Mansfield, in the matter of Fresh For Life.....Pty Ltd (administrators appointed)
[2024] FCA 1048
•5 September 2024
FEDERAL COURT OF AUSTRALIA
Mansfield, in the matter of Fresh For Life.....Pty Ltd (administrators appointed) [2024] FCA 1048
File number: NSD 1197 of 2024 Judgment of: YATES J Date of judgment: 5 September 2024 Catchwords: CORPORATIONS – company in administration – application for extension of time for the resumption of the second meeting of creditors pursuant to ss 439A of the Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth) ss 436A, 439A and 447A
Insolvency Practice Rules (Corporations) 2016 (Cth) s 75‑140
Cases cited: Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733
Georges, in the matter of Vical NSW Pty Ltd (Administrators Appointed) [2018] FCA 1974
Re Wellfully Ltd (administrators appointed) [2023] WASC 458
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 21 Date of hearing: 5 September 2024 Counsel for the Plaintiffs: Mr J Anderson Solicitor for the Plaintiffs: Bridges Lawyers ORDERS
NSD 1197 of 2024 IN THE MATTER OF FRESH FOR LIFE.....PTY LTD (ADMINISTRATORS APPOINTED) ACN 108 016 128
DAVID IAN MANSFIELD AND NATHAN KARL SCHWARZ IN THEIR CAPACITY AS JOINT AND SEVERAL VOLUNTARY ADMINISTRATORS OF FRESH FOR LIFE.....PTY LTD (ADMINISTRATORS APPOINTED) ACN 108 016 128
First Plaintiff
FRESH FOR LIFE.....PTY LTD (ADMINISTRATORS APPOINTED) ACN 108 016 128
Second Plaintiff
ORDER MADE BY:
YATES J
DATE OF ORDER:
5 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.Subject to Order 2, pursuant to ss 37AF(1) of the Federal Court of Australia Act 1976 (Cth) and on the ground that this order is necessary to prevent prejudice to the proper administration of justice:
(a)the documents identified as “Confidential Exhibit DM-2” in the affidavit of David Ian Mansfield sworn on 30 August 2024; and
(b)the paragraph number 6 of pages 16 and 21 of the affidavit of Thomas Karle affirmed on 4 September 2024,
(collectively, the Documents) be marked “Confidential” on the Court’s file and not be published, disclosed or accessed by any person until 19 November 2024, except pursuant to an order of the Court.
2.Order 1 above:
(a)is to take effect throughout the Commonwealth of Australia; and
(b)does not prevent the first plaintiffs, the first plaintiffs’ legal representatives or the first plaintiffs’ servants, agents or employees, from disclosing, publishing or accessing the Documents and the information contained therein.
3.Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Corporations Act), Pt 5.3A of the Corporations Act is to operate in relation to the second plaintiff as if:
(a)s 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR(C)) omitted the words “that is more than 45 business days after the first day on which the original meeting was held” and, in lieu thereof, included the words “later than 19 November 2024”;
(b)Pt 5.3A of the Corporations Act allowed adjournment of the meeting convened under s 439A of the Corporations Act in relation to the second plaintiff to a day not later than 19 November 2024, notwithstanding the operation of s 75-140(3) of the IPR(C); and
(c)the requirement to hold a meeting of creditors of the second plaintiff within the convening period specified in s 439A(2) of the Corporations Act is satisfied by holding the adjourned meeting no later than 19 November 2024,
and provided that the requirements of s 75-140 of the IPR(C) are otherwise complied with in respect of such meeting.
4.Within two business days, the first plaintiffs are to cause notice of these orders to be provided to:
(a)each of the known creditors of the second plaintiff;
(b)each of the directors of the second plaintiff,
(the Notified Parties) with such notice to be provided to the Notified Parties by taking the following steps:
(c)where the first plaintiffs:
(i)have the email address of the relevant Notified Party, by email sent to that email address; and
(ii)do not have the email address of the relevant Notified Party, but have a postal address (or have received notice of non-delivery of a notice sent by email in accordance with Order 4(c)(i)), by ordinary pre-paid post to that postal address.
