In the matter of Ten Network Holdings Limited (subject to a deed of company arrangement) (receivers and managers appointed)

[2017] NSWSC 1480

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Ten Network Holdings Limited (subject to a deed of company arrangement) (receivers and managers appointed) [2017] NSWSC 1480
Hearing dates:	16 October 2017
Decision date:	16 October 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Court confirms the hearing date, reserving the ability to objecting shareholders to bring a further application for deferral of the hearing date.
Catchwords:	CIVIL PROCEDURE — Hearings – Application under s 444GA of the Corporations Act 2001 (Cth) for leave to transfer shares pursuant to deed of company arrangement – where objecting shareholders seek deferral of hearing to prepare objections – whether hearing should be deferred
Legislation Cited:	- Civil Procedure Act 2005 (NSW), s 56 - Corporations Act 2001 (Cth), s 444GA - Judiciary Act 1903 (Cth), s 78B - Supreme Court (Corporations) Rules 1999 (NSW), r 2.13
Category:	Procedural and other rulings
Parties:	Mark Korda, Jennifer Nettleton and Jarrod Villani as joint and several deed administrators of Ten Network Holdings Limited (subject to a deed of company arrangement) (receivers and managers appointed) and each of the companies listed in the Schedule (Plaintiffs) Y Du (Interested Person) (self-represented) D Gubbay (Interested Person) (self-represented)
Representation:	Counsel: C R C Newlinds SC (Plaintiffs)   Solicitors: Baker McKenzie (Plaintiffs)
File Number(s):	2017/290027

Judgment- ex tempore (revised 17 october 2017)

1. On 27 September 2017 I made directions which tentatively allocated a hearing date of 31 October 2017 for proceedings brought by Mr Korda and others as the deed administrators of Ten Network Holdings Limited (subject to deed of company arrangement) (recs and mgrs apptd) (“Holdings”) and other companies for an order under s 444GA of the Corporations Act 2001 (Cth) approving the transfer of shares in Holdings from its shareholders to an entity associated with CBS International Television Australia Pty Ltd, CBS Broadcasting Inc and Showtime Distribution BV (together, “CBS”). In my judgment on that day, I noted that that timetable was "ambitious" and recognised the possibility that that matter may not be able to go to hearing on that day.

2. On that occasion, correspondence was tendered from the solicitors for two parties which had made, for want of a better way to put it, a competing proposal for a deed of company arrangement, namely Birketu Pty Ltd (“Birketu”) and Illyria Nominees Television Pty Ltd (as trustee for Illyria Investment Trust No 4) (“Illyria”), to which my attention has been drawn in the course of the hearing today, and in which they suggested that the deed administrators’ proposed timetable for the hearing was unrealistic. That timetable was plainly compressed, at least if there was to be a substantive challenge at the hearing to the independent expert evidence on which the deed administrators rely to the effect that the shares in Holdings now have no value. In the event, neither Birketu nor Illyria has appeared today to indicate that they will be opposing the application for approval of a transfer of the shares in Holdings from shareholders to CBS.

3. A question now arises as to whether the tentative hearing date set for 31 October 2017 should be maintained or whether that hearing should be deferred to a later date. Each of Mr Du and Mr Gubbay, who are shareholders in Holdings who oppose the application, has sought an adjournment of the hearing, albeit for somewhat different reasons. The deed administrators of Holdings and the other entities in turn seek to maintain the hearing date and read an affidavit of the Chief Executive Officer of Holdings, Mr Anderson, dated 11 October 2017, in support of their contention that the hearing date should be maintained.

4. It will be convenient first to refer to Mr Anderson's evidence, briefly, and then to the submissions made by Mr Du and Mr Gubbay seeking a deferral of the hearing date. Before doing so, I should first note that I am conscious of the fact that individual shareholders, such as Mr Du and Mr Gubbay, plainly face significant challenges in opposing an application of this kind, including challenges as to costs and as to the complexity of the relevant issues. Those challenges are no doubt exacerbated if, as Mr Du points out, the position is that major shareholders in Holdings no longer oppose the application. I am conscious of that matter, and conscious of the need to accommodate the needs of such shareholders to the extent that it is reasonably possible to do so, in order to allow them a fair opportunity to be heard in opposition to the application. Nonetheless, as Mr Newlinds (who appears for the deed administrators) points out, an application of this kind plainly involves a balancing exercise, between the needs of the proponents of the application and the companies that are its subject matter, on the one hand, and the needs of the shareholders who oppose the application on the other. In particular, the question of a fair opportunity to shareholders to be heard needs to be balanced against the commercial imperatives affecting the relevant companies, and indirectly their creditors and employees, and the need to ensure that the process for, and delays in, the determination of such an application do not themselves impose unreasonable damage upon the companies.

