Supreme Court New South Wales Medium Neutral Citation: In the matter of Mosaic Brands Limited (admins apptd) (recs and mgrs apptd) [2024] NSWSC 1439 Hearing dates: 6 and 8 November 2024 Date of orders: 6 and 8 November 2024 Decision date: 08 November 2024 Jurisdiction: Equity - Corporations List Before: Black J Decision: Several orders made in respect of voluntary administration. Catchwords: CORPORATIONS – Voluntary administration – extension of convening period and other orders. Legislation Cited: - Corporations Act 2001 (Cth), ss 419A, 439A, 440B, 447A - Court Suppression and Non-publication Orders Act 2010 (NSW), ss 7-8 Cases Cited: - ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd) v Honey [2010] FCA 353 - Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 - Mighty River International Ltd v Hughes (2018) 265 CLR 480; [2018] HCA 38 - Re BBY Ltd [2015] NSWSC 974 - Re BCD Resources NL [2015] NSWSC 777 - Re Carson (in their capacity as joint and several administrators of Hastie Group Ltd (admin apptd)) [2012] FCA 626 - Re Carson (in their capacity as joint and several administrators of Hastie Group Ltd (admin apptd)) (No 2) [2012] FCA 717 - Re Creative Memories Australia Pty Ltd (admins apptd) [2013] NSWSC 732 - Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 - Re Jahani (as joint and several liquidators of Ralan Group Pty Ltd (admins apptd)) [2019] FCA 1446 - Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 - Re RCR Tomlinson (admins apptd) [2018] NSWSC 1859 - Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 - Re Riviera Group Pty Ltd [2009] 72 ACSR 352; [2009] NSWSC 585 - Re Silvia (in their capacity as administrators of FEA Plantations Ltd (admins apptd)) [2010] FCA 468 - Re Strawbridge, In the matter of Virgin Australia Holdings Ltd (admins apptd) (2020) 144 ACSR 310; [2020] FCA 571 Category: Principal judgment Parties: Vaughan Strawbridge, Kathryn Evans, Kate Warwick and David McGrath in their capacity as Joint and Several Voluntary Administrators of Mosaic Brands Limited (Administrators Appointed) (Receivers and Managers Appointed) and the Third to Fourteenth Plaintiffs named in the Schedule (First Plaintiffs) Mosaic Brands Limited (Administrators Appointed) (Receivers and Managers Appointed) (Second Plaintiff) Noni B Holdings Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Third Plaintiff) Noni B Holdings 2 Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Fourth Plaintiff) Noni B Holdco Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Fifth Plaintiff) Millers Retail Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Sixth Plaintiff) Autograph Retail Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Seventh Plaintiff) Pretty Girl Fashion Group Holdings Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed (Eighth Plaintiff) Pretty Girl Fashion Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Ninth Plaintiff) Crossroads Retail Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Tenth Plaintiff) Katies Retail Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Eleventh Plaintiff) Rivers Retail Holdings Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Twelfth Plaintiff) W Lane Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Thirteenth Plaintiff) Ezibuy Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (Fourteenth Plaintiff) Representation: Counsel: S Scott (Plaintiffs) D Krochmalik (Receivers) (8 November only) Solicitors: Hamilton Locke (Plaintiffs) Gilbert + Tobin (Receivers) (8 November only) File Number(s): 2024/412040 Judgment – ex tempore – 6 November 2024 – Relief in respect of voluntary administration (Revised 7 November 2024) Nature of the application 1. By Originating Process filed on 5 November 2024, the Plaintiffs, Mr Strawbridge and others in their capacity as joint and several voluntary administrators of Mosaic Brands Ltd (admins apptd) (recs and mgrs apptd) and numerous other companies ("Mosaic companies") apply for a range of relief in respect of the voluntary administration of companies within the Mosaic Brands group. 2. The relief relates, generally, to the manner in which a report on company affairs and property is to be prepared by the company directors, relief from personal liability in respect of a funding agreement in favour of the administrators, provision for the sending of notices of meetings to creditors generally, the process in respect of other notices to creditors, the convening of a single committee of inspection across the companies within the group, and it is also proposed that the relevant orders would then be notified to creditors. A further application, for an extension of the convening period, has been adjourned to Friday 8 November 2024, to allow the opportunity for at least one substantial lessor of properties occupied by the Mosaic companies to consider the position. Affidavit evidence 1. The Plaintiffs read the affidavit dated 5 November 2024 of Mr Strawbridge, who has substantial experience in insolvency and voluntary administrations, including in respect of retail companies. Mr Strawbridge refers to the voluntary administrator's appointment to the Mosaic companies, and the subsequent appointment of receivers to those companies by a secured creditor of those companies. Mr Strawbridge notes that the receivers have since had day-to-day control over the Mosaic companies, including their business operations and assets, and are continuing to trade at least a number of the stores within the group. Mr Strawbridge outlines the nature of the business of the Mosaic companies, which are fashion retailers, and points to the fact that the companies operate a very large network of retail stores as well as digital sales processes, and also have operations in New Zealand. Mr Strawbridge also refers to the large number of employees of the Mosaic companies, who plainly have an interest in retaining their continued employment so far as is possible for them to do so, and to the asset position of the companies, which suggests that there is presently a significant deficiency of assets over liabilities. 