Banning Holdings Pty Ltd v Holbrook - [2009] WASC 178

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BANNING HOLDINGS PTY LTD -v- HOLBROOK [2009] WASC 178

CORAM: SIMMONDS J

HEARD: 5 JUNE 2009

DELIVERED : 23 JUNE 2009

FILE NO/S: CIV 2001 of 2009

MATTER :Section 447A and s 447B of the Corporations Act 2001

BETWEEN: BANNING HOLDINGS PTY LTD (ACN 009 006 437)
BAYSTAR HOLDINGS PTY LTD (ACN 066 604 019)
Plaintiffs
AND
KIM DAVID HOLBROOK as administrator of PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD (ACN 082 879 641)
First Defendant
FRASERS - THE PROPERTY MANAGERS PTY LTD (ACN 114 445 500)
R & S MOTORS PTY LTD (ACN 094 148 642)
WATER CORPORATION OF WESTERN AUSTRALIA
COMPUTER ACCOUNTING & TAX PTY LTD (ACN 009 470 491)
Second Defendants

Catchwords:

Corporations - Orders as to the application of Corporations Act 2001 (Cth) pt 5.3A - Order to avoid automatic termination of deed of company arrangement - Relevant considerations in making such an order

Legislation:

Corporations Act 2001 (Cth), s 435A, s 445D, s 445F, s 447A, s 447B
Rules of the Supreme Court 1971 (WA), O 4 r 3, O 52A

Result:

Orders extending effect of deed of company arrangement

Category: B

Representation:

Counsel:

Plaintiffs:     Mr T R Stephenson
First Defendant              :     Mr G A Flynn
Second Defendants        :     No appearance

Solicitors:

Plaintiffs:     Eastwood Law
First Defendant              :     Hotchkin Hanly
Second Defendants        :     No appearance
Interested Party             :     Mr H H J Frigger & Ms A C T Frigger
(Directors of Fourth Named Second Defendants)

Case(s) referred to in judgment(s):

Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133
Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)
Mulvaney v Rob Wintulich Pty Ltd (1995) 60 FCR 81
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222

SIMMONDS J:

Introduction

This was the return of an originating summons to prevent the termination of a deed of company arrangement. This hearing followed orders made ex parte on the first return of the originating summons on 29 May 2009.
At the hearing on 5 June 2009 there were appearances for the plaintiffs and the first defendant. Without objections from counsel, I permitted the two directors and shareholders of the fourth named second defendant to make submissions at the hearing as interested parties notwithstanding Rules of the Supreme Court 1971 (WA) O 4 r 3(2).
At the hearing on 5 June 2009, I made orders to the effects described below, reserved the matter of costs, and otherwise adjourned the present proceedings. These are my reasons.
The present proceedings need to be seen in the context of other proceedings (CIV 2265 of 2006) in which judgment for the fourth named second defendant, Computer Accounting and Tax Pty Ltd (CAT), has been given and enforcement proceedings taken against Professional Services of Australia Pty Ltd (PSA) (the present administrator of which is the first defendant in the present proceedings), and against the estate of the person who had controlled the first defendant (Martin Paul Banning). I shortly describe that context before describing the relief sought by the originating summons, and the parties' submissions.

