Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd - [2005] NSWSC 1235

No judgment structure available for this case.

CITATION:
Bidald Consulting v Miles Special Builders; Bidald Consulting v Miles Special Builders [2005] NSWSC 1235

HEARING DATE(S): 23/9/05, 26/9/05 & 2/11/05

JUDGMENT DATE :

9 December 2005

JURISDICTION:
Equity

JUDGMENT OF:
Campbell J

DECISION:
Deed terminated. Company wound up.

CATCHWORDS:
CORPORATIONS – voluntary administration – Deed of Company Arrangement – termination of – construction of section 445D(1) Corporations Act 2001 – circumstances of application of section 445D(1)(a) and (b) – interrelationship of section 445D(1)(a) and (b) – meaning of “false or misleading” – meaning of “material” – role of informal seeking of views of creditors in deciding materiality – whether failure to call meeting of creditors in circumstances when Deed required it to be called is a material contravention of the Deed – whether winding up proceedings being on foot prevents Deed Administrator from calling meeting of creditors to consider placing company into liquidation – whether a Deed can provide for the de facto winding up of the company – in what circumstances payment of different amounts to creditors bound by a Deed is permissible – role of good faith between creditors in operation of Deed - section 445D(1)(e) does not apply to action contrary to the Deed – relevance of a Deed allowing an insolvent company to continue to trade – relevance of substantial departure in practice from proposal put to creditors at time Deed was adopted – operation of discretion to set aside Deed – relevance of interests of creditors – relevance of public interest – public interest factors which can be taken into account – significance of provision of false or misleading information – whether termination to be affected on application by person said to be a disputed creditor – procedure to achieve winding up by the Court when Deed terminated – BANKRUPTCY – arrangements with creditors without sequestration – composition under the general law – whether, and in what circumstances, special benefits can be provided to one creditor bound by a composition – juristic basis of prohibition on one creditor bound by a composition receiving a special benefit – role of consideration in compositions – CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – consideration – role of consideration in composition between debtor and creditors – juristic basis on which Court prevents one creditor bound by a composition from receiving a special benefit – PROCEDURE – contempt, attachment and sequestration – action out of Court frustrating litigation in Court – when a contempt

LEGISLATION CITED:
Annual Holidays Act 1944
Bankruptcy Act 1966 (Cth)
Corporations Act 2001 (Cth)
Corporations Law
Corporations Regulations 2001 (Cth)
Industrial Relations Act 1996
Long Service Leave Act 1955
Trade Practices Act 1974 (Cth)

CASES CITED:
AG Australia Holdings Limited v Burton & Anor [2002] NSWSC 170; (2002) 58 NSWLR 464; (2002) 58 IPR 268
Argyle Art Centre v Argyle Bond & Free Stores [1976] 1 NSWLR 377
Re Bartlett Researched Securities Pty Ltd (1994) 4 ACSR 707
Beard v Prestige Baking Industries Pty Ltd (1981) 36 ALR 307; 52 FLR 384
Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 397
Bidald Consulting v Miles Special Builders [2005] NSWSC 171
Brambles Holdings Ltd v Trade Practices Commission (1980) 32 ALR 328
Re Carey Builders Pty Ltd (1997) 23 ACSR 754
Commissioner of Taxation v Comcorp Australia Ltd and others (1996) 70 FCR 356; 14 ACLC 1616
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Commonwealth of Australia v Rocklea Spinning Mills [2005] FCA 902
Cook v Lister (1863) 13 CB (NS) 543
Copyright Agency Limited v Department of Education of New South Wales (1985) 4 IPR 5; 59 ALR 172
Re Cufari; Ex parte Commissioner of Taxation v Huppatz (1992) 34 FCR 544
Dallinger v Halcha Holdings Pty Ltd (in admin) & Anor (1995) 14 ACLC 263
Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22
Deputy Commissioner of Taxation (Cth) v Comcorp Australia Ltd (1995) 13 ACLC 1671
Deputy Commissioner of Taxation (Cth) v Pddam Pty Ltd (1996) 19 ACSR 498
Deputy Commissioner of Taxation v Comcorp Australia Ltd [1997] 4 Leg Rep SL3
Deputy Commissioner of Taxation v Markment Pty Ltd (in liq) [2005] NSWSC 1123
Deputy Commissioner of Taxation v Woodings (1995) 16 ACSR 266
Re Denistone Real Estate Pty Ltd v Companies Act [1970] 3 NSWR 327
E. T. Fisher & Co Pty Ltd v English Scottish and Australian Bank Ltd (1940) 64 CLR 84
Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125
Emanuele v Australian Securities Commission (1995) 63 FCR 54; (1995) 19 ACSR 1
Ex parte Milner; In re Milner (1885) 15 QBD 605
Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274
Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139
Hall v Dyson (1852) 17 A & E 785
Hills v Mitson (1853) 8 Exch 751
Hirachand Punamchand v Temple [1911] 2 KB 330
Re Jacobs; ex parte O'Connor (1984) 1 FCR 1
James v ANZ Banking Group Ltd (1986) 64 ALR 347
Jones v Schiffmann (1971) 124 CLR 303
Joseph Khoury & Sons v Zambena Pty Ltd [1999] NSWCA 402; (1999) 217 ALR 527
Kalon Pty Ltd v Sydney Land Corporation Pty Ltd (1998) 26 ACSR 593
Khoury v Zambena (1997) 23 ACSR 344
Lam Soon Australia Pty Ltd (admin apptd) v Molit (No 55) Pty Ltd (1996) 22 ACSR 169
Lancaster v NZI Capital Corporation Ltd (Sheppard J, Federal Court of Australia, 3 September 1991, unreported)
McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2
NZI Capital Corporation Ltd v Lancaster (1991) 30 FCR 441
Paton v Campbell Capital Ltd (1993) 46 FCR 30
Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460
Scuderi v Morris (2001) 39 ACSR 592
Re Segal; Lensworth Finance Ltd v Segal (1975) 9 ALR 154; 45 FLR 85
In re Septimus Parsonage & Co Ltd [1901] 2 Ch 424
Sydney Land Corp Pty Ltd v Kalon Pty Ltd (1997) 26 ACSR 427
University of Newcastle and Others v Audio-Visual Copyright Society Limited (1999) 43 IPR 505
Welby v Drake (1825) 1 C & P 557; 171 ER 1315
Wynsix Hotels (Oxford Street) Pty Ltd v Toomey [2004] NSWSC 236
Young v Sherman (2002) 170 FLR 86; (2002) 20 ACLC 1559

PARTIES:
Bidald Consulting Pty Ltd - Plaintiff
Miles Special Builders Pty Ltd - Defendant

FILE NUMBER(S):
SC 2858/04; 2583/05

COUNSEL:
M R Aldridge SC; V E Whittaker - Plaintiff
G Lucarelli - Defendant

SOLICITORS:
Kemp Strang - Plaintiff
Colin Biggers & Paisley - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

9 DECEMBER 2005

2858/04 BIDALD CONSULTING PTY LTD v MILES SPECIAL BUILDERS PTY LTD
2583/05 BIDALD CONSULTING PTY LTD v MILES SPECIAL BUILDERS PTY LTD

JUDGMENT

HIS HONOUR:

Nature of the Case

1 This judgment relates to two sets of proceedings. One is an application by a creditor seeking to terminate a Deed of Company Arrangement (“the Deed Termination Application”). The other is an application by the same creditor, seeking to wind up the same company in insolvency (“the Winding Up Proceedings”).

