Cathro, in the matter of Australian Hotel Acquisition Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 113 961 194

[2010] FCA 390

FEDERAL COURT OF AUSTRALIA

Cathro, in the matter of Australian Hotel Acquisition Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 113 961 194 [2010] FCA 390

Citation:		Cathro, in the matter of Australian Hotel Acquisition Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 113 961 194 [2010] FCA 390
Parties:		SIMON JOHN CATHRO AND DAVID JOHN FRANK LOMBE AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN HOTEL ACQUISITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 113 961 194; SURFERS PARADISE ACQUISITION CORPORATION (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 116 341 149; HPI AUSTRALIA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 007 709 668; HPI PARRAMATTA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 628 340; AND CE’NEDRA PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 970 885
File number:		NSD 313 of 2010
Judge:		EMMETT J
Date of judgment:		26 March 2010
Catchwords:		CORPORATIONS – whether the Court should grant an order under s 477(2B) of the Corporations Act 2001 (Cth)
Legislation:		Corporations Act 2001 (Cth) s 477(2B)
Date of hearing:	26 March 2010
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	12
Counsel for the Applicant:	J Baird
Solicitor for the Applicant:	Sparke Helmore

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 313 of 2010

IN THE MATTER OF AUSTRALIAN HOTEL ACQUISITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 113 961 194

SIMON JOHN CATHRO AND DAVID JOHN FRANK LOMBE AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN HOTEL ACQUISITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 113 961 194; SURFERS PARADISE ACQUISITION CORPORATION (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 116 341 149; HPI AUSTRALIA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 007 709 668; HPI PARRAMATTA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 628 340; AND CE’NEDRA PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 970 885

JUDGE:	EMMETT J
DATE OF ORDER:	26 MARCH 2010
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to s 477(2B) of the Corporations Act 2001, that the following be approved, namely the entry by the Applicants in their respective capacities as joint and several  liquidators of:

(a)Australian Hotel Acquisition Pty Limited (Receivers & Managers appointed) (in liquidation) ACN 113 961 194 (AHA);

(b)Surfers Paradise Acquisition Corporation (Receivers & Managers appointed) (in liquidation) ACN  116 341 149 (SPAC);

(c)HPI Australia Pty Limited (Receivers & Managers appointed) (in liquidation) ACN  007 709 668 (HPIA);

(d)HPI Parramatta Pty Limited (Receivers & Managers appointed) (in liquidation) ACN 003 628 340 (HPIP); and

(e)Ce’Nedra Pty Limited (Receivers & Managers appointed) (in liquidation) ACN 003 970 885 (Ce’Nedra)

into the deed entitled “Asset Handover Deed”, which is in or substantially to the effect of the Asset Handover Deed which comprises Annexure H to the affidavit of Simon John Cathro sworn on 25 March 2010 in these proceedings, running from pages 64-82 of that affidavit, to which the other proposed parties are the above-named companies, Messrs David John Winterbottom and Robert William Hutson and the Commonwealth Bank of Australia ACN 123 123 124.

2.The Applicants’ costs of this originating process be costs in the winding up of HPIP and Ce’Nedra.

3.The originating process filed today be stood over to 14 May 2010.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 313 of 2010

IN THE MATTER OF AUSTRALIAN HOTEL ACQUISITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 113 961 194

SIMON JOHN CATHRO AND DAVID JOHN FRANK LOMBE AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN HOTEL ACQUISITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 113 961 194; SURFERS PARADISE ACQUISITION CORPORATION (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 116 341 149; HPI AUSTRALIA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 007 709 668; HPI PARRAMATTA PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 628 340; AND CE’NEDRA PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 003 970 885
JUDGE:	EMMETT J
DATE:	26 MARCH 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. I have before me an application under s 477(2B) of the Corporations Act 2001 (Cth) (the Act).  The application is for approval of a deed described as an asset handover deed.  The application is made by Simon Cathro and David Lombe, as liquidators of Australian Hotel Acquisition Pty Limited (AHA), Surfers Paradise Acquisition Corporation (SPAC), HPI Australia Pty Ltd (HPIA), HPI Parramatta Pty Ltd (HPIP) and Ce’Nedra Pty Limited (Ce’Nedra).

2. HPIP is the owner of a property in Parramatta, on which stands the Courtyard by Marriott Parramatta Hotel (the Parramatta Hotel).  SPAC was the owner of the Courtyard by Marriott Surfers Paradise Hotel (the Surfers Paradise Hotel) and North Ryde Property Pty Limited (NRP) was the owner of the Courtyard by Marriott North Ryde Hotel (the North Ryde Hotel).  Commonwealth Bank of Australia (the Bank), financed the purchase of the Parramatta Hotel, the Surfers Paradise Hotel and the North Ryde Hotel.  As security for its advances the bank was granted first ranking charges over the assets and undertakings of AHA, HPIA, HPIP, SPAC, Ce’Nedra, NRP and North Ryde Hotel Pty Ltd (NRH).

