Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 8) [2020] FCA 1344

Federal Court of Australia|2020-08-17|Before: Middleton J

INTRODUCTION 1 On 17 August 2020, I made a number of orders on the interlocutory application of the Applicants brought in this proceeding. These are the reasons for those orders. 2 The Applicants, Broad Peak Investment Advisers Pte Ltd and Tor Investment Management (Hong Kong) Ltd, ('Broad Peak and Tor') make an interlocutory application to the Court, which in summary seeks relief in respect of: (1) the consideration of rival deeds of company arrangement ('DOCA') at the second meetings of creditors of the second to forty-second Plaintiffs (the 'Virgin Companies') to be held on 4 September 2020 (the 'Second Meetings'); and (2) the appointment of a facilitator to assist in assessing the rival DOCAs and providing information to creditors before the Second Meetings. 3 In support of their application, the Applicants rely upon: (1) the affidavits of Cameron Cheetham affirmed 11, 16 and 17 August 2020; (2) the confidential affidavit of Sandeep Gupta dated 15 August 2020; and (3) the confidential affidavit of Willie Wong dated 15 August 2020. 4 The Court was also assisted by the submissions of three interested persons, being: (1) the Commonwealth; (2) BC Hart Aggregator, L.P. and BC Hart Aggregator (Australia) Pty Ltd (together, 'Bain Capital'); and (3) Alexander Funds Management Pty Ltd, Morgans Financial Limited, Crestone Wealth Management Limited, Mason Stevens Limited, Escala Partners Pty Ltd, Yarra Funds Management Limited, Realm Pty Ltd, and Cameron Harrison Private Pty Ltd (collectively, the 'Bondholders' Representative Group'), each of whom act on behalf of bondholders owed, in aggregate, in excess of $2 billion in bond debt by the Virgin Companies.

THE RELIEF SOUGHT BY Broad peak and tor 12 Broad Peak and Tor seek the following substantive relief, which it is convenient to set out here (omitting the inclusion of prayers 1, 2, 7 and 8): Ballot and proxy voting 3 An order pursuant to section 447A of the Corporations Act and section 90-15 of the IPSC, that Part 5.3A of the Corporations Act, the IPSC and Division 75 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPRs) are to operate such that: a. on or before 13 August 2020, the First Plaintiffs are to notify creditors: i. that any proposal for resolution on a deed of company arrangement (DOCA Proposal) is to be submitted to the First Plaintiffs on or before 24 August 2020 (or such later date as may be required, the DOCA Proposal Date); and ii. that a Facilitator has been appointed to facilitate any requests for access to information or stakeholders for the purposes of preparing any such DOCA Proposal; b. the First Plaintiffs would be justified in disregarding any proposal received after the DOCA Proposal Date, provided that such access is provided by the First Plaintiffs, or any Facilitator appointed pursuant to prayer 4 below, within one (1) business day of any such request being made; c. any creditor may submit a DOCA Proposal on or before the DOCA Proposal Date and, despite paragraph (b) above, may submit further explanatory material or amendments in respect of that DOCA Proposal on or before 26 August 2020 (or such later date as may be required, DOCA Publication Date); d. on the DOCA Publication Date, the First Plaintiffs are to publish details of any such DOCA Proposal for consideration by creditors, together with any such explanatory material or amendments; e. at least one (1) business day before the First Plaintiffs issue any ballot papers (including any electronic ballot incorporated into any online proxy form to be issued by the First Plaintiffs), the First Plaintiffs are to give creditors a reasonable time to debate each DOCA Proposal, or alternatively to conduct question and answer sessions or other activities to promote any such DOCA Proposal; f. no earlier than 31 August 2020 (or such later date as may be required), the First Plaintiffs are to issue such ballot papers to creditors; and g. such ballot papers are to fairly provide the opportunity for creditors to cast votes in favour of any such DOCA Proposals. Facilitator 4 An order pursuant to section 447A of the Corporations Act and section 90-15 of the IPSC appointing an independent practitioner (Facilitator): a. to confer with the First Plaintiffs in relation to access to information and stakeholders requested by the Applicants, or any other creditor in preparation of any DOCA Proposal and to facilitate the provision of such access; b. to prepare a limited report for inclusion in the report required to be given to creditors of the pursuant to s 439A of the Act, in respect of each such proposal; c. to report to the Court on or before 22 August 2020 in relation to the Facilitator's work done in accordance with such appointment; and d. to apply to the Court for any direction or order if the Facilitator deems it necessary and appropriate to do so. 5 An order pursuant to section 447A of the Corporations Act and section 90-15 of the IPSC that the First Plaintiffs provide the independent practitioner with access to such documents and information as that practitioner reasonably requires as the Facilitator deems necessary and appropriate. 6 An order pursuant to section 447A of the Corporations Act and section 90-15 of the IPSC that such independent practitioner's remuneration is to be paid on an hourly rate and on the same rates as the First Plaintiffs' remuneration and treated in all respects as if the Facilitator's remuneration is part of the remuneration of the First Plaintiffs and subject to the approval of the Committee of Inspection or Court order, as the case may be.

