Whilst the timetable is tight, given the high level of understanding of both the Australian aviation market and Sydney Airport which already exists amongst most participants in the sale process, the Administrators are of the view that a concise sale timetable is reasonable and appropriate. SACL supports the sale process. This should encourage participants to proceed with a greater degree of confidence.
The timetable set out above will apply to the sale process for all 5 major capital city DTLs.
We will forward to you shortly the following documents:
1. A Bid Conditions Document which sets out the terms and conditions of participation in the sale process. The terms and conditions contained in the Bid Conditions Document are relevant to SACL's agreement to the sale process and will not be negotiable; and
2. A pro forma Sale of Assets Agreement;
3. A pro forma Deed of Assignment of the DTL's;
4. A pro forma Deed of Surrender of the leases. Airport owners may prefer this conveyance mechanism to a Deed of Assignment.
To the extent a bidder would prefer to acquire the DTL's and associated assets via a purchase of the shares in Ansett Australia Limited (Administrators Appointed), the relevant DTL's may be isolated in, and unrelated liabilities may be removed from, Ansett Australia Limited by using the draft Deed of Assignment of Assets and Deed Poll of Novation of Liabilities. These documents are available upon request.
To the extent bidders have queries in relation to the pro forma documentation (other than the Bid Conditions) or wish to substantially depart from those documents, they are encouraged to raise these matters prior to the closing date for submission of tenders. This will be important in seeking to meet the timetable for completion of the sale process.
Bidders are also advised that in addition to the Information Memorandum and Appendices, data rooms are also open in Sydney and in Melbourne. Access to the data rooms is available upon request.
We look forward to your continuing participation in the sale process.
Should you have any queries in relation to the process, please contact me on +614 142 62 530 or Berrick Wilson on +61 419 997 481."
The conditions for bidding for the sale of the key assets of the Ansett group contemplated a sale process which would conclude by 24 May 2002.
26 An infrastructure institution also expressed an interest in acquiring Ansett Australia Limited's interest in the lease of the Sydney Terminal and a memorandum was then prepared by the administrators' solicitors setting out how it could acquire shares in Ansett Australia Limited and thereby take control of the lease of the Sydney Terminal without the consent of SACL.
27 The administrators led evidence in the second extension application from an experienced valuer who expressed the opinion that Ansett Australia Limited would obtain a greater return from the result of a competitive tender for the purchase of the lease of the Sydney terminal than from SACL exercising a right under the buy‑back provisions of the lease.
28 On 24 April 2002, the solicitor for the administrators sent a letter either by email or facsimile transmission to each of the fifteen parties who had expressed an interest in purchasing assets of the Ansett group informing them that if the administrators were unsuccessful in their application for a further extension of time within which to have the companies execute the deeds of company arrangement, they would consider selling the Ansett group's interest in the leases of the domestic terminals before 2 May 2002, being the last day on which the deeds of company arrangement could be executed by the companies. The letter was in the following terms:
"As you know, the Administrators have expressed a preference to sell the domestic terminal lease assets ('DTL's') in an open and transparent sale process. As you also know, Sydney Airport Corporation Ltd ('SACL') and other DTL landlords assert that by signing a Deed of Company Arrangement ('DOCA') Ansett Australia Ltd ('AAL'), the tenant, will have breached the relevant lease. The Administrators deny this.
The Administrators have been concerned that in order for them to sell the DTL's as part of an open and transparent process, it is preferable to obtain appropriate court relief so as to avoid any arguments about whether or not AAL's interests in the DTL's may have been terminated by the Administrators signing the DOCA.
In Federal Court Application No. 3605 of 2002 ('Second Extension Application'), the Administrators have sought an extension of the time to sign the DOCA's until 31 May 2002 with the intent that the sale process may be completed within that timeframe. This is the Administrators' preference.
The Second Extension Application was commenced to protect the status quo to allow for an orderly sale process. SACL and Brisbane International Airport Pty Ltd opposed the further extension.
On 24 April 2002 Justice Goldberg indicated that he presently intends to deliver his judgment next Monday, 29 April 2002. However, in the meantime, he ordered that the time in which the Administrators must execute the DOCA's be extended to three (3) days after his determination.
It is possible that the Court may not provide any further extension beyond next Wednesday, 1 May 2002. If the Court does not provide a further extension and some agreement cannot be reached with SACL and the other DTL lessors, the Administrators may be prepared to sell one or more of Ansett's interests in the DTL's on a pre-emptive basis, that is prior to the process previously announced.
