Destra Corporation Limited, in the matter of Destra Corporation Limited (Receivers and Managers Appointed)(in liquidation) [2010] FCA 150 (2 March 2010)

Last Updated: 9 April 2010

FEDERAL COURT OF AUSTRALIA

Destra Corporation Limited, in the matter of Destra Corporation Limited (Receivers and Managers Appointed)(in liquidation) [2010] FCA 150

Citation:		Destra Corporation Limited, in the matter of Destra Corporation Limited (Receivers and Managers Appointed)(in liquidation) [2010] FCA 150
Parties:		DESTRA CORPORATION LIMITED (RECEIVERS AND MANAGERS APPOINTED)(IN LIQUIDATION) AND THE COMPANIES LISTED IN SCHEDULE A
File number:		NSD 1056 of 2009
Judge:		STONE J
Date of judgment:		2 March 2010
Catchwords:		CORPORATIONS – whether winding up of companies should be terminated – whether companies solvent after implementation of deed of company arrangement – whether interest of present and future creditors protected – whether termination of winding up contrary to interests of liquidators.
Legislation:		Corporations Act 2001 (Cth) s 482(1), s 482(2A)
Cases cited:		Brolrik Pty Ltd v Sambah Holdings Pty Ltd (2001) 164 FLR 91 McAusland v Commissioner of Taxation (1993) 47 FCR 369
Date of hearing:	18 December 2009
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	13
Counsel for the Plaintiff:	Mr J Baird

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1056 of 2009

BETWEEN:

DESTRA CORPORATION LIMITED (RECEIVERS AND MANAGERS APPOINTED)(IN LIQUIDATION) AND THE COMPANIES LISTED IN SCHEDULE A Plaintiffs

JUDGE:	STONE J
DATE OF ORDER:	18 DECEMBER 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Pursuant to section 482(1), the winding up of each of the Destra Group companies listed in schedule B to these orders be terminated.
2. These orders be entered forthwith.
   

SCHEDULE A

#	COMPANY	ACN
1	ACN 119 608 669 Pty Ltd (formerly MESS AND NOISE PTY LTD)	ACN 119 608 669
2	ACN 007 357 495 PTY LTD (formerly AUSTRALIAN FOOTBALL VIDEO PTY LTD)	ACN 007 357 495
3	BECKER MAGNA FILMS PTY LTD	ACN 095 385 783
4	ACN 100 517 860 PTY LTD (formerly BRAND NEW MEDIA PTY LTD)	ACN 100 517 860
5	ACN 118 954 046 PTY LTD (formerly BRAND NEW MEDIA LIVE PTY LTD)	ACN 118 954 046
6	ACN 073 153 705 PTY LTD (formerly CENTRAL STATION PTY LTD)	ACN 073 153 705
7	ACN 064 966 963 PTY LTD (formerly CENTRAL STATION (HOLDINGS) PTY LTD)	ACN 064 966 963
8	DESTRA CORPORATION LTD	ACN 006 070 480
9	DESTRA MEDIA PTY LTD	ACN 094 832 694
10	DESTRA MUSIC PTY LTD	ACN 122 385 826
11	DESTRA MUSIC (HOLDINGS) PTY LTD	ACN 128 663721
12	DESTRA VISION PTY LTD	ACN 128 657 278
13	DESTRA MP PTY LTD (formerly MAGNA PACIFIC PTY LTD)	ACN 010 465 666
14	DESTRA MP (HOLDINGS) PTY LTD (formerly MAGNA PACIFIC (HOLDINGS) PTY LTD	ACN 010 731 718
15	MP3.COM.AU PTY LTD	ACN 093 883 295
16	MRA ENTERTAINMENT GROUP PTY LTD	ACN 083 796 178
17	NICE SHORTS PTY LTD	ACN 119 343 654
18	RAJON DISTRIBUTION PTY LTD	ACN 107 483 474
19	RAJON VISION PTY LTD	ACN 113 091 393
20	ROCVALE ENTERTAINMENT PTY LTD	ACN 081 708 590
21	THE SQUARE GROUP PTY LTD	ACN 113 147 916
22	ACN 056 128 235 PTY LTD (formerly VISUAL ENTERTAINMENT GROUP PTY LTD	ACN 056 128 235
23	3D WORLD AUSTRALIA PTY LTD	ACN 127 775 928