2. Mr Strawbridge also addresses the operation of the business since its appointment, and points to a large number of trade creditors owed a substantial amount, together with the number of landlords who own the more than 600 stores occupied by the Mosaic companies, and claims of employees in respect of employee entitlements. Mr Strawbridge notes, in support of the application to permit communication by email, that he has email addresses for approximately 90% of the estimated 613 trade creditors, and also points to the fact that a number of those trade creditors are situated overseas so that postal communications would delay the communication process. 3. Mr Strawbridge addresses the work done to date, which is characteristic of what one would expect in a large and complex administration, and refers to the likely desirability of selling the business and assets as a going concern, or entering into a deed of company arrangement in order to maximise the proceeds of a sale process. That is relevant, in part, to the question of an extension of the convening period, the application for which has been adjourned, but it is also relevant because the evidence indicates that the administrators are currently unfunded. Without entry into a proposed funding agreement and protection against personal liability under that funding agreement, it is unlikely that they could conduct a sale process, although the receivers may be able to conduct such a process, although with less flexibility than would be available to the administrators. Mr Strawbridge also addresses issues which are relevant to relief from personal liability under the proposed funding agreement, which involve, first, the lack of assets to which the administrators could have recourse, where the receivers have control over the Mosaic companies' assets and, second, the desirability of the administrators' conduct of the sale process to which I have referred above. 4. Mr Strawbridge also refers to the reason why he considers that it would be preferable that the directors prepare a single report of affairs, where a significant number of the Mosaic companies are party to a Deed of Cross Guarantee and prepared accounts on a consolidated basis. He also refers to the reasons that he considers that the formation of a single committee of creditors would be in the interests of creditors generally. 5. The Plaintiffs also read an affidavit dated 5 November 2024 of Ms Dickerson, who is one of the receivers appointed to the Mosaic companies. Ms Dickerson refers to the background to the receivers' appointment, and to their support for this application, and their view that the relief sought would assist in maximising the value of the Mosaic companies' business and assets. That view is of particular relevance, so far as the receivers have offered funding under the relevant funding agreement, and it is they, and their appointor, who would be exposed to any disadvantage arising from the administrator not being personally liable under that funding agreement. 6. Ms Dickerson also addresses the steps taken in the receivership to date, matters relating to the extension of the convening period which have been deferred, and the possible advantages to landlords and others from a sale of the Mosaic companies as a going concern. Again, that matter is relevant so far as the proposed relief in respect of the funding agreement would largely be directed to achieving the benefit of a sale process conducted by the voluntary administrators, in conjunction with the receivers. 7. The Plaintiffs also rely on an affidavit dated 6 November 2024 of Ms Evans which refers to communications, inter alia, with creditors which I need not presently address. Submissions and determination 1. The application is supported by comprehensive submissions of Ms Scott, who appears for the administrators in relation to the application. She draws attention to the scope of the Court's powers under s 447A of the Corporations Act 2001 (Cth) ("Act") and summarises the position in respect of the corporate structure, employees and creditors of the Mosaic companies, and points to the administrators' need for funding if they are to undertake a sale process, where they likely could not have recourse to the companies' assets to repay any funding that is advanced to them. 2. Ms Scott refers, first, to the fact that the Courts have now for many years accepted, and indeed facilitated, electronic notice to creditors particularly where administrations are complex and involve many creditors. I should add to my oral judgment that orders of this kind have been made in cases including ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd) v Honey [2010] FCA 353; Re Silvia (in their capacity as administrators of FEA Plantations Ltd (admins apptd)) [2010] FCA 468; Re Carson (in their capacity as joint and several administrators of Hastie Group Ltd (admin apptd)) [2012] FCA 626; Re Carson (in their capacity as joint and several administrators of Hastie Group Ltd (admin apptd)) (No 2) [2012] FCA 717 and Re Mothercare Australia Ltd (admins apptd) [2013] NSWSC 263 at [8]. In Re Creative Memories Australia Pty Ltd (admins apptd) [2013] NSWSC 732 (at [8]), I made such orders and noted that electronic means of communication were widely accepted in the investing and commercial communities. In Re BBY Ltd [2015] NSWSC 974 at [7], Brereton J referred to that judgment and also noted the Court's increasing willingness to make orders for electronic notice of meetings of creditors of companies under external administration "to save costs and to save time, and thus to conserve the limited available assets for the benefit of creditors". Similar orders were also made in Re Jahani (as joint and several liquidators of Ralan Group Pty Ltd (admins apptd)) [2019] FCA 1446 at [22] and Re Strawbridge, In the matter of Virgin Australia Holdings Ltd (admins apptd) (2020) 144 ACSR 310; [2020] FCA 571 at [27]-[30] ("Virgin Australia"). 