CSV15 v MIBP

Case [2018] FCA 669

FEDERAL COURT OF AUSTRALIA

Kogan (Administrator), in the matter of Red Lea Chickens Pty Ltd (receivers and managers apptd) (administrators apptd) [2018] FCA 669

File number: NSD 707 of 2018
Judge: GLEESON J
Date of judgment: 3 May 2018
Date of publication of reasons: 11 May 2018
Catchwords: BANKRUPTCY AND INSOLVENCY – application for extension of time for convening meetings of creditors under ss 439A and 447A of the Corporations Act 2001(Cth) – application granted
Legislation:

Corporations Act 2001 (Cth) ss 439A, 447A

Insolvency Practice Rules (Corporations) 2016 (Cth) rr 75-15, 75‑225  
Cases cited: Strawbridge, re Custom Coaches (Sales) Pty Ltd (Admin Apptd) [2014] FCA 683
Date of hearing: 3 May 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 40
Counsel for the Plaintiffs: Mr J Hynes
Solicitor for the Plaintiffs: Corrs Chambers Westgarth

ORDERS

NSD 707 of 2018

IN THE MATTER OF RED LEA CHICKENS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) ACN 602 950 569

BARRY FREDERIC KOGAN, JASON PRESTON AND KATHERINE SOZOU AS JOINT AND SEVERAL VOLUNTARY ADMINISTRATORS OF RED LEA CHICKENS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) ACN 602 950 569

First Plaintiff

RED LEA CHICKENS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) ACN 602 950 569

Second Plaintiff

ORCL 92 PTY LTD (ADMINISTRATORS APPOINTED) ACN 002 156 569 (and others named in the Schedule)

Third Plaintiff

JUDGE:

GLEESON J

DATE OF ORDER:

3 MAY 2018

THE COURT ORDERS THAT:

1.The originating process be made returnable instanter.

2.Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (“Act”), the period in which the first plaintiffs must convene the second meeting of creditors of each of the second to eleventh plaintiffs under section 439A(5) of the Act be extended up to and including 2 July 2018.

3.Pursuant to section 447A of the Act, Part 5.3A of the Act is to operate in relation to each of the second to eleventh plaintiffs as if the meeting of creditors of the second to eleventh plaintiffs required by section 439A of that Act, may be convened and held at any time during the period as extended under order 2 above, and the period of five (5) business days thereafter, notwithstanding the provisions of section 439A(2) of the Act.

4.Any person has liberty to apply to the Court in this proceeding, including any creditor of the second to eleventh plaintiffs or the Australian Securities and Investments Commission, who can demonstrate sufficient interest to set aside or vary orders 2 and 3 above on the giving of 48 hours’ notice to the second to eleventh plaintiffs, and to the Court.

5.The first plaintiffs have leave to apply for any further extension of the convening period referred to in order 2 above or any other matter arising in the administration of the second to eleventh plaintiffs generally.

6.The first plaintiffs give notice of the orders made by the Court to the creditors…

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CSV15 v MIBP [2018] FCA 669
Case
[2018] FCA 669
Decision Date

CaseChat Overview and Summary

In the matter of CSV15 v MIBP, the Federal Court of Australia was called upon to decide an application for an extension of time for convening meetings of creditors under sections 439A and 447A of the Corporations Act 2001. The applicants, who were appointed administrators of the Red Lea Group of companies, sought an extension to convene meetings of creditors for the companies, which had entered voluntary administration. The key legal issues before the court were whether the administrators had acted diligently and whether the extension was justified in the circumstances of the case.

The court found that the administrators had acted diligently in managing the administration of the Red Lea Group of companies. The administrators had undertaken extensive steps to understand the companies’ affairs, liaised with numerous stakeholders, and conducted preliminary investigations into potential claims and recoveries. The court also found that the extension was justified due to the complex nature of the administration and the need for additional time to ensure that the meetings of creditors were conducted in an informed and effective manner. The court was satisfied that the administrators had demonstrated sufficient interest and provided adequate reasons for the extension.

As a result, the court granted the application and made orders extending the time for convening the second meeting of creditors for the companies. The orders also provided for any interested party to apply to set aside or vary the orders, and for the administrators to pay their costs. The administrators were required to notify the creditors of the orders by a specified date.

In summary, the court found in favour of the administrators and granted the extension, recognising the complexity of the administration and the administrators' diligent efforts. The decision underscores the importance of considering the unique circumstances of each administration when determining whether to grant an extension of time for convening meetings of creditors.

Orders

Orders of the court

1. The originating process be made returnable instanter.

2. Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (“Act”), the period in which the first plaintiffs must convene the second meeting of creditors of each of the second to eleventh plaintiffs under section 439A(5) of the Act be extended up to and including 2 July 2018.

3. Pursuant to section 447A of the Act, Part 5.3A of the Act is to operate in relation to each of the second to eleventh plaintiffs as if the meeting of creditors of the second to eleventh plaintiffs required by section 439A of that Act, may be convened and held at any time during the period as extended under order 2 above, and the period of five (5) business days thereafter, notwithstanding the provisions of section 439A(2) of the Act.

4. Any person has liberty to apply to the Court in this proceeding, including any creditor of the second to eleventh plaintiffs or the Australian Securities and Investments Commission, who can demonstrate sufficient interest to set aside or vary orders 2 and 3 above on the giving of 48 hours’ notice to the second to eleventh plaintiffs, and to the Court.

5. The first plaintiffs have leave to apply for any further extension of the convening period referred to in order 2 above or any other matter arising in the administration of the second to eleventh plaintiffs generally.

6. The first plaintiffs give notice of the orders made by the Court to the creditors of the second to eleventh plaintiffs by 5.00 pm 7 May 2018.

