Mighty River International v Hughes

DAVIES J: 1 The first and second plaintiffs (the administrators) are the administrators of the third plaintiff, Toddler Kindy Gymbaroo Pty Ltd (the Company). The administrators were appointed on 22 November 2021 pursuant to a resolution of the directors of the Company under s 436A of the Corporations Act 2001 (Cth) (Corporations Act). 2 On 10 December 2021 I heard an application by the administrators for orders under ss 439A(6) and 447A(1) of the Corporations Act extending the convening period for the second meeting of creditors and providing for the meeting to be held at any time during, or within five business days after the end of, the convening period as extended. The application was supported by an affidavit sworn by the first plaintiff, Mr Gideon Isaac Rathner and I made orders that day in the terms sought. These are my reasons.

the company 3 The Company operates a business that provides neuro-developmental and sensorimotor movement programs for babies and children from birth to five years and their parents. 4 The Company's assets include intellectual property assets in Australia and overseas. The Company is the registered owner of 31 different trade marks in Australia and also appears to hold trade marks or pending trade mark applications in a number of overseas jurisdictions. 5 The Company either franchises or licences the use of the programs and the brands in Australia and overseas. 6 At this time, the administrators are continuing to trade the business during the administration. The Company has 69 centres across Australia, two of which are company owned and operated and the balance are operated by franchisees.

extension of the convening period 7 The relevant provisions, ss 439A(6) and 447A(1), are set out in Part 5.3A of the Corporations Act. The overall object of this Part is to maximise the chances of the company involved or its business continuing in existence or achieving a better result for the company's creditors (Corporations Act s 435A). 8 The exercise of the Court's power in extending a convening period is discretionary, however the circumstances in which the Court will extend a convening period are well established: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347 (Strawbridge), 370 [64]. The Court is required to strike a balance between the expectation that the administration will take place expeditiously and on the other hand that "undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders" (Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, [10]; Mighty River International v Hughes [2018] HCA 38; (2018) 265 CLR 480, [73] (Nettle and Gordon JJ)). 9 The convening period for the second meeting of creditors would end on 20 December 2021 if the extension was not granted. An extension was sought (of three months to 31 March 2022) with provision to convene earlier if circumstances allow. 10 The administrators sought the extension for the following reasons: (a) the administrators need more time to provide the required opinion about the best outcome for creditors, including seeking expressions of interest from potential buyers who may wish to purchase the business or company assets; (b) further time is required to investigate the Company's intellectual property assets in overseas jurisdictions and the Company's revenue streams from overseas sources; (c) the administrators require further time to consider any proposal for a deed of company arrangement that the administrators might receive; and (d) the administrators have not been put on notice of any opposition to an extension by any creditor after being informed that the administrators may seek an extension of time of the convening period and the administrators do not consider that any prejudice would result to creditors if the extension of time was granted. 11 I accepted those submissions and considered that the period of the proposed extension is appropriate having regard to, and balancing, the interests of creditors in a speedy administration and the need to allow sufficient time for administrators to carry out their functions properly and maximise creditor benefits (Mentha, in the matter of Griffin Coal Mining Co Pty Ltd (administrators appointed) [2010] FCA 30, [15]). I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies.