FEDERAL COURT OF AUSTRALIA Cathro, in the matter of Australian Hotel Acquisition Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 113 961 194 (No 3) [2010] FCA 938 Citation: Cathro, in the matter of Australian Hotel Acquisition Pty Ltd (Receivers and Managers Appointed) (In Liquidation) ACN 113 961 194 (No 3) [2010] FCA 938 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(s): NSD 313 of 2010 Judge: EMMETT J Date of judgment: 22 July 2010 Legislation: Corporations Act 2001 (Cth) ss 477, 477(20(b) Real Property Act 1900 (NSW) s 74J Date of hearing: 22 July 2010 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 9 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 Plaintiffs JUDGE: EMMETT J DATE OF ORDER: 22 july 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1) Access to the documents comprising Confidential Exhibit B be restricted to the applicants and their legal advisors until completion of the agreements contained in Confidential Exhibit B. 2) Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), that the following is approved, namely entry by the applicants in their respective capacities as joint and several liquidators of a) Ce'Nedra Pty Limited (receivers and managers appointed) (in liquidation) ACN 003 970 885 (Ce'Nedra); and b) HPI Parramatta Pty Limited (receivers and managers appointed) (in liquidation) ACN 003 628 340 (HPIP) on behalf of the above companies into a deed entitled "Business Sale Deed" and a contract entitled "Contract for the Sale of Land", which are in the form of or substantially to the effect of the agreements behind tabs 1, 2 and 3 of Confidential Exhibit B, save that the purchase price in the Contract for the Sale of Land will be greater than that which is shown on the face of the standard form section of that contract in Confidential Exhibit B. 3) The applicants' costs in seeking these orders be costs in the winding up of HPIP and Ce'Nedra. 4) The applicants be granted liberty to apply. 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 Plaintiffs JUDGE: EMMETT J DATE: 22 july 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application for approval under s 477(2B) of the Corporations Act 2001 (Cth) (the Corporations Act). The applicants are the liquidators of HPI Parramatta Pty Limited (HPIP) and Ce'Nedra Pty Limited (Ce'Nedra). The Court has previously made orders under s 477(2B) in relation to transactions entered into by the liquidators in connection with the liquidation of those two companies. 2 HPIP is the owner of land at Parramatta on which the Courtyard Hotel is erected. Ce'Nedra, under a lease from HPIP, occupies the Courtyard Hotel and conducts a hotel business on the property. The liquidators have been negotiating for the sale of the land and the business and proposed to enter into agreements with prospective purchasers in the very near future. 3 However, it is possible, under the terms of the proposed agreements, that certain obligations that arise under the agreements may be performed more than three months after the agreements are entered into. It is for this reason that an application for approval under s 477(2B) of the Corporations Act has been made. The two agreements in question are proposed under a business sale deed (the Deed). Ce'Nedra proposes to sell the hotel business known as "the Courtyard by Marriott Parramatta", carried on at the land owned by HPIP and, HPIP proposes to sell the land. The purchasers are related, but are different. In each case, a guarantee will be given by Aust & NZ International Investment Group Pty Ltd (ABN 96 114 597 867). 4 In order to explain how the provisions of s 477 are triggered, it is necessary to say something about the Deed, and the contract for the sale of the land (the Contract). The pivotal clause of the Deed is clause 4, which provides that Ce'Nedra agrees to sell the assets used by it in the Courtyard Hotel business, together with that business, and the purchaser agrees to buy the business and assets for a purchase price specified in the Deed. The actual price is, at this stage, confidential. The Deed is conditional upon and will not proceed unless certain conditions have been met at, or prior to, completion. The conditions include HPIP providing its consent to an assignment of the lease of the Courtyard Hotel to the prospective purchaser. The conditions precedent also include the removal of a caveat that has been lodged in respect of the land owned by HPIP. I shall say something more about that shortly. Clause 8 provides that completion is to take place on the later of either 60 days from the date of the deed, or 10 business days after the satisfaction or waiver of the last of the conditions precedent. 5 The concern in relation to s 477 arises out of clause 11 of the Deed. Clause 11.1(a) provides that within 30 business days after the calendar month in which completion occurs, the purchaser must prepare and deliver to Ce'Nedra its calculation of the net operating assets, as defined as at the completion date. Within 10 business days after the purchaser gives the final adjustment calculation, or on the date on which Ce'Nedra and the purchaser have agreed to resolve any dispute in relation to the final adjustment calculation, appropriate adjustment payments are to be made between Ce'Nedra and the purchaser as set out in the Deed. Therefore, it is possible that the final adjustments may be made more than three months after the date of the Deed. 6 The completion of the Deed is to be interdependent with completion of the Contract. The price to be paid for the land has been the subject of recent negotiation, and the proposed purchaser has agreed to pay a higher price than was originally specified in a draft of the Contract. It is that renegotiation that has given rise to a dispute with another prospective buyer. The other buyer, through its solicitors, wrote to the liquidators asserting that, as a result of discussions and communications between the other prospective buyer and the liquidators, there exists a binding agreement pursuant to which the liquidators are obliged to sell the land and the hotel business to the other buyer. 7 The other buyer also contends that, if there is no binding agreement, the liquidators are estopped from denying that they are bound to proceed to execute formal documents giving effect to agreed essential terms. On the basis of those assertions, a caveat has been lodged preventing any dealing with the land by HPIP. The liquidators, on the other hand, have served a lapsing notice under s 74J of the Real Property Act 1900 (NSW). The caveat will lapse within 21 days after 19 July 2010, when the lapsing notice was served. There is insufficient material before me to form a view as to whether or not there is any substance in the claim made by the caveator. In any event, as I have indicated, the completion of the Deed and the Contract are conditional upon removal of the caveat. 8 The liquidators have formed the opinion that it is in the interests of the creditors of HPIP and Ce'Nedra that the Deed and the Contract be entered into. The proposed purchasers have offered the highest price for the assets out of a number of offers submitted by various parties. The proposal will therefore provide the best possible return to creditors. The liquidators are satisfied that the guarantor is financially sound, and the deposit contemplated by the Deed in the Contract has been received by the liquidators. Having regard to the provisions to which I have referred, it is clearly possible, although it may well be unlikely, that the conditions precedent will remain unsatisfied for a period that would lead to completion occurring and the adjustment being made more than three months after the agreements are entered into. 9 Nevertheless, in all of the circumstances I am satisfied that approval under s 477(2)(b) should be given for the liquidators to enter into the Deed, and the Contract, in the form contained in Exhibit B, subject to the adjustment upwards of the purchase price for the land, and provided that the forms actually executed are substantially to the effect of the documents contained in Exhibit B. At this stage, the terms of the Deed in the Contract are commercially sensitive, and, in the circumstances, I consider that it is appropriate to accede to the liquidators' request that access to Exhibit B be limited to the liquidators and their legal advisers. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 30 August 2010