Re Phantom Kitchens Pty Ltd
[2023] VSC 276
•29 May 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 02109
IN THE MATTER of PHANTOM KITCHENS PTY LTD (ADMINSTRATOR APPOINTED) (ACN 641 418 082)
BETWEEN:
| RICHARD TRYGVE ROHRT IN HIS CAPACITY AS ADMINISTRATOR OF PHANTOM KITCHENS PTY LTD (ADMINISTRATOR APPOINTED) (ACN 641 418 082) | Plaintiff |
| -and- | |
| NO RESPONDENT | Defendant |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 May 2023 |
DATE OF JUDGMENT: | 29 May 2023 |
CASE MAY BE CITED AS: | Re Phantom Kitchens Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 276 |
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CORPORATIONS – External administration – Application for extension of convening period of company in administration pursuant to s 447A of the Corporations Act 2001 (Cth) – Administrator sought extension to enable conclusion of the sale of the company’s business and assets – Orders made for extension of convening period together with ancillary orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms V Bell | Brand Partners |
HIS HONOUR:
Introduction
On 8 February 2023 the plaintiff, Richard Trygve Rohrt, was appointed administrator of Phantom Kitchens Pty Ltd (Company).
The Company is the trustee of the Phantom Unit Trust which operates a restaurant and bar from leased premises in South Yarra in the state of Victoria.
On 19 May 2023, Mr Rohrt made an application by originating process to extend the adjournment of the second meeting of creditors for a further four months. Mr Rohrt sought the extension to enable him to obtain approval to transfer the liquor licences held by the Company and to conclude the sale of the Company’s business. The Company’s liquor licences are the Company’s sole revenue-generating asset.
Mr Rohrt’s application was made under s 447A(1) of the Corporations Act 2001 (Cth) (Act), and section 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being schedule 2 to the Act. The application sought to alter the operation of r 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR), and sought ancillary orders to notify the Company’s creditors and to provide those creditors with liberty to apply to the Court. Additionally, Mr Rohrt sought the costs of his application.
Mr Rohrt’s application was supported by his affidavits sworn on 17 May 2023, 22 May 2023 and 22 May 2023, and the affidavit of Mr Terence O’Brien sworn on 23 May 2023.
Mr Rohrt deposed that on 17 March 2023 he convened and adjourned the second creditors’ meeting to 24 May 2023, being 45 business days from the date of the second meeting. Mr Rohrt also deposed that, in his opinion, it is in the best interests of the creditors that the Court extend the period of the adjournment for the second creditors’ meeting, and that the four months proposed extension is reasonable and necessary due to the complexities involved in the administration. The complexities are largely caused by a delay associated with obtaining approval to transfer the Company’s liquor licences.
On 23 May 2023, I heard and granted Mr Rohrt’s application. At that time I indicated my intention to publish short reasons for granting the application. These are those reasons.
Background
The Company was incorporated on 2 June 2020. Aside from plant and equipment, fitout, stock and goodwill, the only assets of the Company are two liquor licences.
Since his appointment Mr Rohrt has continued to trade the business. Mr Rohrt’s opinion is that the best way to realise a return to creditors is to sell the business as quickly as possible to benefit from any remaining goodwill.
