In the matter of ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd) and ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd) [2019] NSWSC 869

In the matter of ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd) and ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd) [2019] NSWSC 869

The claims of Noteholders under the Note Deed are, by proper construction of the contractual terms, subordinated to claims of ordinary creditors for the purposes of s 563C of the Corporations Act, as the agreements designate them as 'subordinated debt obligations' and commercial coherence so requires. Claims under the E.ON Loan Agreement and the Constellation Loan Agreement are not, as a matter of construction, subordinated to ordinary creditors but rank equally with them, as the definitions in those agreements refer to 'senior creditors' in a way that does not include ordinary unsecured creditors, and subordination clauses are limited to specific circumstances not engaged by the current...

Parties
First Plaintiff: Geoffrey Robert Davis and John Morgan in their capacity as joint and several liquidators of ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd) and ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd); Second Plaintiff: ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd); Third Plaintiff: ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd); Defendant: Christopher Duffield
Jurisdiction
Australia
Judgment Date
11 July 2019
Procedural Posture
Application for Declarations and Directions in Liquidation / Judgment at First Instance
Outcome
Declaration to be made in respect of Note Deed; declaration in respect of E.ON and Constellation Loan Agreements not to be made in present form; parties to bring in a form of orders to give effect to the judgment.
Legal Topics
Debt Subordination, Convertible Notes, Liquidation, Ranking of Creditors, Construction of Commercial Contracts
Corporations Law Insolvency Debt Subordination Convertible Notes Liquidation Ranking of Creditors Construction of Commercial Contracts

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Parties

Geoffrey Robert Davis and John Morgan in their capacity as joint and several liquidators of ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd) and ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd)

First Plaintiff

ACN 150 567 098 Pty Ltd (in liquidation) (formerly known as Organic Response Investors Pty Ltd)

Second Plaintiff

ACN 151 527 098 Pty Ltd (in liquidation) (formerly known as Organic Response Pty Ltd)

Third Plaintiff

Christopher Duffield

Defendant

Procedural Posture

Application for Declarations and Directions in Liquidation / Judgment at First Instance

Legal Issues

  1. 1 Whether claims of noteholders under the Note Deed are subordinated to claims of ordinary creditors
  2. 2 Whether claims under the E.ON Loan Agreement and Constellation Loan Agreement rank equally with claims of ordinary creditors
  3. 3 Proper construction of Note Deed and loan agreements in the context of liquidation

Ratio Decidendi

The claims of Noteholders under the Note Deed are, by proper construction of the contractual terms, subordinated to claims of ordinary creditors for the purposes of s 563C of the Corporations Act, as the agreements designate them as 'subordinated debt obligations' and commercial coherence so requires. Claims under the E.ON Loan Agreement and the Constellation Loan Agreement are not, as a matter of construction, subordinated to ordinary creditors but rank equally with them, as the definitions in those agreements refer to 'senior creditors' in a way that does not include ordinary unsecured creditors, and subordination clauses are limited to specific circumstances not engaged by the current...

Court Disposition

Declaration to be made in respect of Note Deed; declaration in respect of E.ON and Constellation Loan Agreements not to be made in present form; parties to bring in a form of orders to give effect to the judgment.

Orders

  • Declaration that on the proper construction of the Note Deed, debts owed to Noteholders are subordinated to the debts owed to ordinary creditors for the purposes of s 563C of the Corporations Act.
  • No declaration presently made regarding the ranking of E.ON and Constellation Loan Agreements; matter to be relisted for orders.