3. Here, there is every likelihood that persons who are creditors of the company will have access to electronic communications, and there seems to be no doubt that electronic communications will both reduce the cost of the administration and reduce delays in communicating with creditors, particularly where a number of creditors are overseas. For that reason, I grant the relief which is sought in that respect. 4. The voluntary administrators also seek an order permitting the appointment of a single committee of inspection. That course has an obvious advantage in reducing costs and reducing the administrative complexities which would arise from multiple committees of inspection and is likely to facilitate the performance of that committee's functions, where it would be more difficult to attract creditor involvement if creditors were required to commit time to multiple committees of inspection. Relief of this kind has previously been granted, including in Virgin Australia at [33] and [39] and I am satisfied that it should be granted here. 5. The voluntary administrators seek an order limiting their personal liability in respect of a funding agreement with the receivers which would fund the conduct of a sale process. The Court plainly has power to make such an order and, Re RCR Tomlinson (admins apptd) [2018] NSWSC 1859 at [11], I observed, in respect of the question whether to make such an order, that: "… the considerations applicable in such an application [under s 447A of the Act to alter the operation of s 443D of the Act to permit administrators' liability to be limited, in respect of the borrowings, to the extent of their indemnity against the assets of the companies] have been dealt with in a number of cases, including Mentha, Re Griffin Coal Mining Co Pty Ltd (admins apptd) [2010] FCA 1469; (2010) 82 ACSR 142 and subsequent cases which have adopted the same approach, of which recent examples include Re Nexus Energy Ltd [2014] NSWSC 1041 and Re Ten Network Holdings Ltd (admins apptd) (recs and mgrs apptd) [2017] FCA 1144 . It seems to me that, in the present circumstances, the question ultimately becomes whether it is in the interests of the Companies that the borrowing take place, because it is plain enough that the Administrators could not be expected to assume unlimited personal liability for a borrowing of this magnitude, or the risk that their indemnity against the Companies' assets is ultimately not sufficient to discharge that borrowing." 1. Here, it would be unreasonable to expect that voluntary administrators would assume substantial personal liability for a borrowing which is directed to undertaking a sale process for the potential benefit of creditors of the companies, where the administrators are not likely to have access to the companies' assets to repay that borrowing. In those circumstances, this relief is necessary if it is in the interests of the companies that the borrowing take place, so as to fund the sale process. That is established here, although the question of an extension of the convening period to facilitate the sale process has been deferred. I am therefore satisfied that the order limiting the scope of the administrators' personal liability, and an order in common form clarifying the scope of indemnity provisions should be made. 2. The administrators have also formed the view that their work will best be facilitated by a single report as to the Mosaic companies' activities and property by the directors, where the companies conducted business on a consolidated basis, and that is sufficient reason to grant the relief that is sought in that regard. Orders 1. For these reasons I am satisfied that I should make, and I make, orders in accordance with the Short Minutes of Order initialled by me and placed in the file. I adjourn the application, so far as it concerns the extension of the convening period, to 10 am on 8 November 2024 before me. JUDGMENT – EX TEMPORE – 8 November 2024 – Claim for confidentiality (revised 8 November 2024) 1. At the hearing on 8 November 2024, the voluntary administrators read the affidavit of Mr Strawbridge dated 8 November 2024, and sought a suppression order under the Court Suppression and Non-publication Orders Act 2010 (NSW) ("Suppression Act") in respect of that affidavit. That affidavit broadly describes the process which may be adopted in respect of a sale or other realisation of assets of the Mosaic companies in a voluntary administration. Mr Strawbridge indicates his concern (in paragraph 4 of his affidavit) that information in the affidavit could be used by potential purchasers in respect of any negotiations as to purchase price. It may be that Mr Strawbridge is being particularly cautious in that respect, so far as the affidavit refers to matters which may be general knowledge amongst participants in complex administrations as to how sale processes may be structured. Having said that, I recognise that Mr Strawbridge has particular expertise in the field, especially in respect of large and complex administrations and he would be right to be cautious as to the publication of information in a manner that would be adverse to creditors in the sale process. 