CTHFCA

Dickerson, in the matter of McWilliam's Wines Group Ltd (subject to Deed of Company Arrangement) (No 3) [2020] FCA 1564

[2020] FCA 1564

Federal Court of Australia|2020-10-19|Before: Farrell J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2020-10-19

Before

Farrell J

Source

Original judgment source is linked above.

Judgment (14 paragraphs)

[1]

THE COURT ORDERS THAT:

Pursuant to s 444GA(1)(b) of the Corporations Act 2001 (Cth), the first applicants, in their capacity as joint and several deed administrators of the second applicant, McWilliam's Wines Group Ltd (Subject to Deed of Company Arrangement) (McWilliam's), be granted leave to transfer all of the issued shares in McWilliam's (Shares) from the "members" (as defined by the Corporations Act) of McWilliam's (together, the Members) to MCW BidCo Pty Ltd (MCW) or its nominee, in accordance with the terms of the deed of company arrangement dated 3 August 2020 executed by the applicants and MCW.
Pursuant to s 447A(1) of the Corporations Act and/or s 90-15(1) of the Insolvency Practice Schedule (Corporations), any of the first applicants may jointly or severally: (a) execute, on behalf of any of the Members, share transfer forms and any other documents as are necessary to effect the transfer of the Shares referred to in Order 1; and (b) enter or procure the entry of the name of MCW or its nominee in McWilliam's' register of members in respect of all Shares transferred to MCW or its nominee in accordance with Order 1.
The applicants' costs of and incidental to this application be costs in the deed administration of McWilliam's. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[2]

Introduction 1 By an interlocutory process filed on 29 September 2020, the applicants sought orders under s 444GA(1)(b) of the Corporations Act 2001 (Cth) granting the first applicants leave to transfer all of the issued shares in McWilliam's Wines Group Ltd (subject to a deed of company arrangement) (McWilliam's) (Shares) from the members of McWilliam's to MCW BidCo Pty Ltd ACN 642 488 524 or its nominee (MCW). 2 Gayle Dickerson, Tim Mableson and Ryan Eagle, in their capacity as joint and several deed administrators of McWilliam's (together the deed administrators, formerly the administrators), are the first applicants in these proceedings. McWilliam's is the second applicant. McWilliam's is the immediate parent company of Mount Pleasant Wines Pty Ltd (ACN 000 024 813) (subject to a deed of company arrangement) (Mount Pleasant) and they are together referred to as the Companies. 3 The deed administrators were appointed as administrators of each of the Companies on 8 January 2020. 4 Pursuant to resolutions of the creditors of the Companies passed at the second meeting of creditors held on 24 July 2020, the following documents were executed on 3 August 2020: (a) A deed of company arrangement between the Companies, the administrators and MCW (as deed proponent) (DOCA) pursuant to which the deed administrators were appointed as such; and (b) A trust deed establishing the McWilliam's Creditors' Trust between the Companies, the deed administrators and MCW (as deed proponent) (Creditors' Trust) pursuant to which, among other things, the deed administrators were appointed as trustees of the Creditors' Trust. 5 The applicants also seek orders: (a) Under s 447A(1) of the Corporations Act and/or s 90-15(1) of the Insolvency Practice Schedule (Corporations) (being Sch 2 to the Corporations Act) authorising any of the applicants, jointly or severally to: (i) execute, on behalf of the members of McWilliam's, share transfer forms and any other documents as are necessary to effect the transfer of the Shares; and (ii) enter, or procure the entry, of the name of MCW in McWilliam's register of members in respect of the Shares; and (b) That the applicants' costs of and incidental to this application be costs in the deed administration of McWilliam's. 6 It is a condition precedent to completion of the DOCA that the Court makes orders under s 444GA(1)(b) of the Corporations Act granting leave to effect the transfer of the Shares to MCW. 7 In accordance with the procedural orders made by the Court on 29 September 2020, the applicants have given notice of the hearing of the application (including Ms Dickerson's affidavit sworn on 29 September 2020 and exhibit GD-1) to interested parties, including creditors and members of McWilliam's and the Australian Securities and Investments Commission (ASIC), substantially in the form of exhibit B in the proceedings (the Notice). Included in the Notice was a link to an explanatory statement dated 30 September 2020 and the expert's report referred to below. 8 The Court notes that the explanatory statement at [25]-[26] advised that, if the Court makes the proposed order under s 444GA, the other conditions precedent to the DOCA are satisfied and MCW has made the necessary contribution payments as required by the DOCA: (a) The deed administrators will transfer the Shares to MCW; (b) Members will not receive any consideration for the transfer of the Shares and they will cease to hold the Shares. Members will still be bound by the terms of the DOCA in accordance with s 444G of the Corporations Act; (c) Any claims members have against McWilliam's in their capacity as members will be extinguished and any claims to participate in the distribution of capital of McWilliam's in the event of a winding up will be transferred to the McWilliam's Creditors' Trust and adjudicated upon by deed administrators as trustees in accordance with the trust deed dated 3 August 2020 constituting the McWilliam's Creditors' Trust (Creditors' Trust). (d) Any claims they have as creditors of McWilliam's will be transferred to the Creditors' Trust and adjudicated by the trustees of the Creditors' Trust in accordance with the trust deed. 9 At [27]-[28] of the explanatory statement, interested parties are advised of their right to oppose the application for orders under s 444GA and the process by which they might do so or appear to make submissions. 10 No interested party gave notice of its intention to oppose the application and no interested party appeared at the hearing of the application to oppose the proposed orders being made or to make submissions.

