FEDERAL COURT OF AUSTRALIA Gothard (Administrator), in the matter of Jeanswest Corporation Pty Ltd (administrators appointed) [2020] FCA 148 File number: VID 67 of 2020 Judge: ANASTASSIOU J Date of judgment: 10 February 2020 Catchwords: CORPORATIONS – application by administrators for extension of convening period for second meeting of creditors under Corporations Act 2001 (Cth) ss 439A(6) and 447A(1) – where investigations into companies ongoing – where sale of business as a going concern ongoing – where extension not opposed – extension allowed Legislation: Corporations Act 2001 (Cth), ss 439A and 447A Cases cited: Diamond Press Australia Pty Limited [2001] NSWSC 313 Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 Mighty River International Limited v Hughes [2018] HCA 38; 92 ALJR 822 Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 Villani, in the matter of Bounty Mining Limited (administrators appointed) (receivers and managers appointed) [2020] FCA 24 Date of hearing: 10 February 2020 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 15 Counsel for the Plaintiffs: Mr S. L. Freire Solicitor for the Plaintiffs: Clayton Utz ORDERS VID 67 of 2020 IN THE MATTER OF JEANWEST CORPORATION PTY LTD (ADMINISTRATORS APPOINTED) ACN 007 305 839 PETER JAMES GOTHARD AND JAMES HENRY STEWART AS ADMINISTRATORS OF JEANSWEST CORPORATION PTY LTD First Plaintiff JEANWEST CORPORATION PTY LTD (ADMINISTRATORS APPOINTED) ACN 007 305 839 Second Plaintiff GLORIOUS SUN (AUSTRALIA) PTY LTD (ADMINISTRATORS APPOINTED) ACN 091 122 020 (and others named in the Schedule) Third Plaintiff JUDGE: ANASTASSIOU J DATE OF ORDER: 10 FEBRUARY 2020 THE COURT ORDERS THAT: 1. Pursuant to section 439A(6) of the Corporations Act 2001 (Cth) (the Act), the period within which the Plaintiffs must convene the second meeting of the creditors of each of Jeanswest Corporation Pty Ltd (Administrators Appointed) ACN 007 305 839 and the other companies listed in the schedule (Companies) is extended to and includes 1 June 2020. 2. Pursuant to section 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to each of the Companies as if the second meeting of the creditors of the Companies required by section 439A of the Act be held at any time during, or within 5 business days after the end of, the convening period as extended by Order 1 above, notwithstanding the provisions of section 439A(2) of the Act. 3. Within 2 business days of these orders, the Plaintiffs cause notice of this originating process, and the orders made, to be given: (a) to creditors of the Companies by: (i) placing copies of the documents on the website maintained by the Plaintiffs at https://home.kpmg/au/en/home.html; and (ii) any of the following means: A. hand delivering the documents; B. emailing the documents to those creditors of the Companies for whom the Plaintiffs have a current email address; C. mailing the documents to those creditors of the Companies for whom the Plaintiffs have a current mailing address. 4. Liberty to apply is granted to any creditor or any other person who can demonstrate sufficient interest to modify or discharge Orders 1 or 2 on not less than 48 hours' notice to the Plaintiffs. 5. The Plaintiffs' costs of the application be treated as costs in the administration of Jeanswest Corporation Pty Ltd (Administrators Appointed) ACN 007 305 839. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT Delivered ex tempore, revised from transcript ANASTASSIOU J: 1 The application before the court is for an extension of time pursuant to section 439A(6) of the Corporations Act 2001 (Cth) for the convening of the second meeting of creditors and for consequential orders, in effect, extending the moratorium pursuant to section 447A(1) of the Act as necessary. 2 The application has come before me on short notice, and urgently, as the period for holding the second meeting, if not extended, expires on 12 February 2020. In support of the application, the first plaintiff (the Administrators) provided submissions and a detailed affidavit of one of the administrators, Mr Peter James Gothard, who together with Mr James Henry Stewart were appointed joint and several voluntary administrators of the Companies (as defined below). Background 3 The subject Companies are the second plaintiff, Jeanswest Corporation Pty Ltd, and a group of companies related to that company (being the second to sixth plaintiffs in this proceeding). Jeanswest is the operating company among the group. 4 Jeanswest conducts an extensive retail business in the area of male and female denim and fashion apparel. It operated 144 retail stores throughout Australia before entering administration. 