2. The Court has power to make the order that is sought under s 7(b) of the Suppression Act on the basis set out in s 8(1)(a) of the Suppression Act, namely that such an order is necessary to prevent prejudice to the proper administration of justice, so as to preclude publication or other disclosure of the affidavit. On balance, I am satisfied that such an order is warranted under s 8(1)(a) of the Suppression Act, because such prejudice would arise if an application of this kind could not be brought without the loss of confidentiality as to the voluntary administrators' sales strategy, in a manner that may prejudice the effective realisation of that strategy, and disadvantage creditors. On that basis, the administration of justice, by way of access to justice, is promoted by making an order that will avoid the adverse consequences of such loss of confidentiality. 3. I therefore order that, until further order, which may only be sought on two business days' notice to the voluntary administrators, pursuant to s 7(b) of the Court Suppression and Non-publication Orders Act 2010 (NSW) upon the ground of s 8(1)(a) of that Act, publication or other disclosure of Mr Strawbridge's affidavit dated 8 November 2024 be prohibited up to and including 30 June 2025, and that document be placed in a sealed envelope marked that access not be permitted without leave of a Judge of the Court, on application made with two business days' notice to the voluntary administrators. This order applies throughout the Commonwealth of Australia. JUDGMENT - EX TEMPORE – 8 November 2024 – Extension of convening period (revised 8 November 2024) Nature of the application and supporting evidence 1. I now turn to the voluntary administrators' application for an extension of the convening period for the voluntary administration to 30 June 2025, which was deferred to 8 November 2024 to allow a lessor of a significant number of properties occupied by the Mosaic companies ("Scentre Group") to consider its position in respect of that application. I will refer below to correspondence from Scentre Group's solicitors, and I note that there was no appearance for Scentre Group at the hearing on 8 November and it did not actively oppose the application, although I have regard to the points which its solicitors made in correspondence in dealing with that application. The receivers appointed by a secured creditor of the Mosaic companies, Mr Hardy, Mr Eagle, Ms Dickerson and Ms Coneyworth, were heard by leave, and Ms Dickerson has sworn an affidavit in respect of the application. 2. I have referred to aspects of the evidence led in respect of the application above, and I here focus in this judgment on matters which are relevant to the application to extend the convening period. Mr Strawbridge, in his affidavit dated 5 November 2024, points to the fact that, unless extended, the convening period for the second meeting of creditors of the Mosaic companies would end on 25 November 2024, requiring the second meeting to be held on or before 2 December 2024. This points to one significant aspect of the application. I noted, in my earlier judgment, that the voluntary administrators had been appointed to multiple companies trading as a retail fashion business operating more than 600 stores. There can be no real doubt that, in those circumstances, an extension of the convening period would be granted, in order to allow an orderly sale process and maximise the proceeds of sale from an orderly sale process, although a question plainly arises as to the length of that extension, and the voluntary administrators and the receivers nonetheless lead detailed evidence in support of the application. 3. Mr Strawbridge points to the complexity of the operations of the Mosaic companies, which reflects the scale and nature of their business, and expresses the obvious proposition that a sale of the business and its assets as a going concern is, as is generally the case, likely to result in a better return to creditors than an immediate winding up. That proposition is reinforced, where, here, the business has a value as a going concern, either as a whole or across individual brands, which would not exist in a liquidation, and there is also inventory, of substantial value, which would likely achieve a greater return if sold in a retail context than in a wholesale sale in a liquidation. Mr Strawbridge refers, in his first affidavit, to a timetable towards a potential sale of the Mosaic companies' business in mid-December 2024, and refers to the steps which have already been taken toward that sale. It seems obvious enough, and Ms Scott (who appears for the voluntary administrators) referred in submissions to the fact that (notwithstanding some evidence has been led on a confidential basis), a sale could either be structured as a sale of the business as a whole, or as a sale of parts of the business to different purchasers and that increases the complexity of any sale process. 