By Taline Chater, Partner

Clubb (administrator), in the matter of Town Tavern Blacktown Pty Ltd (adms appt) (receivers and managers appt) [2024] FCA 405

Key Insights

1. Importance of Timely and Flexible Administration:

• The extension of the convening period of 6 months granted by the Court, confirms what is now not an uncommon timeframe sought by administrators in complex administrations. Whilst by no means a “rubber stamp” process, we have seen several instances of such extensions from 3-6 months in the Virgin, Probuild, and Porter Davis administrations, amongst others.
• The decision highlights the importance of providing administrators sufficient time to explore all viable options and maximise value for restructuring or selling a business as a going concern, especially in complex cases involving multiple, contractually and financially intertwined entities.

2.Strategic Use of Judicial Orders:

• The use of extension orders and the “Daisytek” order reflects a sound, albeit now well established approach, allowing administrators the necessary runway to manage the affairs of distressed companies flexibly and more effectively, to ultimately maximise value.

3.Court’s Role in Insolvency

• The court plays a crucial role in Australian insolvency processes, not just in adjudicating disputes but also in facilitating the administration process to enhance outcomes for creditors and other stakeholders.

Key Background facts

• The primary entity, Town Tavern Blacktown Pty Ltd (admins appt) (receivers and managers appt) (Company), along with related entities, operates a licensed hotel in Western Sydney known as the Phoenix Tavern Blacktown. The group is a complex structure with interlinked assets and liabilities, including leases, power machines, gaming and liquor licenses and secured loans to Nomura Special Investments Singapore Pty Limited (Nomura).
• On 6 March 2024, the security trustee on behalf of Nomura, appointed Quentin Olde and Liam Healey as Receivers over all of the assets and undertakings of the Nomura and of the assets and undertakings of the management services entity for the Company, Robin Hood Blacktown Pty Ltd (receivers and managers appt) in addition to other companies within the group.
• On the same date, the security trustee also appointed Duncan Clubb and Andrew Sallway as voluntary administrators of the Company. Administrators were not appointed over any other company in the group.
• The Receivers control all of the property of the group and continue to conduct the business as a going concern.
• It was noted that the Receivers intend to commence a sale campaign following the conclusion of the current school holiday period on 26 April 2024. The Receivers expect the initial campaign will run for 4-5 weeks and that negotiations in respect of any sale will take between 6- 12 weeks. It is also possible that the sale campaign will be delayed by another 4 weeks.

Legal Analysis – What you need to know

Voluntary Administration and Extension of Convening Period

• Justice Halley of the Federal Court of Australia, granted orders extending the convening period for the second meeting of creditors by six months (6) under section 439A(6) of the Corporations Act 2001 (Cth) (the Act).
• The six month extension was deemed necessary to allow the Administrators time to manage the complexities associated with the group structure and potentially sell the business as a going concern including through a deed of company arrangement, in order to maximise value for creditors. The Receivers’ timeline as to the sale and negotiation process supported this conclusion.
• The Court applied well established legal principles in respect the extension of convening periods, balancing the need for a timely administration against the need for administrators to fulfill their duties effectively and maximise value for creditors, within the framework of the objectives of Part 5.3A of the Act.
• The Court considered decisions in Virgin Australia, Citius Property and Sarah Lee and recognised that extensions of six months or more have been granted to administrators of large retail or wholesale businesses to allow a business to continue to trade, to maximise funds available for creditors and to facilitate a sale of business as a going concern, particularly against the likelihood of a winding up scenario.
• It was also relevant that the proposed extension had been raised at the first meeting of creditors and no objections received by creditors.

“Daisytek” Order

• A “Daisytek” order was also granted under section 447A(1) of the Act, which is an order enabling administrators, if they see fit, to hold a second meeting of creditors at any time during or within five (5) business days after the end of the convening period extended by orders of the court pursuant to s439A(6) of the Act.
• Such an order provides flexibility in the administration process.