Federal Court of Australia

Park (Deed Administrator), in the matter of Ellume Limited (Subject to Deed of Company Arrangement) [2023] FCA 374

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 1322(4)(d) or in the alternative section 447A of the Corporations Act 2001 (Cth) (the “Act”) and section 90-15 of the Insolvency Practice Schedule (Corporations) being in Schedule 2 of the Act that:

(a)    a meeting of creditors of the Second Applicant be convened on 28 April 2023 (the “Meeting”);

(b)    the time for giving notice of the Meeting to creditors of the Second Applicant required under rule 75-20 of the Insolvency Practice Rules (Corporations) 2016 be abridged to four (4) business days, so that it shall be sufficient to give notice by 21 April 2023;

(c)    notice of the Meeting is to be in the form annexed to the affidavit of Joanne Emily Dunn sworn on 20 April 2023 (“Notice”) and provided in accordance with Order 2 below.

2.    The Notice is to be given to creditors of the Company by taking the following steps by 6.00 pm on 21 April 2023:

(a)    where the First Applicants have an email address for a creditor, by sending the Notice by email to each such creditor, irrespective of whether the creditor has nominated to receive electronic notifications of documents in accordance with section 600G of the Act;

(b)    where the First Applicants do not have an email address for a creditor but do have a postal address for that creditor, by causing the Notice to be sent via express post;

(c)    by publishing the Notice on the website maintained by the Applicants at https://www.fticonsulting.com/creditors/ellume-limited.

3.    The costs of and incidental to this application be costs and expenses in the deed administration of the Second Applicant.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from Transcript)

DOWNES J:

1    This is an urgent application brought by the first applicants (the deed administrators) seeking an abridgment of time to give notice of a meeting of creditors to be held pursuant to s 445A of the Corporations Act 2001 (Cth) (the Act) to enable the creditors to vote on a resolution to amend a definition at clause 1.1 of a deed of company arrangement (the DOCA) varying the definition of the “Long Stop Date” in the DOCA from “28 April 2023” to “12 June 2023”, and thus prevent the automatic termination of the DOCA.

2    Some background to the administration is contained in the earlier decision of Park (Administrator), in the matter of Ellume Limited (Administrators Appointed) v Evangayle Pty Ltd (Trustee) [2022] FCA 1102.

3    The deed administrators were appointed as administrators of the second applicant (the Company) on 31 August 2022. After their appointment, the administrators conducted a sale process and sought proposals for the recapitalisation of the Company. Ultimately, an offer from Hough Consolidated Pty Ltd (Hough) was accepted. The second report to creditors included a proposal for a DOCA from Hough. At the second meeting of creditors, the creditors resolved that the company enter into the DOCA.

4    The terms of the DOCA provided, amongst other things, that:

(1)    completion of the DOCA is conditional upon clauses 5.1(a) to 5.1(k) of the DOCA (conditions precedent) being satisfied by the “CP Satisfaction Date” as defined in the DOCA, which was 10 March 2023;

(2)    at completion of the DOCA, Hough was required to pay the “Contribution Amount” under the DOCA, being the amount of US$38 million.

5    Save for clauses 5.1(a) and 5.1(h) of the DOCA, as at 30 March 2023, the conditions precedent had either been waived or satisfied, meaning that the “End Date” as defined under the DOCA was to be 4 April 2023.

6    The deed administrators and Hough agreed to a number of extensions to extend completion of the DOCA to 28 April 2023 to allow Hough additional time to finalise its overseas funding of the Contribution Amount.

7    Under the definition provision in the DOCA, the “Long Stop Date” is defined as 28 April 2023. Clause 7.2 of the DOCA sets out the events that create an automatic termination of the DOCA. One such event is if conditions precedent (such as payment of the Contribution Amount) are not satisfied by the earlier of the CP Satisfaction Date and the Long Stop Date, in which case the winding up of the Company is inevitable.

8    Yesterday, the deed administrators received a request from Hough to vary the definition of Long Stop Date to 12 June 2023. That request was made on the basis that Hough requires additional time to finalise its funding of the Contribution Amount in order to attend to completion.