The Parties

2 Miles Special Builders Pty Ltd (“the Company”) carried out certain specialised tasks in the building industry. Its particular speciality involved steel and aluminium fabrication and installation. It had two directors, Mr Mile Kovacic, and his wife, Mrs Jasna Kovacic. It had a paid up capital of two shares of $1 each. Mr and Mrs Kovacic held the shares. The Company carried on business from premises owned by Mr and Mrs Kovacic.

3 The plaintiff in each of the proceedings (“Bidald”) trades under a business name of “Forstaff”. It supplies labour to contractors in the building industry.

The Winding Up Proceedings

4 In 2003 Bidald had supplied labour to the Company, for the purpose of a modification of the Western Distributor in Sydney. Bidald served a statutory demand on the Company on 11 December 2003 for an amount slightly over $420,000, largely related to that project.

5 The Company applied to the Court to have that statutory demand set aside. On 30 April 2004 Master Macready decided that application, holding that there was a genuine offsetting claim for $84,700, but upholding the statutory demand in an amount of nearly $337,000. The time for compliance with it was extended to 7 May 2004. The demand was not complied with.

6 On 13 May 2004 Bidald filed the Originating Process in the Winding Up Proceedings. The Company opposed that application, asserting it was solvent. To support that assertion, it filed an affidavit of Peter Rodgers, a specialist accountant, which annexed a report which he had made on 30 June 2004 concerning the solvency of the Company.

7 The Winding Up Proceedings were before the Registrar on 27 August 2004. Even though the Company had earlier been directed to file all its affidavits by 30 July 2004, on 27 August 2004 the Company indicated it wanted to file a further affidavit, and a further timetable was set for filing affidavits to enable it to do so. On 25 October 2004, the Winding Up Proceedings were set for hearing commencing on 1 March 2005 before Gzell J.

8 The Company had various loans from the ANZ Bank, in connection with which the ANZ Bank held a charge over all of the assets of the Company. During December 2004 Mr and Mrs Kovacic borrowed money from BankWest, on the security of their own assets. On 20 December 2004 they used the money so borrowed to discharge the indebtedness of the Company to the ANZ Bank. At that date that indebtedness stood at around $1.126m. In consequence, the ANZ Bank released its charge over the assets of the Company.

9 On 24 February 2005 the Company instructed Mr Anthony Warner, an accountant specialising in insolvency, to prepare a report on the solvency of the Company. On the basis of the information given to him, Mr Warner came to the view that the Company was then insolvent, but that its solvency would be restored in the course of March or April of 2005.

10 There were various companies shown as creditors in the books of the Company for a total of over $540,000, but whose debts the Company disputed. Bidald was one of those disputed creditors. It claimed over $466,000. The imprecision in Mr Warner’s estimate of the time at which the solvency of the Company would be restored arose because he did not try to decide whether the disputed creditors were in truth creditors of the Company – rather, he came to the view that the solvency of the Company would be restored in March 2005 if the disputed creditors were not in truth creditors of the Company, and would be restored in April 2005 if the disputed creditors in truth were creditors of the Company.

11 On 28 February 2005 – the day before the Winding Up Proceedings were due to be heard – the directors of the Company resolved to place it into voluntary administration, and to appoint Mr Warner and his then partner Mr Worrell as administrators.

12 On 1 March 2005 Mr Warner swore an affidavit in the Winding Up Proceedings which set out his then views about the financial prospects of the Company. It exhibited a report which he had made on 28 February 2005 which set out the reasoning by which he had reached his conclusions concerning the solvency of the Company. The affidavit stated that the directors and shareholders had resolved to propose a Deed of Company Arrangement. Mr Warner’s affidavit stated:

“8. … The Deed will involve a subordination of the directors’ claim against the company of approximately $1,062,000. This will ensure that creditors receive a higher return under a Deed compared to liquidation. Mr Kovacic has also confirmed that he will make a cash contribution to the Deed to ensure that creditors receive a better return under a Deed. The quantum of this cash contribution cannot be determined until the administrators have had sufficient time to finalise the Estimated Outcome Statement but I was informed by Mr Kovacic at the time of my appointment that it will be at least $40,000.00.

9. My investigations of the company have demonstrated to me that there are in excess of 12 employees employed full-time by the company. Additionally, currently, approximately 50 sub-contractors who appear to deal mainly with the company.

10. Based on my current analysis of the company it is my intention to either trade the company or allow the director to license the business of the company so as to allow the business of the company to remain on foot during the course of any Voluntary Administration.”

13 The affidavit set out a summary of the expected outcomes of such a Deed of Company Arrangement, and of a liquidation. According to that summary, under the Deed of Company Arrangement all creditors would receive one hundred cents in the dollar (even if the disputed creditors were ultimately found to be in truth creditors of the Company), while under a liquidation the dividend to unsecured non-priority creditors would be of the order of twelve cents in the dollar if all the disputed creditors were admitted to proof.

14 The affidavit also annexed a “directors’ undertaking” which Mr and Mrs Kovacic had signed on 28 February 2005, which stated:

“1. That the claim by Bidald Pty Ltd t/a Forstaff against the Company is not a valid one and is disputed in its entirety; and

2. We wish to propose a Deed of Company Arrangement which we will formulate in detail within the next few days, but will involve subordinating our claims (as shareholders and directors) until all remaining legitimate creditors have been paid in full; and

3. We acknowledge that the Deed Administrator if appointed will adjudicate on all claims submitted by the creditors; and

4. We understand that any decision that the Deed Administrator makes in relation to claims may be reviewed by the court within 21 days.”

15 The hearing of the Winding Up Proceedings on 1 March 2005 was adjourned to the next day. On 2 March 2005 a contested application for a further adjournment was made. Gzell J granted an adjournment until 11 April 2005: Bidald Consulting v Miles Special Builders [2005] NSWSC 171.

16 In McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2 Barrett J had held that an order for costs against a company in administration in favour of a creditor that had sought its winding up in insolvency was not provable in the company’s subsequent creditors winding up. This was because it was not an expense properly incurred by the administrators or liquidators which fell within section 556(1)(a) or (d) Corporations Act 2001 (Cth), nor was it a debt the circumstances giving rise to which occurred before the commencement of the administration, such that it fell within section 553(1) Corporations Act 2001 (Cth). To take account of the effect that that decision would have on any costs connected with the Winding Up Proceedings which the Company might ultimately be ordered to pay to Bidald, Gzell J imposed two terms on the adjournment:

Corporations Act 2001

The First Meeting of Creditors

17 The first meeting of creditors of the Company was held on 4 March 2005. In the notice to creditors which convened that meeting, creditors were informed:

“It is the intention of the Administrators to license the operations of the company’s business to the directors. Alternatively, the Administrators may continue to trade the business of the company during the Voluntary Administration period.”