4. Mr Strawbridge also points out, and Ms Scott observes, that the receipt of binding offers as part of the sale process would not, of course, complete the sale process, where further steps would be taken to document and then complete a sale, which would at least involve the likely assignment of leases in respect of stores, to the extent that those stores and the businesses conducted in them were included in a sale process. Further steps would likely need to be taken to deal with the position if, for example, parts of the business were to be sold separately, where steps would need to be taken to allow that to occur. 5. Mr Strawbridge identifies several difficulties that would arise, absent an extension of the convening period, all of which are obvious enough within a complex administration, and are exacerbated here by reason of the nature of the Mosaic companies' business. He notes, first, that the voluntary administrators would not likely be able to make a comprehensive recommendation to creditors if the period was not extended, not least because the sale process would not then be sufficiently advanced. He notes that, in those circumstances, the voluntary administrators would likely recommend liquidation, where no deed of company arrangement proposal has to date been received, and they would have difficulties in making any recommendation as to such a proposal. Plainly, that would raise the risk of loss of value within a liquidation process, as distinct from a sale of the business or its assets on a going concern. Mr Strawbridge also refers to the steps which are being taken by the receivers and managers in connection with the sale process, including steps which are to be taken by the receivers and managers to maximise the value of the business and its stock, and the steps which would be taken to seek to sell stock, if a wider sale of the business is not achieved, again, in a going concern context and from existing retail environments. 6. Mr Strawbridge expresses the view that the proposed extension of the convening period would be in the interests of creditors generally, although he acknowledges the effect of the extension of the statutory moratorium which here has the capacity to affect the lessors of the many stores now occupied by the Mosaic companies. He also points to the position of employees, who are likely to be well served by maximising their prospect of continuing employment, both in the longer term if the business is sold, or in the shorter term while the business continues to operate under the control of the receivers and managers. Mr Strawbridge also points to matters which mitigate any prejudice to creditors, and particularly lessors and employees, including the fact that the receivers and managers are continuing to pay employees of the companies in accordance with their employment terms; the prospect that employment of employees will be preserved within the sale of the business; and the fact that receivers and managers are continuing to pay rent and outgoings for leased premises, although a number of premises will be vacated during the period of the receivership. I will refer below to the recognition of the rights available to lessors in that situation. 7. The voluntary administrators also read, and Mr Krochmalik (who appears for the receivers) referred to the affidavit of Ms Dickerson, one of the receivers, in respect of the application. The receivers support the application for extension of the convening period, and Ms Dickerson in turn outlines the structure of the business, including the numerous retail stores operated in it. She refers to the steps which are being taken by the receivers to stabilise the business, where it is currently under their control, including implementing a store rationalisation program which is expected to continue through December 2024 and January 2025. She refers to the steps which would be taken by the receivers to give notice of their intention to vacate leased premises, and to the steps which would be taken to relocate stock and employees if stores were closed, so as to maintain the going concern status of those stores that remained open, maximise the prospects of realising the stock for value and maintain the employment of employees so far as possible. 8. Ms Dickerson points to the fact that the receivers' estimate that it will take up to six months to realise the remaining stock and undertake a staggered closure of all stores, in the situation that a going concern sale of the whole or substantial parts of the business is not achieved. The receivers frankly acknowledge that they seek the benefit of the moratorium that is available to the voluntary administrators to allow that process to be implemented in an orderly way; there is, of course, nothing wrong with their doing so, so far as that moratorium there operates to the benefit of all creditors for reasons that I will note below. Ms Dickerson in turn addresses the advantages of an extended convening period for the sale process and effected constituencies, including, relevantly, employees to the extent that they may maintain their employment, and creditors generally so far as the proceeds of a sale are maximised. 9. Importantly, here, the secured creditor is secured to an amount that is substantially less than at least the book value of the Mosaic companies' assets and, so far as the book value or a significant proportion of that book value may be realised, whether on a sale of the business as a going concern or on a sale of those assets in an orderly way, there appears to be a significant prospect that the secured creditor will be paid in full, which is of course to its advantage, and that the surplus will also be available to unsecured creditors which is to the advantage of those unsecured creditors generally. Ms Dickerson also points to the fact that the receivers are continuing to meet ongoing obligations with respect to leased premises, as well as the Mosaic companies' single head office, whereas store leases would be terminated in the case of a liquidation, a course that is not necessarily to the advantage of lessors. 