Court of Appeal Dismisses Air Vanuatu Liquidation Case

November 24, 2024 10:16 pm | Posted in Business News | Share now Twitter Facebook

By Doddy Morris.

The Court of Appeal has dismissed Civil Appeal Case No. 3198 of 2024, which involved Air Vanuatu (Operations) Limited (AVOL) (in liquidation).

The case, brought under the Companies (Insolvency and Receivership) Act 2013, was initiated by the liquidators of AVOL —Morgan John Kelly, Andrew Hanson, and Justin Walsh. The liquidators acted as Applicants against Respondents Charles Hugh James Perry, Richard Arcus, Jean Vincent Do, Katura Lavinia Marae Tom, and Daniel John Garrigan.

According to the Supreme Court, on 21 November 2024, the COA delivered its judgment in relation to an appeal against a decision of the Supreme Court, which dealt with challenges to a creditors compromise that was proposed by the liquidators of AVOL and approved by creditors in its decision, the Supreme Court “rejected an application to set aside the compromise or, alternatively, to declare that the creditors challenging the compromise were not bound by it, and made certain directions sought by the liquidators of AVOL relating to the implementation of the compromise and ordered that the liquidation of AVOL be terminated.

“The Court of Appeal has dismissed the appeal. This means the implementation of the compromise can continue as AVOL is no longer in liquidation,” the Supreme Court clarified in its Media Summary.

The court recorded that AVOL was put into liquidation by the government of Vanuatu, in May 2024. The liquidators, Messrs Kelly, Hanson and Walsh of EY Australia issued a report to creditors in August 2024 in which they proposed to creditors of AVOL a compromise under which it is stated that a company associated with the Vanuatu Ministry of Foreign Affairs (“AV3’) would contribute US$3.3m (over VT360 million) to AVOL and AVOL would be released from creditor claims after the payments required to be made under the compromise were paid.

In the report, the liquidators advised they had undertaken a process to solicit proposals for the restructuring of AVOL and had received indications of interest from a number of parties. The AV3 proposal was considered to be the best of these.

According to the court, the compromise provided that some unsecured creditors would receive up to US$50 cents for each US$1 owed (these included claims by some former employees who had been made redundant by the liquidators) and some would receive only up to US$5 cents per $1 owed (these included trade creditors’ claims and cancelled booking claims) Employees retained by AVOL continued to be paid their entitlements in full.

“The creditors of AVOL approved the compromise at a meeting of creditors that took place by audio-visual link on 21 August 2024,” the court states.

The court further stated that five former pilots of AVOL (who had been made redundant by the liquidators) and a former director of AVOL (whose company was said to be owed over US$1m by AVOL) commenced court action in the Supreme Court seeking orders that either the compromise be set aside or they not be bound by it. Their claim was dismissed in the Supreme Court and they appealed.

However, the court stated that on appeal, the Court of Appeal ruled that the six objecting creditors (the objectors) had not established that there was a material irregularity in obtaining approval of the compromise or that the compromise was unfairly prejudicial to them. One of the court ruling is that the proposal correctly described the property to be available to meet creditors’ claims under the proposal.

The Court of Appeal therefore dismissed the appeal and awarded costs to the liquidators, the appellants to pay cost of VT1,000,000.