18 At the first meeting of creditors, the appointment of Mr Warner and Mr Worrell as administrators was confirmed.

The Licence to Mr Kovacic and the New Company

19 By 16 March 2005 Mr Kovacic had come to be in control of a company called Miles Special Builders & Services Pty Ltd (“the New Company”). On 16 March 2005 Mr Warner and Mr Worrell, as administrators, entered into a license agreement, under which they granted to Mr Kovacic and the New Company an exclusive license to operate the business of the Company. That license took effect from 28 February 2005 (though it was a license only to Mr Kovacic during the period from 28 February 2005 to 4 March 2005), and lasted until 5 April 2005 or the date when the Company was placed into liquidation, whichever was the earlier. It provided for the Licensee to be responsible for meeting all costs of trading the business during the license period. The Licensee was to pay a royalty of $2,000 per week. There was provision that the employment of the employees of the Company would be taken to have continued without interruption to their service period, during the time that the license was on foot. The Licensee promised to pay all claims of employees:

“… for termination pay, severance pay, unpaid wages, continuing wages, PAYG Tax, Superannuation Guarantee levy payments, pay in lieu of notice, statutory entitlement and any fines, liabilities and imposts related to employment.”

20 The Licensee warranted that during the license period it

“shall complete all current contracts entered into by MSB at a pre-determined price to be agreed by the licensor and licensee. Payments to the licensee from the licensor for work done to complete existing contracts are to be made only after the licensor has been paid in full by the contract client.”

21 There was a printed clause in the agreement which provided that if the Licensee carried out any work in the steel fabrication trade under any other company or in their own capacity the license would terminate. However, there was also a handwritten clause which permitted the New Company to undertake new contracts of its own accord. As a matter of construction, the handwritten clause would prevail.

The Second Report to Creditors

22 Mr Warner decided that the second meeting of creditors would be called for Monday, 4 April 2005. Perhaps because of the intervention of Easter (as Good Friday fell on 25 March 2005) Mr Warner also took the view that 22 March 2005 was the last day for dispatching to creditors the Notice of Meeting and the Report to Creditors required by section 439A(4) Corporations Act 2001 (Cth). As Mr Warner had sent a brief report to creditors before the first meeting of creditors, I shall refer to the report of 22 March 2005 as “the Second Report to Creditors”. Those documents were dispatched on 22 March 2005.

23 The Second Report to Creditors was less optimistic than Mr Warner had been in his affidavit of 1 March 2005. It estimated that employee priority creditors would receive 100 cents in the dollar under either a Deed of Company Arrangement or in a liquidation. It estimated that, if disputed creditors were entitled to prove, non-priority unsecured creditors would receive 57 cents in the dollar under a Deed of Company Arrangement, and 7 cents in the dollar on a liquidation. If disputed creditors were not entitled to prove, non-priority unsecured creditors would receive 91 cents in the dollar under a Deed, and 9 cents in the dollar on a liquidation.

24 The Second Report to Creditors estimated that the amounts which would be available for distribution under a Deed of Company Arrangement from realisation of assets of the Company were as follows:

Work in progress	$626,500
Retention debtors	$288,592
Stock on hand	$104,855
Total	$1,019,947

“retention debtors”

25 In addition to the amount distributable from realisation of assets, a further $55,680 would be distributable amongst creditors, made up of the $40,000 contribution from Mr Kovacic, and $15,680 for the licence fee and stock purchased. Thus, the total resources available under a Deed were estimated to be $1,075,627.

26 The report stated unequivocally “the Company will continue to trade under the terms of the proposed Deed.” It stated that, though the Company had plant and equipment which had been valued at a little over $21,000 on a forced sale basis, and had been included in the list of assets realisable on a liquidation “the Plant and Equipment would not become available under the Proposed Deed as it would be required for continued operations.”

27 The report explained how the figure attributed to each of the asset categories which was expected to be realisable was made up. Concerning the work in progress, it said:

Deed

If the Company was wound up the amount recoverable may be significantly less, particularly if warranty work is required to be carried out. For the purposes of estimating a return to creditors under a liquidation scenario, we have made a significant allowance for bad debts of approximately 40%. Depending upon any warranty claims this estimate may be ambitious and the amount recoverable may be significantly less.

Deed

Builder	Location	Percent Complete %	WIP	Costs to Complete	Liquidation Value $	DOCA Value $
Barclay Mowlem	Talavera Road Vie City Quarters	100%	400,000	Nil	240,000	400,000
John Holland	Taronga Zoo Lucas Heights	90% 90%	95,000 38,000	Unknown Unknown	Nil Nil	95,000 38,000
Leighton Contractors	Sydney Hilton	90%	128,500	35,000	Nil	93,500
Totals	$661,500	$35,000	$240,000	$626,500

28 Concerning the retention debtors, the report said:

“At the date of our appointment there were retention debtors of approximately $392,300. During the period of the administration we have received $42,192.

Deed

If the Company was wound up the amount recoverable may be significantly less, particularly if warranty work is required to be carried out. For the purposes of estimating a return to creditors under a liquidation scenario, we have made a significant allowance for bad debts of approximately 40%. Depending upon any warranty claims this estimate may be ambitious and the amount recoverable may be significantly less.

Deed

Contract	Total due	Liquidation Value	DOCA Value
$	$	$
ABI Group	18,000	10,800	18,000
Art Gallery NSW	25,200	15,120	25,200
Barclay Mowlem	65,013	39,008	65,013
Bovis Lend Lease	22,800	13,680	22,800
John Holland – Lucas Heights	70,000	42,000	70,000
John Holland – Taronga Zoo	51,800	31,080	51,800
Leightons	35,779	19,560	35,779
Totals	288,592	171,248	288,592
Less: Collected	(42,192)	(42,192)	(42,192)
Amount Collectable	246,400	129,056	246,400

29 The amount attributed to stock on hand, in the list of recoveries, was explained as being a valuer’s valuation of the stock on hand.

30 The report also gave a précis of the license agreement which had been entered into.

31 The report attached a copy of the proposed Deed of Company Arrangement, and summarised its provisions as follows:

“ That the Administrators (Anthony Warner and Ivor Worrell) be appointed the Deed Administrators.

· That the control of the Company will revert back to the directors upon execution of the Deed;

· That the assets of the Company as at the date of the appointment of the voluntary administration be held as security by the Deed Administrators until the DOCA successfully completes;

· That all receipts from debtors, work in progress and retentions (that were outstanding at the time of the appointment of the Voluntary Administrators) and stock are to be applied to the Deed Fund until the Deed Administrator deems realisations are no longer commercially viable to collect;

· That the directors contribute a fixed sum of $40,000 into the Deed Fund within a period of 6 weeks from the execution of the DOCA;

· That any asset realisation monies received by the Administrators be included in the Deed Fund;

· That Miles Special Builders & Services Pty Limited will bill the company for labour incurred and any additional materials purchased for the purposes of completing any projects that were uncompleted at the date of the voluntary administrators appointment;

· That the shareholders, directors and their related parties will not prove in the Deed with the exception of their claim for superannuation.

· That the Deed Fund be distributed under the same provisions set out in the Corporations Act, as if the Company was wound up;

· That the creditors receive a final dividend under the Deed of Company Arrangement in full and final satisfaction of any and all claims against the Company and release the Company from the residual of those debts.

· That the Deed will terminate either when; creditors resolve that the Deed be terminated; the Deed is terminated upon a default under the Deed; by an order of a Court; or after a final dividend is paid.

· That the remuneration of the Administrators be calculated on a time basis using the Solvency Management Rates as set by the firm from time to time (refer part 7 of this Report).”

32 The report recommended that the creditors vote for the Deed rather than for liquidation, and identified the benefits of the Deed as being:

Deed

and

· The time expected to receive the dividend compared to a more protracted and costly liquidation;

· The continued operations of the Company providing for the continued employment for the staff and further trading opportunities for customers and suppliers.”