5.The first plaintiffs’ costs of and incidental to this application be costs and expenses in the administration of the second plaintiff and be paid out of the assets of the second plaintiff.
6.Any officer, contributory or creditor of the second plaintiff, and any other person who can demonstrate sufficient interest, has liberty to apply to vary or discharge Order 3 on two business days’ notice.
7.The first plaintiffs be granted liberty to apply to the Court in relation to any further modification of the operation of Pt 5.3A of the Corporations Act in relation to the second plaintiff or any other matter arising in relation to the administration of the second plaintiff generally.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Revised from transcriptYATES J:
INTRODUCTION
The first plaintiffs, David Ian Mansfield and Nathan Karl Schwarz (the administrators), are the joint and several administrators of Fresh For Life…..Pty Ltd (administrators appointed) (the company), who were appointed on 14 June 2024 pursuant to s 436A of the Corporations Act 2001 (Cth) (the Corporations Act). They seek orders extending the time for the resumption of the second meeting of creditors of the company.
Pursuant to s 439A(5)(b) of the Corporations Act, the convening period for the second meeting of the company’s creditors ended on 12 July 2024. The second meeting was convened and held on 19 July 2024. At that meeting, Mr Mansfield, who was presiding, exercised the power under s 75-140(1)(b) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR(C)) to adjourn the meeting for up to 45 business days. This means that at the present time, the meeting must be resumed by 20 September 2024. This would require the administrators to issue and send a notice and updating report to creditors by 12 September 2024. The administrators wish to extend the time for the resumption of the second meeting by approximately two months to 19 November 2024.
The application is supported by an affidavit made by Mr Mansfield on 30 August 2024, and an affidavit made on 4 September 2024 by Thomas Karle, a solicitor in the employ of the administrators’ solicitors.
BACKGROUND
The company previously operated four “Oporto” franchises in the Western Sydney area at two locations in Merrylands (the Merrylands Road Oporto and the Stockland Oporto), Plumpton (the Plumpton Oporto) and Stanhope Gardens (the Stanhope Oporto). Oporto (Franchising) Pty Ltd (Oporto) was the franchisor. The franchises were operated from leased premises. The Stanhope Oporto was sold in 2019.
On 9 April 2024, Oporto terminated the (then) three existing franchises. However, a related entity of Oporto, Oporto Leasing Pty Ltd (Oporto Leasing), entered into licence arrangements with the company which permitted the Stockland Oporto and the Plumpton Oporto to continue trading. No arrangements were entered into in respect of the continued operation of the Merrylands Road Oporto, and that franchise ceased trading on about 9 April 2024.
Between 16 April 2024 and around 5 June 2024, the company conducted negotiations with Oporto with a view to selling the business of the Plumpton Oporto and the stock and other assets of the Stockland Oporto. Those negotiations came to an end on (around) 5 June 2024 as a result of the two directors of the company being issued with Director Penalty Notices by the Australian Taxation Office. Shortly thereafter, the administrators were appointed to their current role.
Following that appointment, the administrators sought to re-engage with Oporto with a view to selling the business and assets of the company. The administrators considered that the company would obtain a higher sale price if the business and assets were sold as part of an operating Oporto franchise. However, for this to be done, Oporto’s assistance, as franchisor, was required.
Correspondence passed between the administrators and Oporto on this matter. By 11 July 2024 at 12.28 pm, Oporto had indicated its preparedness to enter into arrangements which would enable the administrators to proceed with the intended sale. (At the present time, the proposed sale of the company’s business relevantly contemplates the sale of the business, stock, and assets of the Stockland Oporto and the Plumpton Oporto.)
Later on 11 July 2024, the administrators received a draft deed from Oporto, which was a revised draft of a deed previously negotiated with the company (the Revised Proposed Deed) in respect of the proposed sale. However, by that time, the administrators’ second report to creditors was due to be issued the following day (12 July 2024) and the administrators did not have sufficient time to review the draft document and seek legal advice on it. For that reason, the administrators considered that it was necessary to exercise the power under s 75-140(1)(b) of the IPR(C) to adjourn the second meeting of creditors for up to 45 business days.
