Kogan, in the matter of King Holding Company 1 Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) [2016] FCA 660

YATES J: 1 The plaintiffs are the joint and several voluntary administrators of 13 companies which can be described as the Oakville Produce Group. In these reasons, it is convenient to refer to the companies collectively as, simply, the Group. 2 The plaintiffs were appointed on 11 May 2016. They seek an order pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act) that the convening period for the second meeting of creditors of each company in the Group be extended for a period of six months to 8 December 2016. Unless extended, each convening period will expire on 8 June 2016. 3 The application is supported by an affidavit made by the first-named plaintiff, Barry Frederic Kogan, affirmed 2 June 2016.

BACKGROUND 4 On 11 May 2016, following the plaintiffs' appointment, receivers and managers were appointed to all companies in the Group, other than Oakville Produce Export Pty Ltd (administrators appointed), (the receivership companies) by the security trustee, CBA Corporate Services (NSW) Pty Ltd, acting on behalf of a syndicate of financiers (the secured creditor). On their appointment, the receivers and managers took possession of all the books and records of the receivership companies and now control the assets and affairs of those companies. The receivers and managers have continued to operate the businesses of the receivership companies as going concerns. 5 The structure of the Group is reasonably complex. It can be described as follows. First, there are a number of companies which Mr Kogan has described as holding entities which do not have assets (apart from their respective shareholdings), employees or trade creditors. Their liabilities are inter-company loans and amounts owed to the secured creditor. Secondly, there are two companies which Mr Kogan has described as multi-faceted trading entities. The businesses of these entities comprise potato and onion growing, packaging, wholesaling, marketing, and logistics and distribution. These businesses are conducted in Sydney and Queensland. Thirdly, there are three companies which Mr Kogan has described as farming entities. The businesses of these entities comprise potato and onion growing and wholesaling, and are conducted in Griffith and Adelaide. 6 The Group operates three farms in South Australia, three farms in New South Wales and three distribution centres in Sydney, Melbourne and Brisbane. 7 In his affidavit, Mr Kogan has provided more specific evidence with respect to the activities, assets and liabilities of Oakville Produce Pty Limited (administrators appointed) (receivers and managers appointed), Oakville Potatoes Pty Ltd (administrators appointed) (receivers and managers appointed), Golden Sunrise Produce Pty Ltd (administrators appointed) (receivers and managers appointed), Oakville Produce Qld Pty Limited (administrators appointed) (receivers and managers appointed) and Lachlan Produce Pty Ltd (administrators appointed) (receivers and managers appointed).

FinanCial POSITION of the Group 8 Mr Kogan's initial inquiries revealed that secured creditors of the Group were owed in the vicinity of $150 million and that unsecured creditors were owed in the vicinity of $13 million. I have been informed in the course of submissions that these figures represent Mr Kogan's understanding at about the time of the plaintiffs' appointment as administrators. Further information provided by the receivers and managers reveals that secured creditors are owed approximately $184 million and that unsecured creditors are owed approximately $18.1 million. The unsecured creditors include 250 employees and 450 trade creditors. For the financial year ending 30 June 2015 the Group had revenue of approximately $216 million. 9 Mr Kogan has deposed that, given the size and relative complexity of the businesses operated by the Group, it has not been possible for the plaintiffs to identify, at this stage, the precise reason or reasons for the failure of the businesses. The plaintiffs' investigations are only at their initial stages.

position of the receivers and managers 10 On about 17 May 2016, the receivers and managers advertised the sale of the assets of the receivership companies, seeking expressions of interest by 6 June 2016. 11 In a letter dated 2 June 2016, which they have provided in support of the present application, the receivers and managers say that information memorandums, in response to their call for expressions of interest, were issued to approximately 30 parties. As at 2 June 2016, 13 strong non-binding indicative offers had been received. More are expected. The offers include offers from experienced local and overseas businesses in affiliated industries, and investment entities. The letter includes a timetable for the sale process. 12 The receivers and managers say that the process will not be completed in the short term. In this connection they say: An extension of the convening period for up to 6 months will enable a competitive sale process in relation to the business and assets of the Group and will provide the time needed to properly conduct such a process, given the nature and value of the assets involved. The continued operation of the Group is critical to any such sale process and the statutory moratorium is, in turn, essential to the continued operation of the business as a going concern. If the Administrators were forced to call the second meeting of creditors by 15 June 2016 and the Group is placed into liquidation, our ability to conduct a meaningful sale campaign for the Group as a going concern would be fundamentally impaired. We would lose the benefit of the moratorium, landlords may become entitled to terminate any defaulting leases and secured creditors (such as those having retention of title over goods), may seek to take possession of secured assets. 13 In their letter, the receivers and managers confirm that the secured creditor supports the proposed extension. The receivers and managers say that they are continuing to pay rent and outgoings. They say that the leased premises in Brisbane, Melbourne and Sydney are critical to the packaging, wholesaling, and logistics components of the receivership companies, and that if they were to lose the benefit of the statutory moratorium, landlords may seek to terminate the leases and take possession of the premises. They say that loss of the premises would have a detrimental impact on the continuation of the businesses as going concerns, as well as on the Group's ability to generate revenue. 14 The receivers and managers also say that, since their appointment, they have continued to employ all staff. They say they are hopeful that the majority of the Group's employees will consider employment with any purchaser of the Group, and that if a sale of the businesses is able to be achieved it is likely that significant numbers of employees will continue in employment rather than having their employment immediately terminated on the ground of redundancy. 15 The first meetings of creditors were conducted by the plaintiffs at various locations which were considered to be the most convenient for the majority of creditors of the companies concerned. The meetings were held in Sydney, Adelaide, Brisbane and Griffith. The creditors in attendance were informed that the plaintiffs intended to make the present application. It appears that no creditor voiced opposition to that course.

