Lombe & Cathro as administrators of Kirby Street (Holding) Pty Ltd [2009] NSWSC 949

New South Wales Supreme Court

CITATION : Lombe & Cathro as administrators of Kirby Street (Holding) Pty Ltd [2009] NSWSC 949

HEARING DATE(S) : 04 & 05 August 2009

JUDGMENT DATE : 5 August 2009

JURISDICTION : Equity

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 5 August 2009

DECISION : Refer to paras 14 and 15 of judgment.

CATCHWORDS : CORPORATIONS – administration – creditor's meeting – application to extend convening period for second meeting of creditors by further three months after two earlier extensions – in creditors' interests to extend the period as sought – application granted

CASES CITED : Lombe v Australian Discount Retail Pty Ltd [2009] NSWSC 110

PARTIES : David John Frank Lombe and Simon John Cathro (as administrators of Kirby Street (Holding) Pty Limited (previously known as Australian Discount Retail Pty Limited) ACN 116 349 113 and the companies in the schedule attached to the originating process

FILE NUMBER(S) : SC 1526/09

COUNSEL : Applicants: C R C Newlinds SC

SOLICITORS : Applicants: Freehills

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

WHITE J

Wednesday, 5 August 2009

1526/09 David John Frank Lombe and Simon John Cathro (as administrators of Kirby Street (Holding) Pty Limited (previously known as Australian Discount Retail Pty Limited) ACN 116 349 113 and the companies in the schedule attached to the originating process JUDGMENT 1 HIS HONOUR: On 20 January 2009 the plaintiffs were appointed administrators of Australian Discount Retail Pty Ltd and 38 subsidiaries ("the ADR Group"). On the same day receivers were appointed to the assets of the ADR Group. On 16 February 2009 orders were made extending the period for the convening of the second meeting of creditors to 9 March 2009. On 3 March 2009 the period was further extended to 18 August 2009 (Lombe v Australian Discount Retail Pty Ltd [2009] NSWSC 110). The plaintiffs seek a further three-month extension of the convening period to 18 November 2009. 2 The background to this application and the reasons the convening period of the second meeting of creditors was extended to 18 August 2009 are fully set out in the reasons of Barrett J in the above judgment. I will not repeat the matters there set out. His Honour foresaw that a further extension might be sought and granted the plaintiffs liberty to apply. This application was made pursuant to that liberty. 3 As envisaged at the hearing on 2 March 2009, an agreement for the sale of the business of the ADR Group was entered into. The agreement was entered into on 20 March 2009. The purchaser is Retail Adventures Pty Ltd. That agreement was completed on 3 April 2009. However, the vendors were not required to provide assignments to the purchaser of the 300 leases in respect of 360 properties leased by the ADR Group. Rather, as foreshadowed in Barrett J's reasons (at [10]-[12]), the purchaser has been given a licence by the vendors of the properties and is required to use reasonable endeavours to obtain assignments of leases or to obtain surrenders and grants of new leases from the landlords. 4 The negotiations with the landlords have been lengthy and complex. On 27 July 2009 the plaintiff sent a circular to all of the landlords advising, amongst other things, that: " The Receivers have advised that whilst a large number of in principle agreements have been reached and/or finalised by way of executed documentation with landlords, RA has requested a further extension to allow sufficient time for the remaining lease agreements between RA and the respective landlords to be finalised/executed. The Receivers subsequently requested the Administrators to apply to the Court for a further extension of the convening period of 3 months to allow for final documentation to be executed with as many landlords as possible. Impact on Position of Creditors We have been advised by the Receivers that: 1. The Asset Sale Deed contains an adjustment provision for redundancy costs and lost shop profit in the event that RA is unable to negotiate a new lease arrangement; 2. A negative adjustment (in the event of failure to achieve new lease arrangements) has the potential to eliminate any surplus available for the unsecured creditors; 3. An extension of the convening period for a further three months should allow sufficient time for the vast majority of landlords to finalise/execute documentation for the assignment of existing lease or new lease arrangements; and 4. On this basis, a surplus of funds is likely to be available to Administrators for the unsecured creditors that may not be possible without the extension of the convening period. As such, from the information provided by the Receivers, it would appear that a further extension of the convening period is in the best interest of the unsecured creditors. "