5. Mr Anderson refers to the fact that Network Ten has been operating in external administration for several months and his evidence is that that has, perhaps unsurprisingly, been disruptive for its business and impacted adversely on its dealings with its employees, production partners and suppliers. Mr Anderson fairly acknowledges that the position has stabilised, at least to an extent, after the announcement of the vote in favour of the proposed CBS transaction at the second meeting of creditors, but he also points to the fact that Network Ten will shortly hold an annual event which is directed to promoting program content for the 2018 year and securing advertising commitments, and that a relevant matter at that event will be the nature of programming for 2018. Mr Anderson's evidence is that, not surprisingly, the possibility that there will be CBS content in such programming, particularly if the transaction with CBS proceeds, is likely to be a matter relevant to the advertising market. Mr Anderson refers to the fact that this annual programming event is scheduled for 9 November 2017. That scheduling is also somewhat ambitious, if it contemplates that, after this application is heard for up to three days commencing on the tentative hearing date of 31 October 2017, judgment will necessarily be delivered prior to 9 November 2017. In any event, Mr Anderson's evidence is that Holdings will suffer detriment by any significant delay in the hearing of the application, both by the extension of uncertainty, and by the continuing uncertainty as to the outcome of this application at the time of its annual programming event.

6. Mr Newlinds in turn acknowledges that there is a balancing of the kind to which I have referred in this application, but points to the real disadvantage to the companies of delay, and submits that the matters on which Mr Du and Mr Gubbay rely, to which I will shortly refer, do not outweigh that disadvantage.

7. Mr Du, who (as I noted above) is a shareholder in Holdings, seeks a deferral of the proposed hearing date to mid-November or possibly late November. Mr Du refers, first, to a notice to produce which he has issued seeking production of documents, which are in relatively narrow scope, although there may be a question as to how some of them relate to the present value of the shares in Holdings. Mr Newlinds in turn points to a difficulty which Mr Du faces in that regard. Understandably, Mr Du has indicated his intent to seek leave to appear in the proceedings under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), a course that has the capacity to significantly reduce the likelihood that he would face an adverse costs order if unsuccessful in the proceedings. There are very good reasons why Mr Du (and Mr Gubbay) may wish to proceed in that manner, given that the costs of a hearing of this kind may be significant. However, the consequence of proceeding in that manner is that Mr Du (and Mr Gubbay) would not be entitled, as of right, to conduct himself as though he were a party to the proceedings (as distinct from a person heard in them under that rule), by, for example, issuing notices to produce or subpoenas, or cross-examining witnesses called by the deed administrators. I recognise, of course, that there is no absolute rule in that respect, and that some evidence was led and some cross-examination was permitted by persons that were heard under that rule in the Boart Longyear proceedings.

8. Mr Du also advances a number of criticisms of Mr Anderson's evidence, including suggesting that any harm to Holdings needs to be balanced against harm to Mr Du, if the matter proceeds to hearing within a compressed timetable. Mr Du identified that harm as originating from the fact that he is a third year law student who has two assignments to submit and a final examination before mid-November 2017. Mr Du submitted that he would not be able to prepare adequate submissions, at least without sacrificing time that he would otherwise devote to university work, if the matter were listed before mid-November, with the implication that the hearing should be set in late November.

9. Again, I recognise the fact that where a self-represented litigant appears in a matter, then he or she may have constraints upon his or her time which would not necessarily have the same impact as when a party is represented by legal advisers. I do not wholly accept Mr Newlinds’ submission that it was Mr Du's “choice” not to be represented by legal advisers, where a shareholder holding a relatively small number of shares in a case of this kind would plainly have constraints upon the extent to which he or she would sensibly incur the costs of retaining external legal representation, where the costs of such representation may be disproportionate to the value of his or her shareholding. Having said that, as I observed above, the position in respect of Mr Du's private commitments needs to be balanced against the wider position in respect of the issues affecting the Ten group, where delay in the matter may have an impact on its programming, advertising sales and revenue in the 2018 year, and potentially on its wider business.

10. Mr Gubbay in turn supported an application for an adjournment, at least for a month, on the basis that he may seek access to documents made available by Holdings or the deed administrators to the expert whose report will be led in their case. Mr Gubbay submitted that he has accounting qualifications which will allow him to assess the correctness of that expert report, and that he may lead evidence himself in response to that report. If it were apparent that a process of review of those documents were under way, and that Mr Gubbay was in fact leading evidence of that kind, then that is a matter that may support a deferral of the hearing date to allow that evidence to be completed. However, it is presently unclear whether matters will develop in that way. It is possible that Mr Gubbay, having access to some of the information made available to the independent expert, would agree with that expert's view, and would then not be leading evidence to contest it. If that is the case, then that matter plainly does not support an adjournment to give time for evidence that would not be led.

