New South Wales Supreme Court CITATION : Fexuto Pty Ltd v Lombe & Yates in their capacity as administrators of Bosnjak Holdings Pty Ltd & 31 Ors [2006] NSWSC 1429 HEARING DATE(S) : 13/12/06 JUDGMENT DATE : 13 December 2006 JURISDICTION : Equity Division Corporations List JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 12/13/2006 DECISION : See paras [17]-[18] of judgment. CATCHWORDS : Variation of Interlocutory Injunctions - No question of principle. LEGISLATION CITED : Corporations Act 2001 (Cth) Fexuto Pty Ltd PARTIES : v David John Frank Lombe & Peter George Yates in their capacity as administrators of Bosnjak Holdings Pty Ltd & 31 Ors FILE NUMBER(S) : SC 5623/05 Plaintiff: R J Ellicott QC, V F Kerr (mentioned for 25th-27th Defendants) COUNSEL : 1st, 3rd-15th Defendants: F Gleeson SC & R S Hollo 2nd, 18th-24th, 28th-32nd Defendants: P M Wood & S Nixon 16th & 17th Defendants: R A Dick Plaintiff: Piper Alderman SOLICITORS : 1st, 3rd-15th Defendants: Minter Ellison 2nd, 18th-24th, 28th-32nd Defendants: Blake Dawson Waldron 16th & 17th Defendants: Tresscox Lawyers IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Wednesday, 13 December 2006 5623/05 Fexuto Pty Ltd v David John Frank Lombe & Peter George Yates in their capacity as administrators of Bosnjak Holdings Pty Ltd & 31 Ors JUDGMENT - re application to vary orders. 1 HIS HONOUR: There are presently two applications before me. The first is an application by the second defendant, National Bus Co Pty Limited, ("NBC"), to vary orders made on 14 December 2005 and confirmed on 30 August 2006. The second is an application by the first defendants for directions as to whether they would be justified in consenting to the proposed variation of those orders, or otherwise as to how they should act in relation to the present issue. 2 On 14 December 2005, Gzell J made orders by consent. Those orders have been accurately described by the solicitors for the administrators as orders prescribing a regime enabling interim distributions to be made pursuant to the deed of company arrangement governing the affairs of the third defendant, Bosnjak Holdings Pty Limited, to be paid to NBC, on the basis of undertakings given by the plaintiff, Fexuto Pty Limited ("Fexuto"). 3 By the orders, the Court noted that Fexuto by its counsel gave the usual undertaking as to damages. The court ordered that NBC pay moneys received from the administrators in respect of certain proofs of debt into an interest-bearing account, and not transfer such moneys or otherwise deal with them except so far as may be necessary to satisfy any Australian tax liabilities in respect of interest earned thereon. 4 Those orders were amended on 30 August 2006 so as to ensure that the administrators could pay further dividends in respect of proofs of debt lodged. Payments have been made by the administrators to the account established pursuant to the orders of 14 December 2005, in amounts totalling $72,571,428.57. Interest has accrued on that sum such that the amount presently held in the account exceeds $75 million. 5 When the orders of 14 December 2005 were made, it was anticipated that the present proceedings should be able to be heard this year. The claims then made, or anticipated, related at least primarily to a challenge by Fexuto to NBC's proof of debt. Other claims which were made then, or very shortly thereafter, related to a certain deed of cross-guarantee, and included a challenge to the deed of company arrangement. 6 The proceedings were fixed for hearing before Campbell J this year. His Honour allowed Fexuto to amend its statement of claim. The amendments are extensive. They include allegations of oppressive conduct and breaches of directors' duties by a large number of defendants. As a result of the amendments, it is not now anticipated that the proceedings will be ready for hearing until the end of next year at the earliest. 7 Two parties have been identified as persons who may be prejudiced by the discharge of the existing injunctions in relation to NBC's dealings with moneys paid by the administrators to it from the deed of funds. Those parties whose interests may potentially be prejudiced are identified as Fexuto Pty Limited and Bosnjak Group Pty Limited. The latter company is presently deadlocked, but those standing behind it are represented on both sides of the record. 8 Fexuto does not oppose NBC's application. It seeks to be released from its undertaking as to damages. No submissions have been made in relation to the present application by Bosnjak Group Pty Limited, although it has been served with notice of the application. Those standing behind Bosnjak Group are aware of the application, and either consent to it or do not oppose it. 9 The ultimate holding company of NBC, namely the eighteenth defendant, National Express Group PLC, has proffered a guarantee of the undertaking given by NBC on 14 December 2005 that it will repay to the first defendants, (that is, the administrators), or to Bosnjak Holdings Pty Limited, or as the Court may direct, the moneys paid to it by the administrators and any net income therefrom up to 13 December 2006, to the extent necessary to satisfy or comply with any final order in the proceedings. It is not proposed that that undertaking be discharged. 