Corporations law - Administration - Registered charges - Deed of company arrangement - Challenge to validity of appointment of administrators and deed administrators - Convertible loan agreements - Creditor's election to convert loan moneys to shares - Failure of chargor corporation to issue conversion shares - Action for specific performance commenced by chargee to enforce election to convert and obtain conversion shares - Shares not unconditionally delivered to chargee - Status of chargee as creditor for loan after election to convert by Conversion Notice - Acceptance by administrators of appointing chargee as secured creditor - Votes of secured creditor determinative on proposal to approve his deed of company arrangement - Deed of company arrangement proposal approved - Deed of company arrangement discriminates between classes of creditors - Fairness and legitimacy - Certain creditors subscribed funds for share issue but later agreed to proposed use of funds as loans - Relief - Discretion to approve or validate deed of company arrangement notwithstanding deficiencies - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 95A, s 436C, s 445D, s 447A, s 447C
Corporations Regulations 2001 (Cth), reg 5.6.21

Result:

Declaration that Administrators validly appointed
Application to terminate DOCA under Corporations Act s 445D refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett & Ms C L Donald
First Defendant             :     Ms P E Cahill SC, Mr C J Steel (from 26 April - 2 May 2012) & Mr C P Blaxill (from 6 August 2012)
Second Defendant         :     Ms P E Cahill SC, Mr C J Steel (from 26 April - 2 May 2012) & Mr C P Blaxill (from 6 August 2012)
Third Defendant           :     Mr J A Thomson & Mr K L Christensen

Solicitors:

Plaintiff:     Bennett & Co
First Defendant             :     Allens
Second Defendant         :     Allens
Third Defendant           :     Gadens Lawyers

Case(s) referred to in judgment(s):

ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615
Austman Pty Ltd v Mount Gibson Mining Ltd [2012] WASC 202
Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Fitzgerald v Masters (1956) 95 CLR 420
Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd (subject to a deed of company arrangement) [2005] WASC 291;

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Hayes v Doran (No 2)

Details

AGLC: Hayes v Doran (No 2) [2012] WASC 486
Case: [2012] WASC 486
Decision Date: 14 DECEMBER 2012

CaseChat Overview and Summary

In the case of Hayes v Doran, the dispute involved the validity of an appointment of administrators and a deed of company arrangement. The matter was heard in the Federal Court of Australia. The central issue was whether the appointment of administrators and the deed of company arrangement were valid, given that the chargee had elected to convert their loan moneys to shares, but the shares were not issued.

The court had to determine the status of the chargee as a creditor after the election to convert and whether the deed of company arrangement was fair and legitimate. The court examined the circumstances under which the chargee had elected to convert their loan to shares and whether the administrators had accepted the chargee as a secured creditor. The court also had to consider whether the votes of the secured creditor were determinative on the proposal to approve the deed of company arrangement.

The court concluded that the appointment of administrators and the deed of company arrangement were valid. The court found that the chargee had effectively elected to convert their loan to shares, and the administrators had accepted them as a secured creditor. The court held that the votes of the secured creditor were determinative on the proposal to approve the deed of company arrangement. The court also determined that the deed of company arrangement was fair and legitimate, despite certain creditors subscribing funds for a share issue but later agreeing to the proposed use of funds as loans. The court exercised its discretion to approve or validate the deed of company arrangement notwithstanding any deficiencies, as the circumstances were unique to this case.

The final orders of the court confirmed the validity of the appointment of administrators and the deed of company arrangement, and provided relief as appropriate.

Orders