The purpose of this letter is to give you notice of these issues. The Administrators will notify you of the outcome of the hearing before Justice Goldberg when he delivers his judgment. The judgement and other Court documents relating to the Second Extension Application can also be obtained from the Ansett website namely, www.abl.com.au/administrator under the heading 'Further Extension of Time for Execution of DOCA'.
The Administrators will be happy to discuss this matter further should you wish to do so. Please contact Mark Korda, Quentin Law or Berrick Wilson at Ansett."
29 On 29 April 2002, I delivered reasons for judgment in the second extension application and dismissed that application. Immediately after the dismissal of the application the administrators, their solicitors and other persons assisting them in the administration notified nine of the fifteen parties, who had expressed an interest in acquiring the interests of the Ansett group in the domestic terminal leases, of the dismissal of the application and that the administrators may elect to sell the leases of the domestic terminals prior to the companies executing the deeds of company arrangement. These nine parties were also told that if they wished to make a bid for any of these assets, they should do so by no later than midnight on 1 May 2002. Six of the fifteen interested parties were not so informed as by 29 April 2002 they had either indicated to the administrators or the persons assisting them that they were no longer interested in acquiring the interests of the companies in the domestic terminal leases, or they had failed to express any continuing interest in acquiring those interests. All fifteen of those parties were given notice of this proceeding and the principal supporting affidavit, but none of them appeared at the hearing.
30 On 30 April 2002, Qantas announced that as a result of the indication from the Australian Competition and Consumer Commission ("the ACCC") that it would oppose Qantas acquiring the interest of Ansett Australia Limited in the lease of the Sydney Terminal, it no longer intended to make an offer to acquire that interest. The ACCC informed the administrators' solicitors that it would oppose any transaction whereby Qantas acquired that interest.
31 At about midnight on 1 May 2002, the administrators received a draft offer from SACL for Ansett Australia Limited, inter alia, to surrender its interest in the lease of the Sydney Terminal. The offer did not contain the amount which SACL was prepared to pay for such surrender. Prior to midnight on 1 May 2002, the administrators had also received offers from other prospective purchasers for the purchase of various assets of the Ansett group including the leases of the domestic terminals.
32 Between midnight and 2.00am on 2 May 2002, the Chief Executive Officer of SACL and Mr Korda negotiated an agreement whereby, in general terms, Ansett Australia Limited surrendered its interest in the lease of the Sydney Terminal and in a Development Zone Agreement entered into between Ansett Australia Limited and SACL in consideration of a payment by SACL on 1 July 2002 of $192 million. It was a term of the agreement that SACL would release its claims against Ansett Australia Limited in respect of pre‑administration debt, that is to say that it would forgive any arrears of aeronautical charges or lease payments of about $4m and would waive the payment of rent and outgoings for the months of May, June and July 2002 which were of the order of between $3m and $4m. SACL also agreed that it would not seek to set‑off against the price agreed to be paid any damages it had suffered in respect of which it might have a claim against the Ansett group. The agreement was reduced to writing in the form of a letter from SACL to the administrators and was executed at about 5.00am on 2 May 2002. It is a term of the agreement that it is conditional on a court directing that the administrators may properly and justifiably execute and give effect to the agreement.
33 On 2 May 2002, subsequent to the execution of the agreement for the surrender of the lease of the Sydney Terminal, the companies executed the deeds of company arrangement.
34 A number of issues have arisen in relation to the sale of the interests of the Ansett group in the leases of the domestic terminals and, in particular, the lease of the Sydney terminal. It is the existence of these issues which have moved the administrators to seek the direction that they may properly and justifiably execute and give effect to the agreement.
35 On 26 April 2002, Mr Leon Zwier, the solicitor for the administrators, foreshadowed to Mr Henry Carr, the solicitor for the Commonwealth of Australia, the possibility of the sale of the lease of the Sydney Terminal being consummated in the three days following 29 April 2002. Mr Carr told Mr Zwier that the Commonwealth had serious concerns about a sale process being concluded within a short three day time span. Mr Carr has since told Mr Zwier that the concerns of the Commonwealth related to the proceeds of the sale of the lease of the Sydney Terminal rather than the sale process itself.
