Finnish Early Childhood Education (Australia) Pty Ltd (Administrator Appointed) & Ors

[2025] NSWSC 193

Supreme Court

New South Wales

Medium Neutral Citation:

Finnish Early Childhood Education (Australia) Pty Ltd (Administrator Appointed) & Ors [2025] NSWSC 193

Hearing dates:

10 March 2025

Date of orders:

10 March 2025

Decision date:

10 March 2025

Jurisdiction:

Equity - Corporations List

Before:

Brereton J

Decision:

Orders Made

Catchwords:

CORPORATIONS – Voluntary administration – convening periods – whether to grant an extension of convening periods for the second meetings of creditors – where the extension will allow the sale of the business as a going concern – whether any creditors will be prejudiced by the extension.

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777

In the matter of Riviera Group Pty Ltd (admins apptd) (recrs and mgrs apptd) (2009) 72 ACSR 352; [2009] NSWSC 585

Lombe, in the matter of Babcock & Brown Limited (Administrators Appointed) [2009] FCA 349

Lombe re Australian Discount Retail Pty Ltd [2009] NSWSC 110

Mighty River International Limited v Hughes (2018) 265 CLR 480; [2018] HCA 38

Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) v Madden (No 4) (2012) 92 ACSR 255; [2012] FCA 1491

Stewart, in the matter of Kleins Franchising Pty Ltd (Administrators Appointed) [2008] FCA 721

Uni-Aire Security Pty Ltd (Administrators Appointed), in the matter of Uni-Aire Security Pty Ltd (Administrators Appointed) [2006] FCA 1423

Texts Cited:

N.A.

Category:

Consequential orders

Parties:

In the matter of Finnish Early Childhood Education (Australia) Pty Ltd (Administrators Appointed) ACN 630 629 435 (Plaintiff)

Representation:

Counsel:
S Scott (Plaintiff)
No appearance

Solicitors:
Hamilton Locke (Plaintiff)

File Number(s):

2025/00090155

Publication restriction:

n/a

JUDGMENT Ex tempore (revised from transcript)

1. By Originating Process filed on 7 March 2025, the voluntary administrators of Finnish Early Childhood Education (Australia) Pty Ltd (Administrators Appointed) (FEC Australia) and various related companies, who I will refer to as the HEI Group of Companies, seek among other things, orders pursuant to s 439A(6) of the Corporations Act2001 (Cth) (Act), extending the convening period to 11 June 2025.

2. The Administrators are Mr Alan Walker, Mr Glenn Livingstone and Mr Nicholas Charlwood from WLP Restructuring (Administrators).

3. Unless the convening periods are extended, then for the Second to Fifteenth Plaintiffs, those periods will expire no earlier than 11 March 2025, resulting in a second meeting of creditors having to be held by 18 March 2025. For the Sixteenth and Seventeenth Plaintiffs, the convening periods will expire on 27 March 2025, resulting in the second meetings of the creditors having to be held by 3 April 2025.

4. On this application, the Administrators have relied on an affidavit of Mr Walker affirmed on 6 March 2025 and a further affidavit of Mr Walker affirmed 7 March 2025.

5. The HEI Group of Companies operate childcare centres at various locations in Victoria and New South Wales. They are licensed to provide early education services based on the Finnish Early Education model.

6. Investigations by the Administrators indicate that the only valuable assets of the HEI Group of Companies are the leases and the plant and equipment located at the centres. The Administrators have concluded that the HEI Group of Companies were insolvent at the time of their appointment.

7. Prior to the appointment of the Administrators, the HEI Group of Companies employed some 397 staff. The Administrators have terminated seven employees of FEC Australia, ten employees of the Third Plaintiff and two employees of the Ninth Plaintiff. Those employees have not been paid their entitlements and they remain outstanding.

8. The HEI Group of Companies owe employee creditors approximately $3.3 million, security creditors $223,901 and to unsecured creditors approximately $14 million. I am informed that the principal unsecured creditor is the Commissioner of Taxation.

9. The applicable principles in relation to extending a convening period were summarised by Nettle and Gordon JJ (in dissent, but not relevantly in this respect) in Mighty River International Limited v Hughes (2018) 265 CLR 480 (Mighty River) at [73]. The Court is to undertake a balancing exercise between, on the one hand, the expectation of a speedy administration and, on the other, the requirement that undue speed should not be allowed to prejudice sensible constructive actions directed towards maximising the return for creditors: see In the matter of BCD Resources NL (receivers and managers appointed) (administrators appointed) [2015] NSWSC 777 (Re BCD Resources) at [12] (Black J).