10 The interim results for National Express Group PLC for the six months to 30 June 2006, together with its chairman's and other executives' statements in review of its operations, were tendered on the present application. Its balance sheet discloses net assets of ₤273,600,000. Whilst counsel for the administrators pointed to certain features of those accounts, in particular the value of intangible assets, nothing that was put in relation to those accounts suggests that they do not properly reflect the financial position and performance of the group of which National Express Group PLC is the ultimate holding company. 11 I should add in relation to the financial statements of the National Express Group that I accept that it would not be appropriate on the present application to assess those financial statements on a liquidation basis. The group evidently carries on large-scale transport operations across a number of countries from which there is every reason to expect a continued derivation of substantial revenue. 12 As neither of the parties who have been identified as persons who could be adversely affected if NBC were required to repay moneys paid to it, and was unable to do so, has objected to the orders which are sought, I do not think that the suggested reservations concerning those accounts should have any significant weight on the present application. 13 There has been a material change of circumstances since the consent orders of 14 December were made. Where the party for whose benefit those orders were made does not wish to continue its undertaking as to damages, and where the persons whose interests might be adversely affected either consent to, or do not oppose, the present application, the Court would require strong reasons not to vary the orders in the manner sought. 14 Certain scenarios were suggested by the administrators in which NBC might be required to pay back substantial funds. It is not necessary to consider those in any detail, except to observe that the suggested scenario that an order might be made for Bosnjak Holdings Pty Limited to buy back Fexuto's shares, if Fexuto is successful in its oppression claim, is one which is not supported by the claims made by Fexuto in its amended originating process. 15 It may be that an application to further amend the originating process to make such a claim will be made in the future. Whether that is so or not, and whatever might be the success of that application, I do not consider that the possibility that such an application may be made is a sufficient reason for not varying the existing orders as sought. 16 The administrators are entitled to a direction pursuant to s 447D(1) of the Corporations Act 2001 (Cth) that they are justified in consenting to or not opposing NBC's application. They are entitled to a direction that upon receipt of the guarantee from the eighteenth defendant, that Mr Yates permit the release of the moneys presently standing in the account of NBC with the National Australia Bank to be released. 17 For these reasons, I make orders in accordance with the short minutes of order which I initial and date today, as amended by hand. The handwritten amendments which I have made to the orders handed up by counsel for NBC are as follows: the typed para 5 has been amended to 6. The typed para 6 has been struck out. A new para 5 is inserted which reads, "The plaintiff be released from the undertaking given by its counsel noted in para 1(a) and confirmed on 30 August 2006". A new para 7 is added as follows: "7. Direct pursuant to s 447D(1) of the Corporations Act that the first defendants would be justified in consenting to or not opposing orders 1 to 6 above and, upon receipt of the executed guarantee from the eighteenth defendant would be justified in permitting the release to the second defendant of the sum of $72,571,428.57 (plus accrued interest) now standing in a bank account maintained by the second defendant with the National Australia Bank to which the first defendant, Peter George Yates, is a joint signatory." 18 I order that the costs of the plaintiff and of the second defendant, the eighteenth to twenty-fourth defendants, and the twenty-eighth to thirty-second defendants, of both applications, be costs in the proceedings. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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