10. By a further affidavit dated 8 November 2024, Mr Strawbridge referred to the conduct of the first meeting of creditors, which occurred on 7 November 2024, and to the notice given to creditors at that meeting that an application would be made for an extension of the convening period to 30 June 2025. He points to correspondence which has been received from a party claiming to be a supplier of the Mosaic companies since that point, and to a letter dated 7 November 2024 from the solicitors for Scentre Group, where Scentre Group accepts that it is appropriate for a reasonable extension of the convening period to be granted; accepts that a longer extension would be justifiable by reason of the Christmas period; but indicates that it does not consider that an extension until 30 June 2025 is reasonable, and suggests that an extension until March or April 2025 would be appropriate. That view is reached by Scentre Group by reference to their assessment of the sale process, based on Mr Strawbridge's first affidavit dated 5 November 2024. They summarise their position as not opposing an extension of the convening period, but submitting that it should not be extended beyond 30 March 2025. 11. I should note, in that regard, that it now appears that Scentre Group and its solicitors had not had access to Ms Dickerson's affidavit at the time that letter was sent, so they did not have the benefit of her explanation of the process which the receivers proposed to undertake in respect of the sale process, and the orderly realisation of assets and orderly closure of stores if a sale was not achieved, and they also did not have access to a further confidential affidavit of Mr Strawbridge, which has been filed today relating to the voluntary administrators' approach to these matters. Mr Strawbridge also refers to a letter sent by the receivers to Scentre Group, which summarises the position in respect of previous advice to Scentre Group of store closures, and additional store closures which had been identified by the receivers, with the likelihood that at least 15 of 40 stores leased from Scentre Group will close, but also confirms that the receivers will continue to pay rent and outgoings for stores leased from Scentre Group which the Mosaic companies continue to occupy, consistent with their obligations under s 419A of the Act. 12. The voluntary administrators also read a confidential affidavit of Mr Strawbridge, subject to orders under the Suppression Act, which addressed the strategy which would be adopted by the voluntary administrators in respect of a sale process, including the ways in which a sale process could be structured and its impact upon the potential timetable. Submissions and determination 1. Both Ms Scott for the voluntary administrators and Mr Krochmalik for the receivers have made submissions in respect of the extension of the convening period. The applicable principles are well established and I need not summarise them at any length. In making an order to extend the convening period for a second meeting of creditors, under s 439A or s 447A of the Act, the Court must reach an appropriate balance between an expectation that an administration will be relatively speedy and summary and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive action directed to maximising a return to creditors: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611; Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 ; Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 at [7]. Several relevant factors were identified by Austin J in Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) (2009) 72 ACSR 352; [2009] NSWSC 585, in a case which has subsequently been cited on many occasions, including the size and scope of a company's business; the time needed to execute an orderly process of disposal of assets; whether an extension of time is likely to enhance the return for secured creditors; and the impact of any extension upon a person whose claim is affected by the statutory moratoriums under Pt 5.3A of the Act. 2. The relevant factors were also summarised by Nettle and Gordon JJ in Mighty River International Ltd v Hughes (2018) 265 CLR 480; [2018] HCA 38 at [73] as follows: "It is, however, recognised that it is not always practicable for an administrator to gather sufficient information within the convening period to form the requisite opinions under s 438A and communicate them in the notice given to creditors in accordance with s 439A(3) and (4). Accordingly, the courts are given specific power under s 439A(6), and also general power of varied application under s 447A(1), to extend the convening period. Consistent with the legislative intention of Pt 5.3A that the administration of a company be brought to an end within a short period of time, there is a presumptive expectation that extensions will be brief. But over time the courts have come to recognise that significant extra time may be required, and should be allowed, in complex cases. 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. …" [citations omitted] 1. Importantly, the case law has recognised that the Court will give substantial weight to the considered judgment of voluntary administrators in matters of this kind: Re BCD Resources NL [2015] NSWSC 777. 