Breaking news: Court grants further relief for personal liability and rent

Updated: Apr 17

This afternoon Justice Markovic granted the further orders sought by the Administrators of the Colette by Colette Hayman retail group in relation to their personal liability position.


These orders extend orders made on 1 April 2020 in Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 for a period of three (3) weeks. The orders are as follows:

  1. An order pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act) varying the operation of ss 443A(1)(c) and 443B(2) in relation to each company in the Colette Group such that each of the Administrators is not personally liable for rent (and any other payments due under leases) for 93 Australian stores which were closed due to the COVID-19 pandemic (Stores) in respect of obligations up to 5pm on 6 May 2020;

  2. A direction pursuant to s 90-15 of Schedule 2, the Insolvency Practice Schedule (Corporations) to the Act that each of the Administrators is justified in causing the companies in the Colette Group not to pay rent in relation to the Stores for the 3 week period until 5pm on 6 May 2020; and

  3. Orders about the confidentiality of certain evidence filed in respect of the application for the above orders.

Her Honour understood right from the outset the commercial reality behind the application and in her words the ‘extraordinary circumstances’ the Administrators find themselves in. These are unprecedented times and the Administrators are well within their duties to explore a mothballing of a business like any other retailer or indeed any non-essential business that has elected to hibernate during this time.

Albeit a relatively short extension, the orders are intended to provide sufficient time for the Administrators to:

  • assess the impact of the Code of Conduct and engage in good faith discussions with the landlords;

  • assess the impact of the JobKeeper subsidy on the business and the eligible employees (noting the employees would likely receive no subsidy if the relevant companies were placed into liquidation);

  • model the impact of the Code of Conduct, JobKeeper subsidy and any rental concessions agreed to by landlords;

  • engage with stakeholders (including secured creditors);

  • monitor market developments, in particular further Federal Government announcements and also actions taken by other market participants in the retail space; and

  • continue to consider and potentially form a view on whether it is possible or appropriate to re-open stores and continue to work towards a sale or DOCA including whether to permanently close and vacate certain stores.

This strategy was developed to ensure the underlying business had every opportunity to be sold once the hibernation period finishes to maximise the return to creditors and / or ensure the business continued as a going concern. The orders also ensure that the group (and indeed Administrators) are on as equal footing as possible with other retailers adopting similar strategies at this time yet also acknowledging the difficult commercial situation that landlords are in across the market.

Critical to the strategy so far and success of the applications was:

  • early engagement with all stakeholders, in particular the landlords and secured creditor(s) – this involved explaining to them as best as possible within the time constraints the reason for the application and the timeframes sought;

  • electing time periods for the orders that were fair and reasonable to all parties (Including the landlords in the circumstances);

  • a firm understanding of the Government’s assistance package and associated subsidies (including JobKeeper and the new mandatory Code of Conduct in relation to SME commercial leasing – click here for further information on the Code of Conduct);

  • clearly articulated strategy (including counterfactual); and

  • clear understanding of the potential downside option (including a fire sale and controlled wind-down).

The Court’s willingness to consider such an application at this time, as well as the landlords’ willingness to engage (be it under the Code of Conduct or otherwise) will be crucial for businesses as they turn their mind to emerging from hibernation. It goes without saying that relief from an administrator’s statutory personal liability will likely prove crucial to the success of any restructure at the present time through an administration process – be it strategic to facilitate a pre-packaged restructure developed under safe harbour or forced appointment as a company seeks to deal with an ever increasing debt burden in a zero revenue environment.

No doubt such an application should also be considered should an administrator need to borrow further funds during the VA period to facilitate the emergence or as part of a pre-pack restructure. It will also be relevant for businesses that fall outside the scope of the JobKeeper package and therefore the Code of Conduct – similar orders as those received today may strategically be used to facilitate negotiations with landlords if required.

The matter has been tentatively relisted for 6 May 2020 for further hearing. At such time it is likely more fulsome orders will be sought. Please contact us if you would like a copy of the judgment from the orders made on 1 April 2020 or today (once her Honour publishes her reasons).

Hamilton Locke advises Vaughan Strawbridge, Sam Marsden and Jason Tracy of Deloitte in their capacity as administrators of Colette.

The Hamilton Locke finance, restructuring and insolvency team have a broad range of top-tier experience acting for a variety of stakeholders in distressed scenarios. For more information on debt trading, distressed investing and finance, or advice on insolvency, distressed debt and restructuring generally please contact Nick Edwards (Nicholas.Edwards@hamiltonlocke.com.au), Brit Ibanez (Brit.Ibanez@hamiltonlocke.com.au) and Zina Edwards (Zina.Edwards@hamiltonlocke.com.au).

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