36 On 25 April 2002, the solicitors for Virgin Blue wrote to the administrators complaining about their asset sale process and, in particular, referred to the letter from the administrators' solicitors sent on 24 April 2002 (referred to in par [28] above). On 1 May 2002, Aviation By Design Pty Ltd sent a letter by facsimile transmission to the administrators asking them to provide an itemised summary of the value of assets proposed to be sold, including the leases of the domestic terminals and the asking price. When a representative of Aviation By Design Pty Ltd was informed that the lease of the Sydney Terminal had been sold to SACL, he informed one of the persons assisting the administrators that Aviation By Design Pty Ltd may commence proceedings against the administrators to stop the sale to SACL because it did not regard the sale process as being appropriate. Both Virgin Blue and Aviation By Design Pty Ltd were given notice of this application, but neither of them has sought to be heard in relation to the direction sought from the Court.
37 During the hearing of the second extension application, counsel for SACL submitted that it was not appropriate for the administrators to sell the leases of the domestic terminals in the period between the holding of the adjourned second meeting of creditors of the companies on 27 March 2002 and the execution of the deeds of company arrangement. The submission was expressed in the following terms:
"Secondly, the further effect of granting the relief sought would be to deny, or to deny substantially, the effect of the resolution (or resolutions) passed on 27 March 2002 that the companies enter into a deed of company arrangement. Where the deed takes as its principal focus the sale of assets (including the domestic terminal leases which represent the major assets) Ex MAK7 - clauses 3.1 and 12), and the administrators wish to avoid executing the deed until there has been a sale of the major assets, the application effectively negates the operation of s.439C and the right thereunder for the creditors to choose the destiny of the companies."
SACL has informed the administrators' solicitor that it was not submitting that the administrators did not have the power to sell the leases of the domestic terminals. Rather, the submission appeared to be that it was inappropriate for the administrators to sell assets before the execution of deeds of company arrangement once the creditors had resolved that the companies execute deeds of company arrangement under which those assets were to be sold by the administrators as the deed administrators.
38 The administrators have expressed their concern that it is generally unusual to conduct a sale process of assets such as the lease of the Sydney Terminal over such a limited period of time. The administrators said that they elected to do so because of their perception of the serious consequences if a court subsequently determined that the execution of the deeds of company arrangement triggered the buy‑back provisions for the leases of the domestic terminals and the possible set‑off by SACL of $73 million by way of damages.
39 McDonald's Family Restaurants Pty Ltd ("McDonald's") and Travelex Australia Pty Limited which are sub‑tenants of Ansett Australia Limited at the Sydney Terminal had also raised issues in relation to the surrender of the lease of the Sydney Terminal, but those issues have now been resolved.
40 The administrators believe that their commercial decision to surrender the interest of Ansett Australia Limited in the lease of the Sydney Terminal to SACL was appropriate and, in a confidential submission, they have set out their commercial reasons for so doing. It is not necessary to consider that submission in any detail as it is sufficient for the Court's consideration that the administrators have made a commercial decision based on commercial grounds. Ordinarily a court will not revisit a commercial decision made by an administrator unless an issue arises as to the propriety of the decision: In the matter of Ansett Australia Limited and Korda [2002] FCA 90; Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117; Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85.
41 However, the administrators have sought a direction from the Court that they may properly and justifiably enter into an agreement to sell the lease of the Sydney Terminal for the following reasons:
(a) SACL had raised an issue as to whether the administrators ought to dispose of the lease of the Sydney Terminal prior to Ansett Australia Limited executing the deed of company arrangement;
(b) it is the view of the administrators that the sale process should take place over a longer period of time and in a more structured manner;
(c) it might be considered unusual if one of the prospective purchasers, SACL, should have attended at the administrators' premises on the evening that the bids were closed, although for the reasons set out in the confidential submission, they believe it was appropriate in the circumstances;
(d) Aviation By Design Pty Ltd has threatened to commence proceedings in relation to the sale process;
(e) Virgin Blue has complained about the timeliness of the sale process;
(f) the Commonwealth of Australia has expressed concerns about the sale process.
42 Notice of this application has been given to the Australian Securities and Investments Commission, the ACCC, each of the fifteen interested parties, the members of the Committees of Creditors of the companies, Aviation By Design Pty Ltd, the solicitors for Virgin Blue, the Commonwealth of Australia, the solicitors for the Australian Council of Trade Unions and twelve unions who represent employees and former employees of the Ansett group, the solicitors for SACL, Canberra International Airport Pty Ltd, Brisbane International Airport and a number of lessors of aircraft, the solicitors for Melbourne Airport Corporation Pty Ltd and McDonald's.
