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Re Lombe; Australian Discount Retail Pty Ltd

Re Lombe; Australian Discount Retail Pty Ltd

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

HEARING DATE(S): 02/03/09

JUDGMENT DATE :
3 March 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Order under s 447A extending convening period to 19 August 2009

CATCHWORDS: CORPORATIONS - voluntary administration - second meeting of creditors - extension of convening period - whether case for long extension made out - where special factors relevant to sale of business as going concern - one extension already made under s 439A(6) - whether s 439A(6) available to effect second extension - consideration of amendments made by Corporations Amendment (Insolvency) Act 2007 - continued availability of s 447A

LEGISLATION CITED: Corporations Act 2001 (Cth), Part 5.3A, ss 435A, 439A(2), 439A(5), 439A(6), 439A(7), 439A(8), 447A,
Corporations Amendment (Insolvency) Act 2007 (Cth)

CATEGORY: Principal judgment

CASES CITED: Bernsteen Pty Ltd v Newmore Pty Ltd (1995) 13 ACLC 1608
Carter v Global Food Equipment Pty Ltd [2007] NSWSC 901; (2007) 25 ACLC 1173
Re Daisytek Australia Pty Ltd [2003] FCA 575; (2003) 45 ACSR 446
Re Envirostar Energy Ltd [2002] NSWSC 1246
Re Henry Walker Eltin Group Ltd [2005] FCA 984; (2005) 54 ACSR 383
Re LED Builders Pty Ltd [2008] NSWSC 633
Re Madden (1996) 131 FLR 430
Re South Wagga Sports & Bowling Club Ltd [2009] FCA 25
Re Vanfox Pty Ltd [1995] 2 QdR 445
Re Western National Earthmoving Corporation Pty Ltd (1997) 141 FLR 121
Watson v Uniframes Ltd & Trumbull (1994) 55 FCR 556

TEXTS CITED: Legal Committee of the Companies and Securities Advisory Committee final report, June 1998: "Corporate Voluntary Administration" paras 2.79 to 2.81.

PARTIES: David John Frank Lombe and Simon John Cathro as administrators of Australian Discount Retail Pty Limited & ors - Plaintiffs

FILE NUMBER(S): SC 1526/09

COUNSEL: Mr S G Finch SC/Ms K E Day - Plaintiffs
Mr G J Ryan - ING Industrial Custodian Pty Ltd

SOLICITORS: Freehills - Plaintiffs
Mallesons Stephen Jaques - ING Industrial Custodian Pty Ltd

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY 3 MARCH 2009

1526/09 DAVID FRANK LOMBE & SIMON CATHRO (AS ADMINISTRATORS OF AUSTRALIAN DISCOUNT RETAIL PTY LIMITED & ORS

JUDGMENT

1 Mr Lombe and Mr Cathro are the administrators of Australian Discount Retail Pty Limited and 38 wholly-owned subsidiaries under Part 5.3A of the Corporations Act 2001 (Cth). They were appointed on 20 January 2009.

2 The group of 39 companies, which I shall call the “ADR Group”, conducts several discount or variety retailing businesses under the names “Crazy Clark’s”, “Go-Lo”, “Sam's Warehouse” and “Chickenfeed”.

3 On 16 February 2009, the administrators approached the court seeking a substantial extension of the convening period for the second meeting of creditors in each of the Part 5.3A administrations. A solicitor representing a lessor of premises to one of the companies appeared on that occasion and opposed any extension. The court made an order effecting a short extension until 9 March 2009 and stood the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWSC 110
Decision Date: 3 March 2009

CaseChat Overview and Summary

The case involved the voluntary administration of Australian Discount Retail Pty Ltd, a company in financial distress, with the application being made by Re Lombe, a representative of the company's creditors. The dispute centred on the convening of a second meeting of creditors and whether the period for such a meeting should be extended beyond the statutory deadline. The matter was heard in the Federal Court of Australia.

The court was required to determine if there were sufficient grounds for extending the convening period of a second meeting of creditors beyond the standard timeframe. The specific legal issue was whether the circumstances warranted a long extension under section 439A(6) of the Corporations Act 2001 (Cth), particularly given that one extension had already been granted under the same provision. The court also needed to consider the impact of legislative amendments introduced by the Corporations Amendment (Insolvency) Act 2007 on the availability of section 447A for effecting a second extension.

In its reasoning, the court found that the circumstances did indeed justify a long extension of the convening period. The court recognised that special factors were relevant to the potential sale of the business as a going concern. It acknowledged that while an extension had already been granted, the unique nature of the case, including the potential benefits of a going concern sale, warranted further consideration. The court considered the legislative amendments and concluded that section 447A remained available to effect a second extension in these circumstances. Consequently, the court granted the extension requested, allowing for the continuation of efforts to realise the benefits of a going concern sale.

The court's final order was that the convening period for the second meeting of creditors be extended, in line with the provisions of the Corporations Act 2001 (Cth) as amended by the Corporations Amendment (Insolvency) Act 2007. This decision recognised the unique aspects of the case and the potential advantages of proceeding with the business as a going concern.

Orders