In the matter of Fleet Technologies Limited (subject to deed of company arrangement)

By Originating Process filed on 6 June 2025, the Plaintiffs, Messrs Johnson and Hayes as joint and several deed administrators (“Deed Administrators”) of Fleet Technologies Ltd (subject to deed of company arrangement) (“FTL”) seek orders under ss 444GA and 4447A of the Corporations Act 2001 (Cth) (“Act”) in respect of the proposed transfer of the shares in FTL to Mark Osborn or his nominee in accordance with the terms of a Deed of Company Arrangement dated 28 April 2025 (“DOCA”).

By way of background, FTL is a public but unlisted company and has more than 50 members. FTL provides a platform as a service to ground transport companies including taxi and private hire companies. On 25 March 2025, Messrs Johnson and Hayes were appointed as the voluntary administrators of FTL in accordance with a resolution of FTL’s then directors under s 436A of the Act. A group of FTL’s convertible noteholders (“Noteholders”) then provided non-recourse funding of approximately $500,000 to the then voluntary administrators, who have continued to trade FTL’s business with a view to selling or recapitalising the business as a going concern.

Shortly after the voluntary administrators were appointed, they commenced a sale process for FTL’s business and assets which did not generate any binding offers. On 10 April 2025, the voluntary administrators received an initial DOCA proposal from Mr Osborn. On 14 April 2025, they received an updated DOCA proposal from Mr Osborn which provided, inter alia, for the business to continue trading and the continued employment of its 17 employees; a deed fund comprised of a contribution of $100,000 from Mr Osborn and the retention of any surplus funds from FTL’s administration); the appointment of new directors including Mr Osborn to FTL and the transfer of FTL’s shares to Mr Osborn (or his nominee) for no consideration. The making of the orders sought in this application is a condition precedent of the DOCA. At the second meeting of FTL’s creditors on 24 April 2025, they resolved, inter alia, that FTL execute the DOCA, which was subsequently executed on 28 April 2025.

I made the orders sought by the Deed Administrators at the conclusion of the hearing on 10 July 2025. These are my reasons for doing so and I have drawn on the helpful submissions of Mr Krochmalik, with whom Mr Goldberg appeared for the Deed Administrators, in this judgment.

The Plaintiffs read the affidavit dated 6 June 2025 of Mr Johnson, one of the Deed Administrators. Mr Johson’s evidence (Johnson 6.6.25 [19]-[20]) is that FTL has raised debt and equity of approximately $52 million since its incorporation in 2011, including issuing convertible notes between August 2022 and February 2025. Mr Johnson outlines the assets and liabilities of FTL at the date of the then voluntary administrators’ appointment (Johnson 6.6.25 [22]ff). He indicates (Johnson 6.6.25 [29]) his view, based on the voluntary administrators’ investigations, that FTL’s financial difficulties arose from its inability to raise further third party funding which delayed its entry into the US market and from the termination of a major contract in mid-2024 and delays in reaching a commercial settlement with the other party to the contract in circumstances, at a time that FTL was loss-making. Mr Johnson’s evidence is that FTL incurred significant losses in each of the 2022 – 2025 financial years (Johnson 6.6.25 [37]ff) which eroded its working capital so that it was reliant on external funding, and half of its revenue was derived from the major contract which was terminated; FTL’s net asset position declined from modest positive net assets in 2022 to substantial negative net assets in the 2025 financial year; and, based on the sale process for FTL’s assets, the realisable value of FTL’s platform development software, which is the proprietary platform for FTL’s business model, is significantly less than its book value. Mr Johnson also refers to a claim arising from the termination of the major contract to which I referred above and outlines the basis of the Deed Administrators’ view that FTL was likely to have been insolvent at least from 31 December 2024 and possibly earlier.

Mr Johnson also refers (Johnson 6.6.25 [73]ff) to an initial DOCA proposal received from Mr Osborn, who appears to be associated with the Noteholders, and outlines a sale campaign which was undertaken in parallel to consideration of the proposed DOCA, but notes that two parties who put binding indicative offers in that process did not proceed to final offers. He refers to the second meeting of creditors and the entry into the DOCA which, as I noted above, is conditional upon the outcome of this application. Mr Johnson also refers (Johnson 6.6.25 [105]ff) to potential claims available to a liquidator, if FTL was placed in liquidation, and the comparative returns in a liquidation and under the DOCA.

