Re W C Penfold; ex parte Lombe [2004] NSWSC 248

New South Wales Supreme Court

CITATION : Re W C Penfold; ex parte Lombe [2004] NSWSC 248 HEARING DATE(S) : 24 March 2004 JUDGMENT DATE : 24 March 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Convening period extended

CATCHWORDS : CORPORATIONS - voluntary administration - extension of convening period - large business necessitating extended sale process - (no question of general principle) LEGISLATION CITED : Corporations Act 2001 (Cth) s 439A CASES CITED : Diamond Press Australia Pty Limited [2001] NSWSC 313 PARTIES : David Lombe and John Grieg as administrators of W C Penfold Ltd (Administrators Appointed) and of W C Penfold & Co Pty Ltd (Administrators Appointed) (Ps) FILE NUMBER(S) : SC 2102/04 COUNSEL : A P Ryan (Sol) (Ps) SOLICITORS : Blake Dawson Waldron (Ps)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 24 MARCH 2004

2102/04 RE W C PENFOLD LIMITED (ADMINISTRATORS APPOINTED) AND W C PENFOLD & CO PTY LTD (ADMINISTRATORS APPOINTED); EX PARTE LOMBE JUDGMENT (Ex tempore; revised 26 March 2004) 1 HIS HONOUR: Mr Lombe and Mr Greig were appointed joint administrators of these companies on 8 March 2004 and they have held the first meeting of creditors as required by Pt 5.3A of the Corporations Act. The business of the companies is a retailing business. It is one of the largest and oldest retailing groups of office product supplies, operating through 32 outlets in Sydney, Melbourne, Adelaide, Canberra and Brisbane with a large distribution outlet in Botany Bay. The operating company employed some 30 employees. 2 Mr Lombe's affidavit, made on 24 March 2004, gives an account of the work that the administrators have done since their appointment. It is very substantial work. They have taken control of the company's assets, met with creditors and secured creditors, and endeavoured to ascertain in many ways the financial position of the companies and the value of their assets. 3 They have advertised the business of the operating company for sale and dealt with inquiries of interested parties. There has been a substantial number of inquiries in response to the advertisement, and the administrators wish to continue negotiations with a view to the sale of the assets or the business or a restructuring which would have the same general effect. 4 The administrators have established a time line for this process under which submissions of non-binding indicative offers would be received by 5 April 2004, in response to an information memorandum to be issued in this week, a short list of prospective purchasers would then be selected, an electronic data room would be opened and made available to short listed bidders, draft agreements would be prepared, final offers would be called for by 3 May, and the preferred purchaser would be informed by 5 May. Completion of the transaction would take place at a time to be advised. 5 In the circumstances, the administrators say that in order to implement this process effectively it will be necessary for a substantial extension of the convening period for the second meeting of creditors to be granted. They seek an extension up to and including 28 May 2004. In the meantime, the operating company will continue to trade. The administrators have dismissed a small number of employees but, on the whole, the employees will continue to work and, it is intended, be paid in the normal way. 6 The business premises of the companies are held under lease and rent has been paid till the end of this month. I am informed from the Bar table that the administrators intend to pay rent for the remaining period of the administration as and when it falls due, and that for the time being there have been no indications by lessors that they wish to exercise any rights of re-entry. None of the employees whose positions have been terminated have indicated any intention to apply to the Industrial Relations Commission or make any other application in respect of their termination. 7 As far as secured creditors are concerned, the evidence is that the secured creditor who is owed a substantial amount of money has indicated that it supports the extension of the convening period, and that the secured creditor which is owed a smaller amount of money has been informed of the application and indicated it is content for the administration to run its course. 8 It seems to me, therefore, that the categories of claimants upon the companies in administration, who might arguably be prejudicially affected by the extension of the moratorium produced by the legislation consequent upon the extension of the convening period, do not have any particular issue at stake should the administration be extended in the manner proposed. There is some evidence in Mr Lombe's affidavit to support a more optimistic view; namely, that if the proposed dealing with the assets of the companies is allowed to proceed in accordance with the timetable there may be a realisation for the benefit of all concerned. 9 There is not at this stage any proposal for a deed of company arrangement. The financial affairs of the companies are such that it has not yet been possible for the directors to produce their report as to affairs. 10 Given the size of the business and the lack of adverse impact of the extension, according to the evidence, on those categories of persons affected by the moratorium produced by the legislation, I am persuaded that this is an appropriate case to make the orders sought. 11 I was referred in the course of submissions to some judgments of other courts which have some factual similarity with the circumstances in the present case. Each case must be assessed on its own merits in its own factual circumstances, but I note that there is some similarity between the present case and the decision in Diamond Press Australia Pty Limited [2001] NSWSC 313 (23 April 2001 Barrett J). I do not believe there is any difference in principle between his Honour's approach and my own, nor any difference between our approach and the approach taken in the cases listed in para 9 of his Honour's judgment. 12 I grant leave to the plaintiffs, subject to their undertaking to pay the filing fee given by their solicitor, to file in Court the originating process together with the affidavits of Morgan John Kelly and David John Frank Lombe each made 24 March 2004. 13 I order that the originating process be made returnable instanter and dispense with any service of the originating process. 14 I make the orders in the document entitled orders which I now initial and date for identification. 15 I direct that these orders be entered forthwith.