The Plaintiffs' position 16 The plaintiffs advance the following reasons for the extension they seek. 17 First, the extension is required to allow the sale of the relevant businesses of the receivership companies on a going concern basis. As I have noted, there are six farms under the control of the receivership companies, of which three are in South Australia and three are in New South Wales. There are, as well, the three distribution centres in Sydney, Melbourne and Brisbane respectively. The businesses are large and complex. There are a large number of stakeholders, particularly licensors and lessors, who will need to be involved in the sale process in order to make it successful and produce the best possible return to creditors. 18 Secondly, there is a prospect that, as part of the sale process, a deed of company arrangement (DOCA) will be proposed. If such a proposal is made, further time will be required for it to be developed, negotiated and considered by the plaintiffs and put to creditors. Time will be required to allow for any DOCA to be finalised and, if necessary, integrated into the sale process. 19 Thirdly, given the stage of the administrations, the plaintiffs are presently unable to provide any meaningful recommendation or proposal to creditors, as required by s 439A of the Act. At the present time, the plaintiffs have not received a report as to the affairs for each company from the relevant directors. In this regard, they have granted an extension of time to the directors until 11 June 2016. Further, the plaintiffs intend to conduct detailed investigations into the affairs of the Group, including identifying the cause of the financial collapse and establishing whether any funds are available to be recovered or claims pursued. In short, the plaintiffs require further time to investigate the likelihood of any recoveries for the purposes of a s 439A report. 20 Mr Kogan has deposed that he does not consider that extensions of the convening periods by six months will cause any material prejudice to creditors. Rather, he considers that such extensions are likely to increase the possibility of a greater return to the majority of creditors by allowing sufficient time for the sale process to occur. He has deposed that a sale of the businesses on a going concern basis is very likely to achieve a far greater return for creditors than would be realised in a winding up. 21 Mr Kogan has also expressed the belief that the voluntary administration process will provide flexibility in relation to the sale process, including by keeping leases, licences and other agreements in place to allow the sale process to proceed, with likely greater effect. Mr Kogan has expressed the opinion that it is critical that sufficient time be allowed for the sale process to take place.

Consideration 22 In light of the matters discussed in Mr Kogan's affidavit, including those matters referred to in the receivers and managers' letter of 2 June 2016, I am satisfied that the extensions, as sought, should be granted. I accept that it is desirable that the sale of the businesses, on a going concern basis, should be facilitated in the interests of all creditors. There is every reason to expect that the sale process will be complex and will require the time currently estimated by Mr Kogan. Further, I accept that the plaintiffs cannot make any considered recommendation to creditors as to the fate of the companies in the Group in the absence of the sale process reaching its end. In reaching this conclusion, I take into account the receivers and managers' desire to have the benefit of the moratorium provided by the Act. In my view, this is a significant consideration. 23 I also take into account the fact that no apparent objection to any extension of the convening periods was raised at the first meetings of creditors, when notice of the proposed extensions was given. 24 I also note that the plaintiffs' solicitors gave the Australian Securities and Investments Commission (ASIC) notice of this application and that ASIC indicated that it did not wish to be provided with a copy of the originating process or the affidavit in support. 25 The function of the Court in the present application is to strike the appropriate balance between the expectation that the administrations will be relatively speedy and the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return to creditors and any return for shareholders: Diamond Press Australia Pty Limited [2001] NSWSC 313 at [10]; see also the statement of relevant principles by Austin J in Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (ACN 102 298 279) (2009) 72 ACSR 352; [2009] NSWSC 585 at [13]-[14]. In my view, the appropriate balance will be struck by giving the extension that is sought.

Disposition 26 Accordingly, orders will be made substantially as sought in the originating process. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

King Holding Company 2 Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 162 530 761 King Bid Company Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 162 530 930 Oakville Produce Group Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 119 179 216 Oakville Produce Asian Holdco Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 162 955 857 Oakville Produce Australian HoldCo Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 162 558 714 Oakville Produce Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 119 180 004 Oakville Produce Qld Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 071 791 369 OP Holdco SA Pty Limited (Administrators Appointed)(Receivers and Managers Appointed) ACN 127 656 400 Oakville Potatoes Pty Ltd (Administrators Appointed)(Receivers and Managers Appointed) ACN 080 208 671 Golden Sunrise Produce Pty Ltd (Administrators Appointed)(Receivers and Managers Appointed) ACN 126 506 303 Lachlan Produce Pty Ltd (Administrators Appointed)(Receivers and Managers Appointed) ACN 113 179 883 Oakville Produce Export Pty Ltd (Administrators Appointed) ACN 169 302 416