1 To uphold the protection provided under the s 51 (xxxi) of the...

1 To uphold the protection provided under the s 51 (xxxi) of the Constitution relating to acquisition of properties on just terms, I object the applicant’s leave application under s 444GA of the Corporations Act 2001 (Cth). If the applicant’s application for leave to transfer all of the existing shares of Ten Network Holdings Ltd (Subject to a Deed of Company Arrangement) (Receivers and Managers Appointed)(TNHL) could be successful in the particular circumstances of the matter, the constitutional validity of s 444GA of the Corporations Act 2001 would be in serious doubt.

2 The applicant’s failure to consider the implications of the major shareholders’ alternative proposal’s equity component offer in moving this s 444GA application is objected. It is very apparent that two major existing shareholders of TNHL, Birketu and Illyria, who are related to two prominent media entrepreneurs reputable and successful both at domestic and internationally, Mr. Bruce Gordon and Mr. Lachlan Murdoch, have also put up a, at least similar, recapitalisation proposal for a couple of times to get back the business on foot and even to prosperity. Their recapitalisation proposal offers or offered existing shareholders 25% equity of the recapitalised company. Just as ‘the compulsory acquisition or extinguishment of property rights is a serious thing and it is an even more serious thing if the compulsory acquisition or extinguishment is unaccompanied by fair compensation’ as pronounced by Heydon J in the context of Pt 5.3A of the Corporations Act in Lehman Brothers Holdings Inc v City of Swan (2010) 240 CLR 509, 530 [63], the applicant’s turning blind to the terms of the alternative recapitalisation proposal on equity offer to existing shareholders while conducting the recapitalisation of TNHL and moving to apply for leave under s 444GA is a serious matter, and it will unsurprisingly meet objections from shareholders at all levels.
The alternative proposal’s equity offer component has relevance to the value of the members’ shares. Market or willing bidders can better determine the value of share interest. Also in the alternative proposal, share of TNHL will be relisted. The future value if relisted is important for considering the value of the shares.

3 I object this applicant’s reliance on expert value report to prove there is no unfair prejudice to members of TNHL. Value of the shares should not be the only base to decide whether the s 444GA application unfairly prejudices the members of TNHL. Although prior cases had a particular focus on the value of shares to decide the issue of prejudice and unfair prejudice under s 444GA(3), this case is very different to those in which liquidation was almost the only alternative. In the current matter, there is or was an alternative recapitalisation proposal, which arguably is better, at least from the point of justice concern. The major shareholders, along with so many small shareholders, have contributed so much to the maintenance and transformation of the business, a national brand and even icon, and are willing to continue contributing to the business; it is unfair to ignore the past contributions of shareholders to the business, on which the business will keep going. When there is no other better or fairer option as in previous case authorities, expert value report is referenced to.

Share interest in a listed company is special. It always has an element of speculation, which has a special effect on the development of our industries and economy, particular mining interests. The inherent element of speculation of share interest is different from speculating on something. The value of share interest in a listed company or will-be listed company shall not be solely relied on book value or expert report value, at most a benchmark reference.

Share as a property is of proprietary nature. It stands for many things, not only its economic value. As to a long-established national media company, its share interest has some other special benefits. To be able to voice up in a democratic society is among them. That’s why interested parties might pay a high premium to get a shareholding in a media company.

4. D: I object the conducts of the applicant during the voluntary administration The applicant’s conduct and its proposed s 444GA application has the consequences of facilitating oppressive conducts on other members of the company.
The company entered into voluntary administration in a dramatic way. Upon receipt a letter from two of three shareholder guarantors, who threatened the directors to stop drawing current CBA loan facility, the directors called in the applicant who had been working for TNHL for some time, and placed the company into voluntary administration. Several issues worth raising here:

• Whether there is a repudiation of guarantee contract by the shareholder guarantors’ threatening not to allow the company to draw down any current CBA loan facility, and potential damage claim for the company from the shareholder guarantors? It was reported that the management had relied on shareholder guarantors’ promise or acquiescence to continue the planned business transformation process and spend a lot of cash. After all, the shareholder guarantors were entitled to a very generous guarantee fee for their guarantee obligation under their guarantee contract. It is a strong reason that the shareholder guarantors were reliable to keep their promise on the currrent loan facility, at least to some time close to the expiry of the CBA loan facility, December 2017.

• Because of the applicant’s lack of perceived impartiality, this crucial event, that the shareholder guarantor’s threatening not to allow draw-down on any current CBA loan facility and subsequent voluntary administration, cannot be regarded as being reasonably investigated.

• This event has potential consequences, not only to the company, but also to those unsecured creditors.

• This event, and the subsequent receipt of more than $30 million, almost half of the market capitalisation value of TNHL by the shareholder guarantors, pose indication of oppressive conduct by guarantor shareholders against other members of the company, and unfair benefit received by guarantor shareholders to the detriment of other creditors or shareholders.

The applicant’s failure to investigate or deal with the above crucial matter puts doubts on the overall fairness to creditors as a whole and other shareholders. The applicant’s s 444GA application can have the consequences of facilitating oppressive conducts by some big shareholders against other members of the company. In that sense, it will also unfairly prejudice the other non-guarantor members of the company.

5. I object the applicant’s complete disregard of shareholders’ interest, especially other non-guarantor shareholders. The applicant appears to rely on pt 5.3A of the Corporations Act to conduct their dealings.
Pt 5.3A has a particular focus on the interest of creditors as a whole and object of maximising the chance of business’ existence. However, it does not indicate anything that shareholders’ interest can be completely disregarded. Pt 5.3A is not an isolated part of the Corporations Act, which has a notion of shareholder primacy. Corporation law itself is subject to broader general law, including principles of equity.
S 444GA(1)(b) and s 444GA(3) is not totally disconnected with ss 232-233 of the Corporations Act, in relation to oppressive conduct of affairs. In my humble opinion, s 232 can have the effect to circumscribe the scope of s 444GA(1)(b) and s 444GA(3), so that a court would not sanction oppressive conduct imposed on either whole or some members of the company.
Given the applicant’s lack of perceived impartiality as an administrator, it requires high-standard investigation by the applicant before moving to the s 444GA application. Otherwise, the applicant will pose a threat to the reputation of the insolvency industry.