Crosbie (administrator), in the matter of Godfreys Group Pty Ltd (administrators appointed)

This case came before the Federal Court very soon after the Godfreys group entered voluntary administration. The administrators were not asking the Court to decide whether a franchise agreement had been breached or whether one commercial party should pay another. They were asking for a practical package of orders so they could keep the business trading for a limited period, investigate the companies properly, and try to sell the business as a going concern.

The Court described the application as one seeking directions and declarations to facilitate the trading on of the group’s retailing business and its restructure and sale as a going concern. That framing matters. The Court was supervising the administration process and deciding whether the administrators should be given legal room to carry out a strategy they said would better protect creditor value.

The commercial setting was substantial. Godfreys was a long-established retail business selling vacuum cleaners and associated products in Australia and New Zealand. The Court said the business had been established in 1931 and operated through 167 retail stores owned and operated by the companies in Australia and New Zealand, as well as franchisee stores. This was not a small single-site administration. It involved a large network, multiple companies, many leases, employees, franchisees, landlords and a secured creditor.

The Court also identified one especially important feature of the group structure. Electrical Home-Aids Pty Ltd was the primary trading entity. It was the tenant for almost every retail store, the employer of all Australian employees, and the franchisor and licensor to Australian franchisees. In ordinary trading conditions, centralising those functions may create operational control. In an insolvency setting, it concentrates risk and makes urgent court relief more likely.

Before the administrators were appointed, PwC had already been involved as investigating accountants for the principal secured creditor, 1918 Finance Pty Ltd, from August 2023. Their task was to review the group’s financial performance, forecasts and possible restructure proposals. That background helps explain why the administration moved quickly into a court application focused on trading on and sale.

On 30 January 2024, the administrators were appointed by resolution of the sole director. Shortly after appointment, they closed 49 group-owned stores in Australia and terminated about 136 employees in Australia. The Court recorded that they did not then plan to close any further stores, but they were still investigating the lease portfolio and whether additional closures might be necessary.

The administrators formed the view that it was in creditors’ interests to continue trading the business while implementing a restructure, continuing investigations and pursuing a sale of the business as a going concern. The Court accepted that this was a commercial judgment primarily for the administrators, not something the Court should lightly second-guess.

The sale process had already started. On 31 January 2024, an advertisement seeking expressions of interest for the purchase of the business and assets was published in major Australian print and online media. Expressions of interest were due on 7 February 2024. After that, there would be due diligence, shortlisting and negotiation, with final offers due by 20 March 2024. The administrators said they would not be in a position to issue the report for the second creditors’ meeting until after the sale process had been completed and investigations had progressed.

That timing problem sat at the centre of the application. The ordinary administration timetable was too short for the scale of the business, the sale process and the investigations the administrators still needed to complete.

The Court had to decide whether to grant a suite of orders and declarations to support the administrators’ proposed strategy. The legal issue was not abstract. It was whether the administration framework should be adjusted in practical ways so the administrators could continue trading, run the sale process and manage the group efficiently.

The first major issue was time. The administrators sought an extension of the convening period for the second meeting of creditors to 28 May 2024. The Court considered this against the objects of Part 5.3A of the Corporations Act, including maximising the chance of the company, or as much as possible of its business, continuing in existence, or if that was not possible, achieving a better return for creditors than immediate liquidation.

The second major issue was administration mechanics. The administrators wanted notices to creditors, owners and lessors to be given electronically and through website publication. They also wanted permission to use a single administration account and a single committee of inspection across the companies. For a large interconnected group, those orders would make the administration more workable.

The third major issue was personal liability. The administrators sought relief in relation to liabilities incurred in conducting the business, liabilities connected with a funding deed with 1918 Finance, liabilities relating to leased, used or occupied property, liabilities associated with continuing pre-appointment employment contracts and payroll practices, and liabilities connected with funding or supplying a New Zealand subsidiary.

The Court approached these questions in a practical way. Justice Beach said the relevant commercial judgments were primarily for the administrators, but the Court could still give directions and make declarations to protect administrators from claims that they had acted unreasonably in entering transactions or engaging in particular conduct.

This is the part of the case that franchise and retail businesses should read most carefully. As at the date of appointment, there were about 150 leases of stores and other premises in Australia. Those included 124 retail premises of Australian group stores, 15 premises of Australian franchisee stores, 3 service and repair centres, and 2 head office spaces.

Electrical Home-Aids was the tenant under all or substantially all of those leases. The rent and outgoings were significant. For the 15 premises used by Australian franchisee stores, Electrical Home-Aids leased the premises from landlords and then entered into a written licence agreement with each relevant franchisee giving that franchisee a right to occupy the premises and conduct the franchise. The franchisee was required to pay Electrical Home-Aids for rent and other amounts payable under the lease.

The Court explained the practical effect of that arrangement. By allowing the franchisees to continue operating from their premises, Electrical Home-Aids would continue to be liable for rent and the administrators would become personally liable after the expiry of the statutory standstill, while relying on the franchisees to pay the rent. That is a very direct example of how a head lease and licence structure can create insolvency pressure for the franchisor or related entity that holds the lease.

The administrators had already issued section 443B(3) notices to landlords of closed stores and intended to issue notices to the balance of landlords for properties the company no longer intended to use or exercise rights in relation to. But they said they needed much more time to investigate the remaining leases, confer with counterparties and decide whether preserving those sites was necessary to maintain the value of the business for sale.

The Court accepted that this could not sensibly be done by 7 February 2024. Given the number of leases, the number of counterparties, the size of the liabilities and the franchise licence arrangements, the administrators estimated they would need around 16 weeks to fully consider the leases and determine which properties were required for continued operations.