Legal principles 12 The deed administrators sought orders under ss 444GA and 447A of the Corporations Act to give effect to the transfer of the Shares to MCW. 13 Section 444GA of the Corporations Act provides as follows: 444GA Transfer of shares (1) The administrator of a deed of company arrangement may transfer shares in the company if the administrator has obtained: (a) the written consent of the owner of the shares; or (b) the leave of the Court. (2) A person is not entitled to oppose an application for leave under subsection (1) unless the person is: (a) a member of the company; or (b) a creditor of the company; or (c) any other interested person; or (d) ASIC. (3) The Court may only give leave under subsection (1) if it is satisfied that the transfer would not unfairly prejudice the interests of members of the company. 14 As submitted by the deed administrators, the applicable legal principles relating to the grant of leave under s 444GA(1) are well settled. They were summarised by Banks-Smith J in Tucker, in the matter of Black Oak Minerals Ltd (Subject to a Deed of Company Arrangement) (in liq) [2019] FCA 293 (Black Oak Minerals) at [31]-[36] as follows: 31 Applicable legal authorities and principles were set out by Black J in In the matter of Paladin Energy Limited (subject to Deed of Company Arrangement) [2018] NSWSC 11 at [28]-[35], and the following four paragraphs reflect his Honour's summary. 32 As noted in the Explanatory Memorandum to the Corporations Amendment (Insolvency) Bill 2007 (Cth), the requirement that the transfer not unfairly prejudice shareholders is intended to direct the Court to consider the impact of a compulsory sale on shareholders where there may be some residual value in the company. 33 As Martin CJ noted in Weaver v Noble Resources Ltd [2010] WASC 182; (2010) 41 WAR 301: [79] … [t]he notion of unfairness only arises if prejudice is established. If the shares have no value, if the company has no residual value to the members and if the members would be unlikely to receive any distribution in the event of a liquidation, and if liquidation is the only alternative to the transfer proposed, then it is difficult to see how members could in those circumstances suffer any prejudice, let alone prejudice that could be described as unfair. … [80] … So, something more would have to be established before it could said that unfair prejudice to the members of the company could arise. 34 As White J explained in Lewis, in the matter of Diverse Barrel Solutions Pty Ltd (Subject to a Deed of Company Arrangement) [2014] FCA 53 at [19]: Whether or not 'unfair prejudice' will result from a transfer of the shares is to be determined having regard to all the circumstances of the case and to the policy of the legislation. Relevant matters would seem to include whether the shares have any residual value which may be lost to the existing shareholders if the leave is granted; whether there is a prospect of the shares obtaining some value within a reasonable time; the steps or measures necessary before the prospect of the shares attaining some value may be realised; and the attitude of the existing shareholders to providing the means by which the shares may obtain some value or by which the company may continue in existence. A relevant comparison will be between the position of the shareholders if the proposal does not proceed and their position if leave to transfer shares is granted. 35 According to Re Nexus Energy Ltd (Subject to Deed of Company Arrangement) [2014] NSWSC 1910; (2015) 105 ACSR 246 at [27] (Black J), there is an evidentiary onus on the shareholders to raise any consideration telling against the exercise of the discretion, but the ultimate onus of satisfying the court that the discretion should be extended remains on the Deed Administrators. This requires that the Administrators prove that the transfer would not unfairly prejudice the interests of the company. 36 I also note that in Re BCD Resources NL (Subject to Deed of Company Arrangement) [2018] NSWSC 1605, Parker J held at [11] that it was a relevant consideration that a full and accurate description of the proposal has been given to shareholders and they have been given full opportunity to appear on the application. 15 The question of whether shares hold any residual equity of value for the purposes of assessing the existence and nature of any unfair prejudice to the interests of members is determined by comparison with the position of the members in a winding up, at least where that is the likely or necessary consequence of the transfer of shares not being approved: In the matter of Mirabela Nickel Ltd (subject to deed of company arrangement) [2014] NSWSC 836 (Black J) at [42]; In the matter of Paladin Energy Limited (subject to Deed of Company Arrangement) [2018] NSWSC 11 (Black J) at [31]. 16 It has consistently been held that if liquidation is the only realistic alternative to a proposed transfer of the shares, and the shares would have no value in a liquidation, then there is no prejudice, or no unfair prejudice, to the interests of members if leave is given pursuant to s 444GA(1)(b): In the Matter of OrotonGroup Limited (Subject to Deed of Company Arrangement) ACN 000 038 675; Application of Strawbridge and Kanevsky [2018] NSWSC 1213 (White J) and the cases there cited. 17 Section 447A of the Corporations Act is relevant to the relief claimed relating to the execution of transfers of the Shares and the entry of MCW's name on the McWilliam's register of members. Section 447A relevantly provides as follows: General power to make orders (1) The Court may make such order as it thinks appropriate about how [Part 5.3A] is to operate in relation to a particular company. … (3) An order may be made subject to conditions. (4) An order may be made on the application of: (a) the company; or … (d) in the case of a company that has executed a deed of company arrangement - the deed's administrator … 18 As noted by Banks-Smith J in Black Oak Minerals at [39]-[40]: 39 The Court's powers under [s 447A] have been described as 'plenary powers to do whatever it thinks is just in all the circumstances', but the Court must bear in mind the rights of the various groups of people affected: Cawthorn v Keira Constructions Pty Ltd (1994) 13 ACSR 334 at 341 (Young J). In Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270 at [17], the High Court (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ) noted that the section is not confined to cases where it is necessary to cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Pt 5.3A, and that there is no cogent reason to read down the application of s 447A. 40 Orders of the kind sought … have previously made pursuant to s 447A in Paladin Energy Limited, Re BCD Resources NL and In the Matter of OrotonGroup Limited (Subject to Deed of Company Arrangement) ACN 000 038 675; Application of Strawbridge and Kanevsky [2018] NSWSC 1213 (White J). 19 Having regard to these principles, the Court was satisfied that it has power to make the orders sought by the applicants.