The context to these proceedings

The following matters do not appear to be in contest before me.
In the action CIV 2265 of 2006, CAT sought damages and other relief in respect of the conduct of the defendants in that action in the sale to CAT of a property in Armadale. Angela Cecilia Theresa Frigger and Hartmut Huber Josef Frigger (the Friggers) were at all material times and are the sole shareholders and directors of CAT. The first defendant in CIV 2265 of 2006 is PSA and the second defendant in that action, Mr Banning, controlled PSA. There is a deed of company arrangement dated 20 March 2009 in respect of PSA (the DOCA). I return to Mr Banning below.
Freezing orders under Rules of the Supreme Court 1971 (WA) O 52A were made by me in CIV 2265 of 2006 on 8 January 2008, varied by Hasluck J on 11 January 2008 and further varied, by me, on 21 November 2008 and 20 April 2009 (the freezing orders). The freezing orders followed the form set out in Practice Direction 9.6.1.1 (see also Civil Procedure WA [7045.6.1]).
As a result of judgment orders following judgment on 9 July 2008 in CIV 2265 of 2006 (Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133), PSA and Mr Banning were ordered to pay the amount of $1,106,027.27 plus interest at 6% from the date of judgment (the judgment sum), as well as costs to be taxed (the taxed costs). That judgment is presently under appeal (CACV 76 of 2008). An application for a stay of judgment pending determination of the appeal was unsuccessful: Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222.
Mr Banning died in September 2008. Mr Donald Campbell‑Smith is his personal representative, and was substituted as second defendant in CIV 2265 of 2006.
It would appear that a substantial valuable asset of the estate of Mr Banning is, or was, his share interest in the first named plaintiff, Banning Holdings Pty Ltd. Mr Campbell‑Smith and the widow of Mr Banning, Sandra Banning, are and at all material times have been the sole directors of Banning Holdings. The second named plaintiff, Baystar Holdings Pty Ltd, is a company which Mr Banning had also controlled.
At his death, Mr Banning held a 50% share interest in Banning Holdings. Mrs Banning held the other 50% shareholding interest. Mrs Banning is the residual beneficiary of the estate of Mr Banning.
On 21 November 2008 I made orders in CIV 2265 of 2006 for the appointment of a receiver in respect of the share interest of the estate of Mr Banning in Banning Holdings. On or about 10 March 2009 the receiver of that share interest purported to sell that interest to the Friggers. There is a pre‑emptive rights provision in the memorandum and articles of association of Banning Holdings. The transfer of the share interest of the estate of Mr Banning has not been registered with the company.
On 27 November 2008 an administrator of PSA, for the purposes of an administration of the company under Corporations Act 2001 (Cth) pt 5.3A, was appointed by the creditors of the company. The first defendant in the present proceedings is the current administrator of PSA.
Under the DOCA, provision is made with respect to a dealing by Banning Holdings in the principal asset complex of Banning Holdings as well as the possibility of other payments by that company. The principal asset complex comprises the company's interest as one of two partners in a business called the Valencia Complex, which is associated with a property on Benara Road. The board of Banning Holdings had agreed to sell the company's interest in the Valencia Complex and the property on Benara Road to the other partner. That sale was to settle by 30 April 2009 or such other date as might be agreed between vendor and purchaser. By virtue of the DOCA, the proceeds of that sale are to be paid into a bank account for PSA (cl 5.1.1). It would appear, from that provision, that the account is to be used to pay the judgment sum, subject to payment of the amounts for 'Priority Creditors', being the amounts referred to in the DOCA cl 5.1.2(i) for the former administrator of PSA and in cl 5.1.2(ii) for the present administrator of PSA. At the same time, to the extent there would otherwise be a deficiency in the account for that purpose, it also appears from cl 5.1.1 that the balance would be provided from payments made other than by reason of the deed. It would be the responsibility of Banning Holdings to ensure the payment of that balance (cl 5.1.1).
It is a condition of the DOCA (cl 5.2.1) that the judgment sum be paid to the plaintiff in CIV 2265 of 2006 by 30 April 2009, and that the creditors listed in cl 5.1.2 also be paid by the same date, failing which the DOCA would 'automatically terminate' and PSA would be wound up. As I have indicated, the first defendant is the creditor in cl 5.1.2(ii), while the first, second and third named second defendants are respectively the creditors in cl 5.1.2(iii), (iv) and (v).
The DOCA also provides (in cl 5.1.3) for payment of the taxed costs 'to be satisfied from the proceeds of the sale' of the only substantial asset of PSA, the property situated at 11 Lacey Street in Perth, 'on or before 31 December 2009', with allowance for later payment if the costs have not been taxed by that date.
At the hearing on 20 April 2009 before me in CIV 2265 of 2006, I made orders varying the freezing orders in that action, including that nothing in the freezing orders prevent entry into and compliance with the DOCA by, among others, the present administrator of PSA, Mr Campbell‑Smith or Banning Holdings; payment by Banning Holdings of the reasonable living expenses of Mrs Banning at a stated amount; and, subject to payment of the judgment sum under the DOCA, payment by Banning Holdings of Mr Campbell‑Smith's expenses incurred as executor of the estate of Mr Banning and his legal expenses in CIV 2265 of 2006, including the expenses of the appeal.
Subsequently, by writ of summons dated 20 April 2009[rls1] in CIV 1727 of 2009 the Friggers and the receiver, Mr Graeme Trevor Lean, sought against Mr Campbell‑Smith, Mrs Banning and Banning Holdings a declaration of the validity of the receiver's transfer to the Friggers of the shareholding interest in Banning Holdings and injunctive relief to prevent entry into and action under the DOCA.
On 24 April 2009 I made certain orders by consent in CIV 1727 of 2009. By those orders Mr Campbell‑Smith, Mrs Banning and Banning Holdings were restrained until further order of release from making any payment to the present administrator of PSA in terms of the DOCA; and the payment dates of 28 April 2009 and 30 April 2009 in the DOCA cl 5.1.1, cl 5.1.2 and cl 5.2.1 were varied to refer instead to 31 May 2009. The latter orders were taken to have been made pursuant to Corporations Act 2001 (Cth) (Corporations Act) s 447A, which is also one of the sources of jurisdiction relied upon in the present proceedings.
By orders made on 21 May 2009 in CIV 1727 of 2009, Kenneth Martin J of this court set aside the restraining order.