RIVAL DEEDS OF COMPANY ARRANGEMENT 13 Prayer 3 of the interlocutory application seeks broadly two types of relief: (1) paras 3(a) to 3(e) seek to impose a regime for the submission, publication of details, and debate and promotion of DOCA proposals; and (2) paras 3(f) to (g) seek to ensure that a resolution relating to the Bondholders' DOCA, and indeed any other DOCA proposal, is included on any ballot by the Administrators. 14 As I have mentioned, the context in which the relief is sought is as follows. 15 The Administrators have exercised their powers under s 437A(1)(c) of the Act by selling the business and assets of the Virgin Companies to Bain Capital. That sale process culminated in the entry into the Bain SID with Bain Capital. The effect of the obligations undertaken by the parties under the Bain SID is that if the sale does not proceed by DOCA for any reason, the sale will proceed pursuant to the ASA. 16 I indicated in Virgin (No 5) at [24]-[25] and [32], where Broad Peak and Tor were the Applicants, that: … there is no doubt that the Applicants have the ability at the next meeting of creditors to propose a DOCA. A refusal of the relief the Applicants seek now will not impede that endeavour in light of the future steps that must be undertaken by the Administrators prior to the next meeting of creditors - primarily providing sufficient information to enable the creditors to make an informed decision at the meeting of creditors. As Senior Counsel for the Applicants, Mr I Jackman SC said, it is all about timing. The Applicants will in their capacity as, and along with other, creditors, be provided with the Administrators' report under s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) prior to the next meeting of creditors of the Virgin Companies. The information in that report will need to provide to the creditors material as to the Bain transaction and the likely or expected return to creditors. However, there is no reason to prioritise the interests of the Applicants above those of other creditors at this time. … … It is important that proper preparation be made for the meeting of creditors in August 2020. This will obviously require the Administrators to be full and frank with the creditors, and to provide sufficient information to enable the creditors to make an informed decision on the matters for resolution at the meeting of creditors. If a creditor at the meeting needs more time or information to consider their position, this could be a reason to adjourn the meeting of creditors. If sufficient information is not provided which is material to creditors in reaching a decision on a proposed DOCA which is entered into, this could be a ground for the Court later terminating the DOCA. Neither of these scenarios is desirable. 17 That is still the case. The Administrators do not deny that Broad Peak and Tor are entitled to propound a rival DOCA at the Second Meetings themselves, but submit that they cannot be required to put a rival DOCA on the ballot by reason of the terms of the Bain SID. The Administrators also indicated to the Court that they will provide creditors with details of the Bondholders' DOCA in their report to creditors and will comment on it, as is required under r 75-225(3)(v) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (the 'IPR'). 18 However, more generally, the Administrators submit that the relief sought in prayer 3 lacks utility in the circumstances of the case. That is because the process undertaken by the Administrators has limited the scope of the options available at the Second Meetings. The mechanism contained in the Bain SID means there will not be any occasion to vote on any competing DOCA proposal (at least on 4 September 2020) as the sale will proceed pursuant to the ASA if the creditors do not approve the Bain DOCA. 19 Before turning to the submissions of Broad Peak and Tor in some more detail, I outline the relevant principles of law.

