Supreme Court New South Wales Medium Neutral Citation: In the matter of Napoleon Perdis Cosmetics Pty Ltd (admins apptd) and Napoleon Perdis Cosmetics Australia Pty Ltd (admins apptd) [2019] NSWSC 348 Hearing dates: 20 February 2019 Decision date: 20 February 2019 Jurisdiction: Equity - Corporations List Before: Black J Decision: The date for convening the second meeting of creditors of the Plaintiffs is extended to 28 May 2019. Catchwords: CORPORATIONS – external administration – application under s 439A(6) of the Corporations Act 2001 (Cth) to extend the period within which the second meeting of creditors must be convened – where sale of business estimated to not complete before existing convening date – whether convening period for second meeting of creditors should be extended. Legislation Cited: - Corporations Act 2001 (Cth) Pt 5.3A, ss 439A, 439A(6), 447A Cases Cited: - Re ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd); Application by Walker (No 8) [2009] FCA 994; (2009) 73 ACSR 478 - Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 - Re Owen; RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255 - Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 - Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352 Category: Principal judgment Parties: Simon John Cathro, Christopher Richard Cook and Ivan Glavas in their capacity as joint and several administrators of Napoleon Perdis Cosmetics Pty Ltd (admins apptd) and Napoleon Perdis Cosmetics Australia Pty Ltd (admins apptd) (Plaintiffs) Representation: Counsel: C H Withers (Plaintiffs) Solicitors: William James Lawyers (Plaintiffs) File Number(s): 2019/56371 Judgment – ex tempore (revised 22 february 2019) 1. By Originating Process filed today by leave, Mr Cathro and others, as joint and several administrators ("Administrators") of Napoleon Perdis Cosmetics Pty Ltd (admins apptd) ("NPC") and Napoleon Perdis Cosmetics Australia Pty Ltd (admins apptd) ("NPCA") together apply, under ss 439A(6) and 447A of the Corporations Act 2001 (Cth) for an extension of the period within which they must convene the second meeting of creditors of NPC and NPCA and associated orders. 2. The application is supported by a comprehensive affidavit of Mr Cathro, one of the Administrators, who sets out the background to the administration and to the companies' business. Mr Cathro's evidence is that NPC is the main operating company and, as I will note below, it has operations on a significant scale; has had substantial revenue; and has a large number of employees. NPCA is not an operating entity and has, it appears, only one creditor in a modest amount. The Administrators were appointed as administrators of the two companies on 31 January 2019 and, as matters stand, the convening period will end on or about 28 February 2019. 3. Mr Cathro's evidence indicates that NPC operates a cosmetics wholesale and retail business and also runs training academies, which operate out of a large number of "concept stores" and kiosks throughout Australian states and territories other than Tasmania, and also sells products through other distribution channels. NPC leased a distribution centre, several offices, as well as retail premises, and employed some 346 staff. Its revenues in the 2017 year were substantial, and it currently has liabilities in the order of $23 million, including substantial secured claims, employee claims, and claims of unsecured creditors. Since their appointment, the Administrators have ceased to occupy 27 out of 55 leased stores of NPC, and continue to occupy the remaining 29 leased premises, being 28 stores and the distribution centre. Three lessors have issued breach notices, presumably in respect of stores as to which NPC has ceased occupation. 4. Mr Cathro's affidavit sets out the work done by the Administrators to date, which include steps taken to identify profitable stores, maintain ongoing trading by NPC and preserve the opportunity for sale of NPC as a going concern. Mr Cathro also sets out steps which have been taken for the sale of the business, which has now advanced to the point that a significant number of expressions of interest have been received and indicative offers are due to be received shortly. 5. The Administrators estimate that the sale process for the companies' business would complete no earlier than 20 May 2019, where that will require dealing with the lessors of the premises which would likely be taken up by any purchaser. On that basis, the Administrators seek an extension of time for the convening period for the second meeting to 28 May 2019, both in order to allow the sale process to be completed with a view to maximising the return to creditors from the administration, and also to allow meaningful information to be provided to creditors at a second meeting, where the outcome of the administration is very likely to depend upon the amount that can be realised in the sale of the companies' business. 6. Creditors have been notified of this application, not by way of individual notification, but by reference to that matter at the first meeting of creditors; the issue of a media release on the Administrators' website foreshadowing the application; some media commentary as to the proposed application; and individual notification to secured creditors with AllPAAP PPSR registrations and lessors. A number of secured creditors and lessors have indicated that they consent to or do not object to the application, and none have actively opposed the application. 7. The principles that are applicable in an application of this kind are well established. In determining whether to make orders under s 439A and s 447A of the Corporations Act to extend the convening period, the Court will seek to reach an appropriate balance between the 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 actions directed to maximising a return for creditors: Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 at [10]; Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) [2015] NSWSC 2002 at [7]. Several relevant factors were identified in the often-quoted decision of Austin J in Re Riviera Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2009] NSWSC 585; (2009) 72 ACSR 352, where his Honour identified matters which may support such an extension, as including the size and scope of the company's business, which in this case is plainly substantial; the time needed to execute an orderly process of disposal of assets, which is here relevant so far as the Administrators are well advanced in a sale process; whether an extension of time is likely to enhance the return for unsecured creditors, a matter which is satisfied here so far as a successful sale process would maximise that return; and the impact of any extension upon a person whose claim is affected by the statutory moratoriums under Pt 5.3A of the Corporations Act. Here, both secured creditors and lessors have either consented to or not opposed the application. 8. The fact that the successful sale of the business as a going concern would maximise the prospect of many employees retaining their employment may properly be taken into account in an application of this kind: Re ABC Learning Centres Ltd (admins apptd) (recs and mgrs apptd); Application by Walker (No 8) [2009] FCA 994; (2009) 73 ACSR 478. I have regard to the position of employees and, in the case of the continuing employees, their interests are likely to be promoted by an extension of the convening period, so far as that will maximise their prospect of continuing employment with a purchaser of the business. So far as those employees whose employment has been terminated is concerned, there is, of course, a possibility that the application will delay any access to the Fair Entitlements Guarantee scheme, if the returns on a sale of the business are ultimately not sufficient to meet their entitlements, having regard to other claims upon the assets. While that is disadvantageous to the employees who fall within that category, it seems to me that that disadvantage does not outweigh the significant advantages to creditors as a whole that arise from the completion of the sale process, and the extension of the convening period to the extent that that is necessary to permit the sale process to complete. 9. The cases also recognise that an administrator's view is a significant matter in an application of this kind, particularly in a complex administration: Re Owen; RiverCity Motorway Pty Ltd (admins apptd) (recs and mgrs apptd) v Madden (No 4) [2012] FCA 1491; (2012) 92 ACSR 255; Re Renex Holdings (Dandenong) 1 Pty Ltd (admins apptd) above at [9]. I give weight to the considered judgement of the Administrators, supported by Mr Cathro's affidavit evidence, that the extension of the convening period is likely to assist the sale process and allow better information to be provided to creditors at a second meeting of creditors. 10. For these reasons, I am satisfied, having regard to the evidence and Mr Withers' submissions in support of the application, that this is a proper matter in which to extend the convening period, and the extension sought is not excessive, given the complexity of the business and the Administrators' estimate of the time that will be required to complete a sale of the business so that its result may be reflected in the information provided to creditors. I make orders in accordance with the short minutes of order initialled by me and placed in the file. ********** 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: 03 April 2019