The Addendum to the Second Report to Creditors

33 At some time, not precisely proved by the evidence but which Mr Warner described in a report on 12 September 2005 as being “shortly after we were appointed as administrators”, the two contracts which John Holland had with the Company came to an end. Even by the time of the trial, Mr Warner had not received a Notice of Termination of the John Holland contracts, and was only inferring that they had been terminated. Mr Warner himself did not bring the contracts to an end. He assumed, without knowing, that the end came during the period the business was licensed by him. The only reason Mr Kovacic gave him for not completing the contracts was that he did not have the money to fund the working capital.

34 On 31 March 2005 John Holland sent to Mr Warner a proof of debt for $150,000, said to relate to the cost of rectifying defective works and completing the contract works. Upon receiving that document, Mr Warner took the view that the recoveries from John Holland of both work in progress, and retention money, which had been estimated in the Second Report to Creditors, should be reduced to nil. As well, he had discovered some accounting errors which were relevant to the report, and his estimate of the likely amount of the administrators’ fees had risen from the $100,000 disclosed in the Second Report to Creditors to $115,000.

35 To deal with all these matters he prepared, on 31 March 2005, an Addendum to the Second Report to Creditors. The bottom line of that Addendum was that the return to creditors under a liquidation had shrunk to an amount of “up to 3 cents in the dollar”, while the return to creditors under a Deed of Company Arrangement had shrunk to “up to 28 cents in the dollar”. Each of those amounts was calculated on the assumption that the disputed creditors were admitted in full for dividend purposes.

36 The Addendum gave revised figures for the assets of the Company which would be distributable under a Deed of Company Arrangement:

Work in progress	$458,900
Retention debtors	$127,092
Stock on hand	$104,855
Total	$690,847

37 The make up of the figure for work in progress was:

Builder	Location	Percent Complete %	WIP	Costs to Complete	Liquidation Value $	DOCA Value $
Barclay Mowlem	Talavera Road Vie City Quarters	100%	400,000	4,000	240,000	396,000
John Holland	Taronga Zoo Lucas Heights	95% 90%	100,400 64,700	12,500 20,000	Nil Nil	Nil Nil
Leighton Contractors	Sydney Hilton	90%	78,400	15,500	Nil	62,900
Totals	$643,500	$52,000	$240,000	$458,900

38 The make up of the figure for retention debtors was:

Contract	Total due	Liquidation Value	DOCA Value
$	$	$
ABI Group	18,000	10,800	18,000
Art Gallery NSW	12,600	7,560	12,600
Barclay Mowlem	26,400	15,840	26,400
Bovis Lend Lease	11,500	6,900	11,500
John Holland – Lucas Heights	35,000	Nil	Nil
John Holland – Taronga Zoo	26,000	Nil	Nil
Leightons	16,400	9,840	16,400
Totals	145,900	50,940	84,900
Less: Collected	(42,192)	(42,192)	(42,192)
Amount Collectable	188,092	93,132	127,092

39 To deal with the possibility that there might be further shrinkage in the amount received from asset realisations, Mr Warner instructed his solicitor to amend the Deed of Company Arrangement to include a provision which he explained to the creditors, in the Addendum, as being:

“If $500,000 in asset realisations is not achieved then the Deed Administrators will call a meeting of creditors, giving creditors the option of terminating the Deed and liquidating the Company.”

40 The report of 31 March 2005 listed verbatim the same three benefits of a Deed as had been listed in the report of 22 March 2005 (para [32] above).

41 The conclusion of the Addendum was:

“Following the recent developments giving rise to this report the Administrators have lost a degree of confidence in the level of potential asset realisations. Despite this the Deed of Company Arrangement is still considered to be in the creditors’ best interests. Given the circumstances, the Administrators now believe that it is appropriate that a minimal level of asset realisations of $500,000 be incorporated into the DOCA. If $500,000 in asset realisations is not achieved then the Deed Administrators will call a meeting of creditors, giving creditors the option of terminating the Deed and liquidating the company. Please note that the directors have not yet given their consent to this change to the proposed DOCA.”

42 At 7:44 pm on 31 March 2005 Mr Warner sent a copy of his Addendum Report to all the creditors for whom he had an email address, as an attachment to an email. The evidence does not make clear for what particular creditors or what proportion in either number or value of creditors, he had an email address. A printed copy of the Addendum Report was sent to all creditors, by being placed in an Express Post box at 9:00 pm on 31 March 2005. 31 March 2005 was a Thursday.

The Second Meeting of Creditors

43 The second meeting of creditors took place starting at 10:40 am on the morning of Monday, 4 April 2005. At that meeting Mr Warner stated, twice, that if the Deed Fund did not reach $500,000 the administrators would call a meeting of creditors to enable the creditors to decide whether to accept a lower amount, or to place the Company into liquidation.

44 At that meeting, a poll was called. The creditors resolved that the Company should enter into the Deed. Nineteen creditors, with admitted claims totalling $1,813,961.12 voted in favour of the resolution, and four creditors, with admitted claims totalling $774,272.26 voted against the resolution. One creditor, admitted for $17,696, abstained. Three of the creditors who voted in favour of the Deed were related parties. These were Mr Kovacic, (admitted as a creditor for $1,180,823.03, made up of $14,180.15 for unpaid superannuation, $40,197.85 for unpaid holiday pay, and the balance for the amount he had lent to the Company to pay out the loan from ANZ), his daughter Sandra Kovacic for $83,873.53, and Mrs Kovacic for $1. Those three related parties together made up 48% of the dollar value of the vote. Mrs Kovacic had claimed to be a creditor for $669,424.93, but Mr Warner had admitted her claim, for the purposes of that meeting, at $1.00.

45 Nine of the remaining sixteen creditors who voted in favour of the resolution were employees, whose claims ranged in size individually from a little over $400 to a little over $10,000. The claims of those employees totalled $44,118.13.

46 Another creditor whose claim was admitted was Mr Ford, the accountant for the Company, whose proof of debt for $3,316 had been admitted. The admission of his proof for that amount was an error, as it included some work which he had carried out for the administrators, and his proof should have been admitted for approximately $500.

47 The various figures which I have stated in paras [44]-[46] are derived from Annexure B to Mr Warner’s affidavit of 22 September 2005. I prefer that Annexure to other contrary evidence, because it is more systematic and thorough than that other evidence.

The Deed of Company Arrangement

48 Following that vote, the Deed was executed on 6 April 2005. Clause 1.1 contains the following definitions:

“Associated Creditors” means the director of the Company, their relatives, shareholders and any associated persons or related entitles and its executors, administrators, heirs, transferees and assigns whose claim against the Company would have been a provable debt if the Company had been wound up.

“Commencement Date” means 28 February 2005, the date of the appointment of the Voluntary Administrators now Deed Administrators.

“Creditor” means any person whose claim against the Company would have been a provable debt if the Company had been wound up and its executors, administrators, heirs, transferees, and assignees, other than Associated Creditors.

“Deed Fund” means the Fund, which shall be set up by the Deed Administrator under Clause 2.1.

49 Clause 2.1 defined the Deed Fund as consisting of:

“(a) All monies received from debtors, stock, work in progress and retentions from the Commencement Date to the date of this Deed.

(b) Any other monies which may be realised from any assets of the Company, which come into existence prior to the Commencement Date, including but not limited to any legal claims.

(c) All proceeds received in respect of royalty payments relating to the Licence Agreement.