9    Pursuant to clause 15.1 of the DOCA, the definition of Long Stop Date can only be varied by a resolution passed at a meeting of creditors of the Company, convened in accordance with Div 75 of the Insolvency Practice Schedule (being Schedule 2 to the Act).

10    In the opinion of the deed administrators, the effectuation of the DOCA is in the best interests of creditors. Based on current information, the deed administrators consider that if the DOCA is completed, there will be a likely return to priority creditors of 100 cents in the dollar, secured creditors of 100 cents in the dollar, QIAGEN (being the companies referred to in paragraph 19 of Ms Dunn’s first affidavit) of 47 cents in the dollar, small claim creditors (whose claims are less than $20,000) of 50 cents in the dollar, noteholder creditors of between 15 to 35 cents in the dollar and other unsecured creditors between 0 to 20 cents in the dollar. If the DOCA is not completed and the Company is wound up and the assets of the Company are sold, there would be no return to creditors (including priority creditors) other than a possible return to secured creditors, which would be less than would be received pursuant to the DOCA.

11    For these reasons, I am satisfied that the opinion of the deed administrators, being that the effectuation of the DOCA is in the best interests of creditors, is a justified one and supports the orders which are sought today.

12    That is, it is appropriate to abridge the time for service of a notice of meeting of creditors under r 75-20 of the Insolvency Practice Rules (Corporations) 2016 (Cth) to allow for a meeting of creditors to be convened on 28 April 2023 with service of the notice to occur today (21 April 2023) in order for a vote to take place, as required by the DOCA. This is so notwithstanding that r 75-20 of the Insolvency Practice Rules would otherwise require that 10 business days be given for the meeting to be held. I am satisfied that if such notice was given in this case, then the meeting would be futile, as the DOCA would have automatically terminated on 28 April 2023.

13    As submitted by Ms Conway of counsel, who appeared for the applicants, both the Act and the Insolvency Practice Schedule provide mechanisms to enable the Court to abridge the period for service of notice of the meeting of creditors. That is, s 1322(4)(d) of the Act, or, alternatively, the general power provided under s 90-15 of the Insolvency Practice Schedule.

14    For these reasons, I am satisfied that it is appropriate to make the order in paragraph 1 of the draft order provided by the applicants with certain modifications which the applicants accepted were appropriate.

15    I am also satisfied that, for reasons that I will explain, it is appropriate that notice can be validly given to the creditors by email to addresses provided by the majority of the creditors but otherwise by express post to the handful of creditors who have not provided an email address. A notice is also proposed to be published on the website maintained by the applicants.

16    It was submitted and I agree that, as the meeting will be held one week from today, the deed administrators should provide notice of the proposed meeting to creditors as quickly as possible. There are 965 creditors of the company, and the deed administrators have active email addresses for 959 of those creditors. The deed administrators anticipate issuing 1,018 emails in total. As for the six creditors whose email addresses have not been provided, the order proposes that a notice be posted by express post today.

17    Notification by email is permitted pursuant to s 600G of the Act. Pursuant to s 600G(4), it may only be used if at the time it is used or information is given (a) it is reasonable to expect that the document would be readily accessible so as to be usable for subsequent reference and (b) there is a nominated electronic address in relation to the recipient. As to this second requirement and as I have already indicated, s 600G(4)(b) is satisfied in relation to 959 of the 965 creditors. I am also satisfied that it would be reasonable to expect that if the deed administrators send the notice of meeting by email to the nominated email addresses, that notice will be readily accessible by those creditors so as to be usable for subsequent reference by the recipients. Accordingly, I accept the submission that the proposed method of notification as contemplated in paragraph 2 of the draft order is appropriate with, again, minor modifications which were accepted by the applicants.

18    The final order sought was that the costs of and incidental to this application be costs and expenses in the deed administration of the Company. Again, that is an appropriate order in the circumstances.

Associate:

Dated:    24 April 2023