The present proceedings

In the present proceedings, commenced by originating summons dated 29 May 2009, Banning Holdings and Baystar seek principally two orders. At the hearing on 29 May 2009 (to which I will shortly return), I gave leave to amend the terms of the originating summons. Henceforth I will refer to the terms of the originating summons as so amended.
One order sought in the originating summons is to extend the time for compliance with the DOCA cl 5.1.1 and cl 5.1.2 for payment of the judgment sum and to the priority creditors, and for compliance with the condition in cl 5.2.1. The extension sought is 'until the holding of an urgent creditors meeting to approve an amendment to [the DOCA]'.
The other order is to amend the DOCA cl 5.1.1, cl 5.1.2 and cl 5.2.1 to replace the date of 31 May 2009 (appearing in each clause as a result of the orders I made on 24 April 2009 in CIV 1727 of 2009) with the date of 31 August 2009.
It is not clear why the two orders are needed: either would appear sufficient to extend the effect of the DOCA, albeit to different dates.
At the present hearing, counsel for Banning Holdings and Baystar indicated they were content to have orders in terms of the first of the two orders described. However, as I indicated to counsel, it would be appropriate in that case, in order to ensure a prompt meeting, to fix a proximate date on which the time for compliance would end, except where the meeting of creditors is held earlier than that date. At the same time, as counsel for Banning Holdings and Baystar submitted, it would be appropriate to allow, in respect of the meeting of creditors, the lapse of the business day after it. The allowance of that extra day would permit Banning Holdings and Baystar to take any further action necessary to vary the DOCA if the meeting failed to vote to vary it.
The proximate date should be fixed taking account of a further order that Banning Holdings and Baystar requested I make, under Corporations Act s 447A, to abridge the time under s 445F(2)(b) for notice of the meeting of creditors. I consider that an order abridging the notice time is appropriate, given that notice of the present hearing has been served on the parties to these proceedings, and that the present administrator of PSA has sent to creditors the circular dated 2 June 2009 and annexed to his affidavit of 5 June 2009[rls2] (the Holbrook affidavit). The proximate date is fixed at 25 June 2009.
By orders I made ex parte at a hearing on 29 May 2009, I extended the time for compliance with the DOCA cl 5.1.1, cl 5.1.2 and cl 5.2.1 to 5 pm on 5 June 2009, the date fixed for the present hearing. My orders also provided for service of, amongst other things, the originating process and an affidavit as to the funds available for the purposes of the DOCA. At the hearing on 29 May 2009, a solicitor for the present administrator of PSA appeared as a friend of the court.