(d) A lump sum contribution of $40,000 from Mile Kovacic, to be received within 6 weeks of the execution of the deed.”

50 Clause 2.3 provided:

“In the event that the proceeds received from the Company pursuant to Clause 2.1 herein is less than the amount of $500,000.00 the Deed Administrators shall call a meeting of creditors to determine whether the Deed should be set aside and whether the Company should be placed into liquidation.”

51 The manner of distribution of the Deed Fund was governed by Clause 2.5, which said:

Corporations Act

Corporations Act 2001

(a) Assessed or agreed costs of Bidald Consulting Pty Limited, in relation to Supreme Court Proceedings No. 2858 of 2004;

Corporations Act 2001

(d) All outstanding compulsory superannuation entitlements which have not been met by the Company prior to the commencement date; and

(e) all claims proved by Creditors and admitted by the Deed Administrators on a pro rata basis, excluding payments referred to in Clause 2.5(b) above, whose debts are proven and admitted by the Deed Administrators in accordance with the terms of this Deed.”

52 Clause 2.7 barred Mr Kovacic and the Associated Creditors from proving, with the exception of any superannuation entitlements.

53 Clause 6 provided:

“The Creditors must accept their entitlements under this Deed in full satisfaction and complete discharge of all debts or claims present or future, actual or contingent which they claim to have against the Company as at the Commencement Date and each claim against the Company before the Commencement Date is extinguished.”

54 Clause 8.1 provided:

“Employee entitlements as at the Commencement Date will continue to accrue as claims against the Company notwithstanding the Voluntary Administration or Deed of Company Arrangement of the Company. These entitlements (except for superannuation contributions as outlined in Clause 2.5) will be paid by the Company in the ordinary course of business.”

The Deed Termination Application Begins

55 The Deed Termination Application was begun on 22 April 2005, by filing an Originating Process. The making of that application had been foreshadowed in open court, however, on 11 April 2005, when the Winding Up Proceedings were before Barrett J. On that day both Bidald and the Deed Administrator appeared. His Honour stood the Winding Up Application over to 26 April 2005, and directed that any Originating Process filed by Bidald seeking to set aside the Deed also be returnable on 26 April 2005, before the Corporations List Judge.

56 Since then, the Winding Up Proceedings have been adjourned from time to time, and the period during which they must be determined has been extended, pursuant to section 459R(2) Corporations Act 2001 (Cth).

Problems Discovered with Recovering the Barclay Mowlem Debt

57 On 20 April 2005 (by a letter mistakenly dated 25 April 2005) an assistant to the administrator wrote to Barclay Mowlem requesting payment “by return” of eight invoices, copies of which were attached. Those invoices were ones which the Company had sent to Barclay Mowlem. There were three invoices relating to a project at Talavera Road North Ryde, dated from 8 July 2003 to 12 November 2003. There were five invoices relating to a project at Vie City Quarters, dated from 1 April 2003 to 27 February 2004. The invoices total $361,940.48. Those invoices were assumed, in the way the case was run, to be ones which went towards the amount of $400,000 which had been listed, in the report to creditors of 22 March 2005 (para [27] above) and the Addendum of 31 March 2005 (para [37] above), as being owing by that company. No explanation for the difference between the total of those invoices and $400,000 was given.

58 Barclay Mowlem wrote back on 21 April 2005 categorically denying that any of the invoices were outstanding. The letter enclosed a document dated 22 August 2003 relating to the Talavera Road contract, entitled “Statement of Final Subcontract Value”. That document appears to be signed on behalf of both Barclay Mowlem and the Company, with the signature on behalf of the Company bearing a strong pictorial resemblance to the signature of Mr Kovacic. It stated that the agreed final value of the sub contract was $710,000, of which $242,726 was outstanding, and that retention monies of $35,406 would be retained from the balance. Barclay Mowlem’s letter of 21 April 2005 asserted that, according to its records, the Agreed Final Value of $710,000 had been paid in full.

59 The letter of 21 April 2005 also enclosed a letter which Barclay Mowlem had sent to Mr Kovacic on 4 May 2004, concerning the Vie City Quarter Project, and said that “the details attached to this facsimile indicate that an amount of, at least, $954,892.00 is owed” to Barclay Mowlem by the Company. The enclosed letter of 4 May 2004 asserted that no money was owing to the Company in relation to the Vie City Quarter project, whether for work done, or for retention. Further, that letter attached a copy of Barclay Mowlem’s back charges and variations register relating to the project, which asserted that an amount of $954,892 was owing by the Company to Barclay Mowlem. Barclay Mowlem’s letter of 4 May 2004 had said that that register:

“… is still not complete as defects registration is currently underway.

Since you have been notified about the extent of the back charges on previous occasions, BMCL cannot comprehend why you would assume any money would be payable to MSB.”

60 Barclay Mowlem’s letter of 21 April 2005 also included a facsimile transmission record dated 4 May 2004, which showed that Barclay Mowlem’s letter of 4 May 2004 had been successfully transmitted to the facsimile number which appears on the invoices of the Company.

61 26 April 2005 was the first time Mr Warner realised that there was any problem about recoverability of the amounts of work in progress and retention which had been attributed to Barclay Mowlem in the report of 22 March 2005 and the Addendum of 31 March 2005. Mr Kovacic had not previously shown him, or told him about, the “Statement of Final Subcontract Value” concerning the Talavera Road job, or the letter of 4 May 2004 concerning the Vie City Quarter job. Concerning those documents, Mr Warner says:

“Q. Now, I take it that Mr Kovacic hadn't shown you either of those documents?
A. No, he had not.

Q. And had you seen either of those documents, you certainly wouldn't have regarded Barclay Mowlem as a sure source of $400,000; would you?
A. No, I wouldn't have.

The Shortfall Guarantee

62 On 6 June 2005 Mr Warner asked Mr Kovacic whether he was prepared to provide a guarantee for any shortfall under the Deed Fund. Mr Kovacic agreed (on a date which does not appear from the evidence) to provide the guarantee, on the basis that Mr Warner gave him an authority to collect the debtors of the Company on behalf of the Deed Administrators. On 13 July 2005 Mr Kovacic and the New Company jointly and severally promised that if the Deed Fund did not receive $500,000 from payments deposited in accordance with Clause 2.1 of the Deed, then they would make up the shortfall. They would pay half the amount due on 1 December 2005, and the balance on or before 28 February 2006. However, all obligations under the guarantee would cease if, within six months of the date of the Deed, the Company was placed in liquidation, the Deed of Company Arrangement was set aside, or the Court declared that the Deed of Company Arrangement was void.

The Updating Report of 12 September 2005

63 On 12 September 2005 Mr Warner prepared an updating report for creditors. It reported that the Deed Administrators had recovered a total of $332,226, inclusive of GST, from all sources available to them. By that time, Mr Warner was of the view that it was not worth incurring the legal expenses which would be involved in seeking to recover more. His estimate of the distribution under the Deed was that creditors would receive a dividend of “up to 5 cents in the dollar” if all disputed creditors were admitted to prove, and “up to 11 cents in the dollar” if the disputed creditors’ claims were rejected. Part of the reason for the reduction was the expected cost of the Deed Administrator concerning these proceedings, which were expected to cost the creditors “at least 9 cents in the dollar” even if an order for costs were to be made against Bidald. That report identified the distributable tangible assets as follows:

Asset	DOCA Best Case	DOCA Worst Case
Work in Progress	471,617	71,617
Retention Debtors	98,922	87,422
Stock on Hand	65,408	65,408
Plant & Equipment	55,341	55,341
Total	691,288	279,788

64 Mr Warner’s account of the work in progress was as follows:

“Since our last report to creditors, Mr Kovacic has completed the Sydney Hilton contract. We have collected all of the monies due under this contract in full, including the retention. Mr Kovacic did not charge us to complete this contract as originally agreed. That is why the amount paid exceeds the amount claimed.