11. Mr Gubbay also referred to his commitments in his accounting practice which would affect his capacity to address matters in a hearing prior to late November 2017. I sought to explore with Mr Gubbay whether some lesser deferral of the matter would improve his position, but, as I understood it, Mr Gubbay's position was that a deferral to anything earlier than late November would not assist him. That position in turn leaves the Court with a stark choice, between retaining the present tentative hearing dates, or deferring the matter to late November and exposing Holdings and those who have an interest in its continued business to any consequential detriment. That stark choice can be mitigated, to some extent, by reserving the ability of Mr Du and Mr Gubbay further to apply, if they are ultimately preparing evidence of a substantive nature which requires further time and can lead evidence to establish that matter.

12. As I have noted above, the issues raised in this application involve a balancing exercise, and there is no easy answer to them. I have regard to the fact that the Court must, in dealing with applications of this kind, promote the just, quick and cheap resolution of the real issues in dispute in the proceedings, in accordance with s 56 of the Civil Procedure Act 2005 (NSW). I have regard to the fact that, in some circumstances, the speed with which a matter goes to hearing may potentially deprive a party of an adequate opportunity to be heard, just as there are other circumstances where delay will deprive a party of justice if, for example, the effect of delay imposed significant detriments upon Holdings which cannot later be undone even if it is successful in the application.

13. The matter would have been simpler to resolve had some middle course been available, if either Mr Du or Mr Gubbay had been prepared to accept that some shorter extension of time than that which they sought would have improved their ability to prepare for a hearing. I recognise that, as a matter of fact, that may not be the case, given Mr Du's university commitments and Mr Gubbay's professional commitments. It does not seem to me that it is consistent with s 56 of the Civil Procedure Act or with the just, quick and cheap resolution of the real issues in dispute in the proceedings, where the matter does have real commercial urgency by reason of its nature, simply to defer the hearing to late November 2017, and expose Holdings to the adverse consequences which the evidence establishes that it will face by such a deferral.

14. It seems to me that the preferable course is to confirm the present hearing date while reserving the opportunity to Mr Du and Mr Gubbay to apply to seek to defer that hearing date further, on the basis of evidence that establishes the work that they have in fact done to prepare the matter for hearing and the work that remains to be done to prepare the matter for hearing. If the fact is that Mr Du and Mr Gubbay, by reason of their other commitments, are unable to devote significant time to preparing the matter before the hearing date, then it may be that little can be done to assist them further. If, on the other hand, Mr Du or Mr Gubbay are advancing valuation or accounting evidence, which may take issue with the independent expert evidence on which the deed administrators rely, and that evidence could be completed within a short time after 31 October 2017, then it may well be that the Court would further defer the hearing date to allow that evidence to be led.

15. In reaching this view, I have not neglected two other matters that were raised. The first is that Mr Du at one point contemplated bringing a challenge to the constitutionality of s 444GA of the Corporations Act, which would have required the giving of notices under s 78B of the Judiciary Act 1903 (Cth) to the Attorneys-General of the Commonwealth and the States. Mr Du's present position is that he does not propose to press such a challenge, although I have allowed him until tomorrow the opportunity to give a formal indication of his position, to allow him further time for thought. It may be that the matters in issue will be somewhat narrowed if that issue is not raised, or at least the number of parties involved will be reduced if the Attorneys-General do not seek to intervene in the proceedings.

16. Second, Mr Gubbay noted that inquiries would be made, implicitly of Birketu and Illyria, as to whether the offer that they had made prior to the second meeting of creditors, and any further offer that had been foreshadowed or made at the time of that meeting, was still current. Such inquiries can of course be made by Mr Du and Mr Gubbay, although I recognise, as I have noted above, that neither Birketu nor Illyria has appeared today and that there would be some complexities in determining the significance of such an offer in their absence. Any further question of a deferral of the hearing date by reference to those matters can be addressed on the basis of specific evidence dealing with what Mr Du and Mr Gubbay propose to lead by way of evidence as to those matters.

17. For these reasons, while recognising the difficulty of the position and the legitimacy of the concerns raised by Mr Du and Mr Gubbay as to the impact on their personal positions of maintaining the hearing date, and recognising also that a successful application by the deed administrators will be adverse to their personal interests, I am not satisfied that I should defer the hearing date. It seems to me that the preferable course is now to confirm the hearing date, on the basis that the matter will take one day or more, for 31 October 2017, but reserve the ability of Mr Du and Mr Gubbay to bring a further application for a deferral of the hearing date, on the basis of evidence of the work they have done and the work that remains to be done at that time.

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Decision last updated: 17 April 2018