The basis for the present proceedings and the applicable law

In the present proceedings Banning Holdings and Baystar lay the case for the relief they seek in the automatic termination of the DOCA if the judgment sum is not paid on or before the relevant date.
The affidavit of Cameron Victor Eastwood sworn 29 May 2009 for the purposes of the ex parte hearing on 29 May 2009 (the first Eastwood affidavit) states that if the DOCA terminates, creditors of PSA will only receive in the liquidation about ten cents in each dollar they are owed by PSA. Settlement of the asset complex of Banning Holdings was expected to occur on 29 May 2009. Although funds from the settlement were expected to cover payment of the judgment sum, they would not be sufficient for the payment of the priority creditors.
It appears that I was to infer from the terms of the first Eastwood affidavit that, if the time for compliance with cl 5.1.1 and cl 5.2.1 of the DOCA were extended, by the time an urgent meeting of the creditors of PSA had been convened, sufficient funds would have been obtained both from the settlement and other sources to pay the judgment sum as well as the obligations in cl 5.1.2. In any event, as I will indicate, there was further affidavit material which went directly to show that such payment was being attended to.
In my view, jurisdiction to make the present orders comes from Corporations Act s 447A read with s 435A. Those provisions are as follows:
447A General power to make orders
(1)The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.
(2)For example, if the Court is satisfied that the administration of a company should end:
(a)because the company is solvent; or
(b)because provisions of this Part are being abused; or
(c)for some other reason;
the Court may order under subsection (1) that the administration is to end.
(3)An order may be made subject to conditions.
(4)An order may be made on the application of:
(a)the company; or
(b)a creditor of the company; or
(c)in the case of a company under administration - the administrator of the company; or
(d)in the case of a company that has executed a deed of company arrangement - the deed's administrator; or
(e)ASIC; or
(f)any other interested person.
435A Object of Part
The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b)if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.
On the material before me, Banning Holdings and Baystar Holdings are both creditors of PSA, and further both appear to me to be clearly 'an interested person'. Thus both have standing under s 447A(4)(b) and s 447A(4)(f) to apply for orders under s 447A.
I consider that s 447A is sufficiently broad to permit the court to make orders that would prevent a deed of company arrangement terminating in accordance with its terms with the effect that the company would be wound up. That is because pt 5.3A provides for a creditor's voluntary winding up to result from the operation of an automatic termination in the form of cl 5.2.1: see Ford's Principles of Corporations Law (as at 5 June 2009) [26.380], where the following appears:
[I]f the deed specifies circumstances in which it is to terminate and the company is to be wound up and those circumstances occur, the company will be deemed to have passed a special resolution under s 491 that it be wound up voluntarily. Because, under reg 5.3A.07(2), the company will be deemed to have done that without a declaration of solvency under s 494 the winding up will be a creditors' voluntary winding up.
This I consider would allow the court to make an order to permit the creditors to determine whether or not to amend the terms of the DOCA.
I also consider that in determining whether or not to make the order, and its terms, the court should take account of the objects of pt 5.3A of the Corporations Act, the part to do with administering a company's affairs with a view to executing a deed of company arrangement.
I also have jurisdiction to vary the terms of the DOCA under s 447A: see Mulvaney v Rob Wintulich Pty Ltd (1995) 60 FCR 81. As that authority indicates, it is important for me to consider whether or not the orders proposed would prejudice any creditors; whether any creditors who might be prejudiced have agreed to the orders; and whether a meeting of creditors to approve the variations could be convened before the date for fulfilment of the relevant condition in the deed.
I do not consider this list of considerations in the exercise of my discretion under s 447A to be exhaustive. Also relevant, it seems to me, are at least whether it has been shown that PSA is solvent (s 447A(2)(a)); that the DOCA is an abuse of pt 5.3A (s 447(2)(b)); or that the court would be justified in making an order to terminate the DOCA under s 445D. Indeed, counsel for Banning Holdings and Baystar referred me to s 447A(2)(a) and to s 445D(1)(d), (e) and (f), especially the last two, as relevant considerations.
Counsel for Banning Holdings and Baystar also contended that I have jurisdiction under s 447B(2) to make the orders sought. However, I do not consider I need to determine whether I have that jurisdiction, in view of my previous conclusion. In any event, counsel did not suggest that the considerations to guide the exercise of the discretion under s 447B(2) were different from those to guide the exercise of the discretion under s 447A.