7. The first plaintiffs’ costs of the proceedings be paid as a cost in the administration of the second to eleventh plaintiffs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

On 2 May 2018, a meeting of the committee of inspection of Red Lea Chickens passed a resolution in support of the application to extend the convening period.FACTS The Red Lea Group of companies was founded in Western Sydney in 1957. Prior to the appointment of the administrators, the companies’ principal activities included:(1)processing of chicken livestock into wholesale and retail chicken products;(2)distribution of chicken products to retailers and wholesale customers;(3)management of farming operations and livestock grower network; and(4)operation and management of retail and franchise network. Prior to the administrators’ appointment, Red Lea Chickens was the main trading entity in the group of companies, managing the farming operations and employing the majority of staff. The companies employed in excess of 400 employees under various arrangements. Red Lea Retail Holding Pty Ltd (“Red Lea Retail”) ran seven Red Lea branded stores. Red Lea Franchise Pty Ltd (“Red Lea Franchise”) and Red Lea Franchising Pty Ltd (“Red Lea Franchising”) were the franchisors in respect of 22 independently owned stores. Red Lea Logistics Pty Ltd (“Red Lea Logistics”) provided logistics and distribution to support operations and owned approximately 70 vehicles. The remaining five entities were largely dormant and/or non-trading entities from before the administration began. Shortly prior to the administrators’ appointment, three of the four directors resigned from each of the companies. Assad Asif was left as the sole director of each company. The administrators were appointed to the companies on 29 March 2018, in each case pursuant to a resolution of Mr Asif.Administration to date Since their appointment, the administrators have undertaken the following tasks in relation to each of the companies:(1)attending to statutory duties including informing the Australian Securities and Investments Commission (“ASIC”) of the administrators’ appointment;(2)reviewing the books and records for the purposes of understanding the general business, property and affairs of the companies;(3)liaising with the “directors”, management and advisers for the purpose of understanding the business, property and affairs of the companies;(4)issuing a request to the “directors” to complete a report as to affairs (“RATA”) and director’s questionnaire;(5)liaising with over 400 employees of the companies with respect to the appointment of the administrators, the first meeting of creditors and their entitlements;(6)commencing the calculation and verification of employees’ entitlement claims and residency;(7)attending to a winding-down of trading operations;(8)reviewing the secured creditor position and responding to extensive and detailed queries from creditors;(9)liaising with growers who manage and grow the chicken livestock on various properties in NSW;(10)liaising with franchisees in relation to product distribution, potential claims against Red Lea Franchise and Red Lea Franchising and termination of the respective franchise agreements;(11)arranging for the sale of over 600,000 chickens to Baiada; (12)considering and seeking advice in relation to the insurance policies in respect of the companies;(13)considering the reasons for companies’ failure and entry into voluntary administration;(14)holding the first meeting of creditors;(15)conducting preliminary investigations into any potential claims/recoveries that would be available to the liquidators;(16)liaising with the “directors” and their advisers regarding their intention to propose a DOCA for the consideration of creditors and their reasons for their request for an extension of time in which to do so;(17)instructing solicitors to assist and advise the administrators including with respect to litigation and the appointment of receivers over certain of the companies; and(18)preparing for the present application with their solicitors.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The administrators were appointed to the companies on 29 March 2018, in each case pursuant to a resolution of Mr Asif.Administration to date Since their appointment, the administrators have undertaken the following tasks in relation to each of the companies:(1)attending to statutory duties including informing the Australian Securities and Investments Commission (“ASIC”) of the administrators’ appointment;(2)reviewing the books and records for the purposes of understanding the general business, property and affairs of the companies;(3)liaising with the “directors”, management and advisers for the purpose of understanding the business, property and affairs of the companies;(4)issuing a request to the “directors” to complete a report as to affairs (“RATA”) and director’s questionnaire;(5)liaising with over 400 employees of the companies with respect to the appointment of the administrators, the first meeting of creditors and their entitlements;(6)commencing the calculation and verification of employees’ entitlement claims and residency;(7)attending to a winding-down of trading operations;(8)reviewing the secured creditor position and responding to extensive and detailed queries from creditors;(9)liaising with growers who manage and grow the chicken livestock on various properties in NSW;(10)liaising with franchisees in relation to product distribution, potential claims against Red Lea Franchise and Red Lea Franchising and termination of the respective franchise agreements;(11)arranging for the sale of over 600,000 chickens to Baiada; (12)considering and seeking advice in relation to the insurance policies in respect of the companies;(13)considering the reasons for companies’ failure and entry into voluntary administration;(14)holding the first meeting of creditors;(15)conducting preliminary investigations into any potential claims/recoveries that would be available to the liquidators;(16)liaising with the “directors” and their advisers regarding their intention to propose a DOCA for the consideration of creditors and their reasons for their request for an extension of time in which to do so;(17)instructing solicitors to assist and advise the administrators including with respect to litigation and the appointment of receivers over certain of the companies; and(18)preparing for the present application with their solicitors. Preliminary investigations indicate that, on a winding up, any returns to priority employee creditors and ordinary unsecured creditors would be wholly reliant on successful litigation of claims that may be available to the liquidator. The first creditors’ meetings for the companies were held concurrently on 12 April 2018. On that occasion, a resolution was passed in respect of Red Lea Chickens to form a committee of inspection and that the following persons be appointed to the committee:(1)Patricia Fernandez of the Australasian Meat Industry Employees Union representing various employees;(2)Justin Sammut of LAS Lawyers and Consultants representing various creditors;(3)Matthew Clarke representing Peduba Cleaning Services;(4)Pam Natoli representing herself;(5)Ross Quattroochi representing Ingham Enterprises Pty Ltd; and(6)Gavin Rakoczy of King & Wood Mallesons representing Remagen Capital Management Pty Ltd.Secured creditors and refinance