LEGAL PRINCIPLES 20 The decision as to whether a company in administration should execute a DOCA, and which DOCA it should execute, belongs to the creditors and not the administrators: see eg In the matter of TEN Network Holdings Limited (Admins Apptd) (Recs and Mgrs Apptd) and Others [2017] NSWSC 1247 ('TEN') at [38] per Black J. 21 As Gageler J said in Mighty River International Limited v Hughes and Bredenkamp (as deed administrators of Mesa Minerals Limited) and Another (2018) 265 CLR 480 at [61]: … Fundamental to the scheme of Pt 5.3A, as recognised in the plurality in Lehman Bros Holdings Inc v City of Swan (52), is the policy of allowing creditors themselves to decide, in accordance with the majoritarian decision-making rules prescribed … in Div 75 of the Insolvency Practice Rules (Corporations) 2016 (Cth), what course of action is in their own best interests. … 22 As the High Court also observed of the Pt 5.3A regime in Lehman Brothers Holdings Inc v City of Swan and Others (2010) 240 CLR 509 ('Lehman') (at [31]): The point to be made about the provisions of the Act and the Regulations regarding creditors' meetings is that they provide that effect is to be given to the will of the requisite majority of creditors who vote at the relevant meeting. The provisions may be understood as proceeding from two related premises. First, judgment about what is to happen to the subject company, and, in particular, the judgment about the commercial worth of any proposal for a deed of company arrangement, is committed to the body of all creditors. Secondly, for the making of that decision, it is neither necessary nor appropriate to divide creditors into separate classes. The only substantial qualifications to the generality of these propositions are provided by the conferral on the Court of powers under ss 445D and 600A. 23 The Administrators are obliged to provide to creditors details of any proposed DOCA together with "such other information known to the administrator as will enable the creditors to make an informed decision" about "whether … it would be in the creditors' interests for the company to execute a deed of company arrangement": rr 75-225(3)(b)(i) and (v) of the IPR (a matter also emphasised in TEN at [43]). In providing that information the administrator must communicate in such a way as to ensure the creditors' effective understanding of the processes, and their rights and obligations: TEN at [47]. 24 If administrators cannot provide the requisite level of detail before the conclusion of the convening period, they ought to seek a further extension rather than omit the information: In the matter of Pan Pharmaceuticals Limited [2003] FCA 598 at [41] (per Lindgren J). 25 However, the authorities also recognise that s 437A(1)(c) of the Act confers broad powers on an administrator, including to dispose of the whole of the business and assets of the company. In In the matter of Keystone Group Holdings Pty Ltd (recs and mgrs apptd) (admins apptd) & Ors [2016] NSWSC 1604 at [15] Black J said: I also have regard to the fact that s 437A of the Corporations Act confers on the administrator a power to dispose of all or part of the business and dispose of property through the administration in certain circumstances, which may be a proper course for an administrator to take notwithstanding that will necessarily exclude any decision of creditors as to whether to approve a deed of company arrangement which might attach to that property: compare Re Eisa Ltd [2000] NSWSC 940; (2000) 35 ACSR 394. Mr Rich points out, and I accept, that s 437A of the Corporations Act goes to the question of power not to the question of the justification of the decision of an administrator. However, the question of justification requires attention to several of the matters to which I have already referred, including the Administrators' assessment of the likely outcome of the transaction, the comparison of the transaction and its prospects of coming to completion with the deed of company arrangement foreshadowed by GLC and the Administrators' assessment, applying their expertise, that the transaction is in the interests of creditors. 26 Further, a process undertaken by voluntary administrators prior to the second meeting of creditors can limit the range of options available at the meeting. Such matters are business and commercial decisions made by an administrator, and are not to be fettered by the Court: Patrick Stevedores Operations No 2 Proprietary Limited and Others v Maritime Union of Australia & Others (1998) 195 CLR 1 ('Patrick Stevedores') at [54], [61] and [143]. 27 If voluntary administrators have the power to sell the assets and undertaking of a company before the second meeting of creditors, then such a sale necessarily limits the options available at the second meeting of creditors. 28 Similarly, even if there is no "concluded" sale of assets, administrators may enter into contractual arrangements (even if conditional) that necessarily inform the scope of any DOCA proposal: Virgin (No 5) at [14]. The matter was put in these terms in dicta by Black J in TEN at [38] to [40]: I should, however, also add several tentative observations as to that question, although they are not necessary to my decision, which may be of practical importance to the manner in which complex administrations are conducted. First, there is no doubt that, at the second meeting of creditors convened under s 439A of the Act, it is the creditors and not the administrators who decide whether the relevant company should execute a deed of company arrangement specified in the resolution before that meeting (even if it differs from any proposed deed that accompanied any notice of meeting) or alternatively that the administration should end or that the company should be wound up. The creditors and not the administrator have the power to make that decision, because s 439C of the Act so provides, although the administrator has a casting vote if the majority of creditors by number and value reach a different result. The Administrators did not suggest to the contrary in this case. It is perhaps difficult to see why, in a complex administration, the administrators should not or do not have power to take steps to negotiate a deed of company arrangement which will be put to creditors for approval, even if their doing so potentially narrows the range of other options that may be available to creditors. The administrators have wide statutory powers while a company is under voluntary administration, under s 437A of the Act, including control of the company's business, property and affairs, power to terminate or dispose of the company's business and power to exercise any power that the company or any of its officers could have exercised if the company were not in administration. Where a company's assets are under the control of receivers, there would be no utility in putting a deed of company arrangement proposal to creditors unless the receivers would cooperate in its implementation. Where a bidding process for assets is conducted by receivers and administrators, one might expect that bidders would generally not make their best offer until that offer can lead to a concluded (although potentially conditional) transaction, and not if that offer would simply be the starting point for further negotiations at or after a second meeting of creditors. I emphasise, however, that these observations are tentative and not necessary to the decision in this matter. It is important to recognise, of course, that it is also always open to creditors at the second meeting of creditors to vote to adjourn that meeting, and it is open to them to do so in this case if they consider that their interests may be advanced by further negotiations between the Receivers, the Administrators and Birketu and Illyria on the one hand or CBS on that other, and are prepared to accept any commercial and financial risks that may arise from taking that course. 29 I notice the tentative nature of the observations of Black J. However, I agree with his Honour's views. If I may say so, his Honour's observations are both sound in principle, take into account commercial reality, and are in line with the purpose of entering into a voluntary administration and the Pt 5.3A regime.