2. Here, Mr Strawbridge has given an extended explanation of the voluntary administrators' reasoning in respect of the need for the extension of the convening period and why a longer extension is sought to 30 June 2025, both in his open affidavit evidence and in the confidential affidavit. As I noted above, it is plain enough that a significant extension of the convening period would be required, and Scentre Group, as I noted above, has itself accepted that an extension of the convening period to the end of March 2025 would be justified, but the reasons why a longer extension is supported emerge from Mr Strawbridge's evidence in that regard. The issues arising from the size, complexity and the nature of the business and the number of retail stores operated by the Mosaic companies and the need to address the position in respect to those stores and the sale of stock in an orderly way emerges from the evidence to which I referred above. 3. Ultimately, here, only two options are realistic. The first would be to grant the longer extension of the convening period that is sought, and I here have regard to the fact that the rationale for that approach is explained both by Mr Strawbridge and in Ms Dickerson's evidence. It is significant, in that respect, that during the extended convening period, the receivers will pay rental on the stores they continue to occupy and employees will continue to be paid to the extent that their employment is preserved. There is a real prospect, as I have noted above, that an orderly sale process that would be promoted by the extension of the convening period would maximise the prospect, not only that the secured creditor would be paid in full to its advantage, but that funds would be available from the sale process to unsecured creditors generally. Importantly, the longer period is supported by the evidence of Mr Strawbridge, and I have noted above that the Court will ordinarily give significant weight to reasoned evidence of a voluntary administrator in an application of this kind. 4. A second alternative, which I have considered, would be to allow a shorter extension, to the end of March 2025, as Scentre Group had accepted, or to April 2025, recognising that the voluntary administrators could then apply to extend that period. There are, however, real difficulties with that approach. The first is that it is simply not consistent with the evidence. Second, it seems to me likely that it would complicate planning for the receivers and the voluntary administrators, because rather than knowing that they had the period to June 2025 to complete the realisation process if necessary, they would be uncertain as to whether the period would extend only to April 2025 or would then be extended to June 2025. Third, as Ms Scott rightly pointed out, it would introduce the cost of a further application into the process, and costs which are paid on a further Court hearing are monies that are not available to creditors in an ultimate distribution. 5. Fourth, and importantly, both the voluntary administrators and the receivers draw attention to the fact that lessors, whose interests are likely to be particularly affected to the extent that stores may be vacated in the period, have the capacity either to seek the voluntary administrators' consent to re-take possession, or approach the Court under s 440B of the Act. That is a right which is available to them under the Act, and it is not necessary for the Court to take any particular step to preserve that right for them. Nonetheless, the voluntary administrators and receivers have proposed, sensibly, that a note be added to the orders that are sought which recognises the ability of lessors or owners of leased properties both to seek the voluntary administrators' consent to retaking position and to approach the Court if necessary to do so. That note is worthwhile, because no doubt larger lessors will be well aware of that right, but it will draw it to the attention of any lessors which may operate on a smaller scale. It seems to me that the availability of the voluntary administrators' costs, or a costs order, whether in respect of a single store or several stores that may be owned by a particular lessor, significantly mitigates any prejudice which would be suffered by the lessors from the approach which the voluntary administrators propose. 6. Ultimately, it seems to me that, here, the complexity of the process and the prospect that an orderly sale process and orderly realisation of stores, if a sale process cannot be achieved across the group as a whole, will maximise proceeds for unsecured creditors, and the voluntary administrators' and receivers' considered approach to the timing of the exercise support extending the convening period for the longer period that is sought, rather than taking the course, which would likely ultimately add costs and uncertainty to the process, of reducing that period to March or April 2025, with every prospect that it would then be further extended as needed. The voluntary administrators accept that, if they are able to bring about a sale more quickly, then steps would be taken to convene the second meeting of creditors more quickly. Equally, the liberty is reserved to creditors generally to apply, and lessors are specifically given notice of their rights, as I have noted above. Orders 1. For these reasons, I make orders 1-7 in the Short minutes of Order initialled by me and placed in the file and I note the matter appearing after paragraph 7. I add at the end of order 7, "and the exhibits be returned". ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 November 2024