In his affidavits Mr Rohrt describes the tasks that he and his office have undertaken including:
(a) having the assets of the Company independently valued on a fair market value in continued use basis;
(b) holding the first meeting of creditors on 20 February 2023;
(c) issuing an administrator’s report to creditors pursuant to r 75-225(3) of the IPR on 9 March 2023. The report indicated the Company has unsecured liabilities totalling $619,536 — including $14,620 in unpaid employee entitlements — and that the administrator’s current projection of total creditor claims is $565,424.05;
(d) holding the second meeting of creditors on 17 March 2023, which was adjourned to 24 May 2023 to allow time for the business to be advertised for sale and expressions of interest from potential purchasers to be obtained;
(e) advertising the business for sale on 25 March 2023;
(f) receiving an offer to purchase the business which, if completed, the administrator estimates will provide a small return to creditors;
(g) applying to Liquor Control Victoria (LCV) to have Mr Rohrt endorsed on the business’ liquor licences on 28 March 2023 which was finalised by LCV on 17 May 2023;
(h) ensuring a director of the proposed purchaser of the business has completed the necessary training to be the transferee of the liquor licences;
(i) applying for the transfer of the liquor licences to the proposed purchaser;
(j) obtaining the consent of the landlord to the transfer of the lease to the proposed purchaser, which was provided on 16 May 2023;
(k) seeking advice from LCV on the likely timeframe for determination of an application to transfer the liquor licences;
(l) obtaining confirmation of the offer to purchase the business from the proposed purchaser on 22 May 2023;
(m) preparing a sale of business agreement for execution;
(n) conducting searches of the Personal Property Securities Register and liaising with one creditor identified as a secured creditor in those searches; and
(o) from 17 – 19 May 2023, providing notice of Mr Rohrt’s application to this Court to the creditors of the Company and the Australian Securities and Investments Commission (ASIC).
Mr Rohrt stated that if the Court grants a four month extension of the adjournment period, he expects to complete the following steps in that period:
(a) execution of a written business sale agreement within the next seven days; and
(b) transfer of the liquor licences to the proposed purchaser which could take sixteen weeks to finalise.
Mr Rohrt also stated that if the Court grants the extension sought, he will take steps to inform the Company’s creditors by letter and by posting a notice on the ASIC website.
Principles for the grant of an application to further extend the convening period
The principles that apply when considering a further extension of the convening period are the same as those that apply for any extension of the convening period.[1]
[1]Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182, [14].
In Re Strawbridge, Virgin Australia Holdings Ltd (Admins Apptd) (No 2),[2] Middleton J considered the principles and authorities relevant to an application to extend a convening period required to be held under Part 5.3A of the Act:
[2](2020) 144 ACRS 347, 370–1 [64]–[68].
The circumstances in which the Court will extend a convening period are well established. In making such an order, the Court must reach an appropriate balance between an expectation that the administration will be relatively speedy and summary, and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 (Young J); Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10] (Barrett J).
The approach to be adopted was recently set out by Thawley J in Farnsworth v About Life Pty Ltd (admin apptd) [2019] FCA 11 at [3]–[8], where his Honour endorsed the comments of Austin J in Re Riviera Group Pty Ltd (admins apptd) (recrs and mgrs apptd) (2009) 72 ACSR 352; [2009] NSWSC 585 (Re Riviera) at [13] as to the categories of cases in which an extension is granted including, relevantly:
(1)where the size and scope of the business in administration is substantial (citing Lombe, Re Babcock & Brown Ltd (admins apptd) [2009] FCA 349; Worrell; Re Storm Financial Ltd (recs and mgrs apptd) (2009) 69 ACSR 584; [2009] FCA 70; and ABC Learning Centres Ltd, Re ABC Learning Centres Ltd; Application by Walker (No 5) [2008] FCA 1947);
(2)where the extension will allow sale of the business as a going concern, citing Lombe Re Australian Discount Rental Pty Ltd [2009] NSWSC 110; Stewart, Re Kleins Franchising Pty Ltd (admins apptd) [2008] FCA 721; ReUni-Aire Security Pty Ltd (admins apptd) [2006] FCA 1423; and
(3)more generally, where additional time is likely to enhance the return for unsecured creditors: Deputy Commissioner of Taxation v Scottsdale Homes No 3 Pty Ltd (No 2) [2009] FCA 190; Fitzgerald, Re Primebroker Securities Ltd (admin apptd) (recs and mgrs apptd) [2008] FCA 1247; Ex parte Vouris; Re Marrickville Bowling & Recreation Club Ltd (under administration) [2008] FCA 622.
