Federal Court of Australia Rathner, in the matter of Toddler Kindy Gymbaroo Pty Ltd (Administrators Appointed) [2021] FCA 1581 File number(s): VID 732 of 2021 Judgment of: DAVIES J Date of judgment: 10 December 2021 Date of publication of reasons: 15 December 2021 Catchwords: CORPORATIONS – voluntary administration – application for orders pursuant to ss 439A(6) and 447A(1) of the Corporations Act 2001 (Cth) (Corporations Act) that convening period for second meeting of creditors extended for six months – where company has international intellectual property assets and international revenue streams – where extension not opposed by creditors – where application is in best interests of creditors – where administrators believe extension is required to maximise creditor benefits – application granted Legislation: Corporations Act 2001 (Cth) ss 439A, 447A Cases cited: Mentha, in the matter of Griffin Coal Mining Co Pty Ltd (administrators appointed) [2010] FCA 30 Mighty River International v Hughes [2018] HCA 38; (2018) 265 CLR 480 Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 11 Date of hearing: 10 December 2021 Counsel for the Plaintiffs: Mr Freire Solicitor for the Plaintiffs: Baker Jones Lawyers Solicitor for the Interveners: Mr S Ryan of Rigby Cooke ORDERS VID 732 of 2021 IN THE MATTER OF RATHNER, IN THE MATTER OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) BETWEEN: GIDEON RATHNER (IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141) First Plaintiff MATTHEW BRIAN SWEENY (IN HIS CAPACITY AS JOINT AND SEVERAL ADMINISTRATOR OF TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141) Second Plaintiff TODDLER KINDY GYMBAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 166 141) Third Plaintiff AND: SINO GROUP INTERNATIONAL LTD First Intervener BEIJING YINGQIDI EDUCATION AND TECHNOLOGY CORPORATION LTD Second Intervener order made by: DAVIES J DATE OF ORDER: 10 december 2021 THE COURT ORDERS THAT: 1. Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Corporations Act), the period within which the first and second plaintiffs (the administrators) must convene the second meeting of the creditors of the third plaintiff (the Company) is extended to and includes 31 March 2022. 2. Pursuant to s 447A(1) of the Corporations Act, Part 5.3A of the Corporations Act is to operate in relation to the Company as if the second meeting of the creditors of the Company required by s 439A of the Corporations Act be held at any time during, or within five (5) business days after the end of, the convening period as extended by Order 1 above, notwithstanding the provisions of s 439A(2) of the Corporations Act. 3. Within two (2) business days of these orders, the Plaintiffs cause notice of this originating process, and the orders made, to be given to creditors of the Company by any of the following means: (a) hand delivering the documents; (b) emailing the documents to those creditors of the Company for whom the Plaintiffs have a current email address; (c) mailing the documents to those creditors of the Company 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 these directions and orders 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 the Company. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DAVIES J: 1 The first and second plaintiffs (the administrators) are the administrators of the third plaintiff, Toddler Kindy Gymbaroo Pty Ltd (the Company). The administrators were appointed on 22 November 2021 pursuant to a resolution of the directors of the Company under s 436A of the Corporations Act 2001 (Cth) (Corporations Act). 2 On 10 December 2021 I heard an application by the administrators for orders under ss 439A(6) and 447A(1) of the Corporations Act extending the convening period for the second meeting of creditors and providing for the meeting to be held at any time during, or within five business days after the end of, the convening period as extended. The application was supported by an affidavit sworn by the first plaintiff, Mr Gideon Isaac Rathner and I made orders that day in the terms sought. These are my reasons. the company 3 The Company operates a business that provides neuro-developmental and sensorimotor movement programs for babies and children from birth to five years and their parents. 4 The Company's assets include intellectual property assets in Australia and overseas. The Company is the registered owner of 31 different trade marks in Australia and also appears to hold trade marks or pending trade mark applications in a number of overseas jurisdictions. 5 The Company either franchises or licences the use of the programs and the brands in Australia and overseas. 6 At this time, the administrators are continuing to trade the business during the administration. The Company has 69 centres across Australia, two of which are company owned and operated and the balance are operated by franchisees. extension of the convening period 7 The relevant provisions, ss 439A(6) and 447A(1), are set out in Part 5.3A of the Corporations Act. The overall object of this Part is to maximise the chances of the company involved or its business continuing in existence or achieving a better result for the company's creditors (Corporations Act s 435A). 8 The exercise of the Court's power in extending a convening period is discretionary, however the circumstances in which the Court will extend a convening period are well established: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717; (2020) 144 ACSR 347 (Strawbridge), 370 [64]. The Court is required to strike a balance between the expectation that the administration will take place expeditiously and on the other hand 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" (Re Diamond Press Australia Pty Ltd [2001] NSWSC 313, [10]; Mighty River International v Hughes [2018] HCA 38; (2018) 265 CLR 480, [73] (Nettle and Gordon JJ)). 9 The convening period for the second meeting of creditors would end on 20 December 2021 if the extension was not granted. An extension was sought (of three months to 31 March 2022) with provision to convene earlier if circumstances allow. 10 The administrators sought the extension for the following reasons: (a) the administrators need more time to provide the required opinion about the best outcome for creditors, including seeking expressions of interest from potential buyers who may wish to purchase the business or company assets; (b) further time is required to investigate the Company's intellectual property assets in overseas jurisdictions and the Company's revenue streams from overseas sources; (c) the administrators require further time to consider any proposal for a deed of company arrangement that the administrators might receive; and (d) the administrators have not been put on notice of any opposition to an extension by any creditor after being informed that the administrators may seek an extension of time of the convening period and the administrators do not consider that any prejudice would result to creditors if the extension of time was granted. 11 I accepted those submissions and considered that the period of the proposed extension is appropriate having regard to, and balancing, the interests of creditors in a speedy administration and the need to allow sufficient time for administrators to carry out their functions properly and maximise creditor benefits (Mentha, in the matter of Griffin Coal Mining Co Pty Ltd (administrators appointed) [2010] FCA 30, [15]). I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Davies. Associate: Dated: 15 December 2021