10. Relevant factors include the fact that an extension might allow the value of the business to be maximised and the business to be sold as a going concern: see In the matter of RivieraGroup Pty Ltd (admins apptd) (recs and mgrs apptd) and Others (2009) 72 ACSR 352; [2009] NSWSC 585 (Re Riviera) at [13] (Austin J) citing Re Lombe; Babcock & Brown Ltd (admins apptd) [2009] FCA 349; Australian Discount Retail Pty Ltd [2009] NSWSC 110; Stewart, Re Kleins Franchising Pty Ltd (admins apptd) [2008] FCA 721; Re Uni-Aire Security Pty Ltd (admins apptd) [2006] FCA 1423.

11. It has also been said that the Court can, and should, give weight to the considered judgment of the administrators in matters of this kind: see Re BCD Resources at [12] (Black J) citing Re Owen, RiverCity Motorway Pty Ltd (admins apptd) (recs & mgrs apptd) v Madden (No. 4) (2012) 92 ACSR 255; [2012] FCA 1491 at [26].

12. It is submitted for the Administrators that the extension of the convening periods is justified because it will allow the Administrators to sell the business as a going concern and allow for any incoming purchaser to obtain service approval under the Childcare National Law from the Australian Children's Education and Care Quality Authority (ACECQA), which takes at least 60 days.

13. The Administrators regard the sale of the business as a more likely strategy to achieve the best return for creditors for reasons including that the furnished centres and trained staff are likely to be valuable to an incoming purchaser.

14. The Administrators have commenced the sale process and have engaged a broker to assist them. Expressions of interest were due by 6 March 2025 and the Administrators received more than 400 enquiries. I am informed that the closing date for offers to purchase was 7 March 2025 and that over 20 offers were received. Of those the Administrators have identified 10 suitable offers for separate childcare centres and are proposing to negotiate with those prospective purchasers.

15. The additional time for the convening periods will allow sufficient time for those negotiations to take place and then for approval to be obtained from ACECQA.

16. The view of the Administrators is that the sales will result in a better return to creditors of the HEI Group of Companies because it will allow the lease moratorium to continue, it keeps the Group stable, allows a sale to be structured under a Deed of Company Arrangement and the employees will keep their jobs.

17. The view of the Administrators is that the alternative to the sales is a winding up and if that were to occur then it would result in the trading companies ceasing to trade, the landlords would take possession and a lower sale price would likely be achieved.

18. I have considered the question of prejudice to creditors. The Administrators will continue to pay employee wages and entitlements and rent. The Administrators have identified some creditors who, potentially, will be prejudiced by the extension. They are some landlords who are owed historical rent. However, as things stand it seems unlikely that if the companies are wound up that those landlords will recover amounts that are owed to them, whereas if the convening period is extended they may have a better prospect of recovering outstanding moneys.

19. The other creditors who potentially will be prejudiced are those employees who have been made redundant, but who have not received moneys owing to them. In the event that the HEI Group of Companies are placed into liquidation, those employees would be entitled to be paid out of the Fair Entitlements Guarantee. There is a prospect that those employees would recover amounts owed to them earlier in the event that the companies are placed into liquidation. However, I am informed that the process of securing payment under the Fair Entitlements Guarantee takes some time and it is quite possible that they would receive their moneys no earlier under a winding up than they would in the event that the convening period is extended.

20. I am satisfied that given the extension sought is 12 weeks and it is sought to facilitate a better return to all creditors, that the potential prejudice to these creditors is slender and is not disproportionate in the overall scheme.

21. The Administrators intend to hold a second meeting with creditors as soon as possible, notwithstanding an extension to the convening period.

22. The Administrators have informed creditors of their intention to seek the extensions to the convening periods and no creditors have objected.

23. I am satisfied having undertaken the balancing exercise referred to in the judgment of Nettle and Gordon JJ in Mighty River that the extension of the convening period in respect of the Second to Seventeenth Plaintiffs is justified.

24. As to giving notice to creditors, there are 16 entities in administration and various creditors. In light of this, it is an appropriate case for the Court to order that electronic notification be made to creditors by email publication, on ASIC's website and by publication on the Administrator's website.

25. For those reasons, I propose to make orders extending the convening periods of which the Second to Seventeenth Plaintiffs must convene a second meeting of creditors as required by s 439A of the Act to be extended up to and including 11 June 2025.

26. The Administrators also seek orders pursuant to s 447A(1) of the Act that Part 5.3A of the Act is to operate in relation to the companies, such that the second meetings may be convened and held at any time during or within five business days after, the end of the convening period, notwithstanding the provisions of s 439A(2) of the Act. I will make those orders. The Administrators seek various other orders giving persons with sufficient interest liberty to apply to vary or discharge relevant orders on three business days' notice to be given to the Plaintiffs and the Associate to the presiding Corporations List judge.

27. I will make the orders contained in the short minutes of order that I initial, date and place with the papers. Those orders can be entered forthwith.

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Decision last updated: 12 March 2025