An extension of the administration period to facilitate either (or both) of: (a) the sale of the business of the company as a going concern, so as to maximise the value of the company’s assets; or (b) the progression and assessment of a DOCA proposal that may provide a better return to creditors than a winding up, are well-recognised examples of situations where the Court has extended the convening period: Mentha, Re Hans Continental Smallgoods Pty Ltd (admins apptd) [2008] FCA 1933 (Jacobson J); Re Riviera (Austin J); Re Austcorp Group Ltd (admins apptd) [2009] FCA 636 (Re Austcorp) (Lindgren J); and Re Kavia Holdings Pty Ltd (admins apptd) (recs and mgrs apptd) [2013] NSW SC 737 (Black J).
In Mighty River international Ltd v Hughes (as deed administrators of Mesa Minerals Ltd (subject to deed of company arrangement)) (2018) 359 ALR 181; 130 ACSR 427; [2018] HCA 38 at [73], Nettle and Gordon JJ (in dissent, but not relevantly in this respect) referred to a number of cases including Re Riviera and concluded:
…Generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans, and complex recovery proceedings, and, more generally, where the additional time is likely to enhance the return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium imposed by the administration, and the administrator’s estimate of time has had a reasonable basis, the courts have tended to grant extensions for the periods sought by administrators. …
Finally, the administrator’s own opinion as to the need for an extension will be given weight in an application of this kind: Owen (in their capacity as joint and several administrators of Rivercity Motorway Pty Ltd (admins apptd)(recs and mgrs apptd)) v Madden (recs and mgrs) (No 4) (2012) 92 ACSR 255; [2012] FCA 1491 at [26] (Logan J); Re Belmont Sportsmans Club Co-Operative Ltd (admins apptd) [2015] NSWSC 543 at [9] (Black J); Re application by Jahani (in their capacity as joint and several administrators of Northern Energy Corporation Ltd (admins apptd)) (No 2) [2019] FCA 382 at [67] (Farrell J); Re Duro Felguera Australia Pty Ltd (admins apptd) [2020] FCA 422 at [32] (Gleeson J).
Consideration
Mr Rohrt’s purpose in seeking an extension of the adjournment period is to conclude an agreement for the sale of the business and its assets. Mr Rohrt is a very experienced liquidator. His opinion is that absent a sale of the business, he expects the Company’s unsecured creditors to receive no return in the Company’s liquidation. No creditor has opposed Mr Rohrt’s application.
I am satisfied that the further extension sought is consistent with the object of Pt 5.3A of the Act; to maximise the chances of the relevant companies or its businesses continuing in existence or to achieve a better return for the Company’s creditors and members than would otherwise be attained from an immediate winding up.[3]
[3]Corporations Act 2001 (Cth), s 435A.
Accordingly, the orders I made on 23 May 2023 were as follows:
(a) Pursuant to rr 9.03(1) and 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), the plaintiff has leave to amend the originating process to make Phantom Kitchens Pty Ltd (administrator appointed) the second plaintiff in this proceeding.
(b) Pursuant to s 447A(1) of the Act and s 90-15 of the IPS, Pt 5.3A of the Act is to operate in relation to the administration of the Company as if r 75-140(3) of the IPR omitted all words after ‘must not be adjourned to a day’ (namely, the words ‘that is more than 45 business days after the first day on which the original meeting was held) and included, instead of the omitted words, the words ‘later than 21 September 2023’, and as if that Part allowed adjournment of the meeting convened under s 439A of the Act in relation to the Company to a day not later than 21 September 2023.
(c) The plaintiff must take all reasonable steps to cause notice of these orders to be given, within two (2) business days after the making of these orders, to:
(i) the creditors (including persons or entities claiming to be creditors) of the Company, in the following manner:
I.where the plaintiff has an email address for a creditor, notifying each such creditor, via email, of the making of the orders and a copy of these orders;
II.where the plaintiff does not have an email address for a creditor but has a postal address for that creditor (or having received notification of non-delivery of a notice sent by email in accordance with (i)(I) above), notifying each such creditor, via post, of the making of the orders and providing a copy of these orders;
(ii) ASIC.
(d) The plaintiff and any creditor of the Company affected by these orders shall have liberty to apply upon two (2) business days’ written notice.
(e) The plaintiff’s costs of this application be costs in the administration of the Company.
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