Bayview backers barred from pulling DOCA

The Supreme Court of Western Australia has restrained the proponents of a deed of company arrangement for two Bayview Health pharmacies from terminating the DOCA and appointing receivers, finding they could not rely on their own decision to stop managing the businesses as a termination event.

The dispute concerned Bayview Health - Matilda Bay Pharmacy Pty Ltd and Bayview Health North Shore Pharmacy Pty Ltd, which trade under the Bayview Health brand. Administrators Andrew Smith and Robert Jacobs of Auxilium Partners sought orders preventing Scott McGregor and Rebecca Godfrey from terminating the DOCA, enforcing related security or appointing receivers based on the purported termination of a management deed.

Mr McGregor, Ms Godfrey and Julie Adams have been directors of both companies since their registration. Mr McGregor and Ms Godfrey appointed the administrators on 15 May 2025 and continued managing the pharmacy businesses on their behalf during the administration.

At concurrent second creditors' meetings on 4 September 2025, creditors considered two competing DOCA proposals, one put forward by Mr McGregor and Ms Godfrey and another by a company associated with Ms Adams. Creditors voted in favour of the proposal put forth by Mr McGregor and Ms Godfrey, and the companies entered into the DOCA on 25 September 2025.

Under the DOCA and related facility and security agreements, the DOCA proponents were required to make at least $2.8 million of funding available to the companies. They also continued managing the businesses under a management deed entered into as part of the overall transaction.

The broader proposal contemplated full payment of creditors, including interest to unsecured creditors, and either a transfer of Ms Adams' shares or a sale of the companies' assets to a nominee of the DOCA proponents. It also required them to continue managing the businesses pending completion.

The parties ultimately pursued asset sales rather than a share sale. Asset sale agreements were entered into for North Shore on 17 July 2026 and Matilda Bay on 12 August. On 31 August, the parties extended the asset sale period to 6 November 2026 and the transaction end date to 31 December.

Less than two weeks later, at 16:55 on 11 September, the DOCA proponents gave notice that they no longer wished to provide management services. They argued that the management deed automatically terminated five days later and that this, in turn, constituted a termination event under the DOCA.

Their stated intention was then to terminate the DOCA and appoint Clifford Rocke of WA Insolvency Solutions as receiver and manager of the companies' property. Under the transaction documents, termination of the DOCA would also constitute an event of default under the facility and general security agreements.

Justice Hill rejected that construction. Her Honour found that while the management deed gave Mr McGregor and Ms Godfrey a right to cease providing management services on five days' notice, the DOCA did not permit them to voluntarily remove themselves from operational control and then use their own conduct to trigger termination of the DOCA.

The Court held that a cessation of management could amount to a termination event where it resulted from action by the deed administrators or the companies. It did not, however, permit the proponents to create the termination event themselves and then rely on it to bring the DOCA to an end. Justice Hill said the contrary interpretation would allow them to gain the benefit of a termination event created by their own conduct.

Justice Hill separately found that the 11 September notice was itself invalid. The relevant clause required Mr McGregor and Ms Godfrey to no longer wish to provide the management services at all, not simply to stop providing those services under the existing management deed.

The Court also relied on the fact that Mr McGregor and Ms Godfrey had agreed on 31 August to extend the transaction timetable, including their obligations to continue operating the pharmacies. In the absence of any explanation for what changed between 31 August and 11 September, Justice Hill inferred that they did not possess the required intention to cease providing the management services altogether.

The Court concluded that the management deed remained on foot, no termination event had occurred under the DOCA and no event of default had arisen under the facility or security agreements. Final orders were therefore to be made restraining Mr McGregor and Ms Godfrey from terminating the DOCA or exercising the related enforcement rights.

Read the decision here.

Stephen Waddington of Francis Burt Chambers and Corrs Chambers Westgarth acted for the administrators, Andrew Smith and Robert Jacobs of Auxilium Partners.

Shane Murphy of Francis Burt Chambers and Hotchkin Hanly acted for Mr McGregor and Ms Godfrey.