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

[2017] NSWSC 1323

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 1323
Hearing dates:	27 September 2017
Decision date:	27 September 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Court makes the directions at [11].
Catchwords:	CORPORATIONS — Voluntary administration — Deed of company arrangement – Application under s 444GA of the Corporations Act 2001 (Cth) for leave to transfer shares pursuant to deed – directions as to conduct of application.
Legislation Cited:	- Corporations Act 2001 (Cth), Pt 5.3A, s 444GA - 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)
Representation:	Counsel: T Wong (Plaintiffs)   Solicitors: Baker McKenzie (Plaintiffs)
File Number(s):	2017/290027

Judgment- ex tempore (revised 27 september 2017)

1. By application filed on 25 September 2017 the Plaintiffs, Mr Korda and others as joint and several deed administrators of Ten Network Holdings Limited (subject to deed of company arrangement) (recs and mgrs appd) (“Holdings”) and of several other companies apply, under s 444GA of the Corporations Act 2001 (Cth), for leave to transfer all of the existing shares of Holdings to CBS International Television Australia Pty Ltd or its nominees.

2. The matter was listed today for directions. Notice of the listing has been given at least to some shareholders of Holdings who have previously expressed, or might be inferred to have, an interest in the directions to be made today. Notice has been not yet been given to all shareholders of the application, which is a matter that will be addressed in the directions which will be made below. One shareholder, Mr Du, has appeared today and has made submissions as to the directions which should be made, to which I will refer below. Mr Du has foreshadowed that he will oppose the deed administrators’ application, possibly in conjunction with other shareholders. I will grant leave to Mr Du to appear for today only under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). I do not grant wider leave because Mr Du has indicated he wishes to defer a choice whether to be heard under that rule, or to seek to be joined as a party to the proceedings, although the latter choice may expose him to costs consequences which would not likely arise under r 2.13 of the Supreme Court (Corporations) Rules.

3. Notice of the directions hearing today has also been given to the solicitors acting for Birketu Pty Ltd (“Birketu”) and for Illyria Nominees Television Pty Ltd as trustee for the Illyria Investment Trust No 4 (“Illyria”) which are substantial shareholders in Holdings. There has been an exchange of correspondence between the deed administrators’ solicitors and those solicitors in respect of the application, and those solicitors had expressed reservations as to the orders to progress the matter that were initially proposed by the deed administrators, which have been amended in the course of their submissions today. The solicitors acting for Birketu proposed that the matter be brought back to the Court for further directions as to timetable after the deed administrators have released the independent expert’s report on which they will rely, and also identified the possibility that shareholders would need some time to lead expert evidence after publication of that report if they wish to oppose the application. The solicitors for Birketu also foreshadowed questions of access to information, which can be deferred and dealt with if and when the need arises. The solicitors for Illyria indicated that their client wishes to have an opportunity to review the independent expert’s report on which the deed administrators rely before determining whether to appear in the proceedings.

4. Ms Wong, who appears for the deed administrators, proposes directions that will tentatively set a hearing date of the matter for up to three days commencing on 31 October 2017. That is, perhaps, an ambitious timetable, although it would likely be achievable if the application is unopposed, or is opposed in only a narrow scope, or the scope of any opposition (such as that foreshadowed by Mr Du) raises matters of principle rather than questions of expert evidence. That timetable may ultimately need to be revisited if a full contest arises as to matters addressed in the independent expert's report on which the deed administrators rely. Whether that is the case will become apparent in due course. As often occurs in applications of this kind, it may ultimately be necessary for the Court to engage in a balancing exercise, recognising both the commercial urgencies of the application, where a company is insolvent or near insolvency and subject to a deed of company arrangement, and the need for parties to be given a fair opportunity to be heard.

5. The directions proposed by the deed administrators provide for service of evidence on the Australian Securities and Investments Commission, as is appropriate in an application of this kind, and note that the deed administrators intend to make the independent expert's report available to shareholders and the market, which would allow shareholders to make an assessment as to whether they wish to be heard in opposition to the application. The proposed directions provide for interested persons to serve a Notice of Appearance, and then for further directions at which a timetable for further evidence would be set, and the hearing date tentatively listed from 31 October 2017 would be confirmed.

6. Mr Du has indicated opposition to those directions on two bases. First, he submits that the tentative hearing dates proposed by Ms Wong would be too early for shareholders to prepare for a hearing. As I have noted above, that may depend upon the scope of any opposition to the application and any evidence that is to be led, which will emerge after shareholders have had an opportunity to review the independent expert's report that is to be released by the deed administrators. It seems to me preferable to set a tentative hearing date at this stage, and to defer that date if it is ultimately necessary to do so, rather than to delay a hearing where the scope of any opposition to the application remains an open question.

