Deferred vendors lose bid to block Halo project DOCA

A group of deferred vendors owed by FT Sydney Pty Ltd have failed to obtain urgent orders restraining effectuation of a deed of company arrangement for the Halo Project, after the Federal Court held their claims had a prima facie basis but refused interlocutory relief because they did not offer an undertaking as to damages.

The proceeding concerns FT Sydney and related companies behind the proposed Halo Project, a high-rise hybrid commercial tower on a development site at Pitt Street and Hunter Street in Sydney. The site comprises 74 amalgamated property titles acquired from multiple lot holders, many of whom received most of their sale price upfront but were left with deferred payment claims secured or supported through various arrangements.

Twenty-two deferred vendors commenced proceedings seeking to terminate or vary the DOCA, set aside the creditors’ resolutions approving it, or have the administration declared invalid. They alleged that the administration and DOCA were used to strip FT Sydney of unwanted debts owed to deferred vendors and mezzanine creditors, unfairly prejudicing them while facilitating a broader recapitalisation and property transaction with Cbus Property.

The DOCA, executed on 25 May 2026, provides for a $1 million contribution and a creditors’ trust. If effectuated, the deferred vendors are estimated to receive only 0.72 cents in the dollar, while their compromised claims against FT Sydney would be released. The deferred vendors argued that this would extinguish their claims for effectively nil consideration, and that the DOCA should not be allowed to proceed before their final challenge was heard.

Justice Shariff accepted that the deferred vendors had established a prima facie case. Their arguments were not weak, particularly given the need for closer examination of why their deferred debts had to be extinguished when those debts were subordinated to senior secured debt. But the Court assessed their prospects as “greater than weak but less than moderate”, noting that the deferred vendors were not the only creditors whose claims would be extinguished, related-party creditors were also affected, and Merricks Capital entities were owed more than $650 million and could have pursued enforcement.

The Court also accepted that effectuation of the DOCA would cause significant prejudice to the deferred vendors, because it would deprive them of their right to pursue some statutory remedies to terminate or vary the DOCA. However, that prejudice was tempered by the fact that other claims would remain available, including their challenge to the validity of the administration and their argument that they hold equitable liens over the properties, which, if established, may leave them outside the binding effect of the DOCA in relation to those security interests.

Against that prejudice, the Court found there was also significant prejudice if the DOCA were delayed. Cbus Property had indicated it would not complete the transaction while the companies remained in administration, and the evidence showed funding for the project and administration was nearing exhaustion. Justice Shariff said the Cbus transaction was a “bird in the hand”, and delaying effectuation risked the loss of the transaction, stalled development works and a potential collapse into liquidation.

The decisive issue was the deferred vendors’ refusal to provide an undertaking as to damages. Justice Shariff said such an undertaking is the usual price for interlocutory relief, and no special circumstances justified dispensing with it. Although the opposing parties had raised potential losses said to exceed $100 million, the Court found the plaintiffs were private commercial litigants, not public-interest applicants, and there was no evidence they were impecunious. In high-stakes commercial litigation, they had to be prepared to bear the ordinary consequence of seeking urgent injunctive relief.

The Court dismissed the deferred vendors’ application for interlocutory and interim relief, allowing the DOCA to move forward unless other final relief is later obtained.

Merricks’ own application also failed. The Merricks SPVs sought a stay of the deferred vendors’ proceedings, arguing that irrevocable undertakings and subordination deeds prevented the vendors from taking steps in relation to recovery of their deferred debts before Merricks had been paid. Justice Shariff rejected that characterisation, holding that the proceedings sought to preserve the existence of the deferred debts in the face of the DOCA, not recover them. The Court also rejected the argument that the vendors were seeking to wind up FT Sydney or interfere with Merricks’ enforcement rights.

Merricks was ordered to pay the plaintiffs’ costs of the stay application, while the costs of the plaintiffs’ failed interlocutory relief application were reserved.

Read the decision here.

Rachel Mansted of Eleven Wentworth, Haiqiu Zhu of Sixth Floor Selborne Wentworth Chambers, and Ashurst acted for the administrators, David Hardy and Amanda Coneyworth of KPMG Australia.

Christian Bova SC and Jonathan Burnett, both of Eleven Wentworth, and Maddocks acted for the deferred vendors.

Richard Scruby SC of Tenth Floor Chambers and Henry William Lawyers acted for James Milligan.

Stewart Maiden KC, King’s Counsel at the Victorian Bar, Tamasin Jonker of Omnia Chambers, and Arnold Bloch Leibler acted for Merricks Capital.