43 I am satisfied that the circumstances leading up to the agreement entered into between the administrators and SACL early in the morning on 2 May 2002 warrant the Court giving a direction that the administrations may properly perform and give effect to that agreement. The justification for reaching this conclusion is not that the Court should give approval to, or sanction, the commercial decision reached by the administrators but, rather, that the propriety of the decision has been called into question or, at the least, has been publicly subjected to doubt and that other issues have arisen in relation to the process leading up to the decision made by the administrators.
44 The Court does not have express powers in Pt 5.3A of the Act to give a direction that administrators or deed administrators appointed and acting pursuant to Pt 5.3A of the Act may properly perform and give effect to an agreement entered into by them. Nevertheless, the power conferred upon the Court by s 447A of the Act enables the Court to make an order that the directions which the Court may give an administrator appointed pursuant to Pt 5.3A of the Act include a direction that the administrator may properly perform and give effect to an agreement, which is the subject matter of an application for directions: Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 279‑280; In the matter of Ansett Australia Limited and Mentha [2001] FCA 1439 at [82].
45 A direction given to an administrator that the administrator may properly perform and give effect to an agreement is not a direction which approves the specific terms of the agreement, but is rather a direction which protects the administrator from any subsequent allegation of breach of duty in entering into and performing the agreement or any subsequent allegation that the administrator has not acted properly or reasonably in entering into or performing the agreement. The only caveat to this protection is that the administrator must have made full and fair disclosure to the Court: Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674; Mentha v GE Capital Ltd (1997) 145 ALR 565.
46 It is well accepted, and it was acknowledged by the administrators, that the Court should not give directions on an issue which is no more than whether or not the decision made by the administrators is a commercial decision: Sanderson v Classic Car Insurances Pty Ltd (supra); Re Spedley Securities Ltd (in liq) (supra); In the matter of Ansett Australia Limited and Korda (supra). However, where issues as to the propriety or reasonableness of the conduct undertaken, or the decision made, by an administrator is called in question, it is open to the Court to give a direction which, in substance, sanctions or approves the conduct undertaken, or decision made, by the administrator. In In the matter of Ansett Australia Limited and Korda (supra) I said at [65]:
"This review of the authorities satisfies me that the prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator's or administrator's unease. There must be an issue calling for the exercise of legal judgment."
47 In the present circumstances, issues have been raised as a matter of public record which bear upon the reasonableness and the propriety of the administrators entering into, and performing, the agreement made on 2 May 2002. The issue was specifically raised by counsel for SACL in the second extension application. Although SACL did not submit that the administrators did not have a power to sell the leases of the domestic terminals, I am satisfied that the submission made by counsel for SACL on the hearing of the second extension application was to the effect that it was inappropriate for the administrators to sell assets prior to the execution of a deed of company arrangement where there had been a resolution of the creditors of the company that the deed of company arrangement be executed, and where a principal objective or purpose of the deed was to enable the sale of the same assets. The decision made by the administrators was a commercial decision. However, the issue raised by SACL on the second extension application did not simply go to the commerciality of the decision but, rather, to its propriety. Although SACL is now obviously in favour of the implementation of the agreement, the issue of propriety still remains.
48 There is also the issue that the administrators had given evidence in the first extension application and the second extension application that in order to maximise the return to creditors, the process of the sale of the leases of the domestic terminals was one that should take place in an open competitive market environment over a period of time during which there would be an opportunity for all interested purchasers to submit bids. In the circumstances which occurred after the dismissal of the second extension application, the administrators took a commercial view that in order to avoid any argument arising as to the crystallisation of the buy‑back provisions in cl 8.10 of the lease of the Sydney Terminal, it was necessary to enter into a transaction disposing of Ansett Australia Limited's interest in the lease prior to the execution of the deed of company arrangement.
49 This was a commercial decision made by the administrators in order to maximise the return to creditors from the disposition of the leases of the Sydney Terminal. However, it exposed two issues which arguably give rise to doubts about the propriety of that course of conduct. One issue centred around the fact that fifteen potentially interested parties had been informed of a proposed tender process which involved the closing of tenders on 6 May 2002 and a completion date of the tender on or after 17 May 2002. The same parties were informed on 24 April 2002 that if the second extension application was refused, the administrators might be prepared to sell one or more of the interests of the Ansett group in the leases of the domestic terminals on a pre‑emptive basis prior to the process previously communicated to the parties. That situation occurred, but not before those parties who had expressed an interest in purchasing the leases of the domestic terminals, and who had continued to maintain an interest, had been told that if they wished to make a bid for any of the domestic terminal leases they should do so by no later than 1 May 2002.