SUBMISSIONS OF BROAD PEAK AND TOR AND CONSIDERATION THEREOF 30 Broad Peak and Tor submitted the following overall position: The Administrators have no power to sell the shares in the Virgin Companies outside of a DOCA, which requires the approval of the creditors at the Second Meetings. The Administrators have not sold the Virgin Companies' business or its property, as was within their power. Instead, they have merely agreed to sell some or all of these things, in a confidential agreement. This agreement remains on foot in an executory form. The Administrators will seek to complete that sale of the shares by way of the Bain DOCA. If the Bondholders' DOCA is successful at the Second Meetings, that resolution of the creditors will be a supervening event which makes performance of the backup ASA illegal. The Bain Capital transaction will have been discharged by operation of law, viz the operation of Pt 5.3A of the Act. The Administrators will be prohibited from performing the Bain SID. Instead, by force of ss 444A and 444B of the Act, the Administrators and the Virgin Companies will be bound to execute the Bondholders' DOCA, and it is that DOCA that will bind the creditors, with no power or discretion remaining in the Administrators to act inconsistently with it. 31 I accept that it is up to the creditors to decide the future of the company at the meeting of creditors. 32 However, the ability of creditors to decide the future of the company at the meeting of creditors is subject to the previous conduct of the Administrators exercising their powers under s 437A(1)(c) of the Act. Here the Administrators have, by their entering into the Bain SID, not impermissibly denied the supremacy of the Second Meetings of creditors to determine the fate of the company as required by Pt 5.3A. The Administrators have acted within the scope of their wide statutory powers, and in doing so have effectively precluded the range of options available to the creditors. 33 Then, on this basis, going forward to the Second Meetings, the Administrators are subject to a duty of independence and impartiality in preparing their report and in making recommendations to creditors: see Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (Administrators Appointed) (1996) 63 FCR 391 at 405-406; Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 34 ACSR 391 at [105]. It is primarily administrators upon whom the creditors rely in informing themselves as to the appropriate choice to make in voting on the course to be adopted for the future of the company. 34 The Administrators in preparing for and conducting any meeting of creditors will need to allow a reasonable opportunity for informed debate. At the meeting itself, the Administrators will need to ensure the sense of the meeting is properly ascertained with regard to any question before the meeting. The Administrators will need to take care the meeting is conducted in a proper manner and according to law, and will need to ensure that they act in good faith and in a reasonable manner. However, this will all need to be done having regard to the environment in which the Second Meetings are to be conducted, by which I mean the commercial environment which exists on the basis of the Bain SID. The important matter is for the creditors to be given all the necessary information and have time to consider that information before the meeting of creditors. Any voting mechanism at a meeting must be in accordance with the law, and obviously must ensure that everyone that is entitled to vote is given the opportunity to do so. 35 It is then important to recall the precise nature of the interlocutory application before the Court. The orders sought by Broad Peak and Tor are said to facilitate: (1) the completion and submission of DOCA proposals in advance of voting; (2) debate and discussion of the competing proposals prior to votes being cast, allowing sufficient information with respect to the Bondholders' DOCA in particular to be shared; and (3) reporting on the Bondholders' DOCA in a fashion which is fair, impartial and objective, having regard to the Administrators' statutory duties in this regard. 36 Broad Peak and Tor stress that they do not seek to prioritise their interests over those of other creditors, but seek to ensure that proper procedures are followed for the fair presentation of the Bondholders' DOCA to the Second Meetings so that creditors are given a proper and informed choice as to the future of the Virgin Companies, and the outcome of the Second Meetings is not liable to impeachment. 37 In addition to the observations I have made in these reasons and in the earlier judgments, the starting point must be a recognition of the fact that the legislative regime for the conduct of creditors' meetings prescribes a range of procedural requirements designed to safeguard the interests of the creditors. For instance, pursuant to the IPR, attendees at the meeting must be permitted to propose any relevant resolutions (rr 75-70(1) and (2)(b)), reasonable time to debate proposed resolutions or amendments to those resolutions must be allowed (r 75-70(4)), and those resolutions must be put to a vote at the meeting (r 75-70(5)). It is similarly incumbent upon administrators to include with the notice of the creditors' meeting the details of any proposed DOCA (r 75-225(3)(vii)). The Court can make such orders as it thinks fit in relation to the conduct of the administration under s 90-15(1) of the Insolvency Practice Schedule (Corporations) 2016 (the 'IPSC') (being Sch 2 to the Act) or to modify the operation of Pt 5.3A under s 447A of the Act - including with respect to the conduct of meetings (see eg Eagle, in the matter of Techfront Australia Pty Ltd (administrators appointed) [2020] FCA 542) - although that power is to be exercised having regard to the objects of Pt 5.3A as set out in s 435A of the Act and in the interest of the company's creditors as a whole: see eg Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 at [19], [24] and Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 at [30]. 