FEDERAL COURT OF AUSTRALIA Campbell-Wilson (administrator), in the matter of Ceres Agricultural Company Pty Ltd (Subject to Deed of Company Arrangement) [2020] FCA 4 File number: NSD 580 of 2019 Judge: GRIFFITHS J Date of judgment: 3 January 2020 Catchwords: CORPORATIONS – application by administrators of a company subject to a deed of company arrangement (DOCA) to extend the "Condition Precedent Satisfaction Date" in the DOCA – time extended Legislation: Corporations Act 2001 (Cth) ss 435A, 439A, 445A and 447A Cases cited: Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2018] FCA 1003 Silvia, in the matter of FEA Plantations Ltd (Administrators Appointed) [2013] FCA 469 Date of hearing: 3 January 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 25 Solicitor for the Plaintiffs: H Collins of Baker McKenzie ORDERS NSD 580 of 2019 IN THE MATTER OF CERES AGRICULTURAL COMPANY PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 155 816 416 BETWEEN: PHILIP CAMPBELL-WILSON AND SAID JAHANI IN THEIR CAPACITIES AS VOLUNTARY ADMINISTRATORS OF CERES AGRICULTURAL COMPANY PTY LTD (ADMINISTRATORS APPOINTED) (ACN 155 816 416) Plaintiffs JUDGE: GRIFFITHS J DATE OF ORDER: 3 JANUARY 2020 THE COURT ORDERS THAT: 1. The interlocutory application dated 2 January 2020 be returnable instanter. 2. Further to the Court's orders dated 6 and 16 December 2019, pursuant to s 447A of the Corporations Act 2001 (Cth) the definition of "Condition Precedent Satisfaction Date" in the Deed of Company Arrangement (as amended by the Court's orders dated 6 and 16 December 2019) (DOCA) be varied so as to read "28 January 2020". 3. The plaintiffs' costs of this application be paid as a cost of the DOCA administration of the Company. 4. Liberty to apply by any party adversely affected by the above orders on the giving of 24 hours' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) GRIFFITHS J: 1 The substantive proceedings in this matter were commenced on 16 April 2019. Orders were then sought under ss 439A and 447A of the Corporations Act 2001 (Cth) (Act) relating to extending time for the holding of meetings of creditors and other related matters. On 28 March 2019, Philip Campbell-Wilson and Said Jahani were appointed joint and several voluntary administrators of the company, Ceres Agricultural Company Pty Ltd, pursuant to Part 5.3A of the Act. Orders were made on 18 April 2019 by Markovic J. 2 On 6 November 2019, the administrators, the company Pajiti Pty Limited, who is the deed proponent, and Duxton Asset Management Pte Ltd (DAM) executed a deed of company arrangement (DOCA). Clause 2.2 of the DOCA states: "The operation of this Deed (excluding the matters the subject of this clause 2, but always including the obligation of the DOCA Proponent to pay or cause to pay the DOCA Contribution), is subject to and conditional on all of the following events taking place by the Condition Precedent Satisfaction Date (together, being the Condition Precedent): "(a) the Deed Administrators providing the DOCA Proponent with a settled list of Admitted Claims to the satisfaction of the DOCA Proponent (acting reasonably) (Agreed List); and (b) DAM, as representative of and on behalf of each of the Duxton Mandates providing the Deed Administrators with written confirmation that each of the Duxton Mandates consent to this Deed becoming effective. For the avoidance of doubt, the Duxton Mandates may give or withhold such consent in their absolute discretion." 3 Clause 1.1 of the DOCA contains two relevant definitions: Commencement Date means the date that this Deed is executed by the Company, the Administrators, the DOCA Proponent and DAM. Condition Precedent Satisfaction Date is the date that is 30 days after the Commencement Date. 4 As noted, the DOCA was executed on 6 November 2019 with the consequence that the commencement date of that document is 6 November 2019. And initially at least, the Condition Precedent Satisfaction Date was 6 December 2019. By clause 2.6 of the DOCA, if the conditions precedent in clause 2.2 are not satisfied by the Condition Precedent Satisfaction Date, the DOCA will automatically terminate and the company will proceed into a creditors' voluntary liquidation. The plaintiffs initially obtained an extension of time in terms of the Condition Precedent Satisfaction Date on 6 December 2019. 5 They then made a further application before Farrell J on 16 December 2019 in which they sought another extension of that date. I understand that on that occasion, although the date was extended, her Honour expressed some concern about the necessity for there to be an explanation provided to the Court for the relevant delay. 6 A further interlocutory application was filed in the Court yesterday seeking another variation in the Condition Precedent Satisfaction Date such that it would now read 28 January 2020 and not 3 January 2020, which is the date which was the subject of the orders made by Farrell J on 16 December 2019. 7 The matter, which has some urgency about it because the current Condition Precedent Satisfaction Date is today, was heard by me this morning as Duty Judge. The plaintiffs rely upon five affidavits in support of their application. They comprise three affidavits sworn by David James Walter on 6 December 2019, 16 December 2019 and 3 January 2020. They also rely upon an affidavit of Ryan Evan Doherty sworn 2 January 2020 and an affidavit of Anna Maree Ryan sworn 2 January 2020. 