In a decision handed down on 29 July 2014, Justice Gordon of the Federal Court held that a Deed of Company Arrangement (DOCA) entered into by Vivo International Corporation Pty Ltd (Vivo) should be terminated on public interest grounds because of legitimate concerns about the accuracy and completeness of information Vivo and its director provided to the administrator, information on which creditors were to rely in considering whether to vote in favour of the DOCA.
Trade mark infringement proceedings between TiVo and Vivo
This decision forms part of the long running dispute between TiVo Inc. and TiVo Brands, LLC. (TiVo) and Vivo which began when TiVo successfully brought proceedings against Vivo for trade mark infringement in 2011. In late 2012, the Full Court unanimously dismissed Vivo's appeal from the trial judge's decision that Vivo's use of its VIVO trade mark infringed TiVo's TIVO trade mark. Contempt proceedings brought by TiVo against Vivo, its director and related companies in 2013, for failure to comply with orders that had arisen from the earlier findings of trade mark infringement, were also successful.
Background to the Deed of Company Arrangement
On 22 November 2013, in the lead up to the hearing on TiVo's claim for monetary relief following its successful trade mark infringement claim, Vivo's director voluntarily appointed an administrator. At the second creditors meeting held in relation to that administration, the majority of creditors in value and number voted in favour of Vivo executing a DOCA proposed by the company, under which the creditors would each receive around 17 cents in the dollar. TiVo, having been successful in the trade mark infringement and related proceedings, participated in that meeting as a creditor on the basis of the numerous costs orders (some made on an indemnity basis) made in its favour in the trade mark proceedings, and its claim for an account of profits against Vivo. TiVo voted against the DOCA. Apart from TiVo and one other creditor, the other creditors had some ongoing connection with Vivo or its related companies. Those creditors voted in favour of the DOCA. Vivo executed the DOCA on 7 March 2014.
TiVo’s application to terminate the Deed of Company Arrangement
In April 2014, TiVo applied to terminate the DOCA and sought orders that Vivo be wound up, under sections 445D(1)(f) and (g) of the Corporations Act 2001 (Cth) on the basis that the DOCA:
- was oppressive or unfairly prejudicial to, to unfairly discriminatory against,one or more creditors;
- was contrary to the interests of Vivo's creditors as a whole; or
- should be terminated "for some other reason".
Justice Gordon held that in the particular circumstances of Vivo, the public interest demanded that the DOCA should be terminated for reasons including that, at the time Vivo's administrator provided his report to creditors, there were legitimate concerns arising from the non-disclosures or lack of information provided by Vivo's director which gave rise to the risk that creditors had been materially misled by the administrator's report. In exercising her discretion to terminate the DOCA, her Honour took into account the Court's duty to ensure that the continuation of a DOCA is conducive (and not detrimental) to the commercial morality of the country.
Her Honour made orders terminating the DOCA and appointing a liquidator on 6 August 2014.