SCHEDULE B

#	COMPANY	ACN
1	ACN 119 608 669 Pty Ltd (formerly MESS AND NOISE PTY LTD)	ACN 119 608 669
2	ACN 007 357 495 PTY LTD (formerly AUSTRALIAN FOOTBALL VIDEO PTY LTD)	ACN 007 357 495
3	BECKER MAGNA FILMS PTY LTD	ACN 095 385 783
4	ACN 100 517 860 PTY LTD (formerly BRAND NEW MEDIA PTY LTD)	ACN 100 517 860
5	ACN 118 954 046 PTY LTD (formerly BRAND NEW MEDIA LIVE PTY LTD)	ACN 118 954 046
6	ACN 073 153 705 PTY LTD (formerly CENTRAL STATION PTY LTD)	ACN 073 153 705
7	ACN 064 966 963 PTY LTD (formerly CENTRAL STATION (HOLDINGS) PTY LTD)	ACN 064 966 963
8	DESTRA CORPORATION LTD	ACN 006 070 480
9	DESTRA MEDIA PTY LTD	ACN 094 832 694
10	DESTRA MUSIC PTY LTD	ACN 122 385 826
11	DESTRA MUSIC (HOLDINGS) PTY LTD	ACN 128 663721
12	DESTRA VISION PTY LTD	ACN 128 657 278
13	MP3.COM.AU PTY LTD	ACN 093 883 295
14	MRA ENTERTAINMENT GROUP PTY LTD	ACN 083 796 178
15	NICE SHORTS PTY LTD	ACN 119 343 654
16	RAJON DISTRIBUTION PTY LTD	ACN 107 483 474
17	RAJON VISION PTY LTD	ACN 113 091 393
18	ROCVALE ENTERTAINMENT PTY LTD	ACN 081 708 590
19	THE SQUARE GROUP PTY LTD	ACN 113 147 916
20	ACN 056 128 235 PTY LTD (formerly VISUAL ENTERTAINMENT GROUP PTY LTD	ACN 056 128 235
21	3D WORLD AUSTRALIA PTY LTD	ACN 127 775 928

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1056 of 2009

BETWEEN:

DESTRA CORPORATION LIMITED (RECEIVERS AND MANAGERS APPOINTED)(IN LIQUIDATION) AND THE COMPANIES LISTED IN SCHEDULE A Plaintiffs

JUDGE:	STONE J
DATE:	2 MARCH 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 18 December 2009, the plaintiffs, in their capacity as liquidators of Destra Corporation Limited (Receivers and Managers appointed) (in liquidation) and the companies listed in Schedule A to these reasons (together the Destra Group), sought an order under s 482(1) of the Corporations Act 2001 (Cth) that the winding up of each of the companies in the Destra Group be terminated. At the conclusion of the hearing I made the orders sought by the plaintiffs. These are my reasons for agreeing to make those orders.
   2. On 8 October 2009, on the application of the present plaintiffs in their capacity as liquidators, Lindgren J made orders which included the following:
      1. within the Destra Group proofs that they have previously Pursuant to section 436B(2) of the Corporations Act 2001(Cth) (the Act), the Plaintiffs have leave to appoint themselves as administrators jointly and severally of each of the companies listed in Schedule A to these Orders (the Destra Group).
      2. Pursuant to section 448C(1) of the Act, the Plaintiffs have leave to consent to being appointed as administrators of a deed of company arrangement that may be entered into by any company or companies within the Destra Group.
      3. Pursuant to section 447A of the Act, Part 5.3A of the Act is to operate in relation to each of the companies in the Destra Group in the following manner:

(a) the obligation to convene the first meeting of creditors otherwise imposed by section 436E of the Act does not apply;
(b) notwithstanding section 439A(2) of the Act, the meeting referred to in section 439A(1) of the Act in respect of each of the companies in the Destra Group may be held at any time during the convening period, subject to compliance with section 439A(3) of the Act; and
(c) the Plaintiffs may accept as proofs of debt in the administration of any company submitted, and on the basis thereof to admit or reject claims of creditors for voting purposes at any meeting called pursuant to section 439A(1) of the Act.