38 It would be incumbent upon the Administrators to include matters in their report to creditors which may reasonably be expected to be material to the creditors' decision at the Second Meetings. The existence of a competing DOCA and its potential consequences for creditors and the future of the Virgin Companies seems a matter of importance to a creditor's decision whether to adopt the Bain DOCA or to pursue a course which results in an asset sale. This can be attended to in the report to creditors, and I have no reason to assume it will not be so included. 39 The ultimate matter for my consideration is whether the appropriate course is to approve a process (which was said by Broad Peak and Tor to permit the full and fair consideration of all options available to creditors) which would have the effect of directing the Administrators to put the Bondholders' DOCA to a vote by the Administrators at the Second Meetings. 40 However, I do not regard it as appropriate to compel the Administrators to go further than the obligations imposed upon them already. By the process the Administrators have adopted, and so far endorsed by the Court, the creditors will have the opportunity to become informed of the rival DOCAs and the consequences of the Bain SID for the future of the Virgin Companies. 41 In Virgin (No 5) I observed at [14] that s 439C(a) of the Act authorises the creditors to approve a DOCA which is different from the one which accompanied the notice of meeting. However, the statutory scheme does not require an administrator to put forward any competing DOCA proposal: Macks v Viscariello (2017) 130 SASR 1 at [237]-[253]; nor does it require an administrator to adjourn a creditors' meeting to permit an alternative DOCA proposal to be finalised and put to creditors: Promnitz v Indochine Mining Limited (Subject to a Deed of Company Arrangement); In the Matter of Indochine Mining Limited (Subject to a Deed of Company Arrangement) (Indochine) [2015] FCA 857 at [83]-[88]. 42 Then, there is nothing in Pt 5.3A of the Act which prescribes the manner or order in which competing DOCA proposals are to be put to creditors prior to or at the Second Meetings. This will be a matter for the Administrators. It would be open to the Administrators to frame a resolution that invited votes for or against the Bain DOCA or invited creditors to choose between the Bain DOCA and either the ending of the administration under s 439C(b) or winding up under s 439C(c) of the Act. 43 The Administrators have exercised their powers under s 437A(1)(c) of the Act, and no person brings any application to set aside the Bain SID, or seek relief on the basis that the Bain SID was not in the best interests of creditors and in the discharge of the Administrators' fiduciary obligations to the Virgin Companies. 44 As I have said, there is no doubt that the range of options available to the creditors can be circumscribed by the exercise of the broad powers conferred on administrators for the benefit of the company under administration in accordance with s 437A of the Act. The proper exercise of the power to dispose of the whole or part of a company's assets and business will necessarily exclude any decision of creditors as to whether to approve a DOCA that attaches to that disposition. By the time the Second Meetings of creditors take place, the Administrators will need to carry out their responsibilities in accordance with the landscape legitimately created beforehand in accordance with the exercise of their powers under s 437A of the Act. As I have mentioned, the Bain DOCA is a mechanism to complete the sale of the Virgin Companies' assets. If the Bain DOCA is not passed by creditors, the Second Meetings will be adjourned and the sale to Bain Capital will complete as an asset sale. 45 I do not need to consider the extent to which the Bain Capital process of sale was assessed by the Administrators or whether the Bain SID was in the best interests of creditors. I also do not need to consider the extent to which the Bain SID is conditional. As I have indicated, whilst I consider that the Bain SID evidences a binding agreement, it is at least part of the arrangements that are in place that will circumscribe the conduct of the Second Meetings. The Administrators contend that the Bain DOCA will enable the Bain SID to be completed in a manner that is more advantageous to the Virgin Companies and their creditors than will occur if the Bain DOCA is not approved and effectuated. If that does not occur, the Administrators and the Virgin Companies will still be obliged to complete the Bain SID pursuant to the terms of the ASA. 46 As I have alluded to, no application has been made to impugn the business and commercial judgments of the Administrators with which, generally speaking, courts are reluctant to interfere: see eg Hausmann v Smith [2006] NSWSC 682; Robit Nominees Pty Ltd v Oceanlinx Limited (in liq) (Receivers and Managers Appointed), in the matter of Oceanlinx Limited (in liq) (Receivers and Managers Appointed) [2016] FCA 225 at [187]-[188]. 