8 Section 447A of the Act provides as follows: 447A General power to make orders (1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is insolvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. (3) An order may be made subject to conditions. (4) An order may be made on the application of: (a) the company; or (b) a creditor of the company; or (c) in the case of a company under administration—the administrator of the company; or (d) in the case of a company that has executed a deed of company arrangement—the deed's administrator; or (e) ASIC; or (f) any other interested person. 9 The Act also gives creditors the power to vary a deed of company arrangement as is reflected in s 445A of the Act, which is as follows: 445A Variation of deed by creditors A deed of company arrangement may be varied by a resolution passed at a meeting of the company's creditors, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting. 10 Finally, it is also relevant to note the stated object of Part 5.3A of the Act, which is set out in s 435A in the following terms: Object of Part The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is no possible for the company or its business to continue in existence—results in a better return for the company's creditors and members than would result from an immediate winding up of the company. Note: Schedule 2 contains additional rules about companies under external administration. 11 Many of the relevant principles guiding the exercise of the Court's broad discretionary power under s 447A are helpfully summarised by Besanko J in Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2018] FCA 1003 and which has been helpfully brought to the Court's attention by Ms Collins, who appears today for the plaintiffs. The relevant principles to which I refer are set out primarily in [11]-[15] of Besanko J's decision. I have taken those principles into account in respect of the current application. 12 Although each case necessarily turns on its own particular facts and circumstances, I am also guided by Kenny J's informative statement of the relevant factors which arose in Silvia, in the matter of FEA Plantations Ltd (Administrators Appointed) [2013] FCA 469 – and I refer in particular to [16]-[17] of her Honour's reasons for judgment. The issue in Silvia was whether the termination dates in two deeds of company arrangement should be extended by way of an order under s 447A rather than return the issue to creditors for a further resolution under s 445A. 13 The relevant factors which Kenny J relied upon in granting the variation which was sought in Silvia (as summarised by Besanko J in Adelaide Brighton Cement at [14]) were as follows: (1) It would be difficult to convene a meeting of creditors prior to the existing termination dates in the deeds. (2) It was likely that the relevant companies would enter into liquidation if the dates were not extended, which would, in turn, be detrimental to the creditors. (3) It would be costly to convene a creditors' meeting prior to the existing termination date in the deeds. (4) It would be a simple variation. (5) A number of creditors' meetings within a short space of time may be confusing to the creditors, and may also inconvenience them by requiring the creditors to travel to Tasmania twice within 22 days if they chose to attend the meeting. (6) The variation would not adversely affect the interests of the creditors and would instead be in their interests because it will allow time for negotiations between the deed administrators and the relevant banks to be finalised. (7) The variation was supported by a number of the creditors. (8) The receivers, as well as the relevant banks, all indicated that they knew of and did not oppose the variation. 14 The eight factors identified by Kenny J all favoured the Court exercising its discretion under s 447A to vary the relevant date. And Kenny J said at [17] of her Honour's reasons for judgment that there did not appear to be any significant countervailing factors. 15 Having regard to the affidavits referred to above which have been filed by the plaintiffs in support of their application, I consider that they provide an evidentiary basis for the following findings. 16 During the period 16 December 2019 to 2 January 2020, the deed proponent and the DAM parties have been negotiating with a view to achieving satisfaction of the condition precedent specified in clause 2.2(b) of the DOCA. Although previously there was a degree of confidence that the matter could have been finalised by now, that has not occurred for reasons that are explained in the affidavits. It appears that the relevant parties now consider that they are close to reaching an agreement but that it may take some time for that agreement to be formally documented. 17 I am told that on 2 January 2020 there was a meeting of the members of the committee of inspection in relation to the making of this further interlocutory application. It is evident that those who participated in that meeting favoured the course of action which has now been taken. It is also evident that there was one person, a Mr Josh McGregor from the McGregor Gourlay Group, who had been invited to participate in the committee meeting but due to some misunderstanding about the time difference between New South Wales and Queensland times at this point of the year, Mr McGregor did not formally participate in the meeting. Shortly after the meeting concluded, he sent an email to the chairman, Mr Philip Campbell-Wilson, in which he apologised for not participating because he was in Queensland and got his times mixed up. In his