In the matter of DSG Holdings Australia Pty Ltd (administrator appointed) (receivers and managers appointed)
[2014] NSWSC 982
•22 July 2014
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of DSG Holdings Australia Pty Ltd (administrator appointed) (receivers and managers appointed) [2014] NSWSC 982 Hearing dates: 22 July 2014 Date of orders: 22 July 2014 Decision date: 22 July 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Time for convening meeting of creditors extended
Category: Principal judgment Parties: Steven Nichols in his capacity as administrator of DSG Holdings Australia Pty Ltd and other companies (first plaintiff)
DSG Holdings Australia Pty Ltd (ACN 136 178 811) (second plaintiff)
DSG Leaseholding Pty Ltd (administrator appointed) (third plaintiff)
Crazy Clark’s Discount Superstores Pty Ltd (fourth plaintiff)
Sam’s Warehouse Discount Superstores Pty Ltd (fifth plaintiff)Representation: Counsel:
D Stack (plaintiffs)
Solicitors:
Bridges Lawyers (plaintiffs)
File Number(s): 2014/ 215919
Judgment (ex tempore)
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HIS HONOUR: The plaintiff Stephen Nicholls is the voluntary administrator of four companies DSG Holdings Australia Pty Limited, DSG Leaseholding Pty Limited, Crazy Clark's Discount Super Stores Pty Limited and Sam's Warehouse Discount Super Stores Pty Limited, pursuant to an appointment made by their sole director, one Ms Cameron, on 30 June 2014 under (Cth) Corporations Act 2001, s 436A.
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The companies operate an extensive chain of discount stores, the second defendant DSG Holdings being the operating company, and the others holding leases of the premises from which the stores operate. The size of the undertaking and the complexity of the administration is illustrated by the circumstances that the companies employ approximately 2,500 employees with total weekly wages of about $900,000; have an historical annual turnover in excess of $300 million and a weekly turnover currently of approximately $5.8 million; there are 142 stores, in all states of Australia and a network of approximately 230 domestic and international suppliers; and in excess of 140 landlords and a current weekly rent of approximately $1.4 million. There appear to be 219 trade creditors of the holding company, who are owed in excess of $17.7 million, excluding the Australian Taxation Office.
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Concurrently with the appointment of the administrators, two secured creditors, one of which is also the sole shareholder in the holding company and the other of which is also a related company, appointed receivers and managers. The receivers and managers have undertaken a marketing campaign and elicited expressions of interest from a number of potential purchasers in acquiring the business as a whole. In the meantime, the receivers have continued to pay the rent to the landlords and continued to employ and to pay the employees.
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By originating process, leave to file, which is sought, the administrator seeks an order pursuant to Corporations Act, s 439A(6), extending the convening period - which would otherwise expire on 28 July 2014 - to 28 October 2014, a period of 90 days, and the usual order pursuant to s 447A that Pt 5.3A have effect as if it provided that the second meeting of creditors may be held at any time within five business days before or after the period so extended.
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It is unnecessary to rehearse the now well-travelled ground summarised, for example, by Austin J in Re Riviera Group Pty Limited [2009] NSWSC 585; (2009) 72 ACSR 352 as to the categories of case in which it may be appropriate to grant such an extension. It is well established that the Court no longer approaches an application for an extension, on the basis that some special reason needs to be shown for an extension, and that what is involved is striking a balance between on the one hand, permitting the due course of administration to be followed to allow the best prospects of achieving the objects of Pt 5.3A - namely, the continuation of the business of the company or at least the maximisation of the return to creditors – and, on the other hand, avoiding detriment from the various moratoria applied by the status of administration on those who might be adversely affected by them.
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It is very clear that this is a large and complex administration, which is further complicated by the concurrent receivership, and that the prospects of achieving the objects of Pt 5.3A will be enhanced by allowing time for the sale process to be completed and the true financial position to be more clearly established. There are some indications from the director that once the position is clarified, she may propose a deed of company arrangement. At this stage, it would not be reasonable to expect the administrators to make a sensible recommendation to creditors as to what course they should adopt at the second meeting.
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So far as concerns detriment to those affected by moratoria, the employees remain in employment and are being paid and, accordingly, the circumstance that their ability to access the guarantee scheme is deferred is not a significant detriment, as they will continue to receive remuneration while the receivers continue to trade the business.
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The lessors of the premises are being paid by the receivers. The major secured creditors who appointed the receivers support the extension, as does the director who represents the interests of the ultimate shareholder and contributory. The other (minor) secured creditors are, at least for the most part, continuing to be paid by the receivers. Trade creditors are, on the administrator's present estimation, unlikely to receive a significant dividend if the company goes into liquidation. The receivers are continuing to purchase and pay in full for stock and services while they trade on the business. The position of the trade creditors is unlikely to be adversely affected by the proposed extension. In any event, I propose in the usual way to reserve leave to any creditor to apply to set aside the order on reasonable notice.
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For the foregoing reasons and upon the undertaking of Dominic Stephen Calabria solicitor, to pay the appropriate filing fees, I grant leave to Steven Nicols in his capacity as administrator of the four companies to which I have referred to file an originating process in the form initialled by me, dated this day and placed with the papers. I direct that the originating process be returnable instanter.
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The Court orders that in respect of each of the companies DSG Holdings Australia Pty Limited, DSG Leaseholding Pty Limited, Crazy Clark's Discount Super Stores Pty Limited and Sam's Warehouse Discount Super Stores Pty Limited:
Pursuant to Corporations Act, s439A(6), the convening period for the first plaintiff to convene a meeting of creditors of the company under Corporations Act, s 439A, be extended up to and including 28 October 2014.
Pursuant to Corporations Act, s 447A(1), Pt 5.3A of the Act have effect in relation to the company as if it provided that the meeting of creditors required by s 439A(1) may be held at any time before or within five business days after the period referred to in order 1.
Leave be reserved to any creditor of the company to apply to set aside or vary order 1 on seven days’ notice.
Leave be granted to the plaintiff to apply for any further extension in the convening period referred to in order 1 above at any time before 28 October 2014.
Costs of this application be costs in the administration.
These orders be entered forthwith.
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Decision last updated: 20 January 2015
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