7. Mr Du has also foreshadowed a possibly different focus to his opposition to the application from that which is to be addressed by the independent expert's report on which the deed administrator will rely, which will likely address the value of equity in Holdings. Mr Du referred to a suggested unfairness in the voluntary administration regime under Pt 5.3A of the Corporations Act and its result for shareholders. Section 444GA of the Corporations Act, on which the deed administrators rely, provides that the Court may make an order granting leave for an administrator to transfer shares in a company, if it is satisfied that the transfer would not unfairly prejudice the interests of members of the company. That section has been considered in several cases which identify the relevant principles applied in such an application, and provide background to the likely focus on the question of the value of the equity in Holdings in the independent expert's report.

8. Mr Du also submitted that the period of three days for interested persons to file a Notice of Appearance indicating the grounds of opposition to any application, after the independent expert's report was made available by 10 October 2017, was insufficient. I proceed on the basis that applications of this kind are, of necessity, typically brought in respect of companies that face challenges as to solvency, and possibility additional business challenges of the kind to which Ms Wong has referred. It seems to me that both shareholders and the deed administrators may fairly be required to operate under somewhat abbreviated timetables in those circumstances. That is the consequence of the need for a balancing of the time required to take steps in the proceedings and any commercial urgency of the application.

9. I recognise that an independent expert's report may be relatively complex and it may take some time for shareholders and those advising them fully to assess that report. However, it seems to me that those shareholders who may potentially oppose the application will be able to undertake at least some steps between now and the release of an independent expert's report, including informing themselves of the principles relevant to such an application and the contents of the administrators’ report to creditors, which will assist them in forming a view as to whether to oppose the application. I expect that such shareholders can then, within that three day period, and having regard to the independent expert’s report, reach a decision whether they wish to oppose the application. The filing of a Notice of Appearance also does not commit a shareholder to continue with his or her opposition, but simply gives notice to the Court and other parties of that person's then intent to oppose the application. It also seems to me that it would not take long for shareholders in Holdings to formulate grounds of opposition, whether, for example, on the basis that the shares in Holdings have continued equity value or that there are discretionary matters that are contrary to the grant of leave, after reviewing the independent expert's report. The filing of a Notice of Appearance specifying such grounds also does not prevent the later amendment of those grounds, if further grounds are developed or grounds originally identified are not pressed.

10. I am satisfied that three business days is sufficient for the filing of Notices of Appearance and grounds of opposition, in the relevant circumstances, and I have no doubt that those shareholders who wish to oppose the application will have little practical difficulty in forming their views and identifying grounds of opposition within that time. It seems to me, notwithstanding the matters that Mr Du has foreshadowed may be raised in opposition to the application, that directions which will allocate a tentative hearing date, and provide for the independent expert's report to be made available to shareholders, provide a proper basis upon which to proceed, and leave open the opportunity to adjust the timetable as necessary to accommodate the competing interests.

11. I make the following directions:

1. The Plaintiffs' application for relief, pursuant to s444GA of the Corporations Act, 2001 (Cth) be tentatively listed for hearing before a judge to be allocated by the Corporations Judge commencing at 10am on 31 October, 2017, for an estimate up to three days.

2.    The Plaintiffs file and serve on the Australian Securities and Investment Commission their evidence by 4 pm on 10 October, 2017.

3.    Note that the Plaintiffs propose to make available an independent expert's report to shareholders in Ten Network Holdings Ltd (subject to deed of company arrangement) (receivers and managers appointed) and the market by no later than 10 October, 2017, and to notify those shareholders of the directions date, tentative hearing date, and the availability of an explanatory statement and the independent expert's report.

4.    Any interested person wishing to appear at the hearing of the s444G application is to file and serve on the Plaintiffs and the Australian Securities and Investments Commission a Notice of Appearance in the prescribed form and indicating the grounds of opposition by 4 pm on 13 October, 2017.

5.    The matter is listed for further directions at 9.15am on 16 October, 2017, including for any further directions as to timetable and confirmation of the hearing date.

6.    Liberty to apply on two business days' notice specifying the relief sought.

7. Leave for Mr Du to appear under r 2.13 of the Supreme Court (Corporations) Rules for today only.

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Decision last updated: 29 September 2017