Barclay Mowlem has refused to pay the amount outstanding. They claim that they have a counter claim in excess of $1 million. I have serious doubts as to the legitimacy of this counter claim as they didn’t raise the counter claim before they paid us a retention claim during the administration period. I am continuing to work with Mr Kovacic in an attempt to collect this debtor.

Builder	Amount Claimed	Amount Paid	Amount Outstanding
$	$	$
Barclay Mowlem	400,000	Nil	400,000
Leightons	62,900	71,617	Nil

65 The “DOCA Worst Case” figure for the retention debtors was the amount which had at the date of the report been actually collected. The “DOCA Best Case” relating to retention debtors added to that amount $11,500 still said to be outstanding from Bovis Lend Lease.

66 The stock on hand had, by the time of this report, been sold to the New Company. $65,408 was the amount collected for it. That was what the stock had cost.

67 Plant and equipment was included as a distributable asset in the Updating Report to creditors, when it had not been included in either of the earlier reports as a source of funds for creditors under the Deed. The Updating Report stated that the plant and equipment had been sold at valuation to the New Company, and that $55,341 had been collected for it.

68 The Updating Report included, in calculating the amounts which would ultimately be distributable amongst the creditors, an amount of $11,000 which had been paid for a license fee, an amount of $226,262 payable by the director (made up of the $40,000 he had agreed under the Deed itself to contribute, plus the amount which would fall due under the guarantee) some bank interest and a GST refund.

The “Virtual Meeting” of Creditors

69 The Update Report invited the creditors to take part in a “virtual meeting of creditors” by completing and returning a voting slip which was attached to the report. That voting slip made provisions for the creditor to state its name, the amount of its debt, and to mark boxes marked “for”, “against” and “abstain” in relation to two resolutions. The first resolution was:

“That the Deed Administrators defend the Deed of Company Arrangement to allow it to continue.

“That a meeting of creditors be called immediately to consider terminating the Deed of Company Arrangement and liquidating the Company.”

70 The result of that “virtual vote” is that, of those creditors whose votes Mr Warner counted, 28 in number and 74% in value were in favour of the Deed of Company Arrangement, while 4 in number and 26% in value were in favour of liquidation. Of those in favour of the Deed, 2 in number, representing 49% in value of the total value of votes cast, were related parties. Thus, of those in favour of the Deed, it was 26 in number, representing 25% in value of the creditors whose votes were counted, who were not related to the directors. In other words, of the unrelated creditors, there was a small majority in value who favoured liquidation, though a majority in number continued to favour the Deed.

Matters Now Known About Barclay Mowlem Debt

71 The report of Mr Rodgers of 30 June 2004 (para [6] above) had discussed the debtors of the Company. While that report treated the Barclay Mowlem debt as being a debt due to the Company, and not as a disputed account, it noted that Barclay Mowlem had withheld payment of $201,936.90 concerning the Vie City Quarters project, and of $238,028.78 concerning the Talavera Road project. The report set out the assumptions on the basis of which Mr Rodgers had included the Barclay Mowlem debts amongst the debtors of the Company:

Vie City Quarters Project

Mile advised that the Defect Notice Period for this contract expires on 15 July 2004. After rectifying any defects notified, he will ask for the debt to be adjudicated [by the Plumbers Association]. The matter will be heard 3 weeks later. He believes that MSB will be successful, in which case the debtor will be required to pay within 7 days.

He therefore expects to receive payment in the week ending 3 September 2004.

Talavera Road Project

Mile advised that the Defect Notice Period for this contract expires on 2 August 2004. After rectifying any defects notified, he will ask for the debt to be adjudicated [by the Plumbers Association]. The matter will be heard 3 weeks later. He believes that MSB will be successful, in which case the debtor will be required to pay within 7 days.

He therefore expects to receive payment in the week ending 20 August 2004.”

72 Those expectations of Mr Kovacic did not come to fruition. There is no evidence to suggest that the foreshadowed adjudications by the Plumbers Association ever took place.

73 On 15 February 2005 the Company received from Barclay Mowlem an invitation to tender for a new job at Liverpool Hospital. Barclay Mowlem also asked Mr Kovacic to tender for another project at North Ryde in April or May of 2005. At the time of making those invitations to tender, nothing was said about the Company owing money to Barclay Mowlem for the alleged back charges, and indeed it was not until its letter to the administrator of 21 April 2005 that Barclay Mowlem let the administrator know about those alleged back charges. On 8 March 2005 Barclay Mowlem had sent the administrator a cheque for $39,012.60, in payment of retention money that had been held in connection with the Talavera Road project.

74 When Mr Warner was preparing his report dated 28 February 2005, Mr Kovacic gave him a listing of the work in progress of the Company, dated 25 February 2005. It totalled $437,800, and did not include anything from Barclay Mowlem. However, the eight invoices to Barclay Mowlem referred to in para [57] above were included in a listing of debtors of the Company which was provided to Mr Warner and exhibited to his report of 28 February 2005. That statement is subject to the qualification that one of the eight invoices referred to in para [57] above, identified as 5391TAL, is for an amount of $148,311.79, while the record of invoices annexed to Mr Warner’s report of 28 February 2005 shows the invoice bearing that number as being for an amount of $187,324.39. The difference of $39,012.60 might provide an explanation for where the figure of $400,000 appearing in the Second Report to Creditors as being the amount of work in progress of Barclay Mowlem came from, but that question was not explored in the evidence.

75 The evidence does not establish with clarity what the prospects of recovering anything from Barclay Mowlem are. Mr Warner gives evidence (which I accept) that Mr Kovacic:

“… remains adamant that the claim from Barclay Mowlem is completely recoverable and I don’t necessarily have the same view of course …”

76 Mr Warner has received legal advice in May 2005 to the effect that the claim is good for at least $200,000. However that advice was not tendered, and I do not know on the basis of what factual assumptions it was given, so no weight can be placed upon the fact that it was given.

77 Even though there is this uncertainty about what ultimately might be recovered from Barclay Mowlem, Mr Warner gave evidence, which I accept, about the way in which, in the light of knowledge at the time of the trial, the amount of $400,000 included in the 31 March 2005 Addendum Report for work in progress from Barclay Mowlem should be regarded:

“Q. I am saying as of today that $400,000 should have come out?
A. It should have been seriously discounted and, as you put it, put into debtors.

78 If the Barclay Mowlem “work in progress” claim was valued at nil, that would mean that the amount of work in progress which should have been included in the DOCA value of work in progress in the Addendum Report (para [37] above) was $62,900 recoverable from Leighton, not $458,900.

79 By the time of his Updating Report of 12 September 2005, Mr Warner was estimating that nothing more should count on being recovered from Barclay Mowlem for retention debtors, and the only amount which had been recovered from Barclay Mowlem was the amount which was paid to him in March 2005 (para [73] above). It necessarily follows that, with the knowledge he now has about the Barclay Mowlem cross-claim, the amount of $26,400 ascribed to Barclay Mowlem in the Addendum Report as a still outstanding retention debt, ought not have been included.

