Federal Court of Australia · [2024] FCA 1048

Mansfield, in the matter of Fresh For Life.....Pty Ltd (administrators appointed)

In Mansfield, in the matter of Fresh For Life.....Pty Ltd (administrators appointed) [2024] FCA 1048, the Federal Court allowed...

Federal Court of Australia

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Quick read

Read this case as a practical administration decision, not as a ruling on whether the franchise termination was valid or whether a deed of company arrangement should...
In Mansfield, in the matter of Fresh For Life.....

Use this to check

Franchise termination had already happened before the administrators were appointed
Two outlets kept trading only because licence arrangements were put in place
The administrators considered an operating franchise sale would likely preserve more value

Decision snapshot

1
What happened
- Fresh For Life.....
- Pty Ltd was in voluntary administration and had previously operated four Oporto franchise outlets in Western Sydney.
- The outlets were at Merrylands Road, Stockland Merrylands, Plumpton and Stanhope Gardens.
- The Stanhope Gardens outlet had been sold in 2019, so by April 2024 the company still had three operating franchise sites.
2
What the court had to decide
- The issue was whether the Federal Court should use s 447A of the Corporations Act to modify the operation of Part 5.3A so that the second meeting of creditors, convened under s 439A, could be adjourned beyond the usual maximum period in s 75-140(3) of the Insolvency Practice Rules (Corporations) 2016.
- The administrators said they needed more time because the proposed sale of the company's business and assets was complex, depended on the franchisor's cooperation, involved the directors and landlords, and could produce a better return for unsecured creditors if completed.
3
What the court decided
- The Court granted the extension.
- It ordered that Part 5.3A of the Corporations Act operate in relation to the company as if the usual 45 business day adjournment limit in s 75-140(3) were replaced with a deadline of 19 November 2024, and that holding the adjourned meeting by that date would satisfy the relevant convening requirement in s 439A, provided the other requirements of s 75-140...
- Yates J accepted that more time was needed to complete the negotiations described by the administrators and that a better outcome was likely for unsecured creditors if the contemplated sale could be completed.

Practical impact

Practical read

Read this case as a practical administration decision, not as a ruling on whether the franchise termination was valid or whether a deed of company arrangement should ultimately be accepted.
The Court used s 447A of the Corporations Act to modify how Part 5.3A operated for this company, so the adjourned second creditors' meeting could be resumed as late as 19 November 2024 instead of within the usual 45 business day...
The administrators had evidence that the sale process was commercially complex, involved Oporto, the directors and landlords, and could improve returns to unsecured creditors.
The Court also made temporary confidentiality orders over valuations and other commercially sensitive material.

Useful next steps

Franchise termination had already happened before the administrators were appointed
Two outlets kept trading only because licence arrangements were put in place
The administrators considered an operating franchise sale would likely preserve more value
A revised draft deed arrived too close to the reporting deadline for proper review
The sale process involved the franchisor, the directors and the landlords

Snapshot

This Federal Court decision concerned Fresh For Life.....Pty Ltd, a company in voluntary administration that had operated Oporto franchise outlets in Western Sydney. The administrators asked the Court to extend the time for resuming the second meeting of creditors so they could continue working on a proposed sale of the company's business and assets.

The case is commercially useful because the value of the business was tied to franchise arrangements, temporary licence arrangements and leased premises. The Court accepted that extra time could be justified where a more orderly sale process might improve returns to unsecured creditors, especially where the franchisor's cooperation was needed and creditors supported the extension.

The story

Fresh For Life had previously operated four Oporto outlets in Western Sydney. The sites were Merrylands Road, Stockland Merrylands, Plumpton and Stanhope Gardens. The Stanhope Gardens outlet had already been sold in 2019, so by April 2024 the company still had three relevant franchise businesses.

On 9 April 2024, Oporto terminated those three existing franchises. That did not end the practical story immediately. A related entity, Oporto Leasing Pty Ltd, entered into licence arrangements that allowed the Stockland Oporto and Plumpton Oporto businesses to keep trading. No equivalent arrangement was made for the Merrylands Road outlet, which ceased trading on or about 9 April 2024.

Between 16 April 2024 and around 5 June 2024, the company negotiated with Oporto about selling the business of the Plumpton Oporto and the stock and other assets of the Stockland Oporto. Those negotiations came to an end around 5 June 2024 after the company's two directors were issued with Director Penalty Notices by the Australian Taxation Office. Shortly afterwards, on 14 June 2024, the administrators were appointed under s 436A of the Corporations Act.