3. The plaintiffs’ purpose in seeking to be appointed as administrators was to facilitate the Destra Group entering into a deed of company arrangement as contemplated in order 2 of Lindgren J’s orders. Pursuant to those orders the plaintiffs appointed themselves as administrators of each of the companies in the Destra Group. In an affidavit sworn on 17 December 2009, Andrew Leslie Smith, a Chartered Accountant and Official Liquidator and one of the plaintiffs, deposed to the following:
   • on 9 November 2009 the plaintiffs issued a supplementary report to creditors in which they recommended that the creditors execute a deed of company arrangement (DOCA) proposed by Prime Media Group Ltd (Prime);
   • at a meeting of each of the Destra Group creditors on 18 November 2009 the creditors resolved that each of the Destra Group companies execute the DOCA and that the plaintiffs be appointed as deed administrators of the DOCA;
   • The DOCA was executed on 8 December 2009 by Prime and the plaintiffs on behalf of the companies in the Destra Group except for Destra MP Pty Ltd and Destra MP (Holdings) Pty Ltd (together the Magna Pacific Entities). The Magna Pacific Entities were carved out of the arrangements in the DOCA because a dispute involving an employee was not able to be resolved in time.
4. The terms of the DOCA are relevant to the solvency of the Destra Group. In his affidavit, Mr Smith noted that the DOCA included the following key terms:

(a) the operation of the Doca is conditional upon (clause 2 of the DOCA):
(i) Prime contributing the sum of $946,558.00 to the deed fund to be distributed to creditors under the DOCA (Deed Fund Contribution);
(ii) Prime contributing the sum of $154,605 to the liquidators of the Magna Pacific Entities (Magna Contribution) in exchange for the [Plaintiffs] in their capacity as liquidators of the Magna Pacific Entities) entering into a deed poll releasing, inter alia, Prime and its directors and Destra and its directors from any claims relating to the affairs of the Destra Group (Magna Pacific Deed Poll); and
(iii) The [Plaintiffs] in their capacity as administrators of the Destra Group executing a deed poll releasing, inter alia, Prime and its directors and Destra and its directors from any claims relating to the affairs of the Destra Group (Destra Group Deed Poll).
(b) at the election of Prime the [Plaintiffs] must execute the Creditors Trust Deed annexed to the DOCA in order that there can be a further subscription of shares in the capital of Destra Corporaton Ltd (Recapitalisation Plan) (clause 15 of the DOCA); and
(c) any proceeds realised from the Recapitalisation Plan will be paid to Prime up to the amounts contributed by Prime in the administration and the DOCA (clause 15.5 of the DOCA).

5. Mr Smith’s evidence established that the Magna Pacific Deed Poll and the Destra Group Deed Poll were both executed on 8 December 2009 and the Deed Fund Contribution and the Magna Contribution were paid to the plaintiffs on 11 December 2009.
6. Clause 16 of the DOCA provides:

16.1 All Claims Against Group Company Extinguished
On and from the Commencement Date, the Creditors accept their right to participate under the terms of this Deed in full satisfaction and complete discharge of all Claims which they have or claim to have against each Group Company. That release and extinguishment shall be effected either:
(a) upon distribution of the Deed Fund; or
(b) upon the creation of the Creditors Trust
whichever is the first to occur.

7. At the time of the hearing before me the only matter left for implementation under the DOCA was the distribution of the funds payable under the DOCA in accordance with cl 16.1(a) or (b). Clause 16.3 of the DOCA provides that, subject to s 444D of the Corporations Act, the DOCA “may be pleaded by the Group Company or the Administrators against any person having a Claim against the Group Company as an absolute bar and defence to any legal proceedings brought ... in respect of that Claim”. Exhibited to Mr Smith’s affidavit was a consolidated balance sheet for the Destra Group showing the net asset position before and after the implementation of the DOCA. The balance sheet shows that implementation of the DOCA achieves financial stability for the Destra Group and that, pursuant to cl 16 of the DOCA, there would be no liabilities or claims outstanding in relation to the Destra Group.
8. In determining whether an order under s 482 determining a company liquidation should be made the Court is necessarily and primarily concerned to ascertain the solvency of the company; Brolrik Pty Ltd v Sambah Holdings Pty Ltd (2001) 164 FLR 91. Section 482(2A) provides that the Court must have regard to “all of the following matters” in considering whether to make such an order:

(a) any report that has been given to the Court by:
(i) the administrator, or a former administrator, of the company; or
(ii) the liquidator, or a former liquidator, of the company; or
(iii) ASIC;
and that contains an allegation that an officer of the company has engaged in misconduct.
(b) any report that has been lodged with ASIC by:
(i) the administrator, or a former administrator, of the company; or
(ii) the liquidator, or a former liquidator, of the company;
and that contains an allegation that an officer of the company has engaged in misconduct;
(c) the decision of the company’s creditors to resolve that the company execute a deed of company arrangement;
(d) the statement that was given under paragraph 439A(4)(b) when the company was under administration;
(e) whether the deed of company arrangement is likely to result in the company becoming or remaining insolvent;
(f) any other relevant matters.