The parties' submissions

The submissions for Banning Holdings and Baystar were in sum that the judgment sum, including applicable interest, had been paid or was about to be paid and that the only provisions of the DOCA (as varied) that had not been met related to payment of the creditors under cl 5.1.2. This was shown by the affidavit of Mr Eastwood of 4 June 2009 in support of the present application (the third Eastwood affidavit).
In relation to the creditors, part of the condition in cl 5.2.1 was that the creditors would be paid by the varied due date. Those creditors referred to in cl 5.1.2(i) and (ii) have been paid in substantial part, while the remaining creditors, in cl 5.1.2(iii), (iv) and (v), are parties to the present proceedings who have been served in accordance with my orders, and who have chosen not to appear at the hearing before me. As to two of the remaining creditors, the only two with substantial claims, there were indications, referred to in the affidavit of Mr Eastwood of 4 June 2009 as to service and merits (the second Eastwood affidavit), that they were agreeable to orders being made in terms of the originating summons in the present proceedings. In addition, amounts were expected to become available from Banning Holdings which would be sufficient to meet their claims, as shown by the third Eastwood affidavit.

I did not understand these submissions to be in contest, except as to the likelihood that there were those sources of funds which Banning Holdings could use to sufficiently meet the creditor payments, and that those payments would in fact be made, even allowing for any variation of the freezing order needed for this purpose. However, the Friggers put no evidence in those respects before me.
I consider that the evidence in the third Eastwood affidavit establishes the sufficiency of the sources of funds to which that affidavit refers. Moreover, the payments made to CAT and to the former and present administrators of PSA establish, in my view, that the funds to be obtained would be used to meet the various claims.
Counsel for Banning Holdings and Baystar also submitted that there was no reason to believe that the remaining provisions of the DOCA, relating to PSA's liability to pay CAT's taxed costs, would not be duly complied with, including within the timeframe provided in the DOCA.
The Friggers, as I understood their submissions, strongly contested the reliability of any of the indications in the third Eastwood affidavit that there would be proceeds of PSA assets from which the taxed costs in CIV 2265 of 2006 would be paid in accordance with the terms of the DOCA (cl 5.1.3).
However, it was not made clear to me why I should consider that the likelihood of payment of the taxed costs had reduced since entry into the DOCA, or was not substantial. The Friggers reminded me that the original date for payment of the judgment sum under the DOCA had been extended twice. However, in view of the payments already made towards the judgment sum and the indications as to payment of interest, I do not conclude, from the need for those extensions, that the later date of 31 December 2009 in the DOCA cl 5.1.3 should be seen to be significantly less likely to be met.
Further, counsel for Banning Holdings and Baystar submitted that a meeting of creditors to approve variations to the DOCA could not be convened before the date on which the relevant condition in the DOCA had to be fulfilled. This was particularly in view of the requirement to prepare proper materials for the meeting, including a document showing the administrator's assessment of the advantages and disadvantages of variations to the DOCA to extend its effect (as well as some other changes, as I will explain below[MSOffice3] ). I did not understand this submission to be in contest.
Finally, counsel for Banning Holdings and Baystar submitted, on the evidence before the Court, in the terms of Corporations Act s 435A(b), that continuation of the administration under the DOCA could be expected to result 'in a better return for the company's creditors and members than would result from an immediate winding up of the company'. That is because, as the first Eastwood affidavit indicates, the return to the creditors at the time of completion of the DOCA would be significantly greater, up to repayment in full (the claims of Banning Holdings aside, as I will indicate), than the return if the first defendant were now wound up. Progress to date on payment of the judgment sum and the amounts in cl 5.1.2 would, as I understood the submission, provide further support for the superiority of payment under the DOCA to payment towards claims in a liquidation.