47 It would be inappropriate to constrain the Administrators at this time either in their preparation for and their proposed conduct at the Second Meetings. As Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ observed in Patrick Stevedores at [60]-[62] (citations omitted): … But s 437A confers on the administrators a power to be exercised in their discretion to continue or to desist from trading. That power is to be exercised in the interests of those affected (general creditors as well as employee creditors and shareholders) and having regard to the object (s 435A) of Pt 5.3A … The orders made by North J fettered the discretion. In particular, order 5 precluded the administrators from deciding whether, if trading were resumed, it would be feasible to retain the whole workforce of the employer companies. Decisions of that kind are for the administrators to make, not the Court. They are to be made having regard to all of the circumstances known at the time. It was submitted on behalf of the employees that if the administrators wanted to exercise their powers they could always approach the Federal Court pursuant to the liberty to apply that was reserved. If they could justify their proposed course of conduct, the orders could then be varied to permit it. This contention identifies an error in the orders made by the courts below. The administrators cannot be deprived of the discretion which the Corporations Law reposes in them. True, they must obey the general law in exercising their discretions (93), including the law governing the dismissal of redundant employees, but that is not to say that their discretionary power is subject to court approval. No doubt, a decision made by an administrator may be challenged by appeal under s 1321 of the Corporations Law but there is a radical difference between a challenge to an exercise of discretion under s 1321 and a denial of the administrator's discretionary power without the court's prior approval. 48 In TEN, Black J made the following observation regarding the role of the Court before the views of creditors are known, stating at [127]: … It also seems to me that it is important that the Court does not, in applications of this kind, deal with matters that are properly dealt with after the event, when creditors' views are known, and a full factual examination of the issues can be undertaken without the time pressures of an urgent application for final interlocutory relief. I am not persuaded that the Court should seek to determine any substantive application by Fox, at this point, rather than in the context of an application properly brought under s 445D of the Act. 49 In this case, neither the content of the Administrators' report to creditors in accordance with r 75-225 of the IPR nor the outcome of the Second Meetings is known. In those circumstances, the proper scope for the Court to become involved in the process leading up to the Second Meetings is limited. The position may be contrasted to the role of the Court in convening meetings for the approval of a scheme of arrangement under s 411(1) of the Act, where procedural directions as to voting and provision of information are regularly made. There is no warrant or occasion for the Court to make such orders in the context of a second meeting of creditors under Pt 5.3A. 50 I should indicate that the Act provides remedies for creditors or other interested persons with respect to a company's execution of a DOCA. For example, Divs 11 and 13 of Pt 5.3A (and ss 75-41 to 75-44 of the IPSC) expressly preserve parties' rights to challenge the outcome of any process at the second meeting of creditors that culminates in a DOCA. Section 445D of the Act empowers the Court to set aside a DOCA if the jurisdictional preconditions in sub-s (1) (such as material omission, unfair prejudice or unfair discrimination) are enlivened and the Court exercises its discretion to do so. 51 I now turn to consider prayers for relief 4 through 6, which are directed towards the appointment of an independent practitioner as facilitator who would be given access to documents, information and stakeholders as reasonably required to inform the facilitator's assessment of the Bondholders' DOCA and prepare a limited report on that proposal for inclusion in the Administrators' 439A report to creditors. 52 It is proposed that a facilitator confer with the Administrators in relation to access to information in relation to the Bain DOCA and any rival DOCA proposals, prepare a limited report for inclusion in the report to creditors in respect of each rival DOCA proposal, report to the Court in relation to the work done by the facilitator, and apply to the Court for directions if the facilitator sees fit to do so. 53 Broad Peak and Tor contend that the need for a facilitator in this case flows from a conflict the Administrators face between their statutory duties of impartiality, objectivity and independence on the one hand, and their asserted contractual duties to Bain Capital under the Bain SID. It is to be recalled the Administrators consider the Bain SID to be final and binding and that the terms of the Bain SID prevent the Administrators from acceding to any request for the provision of information or consent to Broad Peak and Tor's engagement with stakeholders. 