9. In McAusland v Commissioner of Taxation (1993) 47 FCR 369 at 374. Gummow J said of s 383 of the Companies (New South Wales) Code, that it was “a provision plainly remedial in nature” and “should be given a generous construction so as to permit the fullest relief which will be allowed on a fair reading of its language”. Section 383 was a predecessor of s 482 and his Honour’s approach equally applies to s 482.
10. In the present matter the evidence of Mr Smith, including that contained in the documents exhibited to his affidavit, satisfied me that the orders sought by the plaintiffs should be made. The evidence established that the execution of the DOCA had been approved by the creditors and that the interests of creditors had been addressed by the DOCA.
11. There was no risk to future creditors as the effect of the DOCA was to release the companies subject to the DOCA from all claims that might be brought by creditors. There was no evidence of any report being given to ASIC alleging that an officer of the company had engaged in misconduct and no such report was before the Court.
12. I am also satisfied that the proposed termination of the winding up was not contrary to the interests of the liquidators who were the plaintiffs in the application. Moreover, as mentioned above, the evidence satisfies me that the implementation of the DOCA achieves financial stability for the Destra Group.
13. In conclusion, having taken into account all of the considerations referred to in s 482(2A), I was satisfied that the orders sought by the plaintiffs should be made.

I certify that the preceding thirteen (13) numbered paragraphs is a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate:

Dated: 2 March 2010

SCHEDULE A

#	COMPANY	ACN
1	ACN 119 608 669 Pty Ltd (formerly MESS AND NOISE PTY LTD)	ACN 119 608 669
2	ACN 007 357 495 PTY LTD (formerly AUSTRALIAN FOOTBALL VIDEO PTY LTD)	ACN 007 357 495
3	BECKER MAGNA FILMS PTY LTD	ACN 095 385 783
4	ACN 100 517 860 PTY LTD (formerly BRAND NEW MEDIA PTY LTD)	ACN 100 517 860
5	ACN 118 954 046 PTY LTD (formerly BRAND NEW MEDIA LIVE PTY LTD)	ACN 118 954 046
6	ACN 073 153 705 PTY LTD (formerly CENTRAL STATION PTY LTD)	ACN 073 153 705
7	ACN 064 966 963 PTY LTD (formerly CENTRAL STATION (HOLDINGS) PTY LTD)	ACN 064 966 963
8	DESTRA CORPORATION LTD	ACN 006 070 480
9	DESTRA MEDIA PTY LTD	ACN 094 832 694
10	DESTRA MUSIC PTY LTD	ACN 122 385 826
11	DESTRA MUSIC (HOLDINGS) PTY LTD	ACN 128 663721
12	DESTRA VISION PTY LTD	ACN 128 657 278
13	DESTRA MP PTY LTD (formerly MAGNA PACIFIC PTY LTD)	ACN 010 465 666
14	DESTRA MP (HOLDINGS) PTY LTD (formerly MAGNA PACIFIC (HOLDINGS) PTY LTD	ACN 010 731 718
15	MP3.COM.AU PTY LTD	ACN 093 883 295
16	MRA ENTERTAINMENT GROUP PTY LTD	ACN 083 796 178
17	NICE SHORTS PTY LTD	ACN 119 343 654
18	RAJON DISTRIBUTION PTY LTD	ACN 107 483 474
19	RAJON VISION PTY LTD	ACN 113 091 393
20	ROCVALE ENTERTAINMENT PTY LTD	ACN 081 708 590
21	THE SQUARE GROUP PTY LTD	ACN 113 147 916
22	ACN 056 128 235 PTY LTD (formerly VISUAL ENTERTAINMENT GROUP PTY LTD	ACN 056 128 235
23	3D WORLD AUSTRALIA PTY LTD	ACN 127 775 928