Estimated legal costs

80 The estimate of costs sent to the creditors in the Updating Report of 12 September 2005 has not been specifically updated in the evidence. These proceedings came on for hearing on 23 September 2005 in the Corporations List, with a seriously inadequate estimate of the likely hearing time. They continued on 26 September 2005, and 2 November 2005. It is not unusual for litigation the hearing of which is interrupted to prove more expensive than the same litigation would have been if it concluded in a single run of days. While a positive finding cannot be made about it, it would be no surprise if the estimate of costs made on 12 September 2005 proved inadequate.

Transfer of Business Operations to the New Company

81 Mr Warner at no time paid any employee of the Company any wages or other entitlements in connection with ongoing work. From the start of the administration Mr Kovacic, or the New Company, paid the employees, and directed their work. After the appointment of the administrator, Mr Kovacic terminated the services of two or three of them, but kept the rest on.

82 Mr Warner has received a total of $11,000 in license fees from Mr Kovacic or the New Company. The license contained a term that it would run from 28 February 2005 to 5 April 2005 inclusive, or until the liquidation of the Company, which ever was earlier. The period from 28 February 2005 to 5 April 2005 is approximately 5½ weeks, so a basis for the payment of that sum of $11,000 can readily be inferred.

83 At the commencement of the administration Mr Warner was undecided about whether he would conduct trading operations himself as administrator, or whether he would license the Company’s business to the directors. When Gzell J directed, on 2 March 2005, that any Deed of Company Arrangement should pay Bidald’s costs of the Winding Up Proceedings in priority to all other amounts payable by them, Mr Warner was given an estimate that those costs could be between $50,000 and $60,000. He explained:

“What that meant was the first or $50 or $60,000 that was covered in the administration had to be reserved for those costs. In other words, the first $50 or $60,000 recovered could not be used by me to trade the business. What that meant from a practical point of view was I didn't have any money to trade the business because of that order.”

84 That led him to decide in favour of licensing the business. At the time of granting the license, it was his intention that, while the Company would operate under that license during the period of the administration, if a Deed of Company Arrangement could be agreed upon, the Company would then continue operations in its own right.

85 The reader will recall that, in his affidavit of 1 March 2005 Mr Warner was expecting that all creditors, including disputed creditors, could be paid in full, from the ordinary operations of the Company, by the end of April 2005. As well, Mr Kovacic had informed Mr Warner that he would make a cash contribution of at least $40,000, and subordinate the directors’ claims against the Company.

86 By 17 March 2005 the proposal for a deed being discussed between Mr Warner and Mr Kovacic had the following elements:

(a) The directors would contribute a minimum amount of $500,000 to the deed administrators within six months, up to a maximum of $600,000 depending on debtor collections;

(b) The source of the funds would be the company’s pre-appointment assets including debtors and any shortfall below $500,000 made up by directors personally;

(c) The directors were not, however, prepared to give any personal security over their assets to secure their promised shortfall contribution;

(d) The deed administrators would hold security over the company’s assets until the required payments were made;

(e) All loans payable to the directors and related parties entitlements would not participate in the deed fund;

(f) Except for superannuation claims, accrued employee entitlements would not participate in the deed fund but would be satisfied from results of future trading;

(g) That control of the Company would revert back to the directors upon execution of the Deed; and

87 Quite what had caused Mr Warner’s view to alter between 1 March 2005 and 17 March 2005, from one where the Company’s own resources could meet completely all non-related creditors, to one where up to $600,000 might be needed depending on debtor collections, was not explored in the evidence. Drafts of a Deed of Company Arrangement, containing the elements I have just set out, were prepared.

88 On the morning of 22 March 2005 Mr Kovacic put a revised deed proposal to Mr Warner. The new proposal differed from the previous one in that:

(a) The directors would contribute a fixed sum of $40,000 into the Deed Fund within 6 weeks from execution of the DOCA, and

89 On 22 March 2005 Mr Warner revised a draft of the Second Report to Creditors to take account of this change in the deed proposal.

90 The stock of the Company (which had been valued at $369,000 in Mr Warner’s affidavit of 1 March 2005, but which had come to be valued at $104,855 by the time of the Second Report to Creditors) was at all times in the physical possession of Mr Kovacic and the New Company. The administrator sold it to the New Company at some stage, receiving payment for it in August 2005, of $65,408. The stock of the Company was specialised stock, made for a particular job.

91 Likewise, the plant and equipment of the Company remained in the physical possession of Mr Kovacic and the New Company throughout the administration. The plant and equipment was sold by the administrator to either Mr Kovacic or the New Company at a time fixed no more precisely than “maybe July”.

92 As demonstrated by the handwritten clause in the license agreement (para [21] above), from the time of the license agreement being entered it was contemplated that it was possible that the New Company could undertake contracts on its own accord. In fact, the New Company is carrying on business and getting new work. There is at least an overlap between the sorts of customers, the employees, and the suppliers that the Company had, and that the New Company now has.

93 Once the John Holland contracts were brought to an end (which I infer had happened at some stage prior to 31 March 2005) the only work which remained to be done to complete the contracts of the Company was to finish the Leighton job, and possibly (if one accepts that there was $4,000 of work still to do concerning Barclay Mowlem) to do that small amount of work for Barclay Mowlem. The total costs to complete those contracts, as estimated in the Addendum of 31 March 2005, was $19,500. That is unlikely to provide a workforce of nine or ten with work for very long.

94 The Company could not have resumed operations once its plant and equipment had been sold in “maybe July”. However, Mr Warner’s assessment went further than that:

“Q. * There was no possibility this company was going to continue to trade once the unfinished work was completed?
A. The intention was to finish the contracts which it had.

HIS HONOUR: Try answering the question, please.

ABOVE QUESTION MARKED * READ BACK BY COURT REPORTER.

95 While the license agreement was on foot, it provided a legal justification for the New Company to be regarded as not employing the employees, but rather as being an entity to which the employees were lent. That analysis could apply even if the employees were to some extent, or perhaps even entirely, doing work which was for the benefit of the New Company. Even if it was the New Company which was paying their wages, the license agreement would provide a justification for that payment being regarded as being on account of the Company. However, once the license agreement had come to an end, that basis for regarding the employment of the employees by the Company as continuing disappears. In the absence of any other evidence, it is most likely that the employees ceased to be employees of the Company no later than 6 April 2005. Once it had lost its workforce, the likelihood of the Company continuing in business was for that reason alone slight.

96 I mention here that Mr Aldridge SC submitted that votes of the employees had been improperly admitted at the Second Meeting of Creditors, because by that time their employment had transferred to the New Company, and therefore, the New Company had become responsible for the statutory entitlements of the transferred employees, and the Company relieved from responsibility for those entitlements: section 4 Long Service Leave Act 1955, sections 101, 102 Industrial Relations Act 1996, section 4B Annual Holidays Act 1944. I do not give effect to that argument because Bidald has not proved that the transfer of employees had taken place by the time of the Second Meeting of Creditors.