Mr Johnson’s evidence (Johnson 6.6.25 [116]ff) is that, if the share transfer completes then and the DOCA is fully effectuated, then employees will remain employed by FTL and their entitlements will be preserved; the secured creditor is expected to receive 100 cents in the dollar, funded by an R&D tax refund over which it has security; a third party, iCare Insurance Pty Ltd has already received 100 cents in the dollar in respect of its $3,047.27 claim; and participating unsecured creditors (excluding, relevantly, the Noteholders as defined in the DOCA, the Financiers as defined in the DOCA and Mr Osborn) are expected to receive between 23.9 and 32.5 cents in the dollar on their debts; and the Noteholders will not prove as creditors in the DOCA but will instead receive new equity in FTL, increasing the return available to other unsecured creditors under the DOCA. His evidence is also that, if the share transfer does not proceed, then the DOCA and a subsequent restructuring of FTL will not proceed; the Deed Administrators will convene a meeting of creditors as required by cl 7.4 of the DOCA and it is very likely that it creditors would resolve that FTL be wound up; and, on a winding up, FTL’s employees would lose their employment, FTL’s creditors will receive a worse return than under the DOCA and FTL’s shareholders would still receive a nil return (Johnson 6.6.25 [115]-[116], [135], [139]).

Mr Johnson also observes (Johnson 6.6.25 [126]) that:

On this basis, Mr Johnson expresses the view (Johnson 6.6.25 [129]) the interests of FTL’s shareholders would not be unfairly prejudiced by the proposed share transfer, by reason of the lack of value in the shares, and that FTL’s creditors and employees would benefit from the completion of the DOCA. Mr Johnson notes that the Deed Administrators have sought ASIC relief from the takeover requirements in Ch 6 of the Act in respect of the transfer of the issued shares in FTL and I address the position as to that relief below.

The exhibit to Mr Johnson’s affidavit (Ex CJ1) included balance sheets for FTL which indicated that, as at 30 June 2024, FTL had total current liabilities of $5.467 million, of which the substantial part consisted of the convertible notes of approximately $3.54 million, which ranked senior to FTL’s equity and junior FTL’s secured debt, and had a maturity date (as extended) of 30 June 2025, when they would automatically convert to ordinary shares of FTL, subject to an insolvency event (which has occurred) with the result that Noteholders are entitled to be paid the conversion amount (as defined). That entitlement points to the benefit to other unsecured creditors from the fact that Noteholders are treated as Non-Participating Creditors (as defined) under the DOCA. That exhibit also includes the original DOCA proposal (Ex CJ1, 442), to which I was taken I submissions, and the executed DOCA (Ex CJ1, 448) which treats the Noteholders as Non Participating Creditors; identifies relevant conditions precedent in cl 7.1, including as to ASIC relief under s 655A of the Act and the orders sought in this application; and provides for the transfer of shares to Mr Osborne or his nominee once the conditions precedent are satisfied, under cl 8.2 of the DOCA; and provides for the distribution of amounts from the deed fund in cl 11.4 of the DOCA.

The Plaintiffs also read an affidavit dated 30 June 2025 of Mr Melluish, addressing his expert report dated 23 May 2025 (Ex JM1) on which they rely. Mr Melluish there refers to losses incurred by FTL in the period from FY 2022 to date, to which I have referred above; notes the termination of the major contract, to which I have referred above, which decreased FTL’s revenue in FY 2025 although its expenses remained constant as it sought opportunities in the US market; noted the negative net asset position of FTL since FY 2023, to which I also referred above; and indicated the likelihood that FTL had a greater net asset deficiency as at February 2025, by reason that FTL’s software had a realisable value less than its book value, as I have also noted above. Mr Melluish noted FTL’s entitlement to an R&D tax refund, likely to be received in October 2025, which was secured in part to a secured creditor, and valued FTL’s assets, including the R&D tax refund but excluding the value of the software platform, as approximately $896,141 (Ex JM1, 19), and he also noted that a potential legal recovery in a claim made by FTL’s 50% subsidiary, in respect of the termination of the contract, was likely to have a nil value but could have a potential value of up to $500,000.

Mr Mellish also addressed the position in respect of FTL’s liabilities; and noted that the amount owing by way of employee entitlements would increase by the crystallisation of entitlements on a winding up, and calculated the total value of creditor claims as in excess of $6.9 million (Ex JM1, 21), excluding the increase of employee claims on a winding up. Mr Melluish noted that, given FTL’s negative earnings, it does not have a value on either a discounted cashflow or capitalisation of earnings basis that exceeds the value of its assets (Ex JM1, 22 – 23). He addressed the valuation of individual assets and derived a value for the software of approximately $654,228, by reference to the amount payable by the deed proponent under the DOCA, where no higher offer was obtained for that software in the sale process (Ex JM1, 26). I accept that approach was a reasonable one. Mr Melluish concluded that there was a total deficiency in equity in excess of $5.35 million which, as I noted above, would be increased in a winding up.

Mr Krochmalik recognises that Mr Melluish’s valuation does not include the value of any claim against the other party to the terminated contract, to which I referred above, which is available to its 50% subsidiary (Johnson 6.6.25 [43]–[48], [115]); but it is plain that, after taking into account the maximum potential value of that claim, the residual equity in FTL would still have no value. Mr Krochmalik recognises that that valuation also does not include potential claims of up to about $0.45 million in a winding up (Johnson 6.6.25 [106]–[107], [110], [115]) but they would also not result in any positive residual value for shareholders given FTL’s negative equity of $5.35 million.