In the second report to creditors, the administrators informed the creditors that a proposal for a deed of company arrangement had not been received. They recorded their recommendation that the company be wound up and placed in liquidation, but indicated that the proposed sale process in relation to the company was ongoing and that it was intended that the second meeting of creditors would be adjourned.
At the meeting on 19 July 2024, the creditors passed a resolution to “support and authorise the administrators to apply to the Court for any necessary extension of the administration with respect to the sale of the company’s business and/or the determination of the company’s future”.
The administrators wish to extend the time for the resumption of the second meeting of creditors because the proposed sale of the company’s business and assets is complex due to the type of business conducted under the franchise arrangements and the consequent need to involve a number of parties in the proposed negotiations, including Oporto as franchisor, the directors of the company, and the landlords of the premises from which the company’s business operates.
The administrators have expressed the view, through Mr Mansfield, that deferring the resumption of the second meeting of creditors to 19 November 2024, should allow sufficient time for them to progress and finalise negotiations with the necessary parties and to complete the sale process. By doing so, the administrators expect that this will provide the opportunity for a better return to the unsecured creditors. The administrators have, however, left open the possibility that it may be necessary for them to approach the Court to further extend the period for resuming the second meeting.
The administrators are not aware of any material prejudice that would be suffered by the company’s creditors if the resumption of the second meeting were to be deferred. Oporto has agreed to maintain the existing licence arrangements with respect to the Stockland Oporto and the Plumpton Oporto. As I have said, on 19 July 2024 the creditors passed a resolution of support in respect of extending the administration.
On 3 September 2024, a circular was sent to creditors advising that an application would be made to the Court on 5 September 2024 seeking to extend the administration. Although the period of notice was necessarily short, the administrators have not received any objection to the Court granting the relief they seek.
CONSIDERATION
Section 75-140 of the IPR(C) relevantly provides:
75‑140 Adjournment of meetings
(1) A meeting may be adjourned from time to time and from place to place:
(a) by resolution; or
(b) by the person presiding at the meeting.
(2) The meeting must not be adjourned to a day that is more than 15 business days after the first day on which the original meeting was held.
(3) Despite subsection (2), a meeting convened under section 439A of the Act must not be adjourned to a day that is more than 45 business days after the first day on which the original meeting was held.
…
The power under s 447A of the Corporations Act extends to modifying the maximum period of an adjournment prescribed by s 75-140(3) of the IPR(C) of a meeting of creditors convened under s 439A: Georges, in the matter of Vical NSW Pty Ltd (Administrators Appointed) [2018] FCA 1974 at [25] – [27]; Bailey, in the matter of Megacrane Holdings Pty Ltd (administrator appointed) [2022] FCA 733 at [17]; Re Wellfully Ltd (administrators appointed) [2023] WASC 458 at [20].
I accept that this is an appropriate case for granting the relief that the administrators seek, and orders will be made accordingly. On the evidence before me, I accept that time will be needed to complete the negotiations to which Mr Mansfield has deposed. The administrators’ assessment is that a better outcome is likely for the unsecured creditors if the sale in contemplation can be completed. I have no reason to doubt that expression of opinion. I also place considerable weight on the views of the creditors, who support the administration being extended to achieve a sale of the company’s business and assets.
The evidence includes documents referred to in Mr Mansfield’s affidavit as “Confidential Exhibit DM-2”. The plaintiffs seek an order under s 37AF(1) of the Federal Court of Australia Act 1976 (Cth) that these documents not be published, disclosed, or accessed by any person until 19 November 2024, except pursuant to an order of the Court. The same order is sought in relation to the paragraph numbered “6” on pages 16 and 21 of Mr Karle’s affidavit.
I am satisfied that this order is appropriate given that the documents and information in question contain valuations and other commercially sensitive information which, if disclosed, may adversely affect the ability of the administrators to obtain the best value for the company’s business and assets for the benefit of the creditors. The order that the administrators seek is of limited duration and allows for the possibility that the Court can permit earlier disclosure on sufficient grounds being established.
DISPOSITION
Orders, substantially as sought by the administrators, will be made.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate:
Dated: 10 September 2024
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