The Friggers strongly contested these submissions. They put it to me that PSA should now be seen as solvent, from which, as I understood them, I should take it that creditors would receive at least as great a return as if the DOCA were permitted to continue. I further note for this purpose Corporations Act s 447A(2)(a).
However, I disagree with the proposition put to me by the Friggers. On the evidence before me the creditors of PSA include the first named plaintiff, Banning Holdings. Banning Holdings would as a result of the DOCA seem now to have a larger claim than the one it had at the time PSA went into administration. The increase in its claim would correspond to the amount it has paid to reduce the judgment sum for which PSA is liable. Further, Banning Holdings claimed to have mortgage security over the only remaining substantial asset of PSA, certain land, in respect of the amount that was owing to it by PSA. It appears not to be in contest that at the time PSA went into administration Banning Holdings claimed to be owed by PSA the sum of $375,000, representing the largest claim on PSA after CAT's claim. Under the DOCA, Banning Holding waived its security at least to the extent necessary to permit compliance with the terms of the DOCA (cl 5.1.6). The effect of this waiver would, as I understood the submissions of counsel for Banning Holdings and Baystar, defer any claim of Banning Holdings, in respect of amounts the subject of its claim to mortgage security against PSA, to payment to CAT and the costs and charges of the priority creditors. However, it is not evident to me that this waiver and deferral would extend past the termination of the DOCA.
It is thus not evident to me that PSA has become solvent, or that the return to the creditors at the time the DOCA is fulfilled would not be significantly greater, approximating repayment in full (Banning Holdings aside), than the return if the first defendant were now wound up.
Overall, counsel for Banning Holdings and Baystar submitted, there were good reasons to exercise my discretion to make the orders sought, and indeed that there was no basis that could be shown by the defendants for any objection to the variation being sought in this case.
Counsel for the first defendant, the present administrator of PSA, indicated that the first defendant was in support of the submissions of counsel for Banning Holdings and Baystar.
Further, counsel for the present administrator of PSA noted that, while a substantial portion of the amounts, for which the former as well as the present administrator of PSA were the priority creditors under cl 5.1.2(i) and (ii), had been paid (as the third affidavit of Mr Eastwood indicated), that portion represented only the sum of the dollar amounts there shown, to which needed to be added (by cl 5.1.2(ii)) the 'additional fees and costs in the administration of [the DOCA] of until finalization in accordance with clause 18.1 of [the DOCA]'. I note for this purpose that under the DOCA cl 15, 'termination' of the DOCA may occur as late as execution by the administrator of a notice of termination once the creditors have been paid as anticipated under the DOCA. As I understood the submissions of counsel for the present administrator of PSA, this would mean, at least on one construction of the DOCA's current terms, that the condition in cl 5.2 could not be satisfied without final determination of the additional fees and costs, which determination could not occur before termination of the DOCA, which termination could occur as late as the date indicated. As I further understood the submissions of counsel for the first defendant this construction indicated that the DOCA might need to be varied to deal appropriately with the matter.
I have already reviewed a number of the submissions of the Friggers. I now turn to consider their remaining submissions.
The Friggers put to me, as I understood them, that I have two bases for allowing the DOCA to terminate.
One basis, as I understood them, is that the DOCA is an abuse of the provisions of Corporations Act pt 5.3A (s 447A(2)(b)) or is 'oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors', being CAT (s 445D(f)(i)). The abuse, oppression, unfair prejudice and unfair discrimination lie in two effects of the DOCA. One is that the DOCA has the effect of staying the payment of CAT's claim against PSA, even though the defendants in CIV 2265 of 2006 have been unsuccessful in obtaining a stay of execution pending their appeal in that action. The other effect of the DOCA is that CAT would, unlike any of the other creditors, not be assured of receiving full satisfaction of its claim against PSA[MSOffice4] .
I do not consider this basis made out on the evidence before me.