5 Mr Gothard's affidavit details, with some particularity, the steps that have been taken in the time since the Companies were placed under administration to rationalise the business of Jeanswest. That rationalisation has included closing approximately 37 stores. It has also included the realisation of certain floor stock with the assistance of specialist consultants. There have also been a number of redundancies and terminations of employees such that the number of employees has been significantly reduced, no doubt consistent with the closing of certain retail outlets that had been assessed to be underperforming. The application for extension of time in which to hold the second creditors' meeting 6 Counsel for the Administrators submitted that time should be extended for the following principal reasons: (1) First, the extension is sought in circumstances where the Administrators are continuing to trade the business operated by Jeanswest, and are seeking to sell that business as a going concern. (2) Second, the extension sought will permit the Administrators to complete the sale process and their investigations, such that they may report to creditors, and make informed recommendations, in advance of the creditors' meeting that will determine the fate of the Companies. (3) Third, the extension sought is for up to 111 days, being the additional period that the Administrators consider necessary for them to conclude the sale process and be in a position to report to creditors in advance of the meeting. (4) Fourth, none of the Companies' creditors (including the major secured creditor), or employees, have expressed opposition to the extension. 7 As things presently stand, there is a sale process which remains underway for the sale of the company's business as a going concern. It is anticipated that by the end of this month the sale process will be 'concluded' in the sense that it will either result in a successful tender being accepted or it will not. 8 Mr Gothard's affidavit deposes that it is the opinion of the Administrators that it is in the best interests of creditors to allow the sale process to be pursued fully in the hope that there will be a sale of the whole of the Jeanswest's business as a going concern. 9 I note, also, that the major secured creditor has been informed of the proposal to extend the time for the holding of the second meeting and no objection has been taken. 10 There is provision in the orders for any creditor, and that will include landlords, to apply to the court to vary the order extending time for the holding of the second meeting or for any other person who can demonstrate a sufficient interest to make such application. Creditors will be provided a copy the orders in a circular to be distributed by the Administrators. 11 In the event that it becomes clear to the Administrators prior to the date to which the second meeting is to be extended that it will not be possible to achieve the deed of company arrangement or some other arrangement beneficial to the creditors, I was informed by counsel for the Administrators that it is proposed to bring forward the holding of the second meeting. 12 I note that in counsel's very helpful written submissions, reference is made to a recent decision of the High Court in Mighty River International Limited v Hughes [2018] HCA 38; 92 ALJR 822 in which their Honours (Nettle and Gordon JJ at [73]) quoted with approval the observation of Barrett J in Diamond Press Australia Pty Limited [2001] NSWSC 313 at [10] that: … undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders. 13 More recently, in Villani, in the matter of Bounty Mining Limited (administrators appointed) (receivers and managers appointed) [2020] FCA 24, Perram J when considering a like application (at [11]) in a similar context to present said: The principles applicable to the extension of a convening period granted under s 439A(6) are straightforward. The Court will have regard to the objectives of Pt 5.3A of the Act and the need for expedition in an administration, but will also have regard to the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors: Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 at [7] per Black J; Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611. 14 I am satisfied that the extension of time is warranted for the reasons advanced by the Administrators and having regard to the complexity of the business and the steps already taken in relation to its restructuring. 15 For these reasons, I will make the orders sought by the plaintiffs. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anastassiou. Associate: Dated: 27 February 2020 SCHEDULE OF PARTIES VID 67 of 2020 Plaintiffs Fourth Plaintiff: GLORIOUS SUN CORPORATE SERVICE PTY LTD (ADMINISTRATORS APPOINTED) ACN 091 122 002 Fifth Plaintiff: JEANSWEST INVESTMENTS (AUSTRALIA) PTY LTD (ADMINISTRATORS APPOINTED) ACN 074 258 781 Sixth Plaintiff: JEANSWEST WHOLESALE PTY LTD (ADMINISTRATORS APPOINTED) ACN 074 258 807