After their appointment, the administrators tried to re-engage with Oporto. Their evidence was that the company would likely obtain a higher sale price if the business and assets were sold as part of an operating Oporto franchise rather than as disconnected assets. That meant Oporto's assistance as franchisor was important to preserving value.

The timing problem then became critical. By 11 July 2024 at 12.28 pm, Oporto had indicated it was prepared to enter arrangements that would enable the intended sale. Later that same day, the administrators received a revised draft deed that had previously been negotiated with the company. But their second report to creditors was due the next day, 12 July 2024. The administrators said they did not have enough time to review the revised draft properly and obtain legal advice before reporting to creditors.

Because of that, they used the available adjournment mechanism for the second creditors' meeting. The convening period for the second meeting ended on 12 July 2024. The second meeting was convened and held on 19 July 2024. At that meeting, Mr Mansfield exercised the power under s 75-140(1)(b) of the Insolvency Practice Rules to adjourn the meeting for up to 45 business days.

Practical sense check

Franchise termination had already happened before the administrators were appointed
Two outlets kept trading only because licence arrangements were put in place
The administrators considered an operating franchise sale would likely preserve more value
A revised draft deed arrived too close to the reporting deadline for proper review
The sale process involved the franchisor, the directors and the landlords

Sequence and timing of key events

The sequence matters because this was a timetable case. The administrators were not asking for an open-ended delay. They were asking the Court to modify the usual administration timetable so negotiations could continue in a structured way.

First, the franchises were terminated on 9 April 2024. Two sites then continued under licence arrangements. Next, negotiations about a sale took place between 16 April and around 5 June 2024, but those negotiations ended after Director Penalty Notices were issued to the directors. The administrators were appointed on 14 June 2024 and then sought to restart discussions with Oporto.

By 11 July 2024, Oporto had indicated a preparedness to enter arrangements that would enable the intended sale, and a revised draft deed was sent later that day. The problem was that the administrators' second report to creditors was due on 12 July 2024. They said there was not enough time to review the revised draft and obtain legal advice before issuing that report.

The second meeting of creditors was then convened and held on 19 July 2024. At that meeting, the administrators used the statutory power to adjourn the meeting for up to 45 business days. That meant the meeting had to be resumed by 20 September 2024. Because that period was still not long enough to complete the negotiations and sale process, the administrators applied to the Court for an extension to 19 November 2024.

The judgment also records that on 3 September 2024 a circular was sent to creditors advising that the application would be made on 5 September 2024. Although the notice period was necessarily short, the administrators had not received any objection to the Court granting the relief sought. That timing point helped show the Court that creditors had been informed and that there was no known opposition.

The legal issue before the Court

The legal issue was narrow but commercially important. The Court had to decide whether it should use s 447A of the Corporations Act to modify how Part 5.3A operated for this company so that the adjourned second meeting of creditors could be resumed later than the usual maximum period allowed by s 75-140(3) of the Insolvency Practice Rules.

Under the ordinary rule, a meeting convened under s 439A of the Corporations Act must not be adjourned to a day more than 45 business days after the first day on which the original meeting was held. The administrators had already used the adjournment power available under s 75-140(1)(b), but they needed more time than that rule allowed. They therefore asked the Court to modify the operation of the regime so the meeting could be resumed no later than 19 November 2024.

The practical question for the Court was whether this was an appropriate case for that relief. That turned on the evidence about the ongoing sale process, the complexity created by the franchise structure, the need for negotiations with several parties, the administrators' opinion that a better return to unsecured creditors was likely if the sale could be completed, and the attitude of creditors to the proposed extension.

What the Court decided

Yates J accepted that this was an appropriate case to grant the relief sought. The Court noted earlier authority confirming that s 447A can be used to modify the maximum period of adjournment prescribed by s 75-140(3) for a meeting of creditors convened under s 439A. Orders were therefore made so that Part 5.3A would operate in relation to the company as if the usual words in s 75-140(3) were replaced with a requirement that the meeting be resumed no later than 19 November 2024.

The Court also ordered that the requirement to hold a meeting of creditors within the convening period specified in s 439A(2) would be satisfied by holding the adjourned meeting no later than 19 November 2024, provided the other requirements of s 75-140 were complied with.

In reaching that conclusion, the judge accepted that time would be needed to complete the negotiations described by the administrators. The administrators' assessment was that a better outcome was likely for unsecured creditors if the contemplated sale could be completed, and the judge said there was no reason to doubt that opinion. The Court also placed considerable weight on the views of creditors, who supported extending the administration to achieve a sale of the company's business and assets.