The Court granted the orders sought. The most important timing order was the extension of the convening period for the second meeting of creditors to 28 May 2024. The Court also made what is commonly called a Daisytek-style order so the second meeting could be held at any time during the extended convening period or within five business days after it. Justice Beach said he had no difficulty extending the convening period until 28 May 2024 for all of the companies so the proposed strategy could be implemented.

The Court also approved electronic notice arrangements. Notices of the first meeting and other notices to creditors, owners and lessors could be given by email where an email address was available, by post where needed, and by publication on ASIC’s insolvency notices website and the administrators’ website. The Court also allowed creditor names and contact information to be redacted or withheld in responding to certain information requests, and extended the time for providing requested information from 5 business days to 10 business days, with publication on the administrators’ website permitted as a method of providing information.

For administration mechanics, the Court allowed the administrators to pay all money received on behalf of or in relation to the companies into a single account, relieving them from the usual requirement to establish a separate account for each company. It also ordered that a single committee of inspection be formed for the companies, with members appointed from creditors of any of the companies at the first meeting of creditors scheduled for 9 February 2024.

On personal liability, the Court made several important orders. It provided that liabilities incurred in conducting the business up to 28 May 2024, and liabilities arising out of or in connection with the funding deed with 1918 Finance, were debts incurred by the administrators in performing their functions, but that the administrators would not, except as expressly provided in the deed, be personally liable to repay or satisfy them. It also ordered that the administrators’ personal liability in relation to leased, used or occupied property would begin on 29 May 2024, so they were not personally liable for relevant liabilities from 30 January 2024 to 28 May 2024 inclusive.

The Court further granted relief concerning liabilities arising from pre-appointment employment contracts where those liabilities arose because the administrators implemented the pre-appointment payroll practices described in the employee proposal annexed to the orders, to the extent the companies’ assets were insufficient. It also granted relief in relation to arrangements by Electrical Home-Aids to fund or supply assets to the New Zealand entity, again to the extent assets were insufficient.

Finally, the Court made declarations that the administrators were acting in the interests of creditors by continuing to conduct the business up to 28 May 2024 while seeking a sale that maximised value, by causing the companies to enter into and perform the funding deed, by paying employees in accordance with the employee proposal, and by causing Electrical Home-Aids to enter arrangements to fund or supply the New Zealand entity. Confidentiality and ancillary notice orders were also made.

For franchisors, this case is a reminder that legal structure is not just administrative detail. If one entity is the tenant, employer, franchisor and licensor across a network, that entity becomes a major pressure point in distress. Administrators may need urgent court orders simply to keep the network operating while they assess whether a sale or restructure is possible.

For franchisees, the case is a warning not to assume that day-to-day trading tells you everything about your legal position. If your right to occupy premises comes from a licence granted by the franchisor or a related company, rather than from your own lease or sublease, your ability to stay in the site may depend heavily on what happens to the head tenant in administration.

For landlords, suppliers and other counterparties, the case shows that the ordinary administration timetable and ordinary notice assumptions may be modified by court order. Notices may be validly given by email and website publication. A group may be administered through a single account and a single committee of inspection. Administrators may also obtain temporary relief from personal liability while they decide whether to continue using premises or continue trading.

For any business with a multi-entity structure, the practical lesson is to map the real operating relationships before there is a crisis. Know which entity signs leases, which entity employs staff, which entity contracts with franchisees, which entity borrows money, and whether there are cross-guarantees. Those details can determine who carries the immediate risk when insolvency hits.

This case is a useful prompt for a practical document review. The Court was willing to support the administrators because there was evidence of a structured sale process, a reasoned view that continued trading could improve creditor outcomes, and a clear explanation of why the ordinary timetable and liability settings were commercially difficult. Businesses should not wait until insolvency to work out where those pressure points are.

Start with occupancy documents. Make sure leases, subleases and licences to occupy are current, signed and internally consistent. If a franchisee occupies under a licence, the documents should clearly explain who is liable to the landlord, who pays rent and outgoings, and what happens if the head tenant becomes insolvent.

Then review employment and payroll arrangements. In this case, the administrators sought relief connected with continuing pre-appointment payroll practices. That highlights how operational systems can create legal exposure if they continue after appointment without a clear framework.

Finally, review intercompany and funding arrangements. The Court made orders concerning a funding deed with the secured creditor and arrangements to fund or supply a New Zealand subsidiary. If your group relies on intercompany support, stock transfers or centralised funding, those arrangements should be documented and understood before any insolvency event.

The key orders were made on 5 February 2024, and the reasons were published on 7 February 2024. The convening period for the second meeting of creditors was extended to 28 May 2024. The Court also ordered that the second meeting could be held during that extended period or within five business days after it.

The lease-related relief was expressly time-limited. The administrators were not personally liable for relevant liabilities concerning property leased, used or occupied by the companies from 30 January 2024 to 28 May 2024 inclusive, with personal liability beginning on 29 May 2024 under the terms of the order. The declarations supporting continued trading and the sale strategy were also framed by reference to trading up to 28 May 2024.

That timing matters for business readers. This was not a general statement that administrators can always trade on without personal exposure. It was a court-supervised, time-specific response to the circumstances of this administration.

This explainer is based on the Federal Court reasons and orders in Crosbie (administrator), in the matter of Godfreys Group Pty Ltd (administrators appointed) [2024] FCA 60. The published material clearly supports the core account given here: the administrators sought and obtained orders to continue trading for a limited period, pursue a sale process, extend the convening period, use electronic notices, operate a single administration account, form a single committee of inspection, and obtain relief from certain personal liabilities.

The publicly available extract is truncated before all of the detailed reasoning appears. Because of that, this page stays close to the facts, orders and practical effects that are clearly stated in the published reasons and orders.