54 Broad Peak and Tor submit that although the Administrators have maintained that they will report upon the Bondholders' DOCA, that assurance has been given against the Administrators' stance that the Bain SID will deliver a superior outcome for the Virgin Companies. While it is incumbent upon the Administrators to express a view as to the optimal outcome in their s 439A report, Broad Peak and Tor submit that it is difficult to see how the view which one can expect to be expressed in the context of this administration could be characterised as fair, impartial and independent when the Administrators have maintained their view that the Bain SID would realise the best outcome for the Virgin Companies' creditors, notwithstanding their refusal to consider the terms of, and potential outcomes achievable under, the Bondholders' DOCA. It is submitted that that refusal makes it implausible that the inquiries which the Administrators are duty-bound to conduct to inform themselves as to the competing advantages and disadvantages of each proposed course will have been carried out. 55 It is further complained by Broad Peak and Tor that the Administrators' provision of information to the creditors will be constrained by the confidential obligations imposed upon them by the Bain SID, and so it is said one can have little confidence in the adequacy of the Administrators' report with respect to the advantages of the Bondholders' DOCA. In my view, this issue seems to have now gone away with the tender into evidence in this proceeding of the Bain SID (which was provided on a confidential basis to Broad Peak and Tor), with its primary terms otherwise in the public domain. It is my anticipation that the Administrators will fully report to the creditors, including dealing with the Bain SID, especially now that the main terms are in the public domain. 56 I accept that administrators are expected to be free of actual or potential conflicts of interest and actual or apparent bias: In the matter of Recycling Holdings Pty Limited [2015] NSWSC 1016 at [94]. A lack of independence or bias may result in the removal of an administrator where to do so would be for the better conduct of the administration (see eg In the matter of Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) Phoenix Lacquers & Paints Pty Limited v Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) & Ors [2012] NSWSC 214 at [45]). This relief is not sought in the interlocutory application brought by Broad Peak and Tor. 57 Alternative approaches can be adopted to safeguard the interests of creditors in the face of any potential conflict, with one such approach being the appointment of a facilitator. The appointment of an independent insolvency practitioner to prepare a limited report for inclusion in an administrators' report to creditors under s 439A of the Act was a course taken by O'Callaghan J in Re Ten Network Holdings Ltd and Others (2017) 252 FCR 519. However, such a course was ultimately pursued due to real questions as to the actual or apprehended bias of the administrators who had been appointed, which was capable of being cured by the involvement of an independent third party to report on matters which the creditors could not be confident the administrators would report upon fairly and impartially. I do not see this as the situation before the Court in this proceeding. 58 The Administrators have made repeated public statements that they intend to ensure that creditors are properly informed (including with respect to any DOCA proposal by Broad Peak and Tor). I am not persuaded that the Administrators will not comply with their statutory and general law obligations. I am satisfied that Broad Peak and Tor and the other creditors have and will be afforded access to sufficient information for the purposes of the Second Meetings. I see no reason to prioritise the interests of Broad Peak and Tor. As I said in Virgin (No 5) where Broad Peak and Tor were Applicants at [25]: The Applicants will in their capacity as, and along with other, creditors, be provided with the Administrators' report under s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) prior to the next meeting of creditors of the Virgin Companies. The information in that report will need to provide to the creditors material as to the Bain transaction and the likely or expected return to creditors. However, there is no reason to prioritise the interests of the Applicants above those of other creditors at this time. 59 Therefore, I do not consider that the appointment of a facilitator is necessary or required: if the main purpose would be to ensure creditors are properly informed about the alternative proposal sought to be advanced by Broad Peak and Tor, this will in any event occur. 60 I also consider that the appointment of a facilitator is unlikely to enhance the position of the creditors so far as imparting relevant information to them will unnecessarily involve costs to the creditors, and will unnecessarily disrupt the progress of the administrations leading up to the Second Meetings. It has not been established that the Administrators, keeping in mind the constraints of the Bain SID, will be acting inappropriately in preparing for and conducting the Second Meetings. 61 In my view, the interlocutory application brought by Broad Peak and Tor should be dismissed with costs. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton.

