IT MAY be little more than a corporate shell but the assets of failed online video company ReelTime Media Ltd have sparked a long-running and expensive legal tug of war over control of the entity.
IT MAY be little more than a corporate shell but the assets of failed online video company ReelTime Media Ltd have sparked a long-running and expensive legal tug of war over control of the entity.
A Sydney-based backer of the company has changed the likely control of ReelTime after winning a NSW Supreme Court bid to overturn a Deed of Company Arrangement put together by administrator Martin Jones and his colleagues at Ferrier Hodgson.
The decision by NSW Supreme Court Justice George Palmer paved the way for the full $1 million debt of NSW company Maylord Equity Management Pty Ltd to be recognised, allowing it to vote on a new DOCA, to be administered by the KordaMentha partnership.
In overturning the original DOCA, which was to allow a reconstruction by Albion Capital Partners, Justice Palmer was highly critical of the role of Mr Jones in chairing the May 9 creditors' meeting at which the judge concluded the voting process had been seriously miscarried.
The judgement was a victory for Maylord which had not initially been allowed to vote more than $10,000 of its claim, leaving it without a significant say in the original DOCA, which it opposed and which the court found would also have diminished the prospect of potential insolvent trading claims against ReelTime's directors.
According to Justice Palmer's judgement, ReelTime issued a convertible note to Maylord as part of a $1 million loan in July last year.
Maylord converted that debt to equity in early October but on March 5 it wrote to ReelTime's directors alleging that it had been induced by misrepresentations by officers and directors of ReelTime into the original transaction and it further alleged that ReelTime was trading while insolvent.
ReelTime was placed into voluntary administration the next day, March 6.
Justice Palmer's judgement was especially critical of the handling of the May 9 creditors' meeting chaired by Mr Jones, describing several of his actions on the day as disquieting.
Maylord director Peter Batterham told WA Business News he had been stunned by the creditors' meeting and did not understand the reasoning behind the decisions on the day which prompted the legal action to overturn the original DOCA.
The judgement explains that the original DOCA was proposed by former ReelTime director Alistair Mackinlay, a director of Perth company Movies Online Ltd which was to receive a substantial number of shares if the DOCA involving Albion proceeded.
Mr Mackinlay said Movies Online was interested in being involved in the relisting, which required the company to show continuing ongoing activity in the same field of enterprise.
He said ReelTime had been battered by the market crash in January and the operations had been sold in another DOCA to a former strategic partner EzyDVD.
Mr Mackinlay said Mr Jones had been upset by the judgement because he was simply trying to make the best of an uneconomic situation.
He said Trident Capital has since had a new DOCA agreed to by creditors and is awaiting shareholder approval.
Mr Batterham said, following the successful court battle which cost Maylord $75,000, his company had sought and won costs against the administrators.