email, Mr McGregor said: Can you please record that my vote was "no" for the extension. I've lost count of how many times this process has had to be extended because the parties who are in the wrong can't get their act together and it has long past been a farce. If further extensions are required you can record my vote as a "no" for each one. 18 Ms Collins was unable on the basis of her current instructions to be more specific about the nature of Mr McGregor's interest in the matter other than to state that he obviously is a creditor. I have taken his views into account but do not consider that they are determinative although I understand his expression of frustration. In my view, however, that is insufficient reason of itself not to make the orders which are sought. Westpac, which is the holder of a general security agreement over the assets of the company, has, I am told, been notified of this further interlocutory application and I am further told that to date no response has been provided to the plaintiffs by Westpac. 19 I am satisfied that appropriate steps have been taken to notify creditors of the terms of the Court's orders dated 6 December 2019 and 16 December 2019 and also that they have been appropriately notified of the making of this further interlocutory application. The administrators believe that the DOCA should not be allowed automatically to terminate and although they acknowledge that a further extension of time will further delay the provision of funds, which was originally expected to occur within 30 days of the execution of the DOCA, they do not consider that the further delay departs significantly from the proposal which has been agreed to by the creditors in the DOCA. 20 In his most recent affidavit, Mr Walter deposes that Mr Campbell-Wilson has informed him that the deed administrators are of the view that it is in the best interests of creditors of the company that the DOCA not be allowed to terminate today and that he believes that it is in the best interests of creditors of the company that the time for satisfying the condition precedent be extended to 28 January 2020. I have taken into account the explanations provided in the affidavits of Mr Doherty and Ms Ryan respectively as to the attempts that have been made to finalise this matter by 3 January 2020. 21 Mr Doherty has deposed that the parties were close to finalising the terms of the relevant transaction documents but that the structure of the transaction as contemplated initially required approval from one of the Duxton mandates, an entity called Stichting Pensioenfonds ABP (ABP), and that ABP had not given its approval. Mr Doherty has also said that the parties are located in multiple locations around the world and in different time zones, which has made the negotiations difficult, particularly having regard to the Christmas and New Year period in which the negotiations have occurred. He deposes and I accept that this has made the process of engaging with relevant decision-makers more difficult. I also note and accept Mr Doherty's evidence that the parties and their advisors have continued to work and negotiate over the holiday period with a view to attempting to finalise the transaction. 22 As I have already noted, although agreement on the commercial terms of the transaction appears close, a revised structure for the transaction has been proposed which it is hoped can be approved by all parties, including ABP. Mr Doherty has also given evidence that DAM and the other Duxton mandates have indicated their position as excluded creditors under the DOCA and their right to give or withhold consent to the DOCA becoming effective in their absolute discretion but that those parties have instructed him that they will not waive the condition precedent in clause 2.2(b) of the DOCA as that condition precedent is intended to ensure that the position of the Duxton mandates is satisfactorily addressed concurrently with the positions of relevant creditors being addressed under the DOCA and that its waiver would prejudice that outcome. 23 I have also taken into account the contents of Ms Ryan's affidavit. Ms Ryan acts for the deed proponent, and she substantially confirms the evidence given in the other affidavits as to the steps which the parties have taken up until this time with a view to trying to finalise the matter. I note in particular that Ms Ryan expresses agreement with Mr Doherty's view that negotiation of the transaction documents is well advanced and that it is not envisaged that the existing draft transaction documents will require significant negotiation or re-drafting. And I note that she is of the view that a satisfactory resolution of the outstanding issues can be achieved before 28 January 2020. 24 Ms Ryan deposes and I accept that the deed proponent has indicated to her that it supports the relief sought in the current interlocutory process and that the deed proponent has also stated that it will be in a position to confirm whether the condition precedent set out in clause 2.2(a) of the DOCA is either satisfied or waived before 28 January 2020. 25 For these reasons, and taking into account the contents of the five affidavits together with the submissions helpfully made by Ms Collins this morning, I consider that it is appropriate for the Court to exercise its discretion under s 447A of the Act to vary the DOCA as sought in the interlocutory application filed yesterday. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths. Associate: Dated: 7 January 2020