By his affidavit dated 7 July 2025, Mr Ng, a solicitor acting for the Plaintiffs, refers to correspondence with ASIC in respect of the application for relief from Ch 6 of the Act and correspondence with shareholders and creditors of FTL giving notice of the application. By a second affidavit dated 9 July 2025, Mr Ng referred to further correspondence with ASIC, including advice of ASIC’s in-principle decision to provide relief under Ch 6 of the Act to facilitate the transfer of the shares in FTL, subject to this Court making the orders sought in this application.

Neither the Deed Administrators nor their solicitors were advised of any opposition by shareholders or creditors to the orders sought in this application and no shareholder or creditor appeared at the hearing to oppose the application.

First, the Deed Administrators seek leave under s 444GA(1)(b) of the Act to transfer all of the issued shares of FTL and its members to Mr Osborn or his nominee in accordance with the terms of the DOCA.

Section 444GA of the Act provides that:

I summarised the applicable principles in Re Mirabela Nickel Ltd (subject to deed of company arrangement) [2014] NSWSC 836 at [38]ff as follows:

In Re Nexus Energy Ltd (subject to deed of company arrangement) (2014) 105 ACSR 246; [2014] NSWSC 1910 (“Nexus”) at [22], I again followed the observations of Martin CJ in Weaver that the possibility of prejudice to a shareholder “would arise if there was some residual equity in the company.” Conversely, it is difficult to see how shareholders could be prejudiced by the transfer of their shares in the absence of any residual value or equity in the company: Weaver at [70]. The case law also seems to me to establish that there would not ordinarily be any prejudice, or no prejudice that has the requisite quality of “unfairness”, if the shares to be transferred have no value and there would be no distribution in the event of a liquidation which is the only realistic alternative to the proposed transfer: Re Kupang Resources Ltd (subject to deed of company arrangement) (recs and mgrs apptd) [2016] NSWSC 1895 at [16]; Re Ten Network Holdings Ltd (subject to a deed of company arrangement) (recs and mgrs apptd) [2017] NSWSC 1529 at [32]–[39]; Re Openpay Group Ltd (recs and mgrs apptd) (subject to a DOCA) [2024] NSWSC 789 at [20]ff on which I have drawn for this summary.

In Cussen, Re Big Un Ltd [2019] FCA 1162 at [5], Jagot J observed that:

The Deed Administrators bear the legal onus of proving that the Court’s discretion to allow the share transfer should be exercised in their favour: Nexus at [27]. I have here drawn on my summary of the applicable principles in Re Infinite Water Holdings Ltd (subject to deed of company arrangement) [2024] NSWSC 1096 at [16]ff, to which Mr Krochmalik referred in submissions.

Mr Krochmalik submits that the Court should exercise its discretion to make the orders sought under s 444GA of the Act because the DOCA (which requires the share transfer) will preserve the ongoing business of FTL and result in an equal or higher return for all creditors of FTL as compared to a liquidation scenario; the share transfer will not prejudice FTL’s shareholders or have any financial impact on them, because the equity in FTL has no residual value; and interested parties have had an opportunity to raise any objection to the share transfer and none have sought to do so. Mr Krochmalik also submits that:

I accept that the evidence establishes that FTL’s shares have no residual value and there can be neither prejudice nor unfair prejudice to FTL’s shareholders in making the orders sought by the Deed Administrators, and those orders should be made where they will otherwise promote the objects of Pt 5.3A of the Act.

Second, the Deed Administrators and FTL seek orders under s 447A of the Act and/or s 90-15 of the Insolvency Practice Schedule (Corporations) in respect of the execution of share transfer forms and the entry of the name of Mr Osborn or his nominee in the share register of FTL. Under s 447A of the Act, the Court may make such order as it thinks appropriate about how Pt 5.4A is to operate in relation to a particular company, and such an order can be made, where a company has executed a deed of company arrangement, on application by the deed administrators. Orders of the kind sought by the Deed Administrators, to give effect to the share transfers, have been made under that section in earlier cases including Re Paladin Energy Limited (subject to Deed of Company Arrangement) [2018] NSWSC 11 and Re OrotonGroup Ltd (Subject to Deed of Company Arrangement) ACN 000 038 675; Application of Strawbridge and Kanevsky [2018] NSWSC 1213. I accept that the Court has power to make and should make the orders sought to facilitate the transfer of shares in FTL, where an order has been made under s 444GA of the Act in respect of that transfer.

I am satisfied that this application was properly brought in the performance of the Deed Administrators’ role and to advance the implementation of the DOCA and the interests of creditors and I will make the order as to costs sought by the Deed Administrators on that basis.

For these reasons, I made the orders sought by the Deed Administrators at the conclusion of the hearing on 10 July 2025.