3. The Bank also had mortgages over the North Ryde Hotel and the Surfers Paradise Hotel and has a first ranking mortgage over the Parramatta Hotel.  On 14 May 2008, David Winterbottom and Robert Hudson, of KordaMentha (the Receivers), were appointed as the receivers and managers of all of the assets and undertakings of the companies I have just described.  They were appointed by the Bank, pursuant to the charges to which I have referred.  Following their appointment, the Receivers sold the North Ryde Hotel and the Surfers Paradise Hotel.  They also offered the Parramatta Hotel for sale but it has not yet been sold.

4. The Receivers continued with the trading of the Surfers Paradise Hotel and the North Ryde Hotel until they were sold.  They have continued to trade the Parramatta Hotel.  The Receivers have received the proceeds of the sale from the sales of the Surfers Paradise and North Ryde Hotels.  They have applied those proceeds in satisfaction of the principle debt and interest owed to the Bank.  The Receivers now hold surplus funds, which they have retained to cover their fees and expenses of the Receivership and to satisfy any remaining liabilities that they have as Receivers.  However, the Receivers are not in a position to retire and will not be until all tax liabilities incurred by the companies under their receivership, during their receivership, have been satisfied.

5. They do not expect that they will need to sell the Parramatta Hotel to settle such remaining liabilities.  Accordingly, the Receivers propose to hand over to the liquidators the Parramatta Hotel and other assets of the companies.  That will enable the sale of the Parramatta Hotel to continue under the control of the liquidators and will enable the assets of HPIP and Ce’Nedra to be realised more quickly for the benefit of the creditors of those companies.  The liquidators consider that it is in the interests of the creditors for the sale process to continue and for the sale to occur as soon as possible, at the best price obtainable.  The liquidators have in mind conducting a public tender process, during April 2010, in order to identify a possible purchaser for the Parramatta Hotel.

6. The Parramatta Hotel had been marketed under the direction of the Receivers and a data room had been set up by the Receivers.  The Receivers proposed to permit the liquidators to give potential purchasers access to the data room for due diligence purposes.  It is proposed that the handover of assets occur at midnight on 31 March 2010.  The liquidators would advertise the tender process on 1 April 2010.  They wish to set 28 April 2010 as the last day for submission of tenders.  The liquidators consider that the sooner the assets of the companies are realised, the sooner will they be able to consider the manner in which a distribution to creditors might occur.

7. To that end, the Receivers and the liquidators have engaged in negotiations for the handover of the assets in question, prior to the formal retirement of the Receivers.  They propose to do that by entering into an asset handover deed (the Deed). The parties to the proposed asset handover deed will be the Receivers, the Bank and the liquidators on behalf of AHA, SPAC, HPIA, HPIP and Ce’Nedra. The Deed contains a number of obligations that will subsist for more than three months after the agreement is entered into. However, s 477(2B) of the Act provides that, except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf if, relevantly, obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance more than three months after the agreement is entered into, even if the obligations may be discharged within those three months.

8. There is no committee of inspection of the companies and it would not be practicable to convene a resolution of creditors, prior to entry into of the Deed, if that is to be entered into before the proposed handover on 31 March 2010.  Hence, the liquidators have made this application for the Court’s approval of their entry into the Deed.  The pivotal provision of the Deed is clause 3.  Under clause 3.1 the Receivers will, at midnight on 31 March 2010, deliver up possession of all of the assets of the company, including the Parramatta Hotel, save for the balance of the Receiver’s accounts, as defined as at the time of handover.

9. The liquidators agree to accept and take possession of those assets for, and on behalf of, each of the five companies having any right, title or interest in those assets.  Where necessary the Receivers will do everything necessary, or reasonably required, to transfer, sign or novate to Ce’Nedra any ongoing contracts for the operation of the Parramatta Hotel.  The proposed deed contains several indemnities, by the liquidators, in favour of the Receivers.  For example, clause 10 provides that in the event that a liability of the Receivers arises, whether before or after the date of handover, and at the time when that liability arises, the assets retained by the Receivers are insufficient to meet the liability, then the liquidators will immediately indemnify the Receivers against any expense, liability or loss incurred by the Receivers in connection with that liability.

10. Under clause 10.2 that obligation of the liquidators will not operate to the extent that the companies have insufficient assets from which the liquidators may indemnify themselves, in respect of any sum to be paid in satisfaction of the obligation, or where the liquidators are paid a final dividend to the creditors of each and all of the companies.  The Deed contains other specific indemnities along similar lines.  Evidently, the obligation of the liquidators, under clause 10.1, may arise for discharge by performance, more than three months after the proposed deed is entered into.

11. Clearly enough, the handover deed is in the interests of the creditors of the companies, in the sense that it will make available, to the liquidators, for the benefit of the creditors, the assets that are no longer required to satisfy the obligations of the companies to the bank and other liabilities and expenses incurred by the Receivers.  On the other hand, it is not unreasonable for the Receivers to require, as a condition of parting with possession of the assets that are the subject of the charge and from which they can indemnify themselves, to require the indemnities to which I have referred.  In all of the circumstances, I consider that it is appropriate to accede to the liquidators’ application.

12. The liquidators have also foreshadowed the possibility of making a further application under s 477(2B), in relation to agreements that might be entered into in connection with the further conduct of the business of the Parramatta Hotel. They therefore wish to stand over the originating process in order to make any such application, if such an application is required.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:        18 April 2010