SCHEDULE OF PARTIES NSD 464 of 2020 Plaintiffs Fourth Plaintiff: VIRGIN AUSTRALIA INTERNATIONAL HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 155 860 021 Fifth Plaintiff: VIRGIN AUSTRALIA INTERNATIONAL AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 125 580 823 Sixth Plaintiff: VIRGIN AUSTRALIA AIRLINES (SE ASIA) PTY LTD (ADMINISTRATORS APPOINTED) ACN 097 892 389 Seventh Plaintiff: VIRGIN AUSTRALIA AIRLINES HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 093 924 675 Eighth Plaintiff: VAH NEWCO NO.1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 160 881 345 Ninth Plaintiff: TIGER AIRWAYS AUSTRALIA PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 124 369 008 Tenth Plaintiff: VIRGIN AUSTRALIA AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 090 670 965 Eleventh Plaintiff: VA BORROWER 2019 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 633 241 059 Twelfth Plaintiff: VA BORROWER 2019 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 637 371 343 Thirteenth Plaintiff: VIRGIN TECH PTY LTD (ADMINISTRATORS APPOINTED) ACN 101 808 879 Fourteenth Plaintiff: SHORT HAUL 2018 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 622 014 831 Fifteenth Plaintiff: SHORT HAUL 2017 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 617 644 390 Sixteenth Plaintiff: SHORT HAUL 2017 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 617 644 443 Seventeenth Plaintiff: SHORT HAUL 2017 NO. 3 PTY LTD (ADMINISTRATORS APPOINTED) ACN 622 014 813 Eighteenth Plaintiff: VBNC5 PTY LTD (ADMINISTRATORS APPOINTED) ACN 119 691 502 Nineteenth Plaintiff: A.C.N. 098 904 262 PTY LTD (ADMINISTRATORS APPOINTED) ACN 098 904 262 Twentieth Plaintiff: VIRGIN AUSTRALIA REGIONAL AIRLINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 008 997 662 Twenty-first Plaintiff: VIRGIN AUSTRALIA HOLIDAYS PTY LTD (ADMINISTRATORS APPOINTED) ACN 118 552 159 Twenty-second Plaintiff: VB VENTURES PTY LTD (ADMINISTRATORS APPOINTED) ACN 125 139 004 Twenty-third Plaintiff: VIRGIN AUSTRALIA CARGO PTY LTD (ADMINISTRATORS APPOINTED) ACN 600 667 838 Twenty-fourth Plaintiff: VB LEASECO PTY LTD (ADMINISTRATORS APPOINTED) ACN 134 268 741 Twenty-fifth Plaintiff: VA HOLD CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 165 507 157 Twenty-sixth Plaintiff: VA LEASE CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 165 507 291 Twenty-seventh Plaintiff: VIRGIN AUSTRALIA 2013-1 ISSUER CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 165 507 326 Twenty-eighth Plaintiff: 737 2012 NO.1 PTY. LTD (ADMINISTRATORS APPOINTED) ACN 154 201 859 Twenty-ninth Plaintiff: 737 2012 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 154 225 064 Thirtieth Plaintiff: SHORT HAUL 2016 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 612 766 328 Thirty-first Plaintiff: SHORT HAUL 2016 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 612 796 077 Thirty-second Plaintiff: SHORT HAUL 2014 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 600 809 612 Thirty-third Plaintiff: SHORT HAUL 2014 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 600 878 199 Thirty-fourth Plaintiff: VA REGIONAL LEASECO PTY LTD (ADMINISTRATORS APPOINTED) ACN 127 491 605 Thirty-fifth Plaintiff: VB 800 2009 PTY LTD (ADMINISTRATORS APPOINTED) ACN 135 488 934 Thirty-sixth Plaintiff: VB LEASECO NO 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 142 533 319 Thirty-seventh Plaintiff: VB LH 2008 NO. 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 134 280 354 Thirty-eighth Plaintiff: VB LH 2008 NO. 2 PTY LTD (ADMINISTRATORS APPOINTED) ACN 134 288 805 Thirty-ninth Plaintiff: VB PDP 2010-11 PTY LTD (ADMINISTRATORS APPOINTED) ACN 140 818 266 Fortieth Plaintiff: TIGER INTERNATIONAL NUMBER 1 PTY LTD (ADMINISTRATORS APPOINTED) ACN 606 131 944

In the matter of Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) Phoenix Lacquers & Paints Pty Limited v Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) & Ors [2012] NSWSC 214 In the matter of Keystone Group Holdings Pty Ltd (recs and mgrs apptd) (admins apptd) & Ors [2016] NSWSC 1604 In the matter of Pan Pharmaceuticals Limited [2003] FCA 598 In the matter of Recycling Holdings Pty Limited [2015] NSWSC 1016 In the matter of TEN Network Holdings Limited (Admins Apptd) (Recs and Mgrs Apptd) and Others [2017] NSWSC 1247 Lehman Brothers Holdings Inc v City of Swan and Others (2010) 240 CLR 509 Macks v Viscariello (2017) 130 SASR 1 Mentha, in the matter of Griffin Coal Mining Company Pty Ltd (administrators appointed) [2010] FCA 1469 Mighty River International Limited v Hughes and Bredenkamp (as deed administrators of Mesa Minerals Limited) and Another (2018) 265 CLR 480 Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (Administrators Appointed) (1996) 63 FCR 391 Patrick Stevedores Operations No 2 Proprietary Limited and Others v Maritime Union of Australia & Others (1998) 195 CLR 1 Promnitz v Indochine Mining Limited (Subject to a Deed of Company Arrangement); In the Matter of Indochine Mining Limited (Subject to a Deed of Company Arrangement) (Indochine) [2015] FCA 857 Re Ten Network Holdings Ltd and Others (2017) 252 FCR 519 Robit Nominees Pty Ltd v Oceanlinx Limited (in liq) (Receivers and Managers Appointed), in the matter of Oceanlinx Limited (in liq) (Receivers and Managers Appointed) [2016] FCA 225 Secatore, in the matter of Fletcher Jones and Staff Pty Ltd (Administrators Appointed) [2011] FCA 1493 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 3) [2020] FCA 726 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 4) [2020] FCA 927 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 5) [2020] FCA 986 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 6) [2020] FCA 1172 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182

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