 2016. The request is currently under consideration. Further, the Administrators intend to conduct a detailed investigation into the companies' affairs to identify the cause for the financial collapse of the Group and to determine whether funds are available to be recovered or claims pursued. Given the size and complexity of the Group's affairs, Mr Hayes expects that a period of up to six months would be required for this task. 25 Mr Hayes has expressed the belief that the extensions that are sought will not cause material prejudice to creditors. Indeed, he says that granting the extensions is likely to increase the possibility of a greater return to creditors, particularly by allowing the sales process, to which I have referred, to continue while the companies are in administration. This would allow the process to continue with a view to selling the business and assets on a going concern basis with the benefit of the statutory moratoriums. Mr Hayes says that, having regard to the size and complexity of the business involved, it is critical that there be sufficient time to conduct the necessary investigations and put in place a suitable sales program. 26 The Administrators have given notice of the present application to the Australian Securities and Investments Commission (ASIC). ASIC has not raised any objection to the extensions that are sought. It considers the question of the extensions to be one properly left for the determination of the Court. In adopting this position, ASIC has, nevertheless, expressed the view that should an extension of six months be granted, interim reporting to creditors would be beneficial. Mr Hayes says that the Administrators intend to provide an interim report to creditors. 27 No person with a relevant interest has come forward to oppose the extensions that are sought. However, one creditor identified as the Scentre Group, which is a landlord for a number of stores, has indicated that, while it does not oppose the present application, its current position may change depending on how the administrations proceed.

relevant legal principles 28 In exercising the power to extend a convening period the Court must balance the interests of creditors in a speedy administration and the need to allow sufficient time to administrators to carry out their function properly and maximise the benefit to creditors through a proper administration. 29 In written submissions, counsel for the Administrators has drawn my attention to the summary of relevant principles provided by Austin J in Re Riviera Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (2009) 72 ACSR 352; [2009] NSWSC 585 at [13] and [16] to [18]. 30 Counsel submitted that, apart from these principles, it is relevant to take into account the fact that no objection to any extension was raised at the first meetings of creditors where notice of the proposed extensions was given: In the matter of Henry Walker Eltin Group Ltd (Administrators Appointed) [2005] FCA 316 at [2]. Counsel also submitted that, in circumstances where a company under administration is also under the control of a privately-appointed receiver, the receiver's desire to have the benefit of the moratoriums provided by the Act to assist in allowing the sale of a business as a going concern is a significant and very relevant consideration: Lombe Re Australian Discount Retail Pty Ltd (2009) 27 ACLC 115; [2009] NSWSC 110; ABC Learning Centres Limited, in the matter of ABC Learning Centres Limited; application by Walker (No 5) [2008] FCA 1947. These submissions are, of course, directly relevant to the position of the Dick Smith Group of companies.

disposition 31 Having regard to Mr Hayes' evidence, which I accept, as supplemented by Mr Henry's evidence, which I also accept, and the submissions which have been made, I am satisfied that a case for the extensions that are sought has been made out. Orders will be made accordingly. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

SCHEDULE OF PARTIES DICK SMITH SUB-HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 160 162 925 DSE HOLDINGS PTY LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 001 456 720 DICK SMITH MANAGEMENT PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 001 585 735 DICK SMITH ELECTRONICS FRANCHISING PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 054 295 733 INTERTAN AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 002 511 944 DICK SMITH (WHOLESALE) PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 000 445 956 DICK SMITH ELECTRONICS PTY LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) ACN 000 908 716 DICK SMITH ELECTRONICS STAFF SUPERANNUATION FUND PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 059 802 470 MAC 1 PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 136 849 584