The Court further accepted that there was no known material prejudice to creditors if the resumption of the second meeting were deferred. The judgment records that Oporto had agreed to maintain the existing licence arrangements for the Stockland Oporto and the Plumpton Oporto, which was practically important because those arrangements helped preserve trading continuity while negotiations continued.

The Court also made confidentiality orders under s 37AF(1) of the Federal Court of Australia Act. Certain documents and parts of an affidavit were to be marked confidential and not published, disclosed or accessed by any person until 19 November 2024 except by Court order.

The reason was practical and commercial: the material contained valuations and other sensitive information that, if disclosed, might adversely affect the administrators' ability to obtain the best value for the company's business and assets for creditors.

Those confidentiality orders were limited in duration. They were not permanent, and the Court noted that earlier disclosure could be permitted if sufficient grounds were shown. The administrators were also required to notify known creditors and directors of the orders within two business days, and interested persons were given liberty to apply to vary or discharge the key extension order on two business days' notice.

How businesses should read it

If you run a franchise business, this case is a reminder that the business's value may depend on rights you do not fully control. A buyer may want the benefit of the brand, operating system, site approvals and ongoing trading rights. If the franchise has been terminated, or if the business is only trading under a temporary licence, the sale process can become more complicated and more time-sensitive than a sale of an ordinary standalone business.

For directors and owners, the practical point is that a distressed sale is not just about finding a buyer. It may also require the franchisor's cooperation, landlord engagement, and enough time for administrators to review draft documents, obtain advice and report properly to creditors. If those pieces are still being negotiated, a rushed meeting timetable can reduce value.

For franchisors, the case shows that your position can materially affect whether a franchisee's business can be sold as a going concern during an administration. Here, the administrators considered that the company would obtain a higher sale price if the business and assets were sold as part of an operating Oporto franchise. That meant the franchisor's willingness to enter arrangements was commercially significant.

For landlords, the judgment is a reminder that leased premises are part of the practical sale equation. The administrators specifically said the negotiations needed to involve the landlords of the premises from which the company operated. In many franchise administrations, site occupation and consent issues can be just as important as the sale price itself.

In practice

Check whether the franchise has been terminated, suspended or replaced by a temporary licence arrangement
Identify what approvals or cooperation are needed from the franchisor for any sale or transfer
Review lease position and landlord consent issues early
Allow enough time to review draft sale documents and obtain legal advice before creditor reporting deadlines
Consider whether valuations and deal terms need confidentiality protection while a sale process is active

Documents and confidentiality

One practical feature of this case is the confidentiality order. The Court accepted that some material before it contained valuations and other commercially sensitive information. In a live sale process, public disclosure of that kind of material can affect bargaining positions and may reduce the value that administrators can achieve for creditors.

That is why the Court ordered that specified documents and parts of an affidavit not be published, disclosed or accessed until 19 November 2024 unless the Court ordered otherwise. The order applied throughout Australia, but it did not stop the administrators, their legal representatives or their staff from accessing or using the material as needed for the administration.

For businesses, the lesson is not that confidentiality will always be granted. The point is that if there is a real and current sale process, and disclosure of valuations or sensitive deal information could prejudice value, the Court may be prepared to protect that material for a limited period. The order here was tied to the administration timetable and was expressly temporary.

FAQ for business owners

Business owners often assume that once administrators are appointed, the timetable is fixed and the company must move quickly to a final vote. This case shows that the Court can adjust the timetable in an appropriate case, but only where there is evidence supporting the extension.

The judgment also shows that creditor support matters. Here, creditors passed a resolution supporting and authorising the administrators to apply for any necessary extension in relation to the sale of the company's business or the determination of the company's future. The Court placed considerable weight on that support.

Practical sense check

Extra time is possible, but it must be justified by evidence
A live sale process can support an extension if it may improve returns to unsecured creditors
Creditor support is influential, especially where no objection is received
Franchise and licence arrangements can be central to preserving value
Confidentiality orders may be available for valuations and sensitive sale material

Source notes

This page is based on the Federal Court judgment in Mansfield, in the matter of Fresh For Life.....Pty Ltd (administrators appointed) [2024] FCA 1048, delivered by Yates J on 5 September 2024. The published reasons confirm the administrators' appointment, the Oporto franchise background, the termination and licence arrangements, the sale negotiations, the creditors' support for an extension, and the orders extending time to 19 November 2024.

The judgment should be read carefully as a procedural administration decision with a franchising context. It is useful for understanding how franchise structure can affect value and timing in an insolvency sale, but it is not a general authority on franchise termination disputes or broader franchising compliance issues.

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