The payment towards the judgment sum is, in my view, evidence that the DOCA represents an attempt to satisfy the liability under the judgment. While it is true that payment did not occur as was originally provided under the DOCA, there is no evidence that the delays were of the making of those liable under the judgment. Nor have the delays been substantial.
Further, it has not been shown to me that the DOCA was entered into at a time (March 2009) when full satisfaction of the claims of all the creditors of PSA at that time, with one significant exception, would not result from the DOCA's operation. This exception is Banning Holdings, payments on the claims of which, as I have indicated, appear to be deferred by the DOCA until the claims of the other creditors in cl 5.1.1 and cl 5.1.2 are satisfied.
It is true that, not long after March 2009, judgment in relation to costs in the action CIV 2265 of 2006 was delivered: Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S). The effect of this decision on the taxation of CAT's costs in CIV 2265 of 2006 is, among other things, to allow for uplifts on a number of items. There has since been a draft bill of costs, which has been provided to the present administrator of PSA. The amount in that bill of costs would seem, before any increase or decrease in CAT's entitlement to taxed costs as a result of the appeal, and with the costs and charges of the present administrator of PSA, to exceed the amount available from the remaining assets of PSA to meet the claim for CAT's taxed costs and the administrator's costs and charges.
However, there is a contest as to the likely size of CAT's taxed costs, with indications from previous counsel for CAT[rls5] (albeit before the special costs order was made) that the likely taxed costs would be of a significantly smaller amount than currently claimed. That reduced amount is one that the remaining assets of PSA would appear sufficient to meet together with the costs and charges of the present administrator of PSA. It seems to me this contest is one that cannot readily be resolved without the taxation of the costs in CIV 2265 of 2006.
The other basis which the Friggers say I have for allowing the DOCA to terminate is that the DOCA was improperly procured as not all of the creditors listed in the recent creditors' mailing list (forming part of an annexure to the Holbrook affidavit) had been invited to the meeting in February 2009 to approve the DOCA, while two of the creditors, the first and second named second defendants, who were invited to attend, and who attended and voted for the DOCA, were not creditors with claims against PSA[rls6] . However, there is no evidence before me that the creditors on the mailing list were not invited to attend the meeting, nor is it established on the evidence (see the affidavit of Mrs Frigger dated June 2009 in the present proceedings [11] and [12] and annexures 2 and 3) that the first and second named second defendants did not have claims as creditors against PSA at the date of the execution of the DOCA.
At the same time, I recognise that CAT have in these proceedings had only a limited opportunity to make good the bases for the claims in respect of the DOCA I have described. I consider it would be appropriate, as part of the liberty to apply that I consider should be provided for in the orders to be made, to allow CAT the opportunity, if it wishes to use it, to seek to make good those claims.
The Friggers also put to me that the conduct of the affairs of Banning Holdings, in becoming a party to the DOCA and in securing funds for the purpose of providing funds under the DOCA, gave rise to serious cause for concern. In particular, it was not clear, the Friggers contended, that funds realised, for that purpose, from the sale of assets by Banning Holdings had been properly accounted for.
However, it was not made clear to me that these contentions, if well founded, had a bearing on the decision I have to make. They appear rather to go to matters relating to the conduct of the affairs of Banning Holdings, which would properly be the subject of separate proceedings. As I have indicated, such proceedings have in fact been commenced and are on foot, as CIV 1727 of 2009.

[rls1]
Find from file or ICMS

[rls2]
Holbrook affidavit ‘KDH3’.

[MSOffice3]
This is the matter of changing cl 5.1.1 and cl 5..1.2 to allow for payment of the liquidator’s costs up a date following on or before the relevant date, leaving subsequent costs to other provision

[MSOffice4]
To here: further matters are the validity of the DOCA, and dealings with assets of Banning Holdings, including accountability for funds received

[rls5]
Eastwood affidavit (2) p 47

[rls6]
Frigger affidavit of 4 June 2009, pars 11 and 12.