Re Strawbridge ((in their capacity as joint and several administrators of CBCH Group Pty Ltd (administrators appointed)) (No 2)

Strawbridge, as administrators for a group of companies including CBCH Group Pty Ltd, applied to the Federal Court for relief from personal liability for rent due under leases for a two-week period and for directions justifying non-payment of rent for that period. The application was made in the context of a corporate administration initiated on 31 January 2020, with an extension of the convening period ordered by the Court on 24 February 2020. The Administrators had closed 31 of the 124 Australian stores by 26 March 2020 due to underperformance and had continued to meet the lease obligations of the remaining stores. The Administrators sought to cease rent payments for a two-week period in order to negotiate with landlords or to facilitate a sale of the business.

The primary legal issues before the Court were whether the Administrators were entitled to relief from personal liability for the rent and whether they were justified in causing the companies to cease rent payments. The Court considered the principles applicable to such applications, including the requirement that some issue of substance, procedure, power, propriety, or reasonableness must be raised to justify a direction. The Administrators argued that the COVID-19 pandemic had created an extraordinary situation warranting exceptional measures, and that ceasing rent payments would provide the best outcome for creditors.

The Court found that the Administrators had made full and fair disclosure of the relevant facts and circumstances, and that the COVID-19 pandemic constituted an extraordinary situation warranting a deviation from the usual operation of the relevant provisions of the Corporations Act. The Court accepted that ceasing rent payments for a short period could provide the best outcome for creditors and facilitate either a sale of the business or negotiations with landlords. The Court also noted the undertakings given by the Administrators not to open for trade or conduct online trading from certain retail premises during the period in question.

Accordingly, the Court made orders relieving the Administrators from personal liability for rent due under leases for a two-week period and providing directions justifying non-payment of rent for that period. The Court also made orders regarding confidentiality, costs, and further proceedings. The Court found that the Administrators were justified in their decision to cease rent payments for the two-week period, given the extraordinary circumstances created by the COVID-19 pandemic. The Court emphasised that its direction was limited to the specific circumstances of this case and did not constitute a general approval of the Administrators' business decision.