Re Derwent Howard Media Pty Ltd
[2011] NSWSC 1164
•28 September 2011
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Derwent Howard Media Pty Limited [2011] NSWSC 1164 Hearing dates: 28 September 2011 Decision date: 28 September 2011 Jurisdiction: Equity Division - Corporations List Before: Barrett J Decision: Deed of company arrangement varied
Catchwords: CORPORATIONS - deed of company arrangement - power of court to vary - whether power should be exercised Legislation Cited: Corporations Act (Cth) 2001, ss 445A, 447A, 556(1) Cases Cited: Brandrill Pty Ltd v Newmont Yandal Operations Pty Ltd [2006] NSWSC 974; (2006) 24 ACLC 1179
Mulvaney v Rob Wintulich Pty Ltd (1995) 18 ACSR 384
Re Paradox Digital Pty Ltd; Ex parte Smith [2001] WASC 182
Re Pasminco Ltd [2003] FCA 265; (2003) 45 ACSR 1Category: Principal judgment Parties: Christopher Damien Darin and Nicholas Craig Malanos as Deed Administrators of Derwent Howard Media Pty Limited - Plaintiffs Representation: Mr M G Doble
Eakin McCaffery Cox - Plaintiffs
File Number(s): 2011/00311174
Judgment
These are my reasons for having made the following order today pursuant to s 447A of the Corporations Act 2001 (Cth):
"Order pursuant to s 447A of the Corporations Act 2011 (Cth) that Part 5.3A of that Act is to have effect in relation to Derwent Howard Media Pty Limited as if the date first mentioned in clause 5.3 of the Deed of Company Arrangement dated 15 December 2009 affecting the said Derwent Howard Media Pty Limited were 30 December 2011."
The deed of company arrangement of Derwent Media dated 15 October 2009 created machinery for the creation and distribution of a deed fund. A company called Media Factory was to provide an amount sufficient to pay certain costs, expenses and remuneration and all admitted claims of "priority creditors" (being creditors whose claims would have enjoyed priority over all other unsecured claims in a winding up), plus a sum of $160,000. This was to be the main component of the deed fund and that fund was to be applied in a manner corresponding with that which would have applied in a winding up.
The aim, clearly enough, was to see the relevant costs, expenses and remuneration and the admitted claims of "priority creditors" met in full with the aid of the Media Factory contribution and for other creditors to share in the remaining $160,000 of that contribution plus anything else in the deed fund.
The deed of company arrangement required the Media Factory contribution to be paid as to $50,000 by 30 June 2010, as to a further $40,000 by 30 September 2010 and as to the balance as determined by the deed administrators, but subject to an end date of 12 January 2011.
Certain payments were made but when it became clear towards the end of 2010 that it would not be practicable to quantify by 12 January 2011 the element of the Media Factory contribution related to priority creditor claims, a meeting of creditors resolved to vary the deed so that 30 September 2011 was substituted as the deadline for the payment of that contribution into the fund. The deed was in that amended state when the deed administrators approached the court this morning - that is, on the morning of the day immediately before the revised deadline.
The deed administrators sought an order of the court varying the end date by extending it to 30 December 2011. The affidavit of Mr Darin, one of the deed administrators, explained continuing difficulties that had been encountered in quantifying the element of the Media Factory contribution related to priority creditor claims.
First, an employee with a claim which, in a winding up, would have enjoyed priority under s 556(1)(e), had lodged a proof in the sum of $122,019.95 and, when the proof was rejected, had appealed to the Federal Court in June 2010. Orders were made in the Federal Court as recently as 1 September 2011. As a result of those orders, the claim was admitted in the sum of $21,982.36 but certain costs remain unquantified.
Second, the deed administrators have not received from the Australian Taxation Office a proof of debt in respect of superannuation amounts enjoying priority under s 556(1).
The deed administrators have reason to think that, in the light of the Federal Court proceedings and, in particular, the expenses they entailed, Media Factory may wish to put before creditors for their consideration some proposed alterations of the substantive terms of the deed of company arrangement.
The deed administrators apprehend that, if 30 September 2011 passes without the presently unquantifiable balance of the Media Factory contribution having been paid over, the deed may be terminated to the detriment of creditors whose claims have not been the subject of any dividend; and that this will be in circumstances where, with some additional time, a more satisfactory outcome for creditors could be achieved.
Ordinarily, any variation of a deed of company arrangement should be by resolution of creditors under s 445A. But it is, I think, sufficiently established that the court's power under s 447A enables it, in an appropriate case, to vary a deed of company arrangement or, more accurately, to cause Part 5.3A to operate in relation to the subject company as if some provision of the deed were varied: see, for example, Mulvaney v Rob Wintulich Pty Ltd (1995) 18 ACSR 384; Re Pasminco Ltd [2003] FCA 265; (2003) 45 ACSR 1; Brandrill Pty Ltd v Newmont Yandal Operations Pty Ltd [2006] NSWSC 974; (2006) 24 ACLC 1179.
Generally speaking, however, the court should be reluctant to exercise this power (and thereby to deprive creditors of their role under s 445A) except in circumstances that are uncontentious, in the sense that no prejudice to creditors is involved: Re Paradox Digital Pty Ltd; Ex parte Smith [2001] WASC 182. That is the position here. Deferral of the 30 September 2011 deadline will avoid the possibility of untoward termination of the arrangement and preserve the basis of participation by creditors envisaged by the deed, as well as allowing time within which any proposal for substantive variation can be placed before creditors for consideration.
It is of particular relevance that the creditor who initiated the Federal Court proceedings has consented to the extension of time. There is no reason to think that that creditor's interests differ from those of other creditors or that what is acceptable to him would not be acceptable to others.
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Decision last updated: 29 September 2011
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