50 That sequence of events gives rise to the question whether or not this was a proper course of conduct to undertake, having regard to the previously announced process. It might be said, for example, that the administrators had engaged in misleading and deceptive conduct by proposing an extended period for the tender process and then cutting it short, albeit on notice to all interested parties. It is not necessary to make a final determination on this issue, but I note that the administrators had expressed the view that the sale process should take place over a longer period of time and in a more structured manner. In these circumstances, I consider it appropriate to give a direction, in substance, that notwithstanding this issue the administrators may properly perform and give effect to the agreement. I take into account the fact that all the fifteen interested parties who had been notified of the proposed tender process on 19 April 2002 have been given notice of this application and copies of the principal affidavit in support of the application, and that none of them has appeared at the hearing or made any submissions that the direction sought by the administrators should not be made.
51 The second issue which bears upon the propriety of the conduct undertaken by the administrators on 1 and 2 May 2002 is that the administrators have expressed the view that it might be considered unusual that, in circumstances where competitive bids have been sought for the purchase of an asset, one of the prospective purchasers, namely SACL attended at the administrators' premises on the evening that the bids were closed. I express no view on the propriety of this conduct, other than to note that it occurred in circumstances where the other fourteen interested parties had been put on notice that if they wanted to put in a bid, they should do so by midnight on 1 May 2002. In all the circumstances, it is appropriate to give a direction that, notwithstanding this issue, the administrators may properly perform and give effect to the agreement. Again, I take into account the fact that although put on notice of the application, the other fourteen interested parties have not sought to participate in the proceeding.
52 In deciding to make the direction which has been sought, I have taken into account the circumstance that Aviation By Design Pty Ltd has threatened to commence proceedings in relation to the sale process. The complaint by Virgin Blue did not bear upon the sale of the lease of the Sydney Terminal but, rather, bore upon the sale of other assets. That complaint has not given rise to any issue as to the propriety of the administrators in entering into, or seeking to perform and give effect to the agreement. Neither has the concern expressed by the Commonwealth of Australia which was subsequently clarified as relating to the disposition of the proceeds of sale rather than the process of sale itself.
53 I have not taken into account the claim by SACL that it had a claim for unliquidated damages against Ansett Australia Limited which it might be able to set off against any payment it was required to make to Ansett Australia Limited under the buy‑back provisions of cl 8.10 of the lease. That claim has been compromised and disposed of by the terms of the agreement, but it did not involve Ansett Australia Limited or the administrators abandoning any claim which they had for unliquidated damages.
54 Insofar as it might be thought that it is implicit in my reasons for directing that the administrators may properly perform and give effect to the agreement that there is approval for the commercial decision taken by the administrators, that is a necessary and inevitable consequence of a consideration of the propriety and reasonableness of the conduct of the administrators in entering into and seeking to perform and give effect to the agreement. As I observed in In the matter of Ansett Australia Limited and Korda (supra) at [66]:
"From time to time, the Court is necessarily drawn into a consideration of commercial issues where there is a matter giving rise not only to the need to make a business or commercial decision, but also to issues of propriety, power, reasonableness of conduct, contested issues of legal principle or procedure or challenges to the decision made by the liquidator or administrator. Such a situation arose, for example in Re Codisco Pty Ltd [[1974] CLC ¶40‑126], Sanderson v Classic Car Insurances Pty Ltd (supra) and Re Addstone Pty Ltd (in liq) [(1997) 25 ACSR 357]."
The feature which exists in the present proceeding which did not appear in that decision was the existence of issues as to the propriety and reasonableness of the conduct undertaken by the administrators.
55 It was for these reasons that I gave the direction on 14 May 2002 that the administrators may properly perform and give effect to the agreement. Although the administrators sought a direction in the terms that "they may properly and justifiably execute and give effect" to the agreement, I do not consider it appropriate in the circumstances to give a direction that they may execute the agreement when it has already been entered into. I am also not disposed to direct that they may "justifiably" enter into the agreement as the justification for doing so depends upon commercial considerations which are for the administrators to evaluate.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.