97 There is another reason as well why it is unlikely that the Company would have resumed trading once the period of administration had come to an end. Even though the debts owed to Mr Kovacic and Sandra Kovacic, and the debt claimed by Mrs Kovacic, were not debts which were provable under the Deed, they remained debts of the Company. There is no evidence of any specific arrangement in relation to when they would be paid, so the legal inference is that they were payable upon demand. As things were presented to the creditors in the Second Report to Creditors, all the readily available resources of the Company, apart from its stock, plant and equipment, were to be consumed by the Deed Fund. The plant and equipment had a value quite inadequate to pay the debts owed to the associated creditors, and in any event if the plant and equipment were to be sold, the Company would cease trading. There was no contract or arrangement for the loans owing to the related parties to be capitalised, or made payable only at some fairly distant future time. Thus, the Company would, if it had resumed trading, been trading while insolvent.

98 Mr Aldridge SC submitted that it had been proposed since 9 March 2005 that Mr and Mrs Kovacic would purchase the stock, plant and equipment, and that, therefore, as early as 9 March 2005, it was clear the Company would not continue to trade. The factual basis of that submission is a letter which Mr Warner wrote to Mr and Mrs Kovacic on 9 March 2005 putting a proposal that they buy the stock, plant and equipment for an agreed sum. However, that proposal is one which Mr Warner made in the context of making suggestions to Mr Kovacic about how his objective of paying all legitimate creditors in full could be carried out. The proposal for Mr and Mrs Kovacic to buy the stock, plant and equipment was coupled with a proposal that that sale be for a sum which would be sufficient, along with work in progress realisations, debtor realisations and licence agreement royalties,

“to discharge the costs of the administration, the costs of the DOCA, the claims of the priority creditors and provide a return to all remaining creditors (including disputed creditors) of 100 cents in the dollar.”

The Liquidation Comparison

99 An important element of the Second Report to Creditors, the Addendum of 31 March 2005 and the Updating Report has been to compare the return to creditors which, at the date of the report, was estimated under a Deed, with the return estimated in a liquidation.

Liquidation Comparison in Second Report to Creditors

100 The Second Report to Creditors compared the resources available in a liquidation and a Deed of Company Arrangement as follows:

Liquidation	Deed of Company Arrangement
Tangible Assets
Available Cash	Nil	Nil
Work in Progress	240,000	626,500
Retention Debtors	171,248	288,592
Stock on Hand	37,320	104,855
Plant & Equipment	21,713	Nil
Total Tangible Assets	470,281	1,019,9047
Insolvent Transaction Recoveries
Preferential/Uncommercial Transactions	50,000	Nil
Insolvent Trading	100,00	Nil
Other Voidable Transaction	Nil	Nil
Assets Available	620,281	1,019,947
Licence Fee and stock purchased	15,680	15,680
Directors Contribution to DOCA	Nil	40,000
Total Resources Available	635,961	1,075,627

101 That table then deducted the priority payments for a liquidation, and a Deed, respectively. It estimated that those priority payments would total $450,255 in a liquidation, and $319,593 under a Deed. The difference arose because $80,662 of employee entitlements would be provable on a liquidation, but were said to be excluded under the proposed Deed, and because it was assumed that the remuneration of a liquidator would be $100,000, while the remuneration of a Deed Administrator would be $50,000. That resulted in $185,706 being distributable amongst non-priority creditors in a liquidation, and $756,034 being distributable amongst non-priority creditors under a deed.

102 The total unsecured non-priority creditors in a liquidation were estimated to be $2,544,111 in a liquidation, and $1,336,158 under a deed. The difference arose because $119,389 of employee entitlements would rank as non-priority in a liquidation, but were said to be excluded under the deed, and because a shareholder’s loan account totalling $1,088,564 was provable in a liquidation, but was excluded under the Deed.

103 I have set out, at para [27] and [28] above, the reasoning which lay behind the adoption of lower figures for work in progress and retention debtors in a liquidation than under a deed. As things worked out, that reasoning proved mistaken, when the John Holland contracts were not continued with (and the evidence does not enable a finding to be made about whether the John Holland contracts were not continued with on a date before or after 22 March 2005), no work of substance appears to have been actually done concerning the Barclay Mowlem project, and in any event Barclay Mowlem proved unwilling to pay the amount of the claimed “work in progress”.

104 Likewise, the actual recoveries from retention debtors proved to be much less under the Deed of Company Arrangement than was estimated, with only $87,422 actually collected by 22 September 2005, and only an additional $11,500 remaining outstanding at that date.

105 Likewise, the estimate for recovery on account of stock on hand proved excessive, with only $65,408 being actually recovered. On the other hand, the recovery actually made for plant and equipment exceeded the estimate for that item in a liquidation, as $55,341 was recovered on that count.

106 Recoveries of $50,000 were estimated in the Second Report to Creditors for preferential/uncommercial transactions in a liquidation. Mr Warner had identified a total of nearly $72,000 in possibly preferential payments, stretching back to 7 February 2004. Beyond a reference to the law concerning recovery of preferential payments being complicated and that defences are sometimes available, no firm basis for the figure of $50,000 was provided.

107 The figure of $100,000 recovered for insolvent trading proceeded on an assumption (which was explicitly stated not to have been proved) that the Company was insolvent from 1 July 2004. That date was chosen because Mr Rodgers’ report had found that the Company was solvent as at 30 June 2004, and Mr Warner assumed, as a possible worst case, that the Company had become insolvent some time in July 2004. In the period from July 2004, $804,000 had been paid to unsecured creditors. As well, Mr Warner took into account, in fixing this date, that Mr Kovacic had put about $120,000 of his own money into the Company between 1 July 2004 and early April 2005, even though there was apparently no pre-existing legal obligation for him to do so, or any legal obligation for him to continue to make any such payments in the future.

108 Mr Warner had carried out some investigations of the ability of the directors to satisfy any judgment against them for insolvent trading, which disclosed that Mr and Mrs Kovacic owned five lots of land, each of which was mortgaged for an unknown amount, and Mrs Kovacic and Sandra Kovacic together owned another lot of land which was not mortgaged. At the time of the report Mr Warner did not have funding available to proceed with any preference recovery or insolvent trading actions, but he adverted, in the Second Report to Creditors, to the possibility of funding from creditors or a litigation lender. No firm basis appears in the report for the estimate of $100,000 as the likely return from insolvent trading actions in a liquidation.

109 There might possibly be a basis for the Company having been insolvent at an earlier date than July 2004. The Company had traded at a loss from 1 July 2003, and at the time of Mr Warner’s appointment the BAS returns of the Company had not been lodged since June 2004. Mr Warner conceded in cross-examination that it was possible that insolvency could go back to 1 July 2003, which would increase the amount of any insolvent trading claim.

110 Some contrary evidence is that the accountant of the Company, Mr Ford, prepared some accounts of the Company up to 31 May 2004, which concluded that in the eleven months ended 31 May 2004 the Company had made a profit after tax of $454,647. Those accounts are not, however, ones which have ever been adopted by the directors.

111 Concerning the availability of funding for preference recovery or insolvent trading litigation, Mr Warner has not asked creditors whether they are willing to provide such funding. Mr Kirkham, the secretary of Bidald, says that Bidald would be prepared to consider any application to provide such funding which might be put.

112 In all these circumstances, there had been insufficient examination of the transactions of the Company, and of the possibilities of obtaining funding for litigation, to enable any firm conclusions to be drawn about amounts which might be recovered in a liquidation under preference or uncommercial transaction litigation, or insolvent trading litigation. The amounts ultimately recovered might be more than the amounts of Mr Warner’s estimates, or they might be less. His estimates were little more than guesses. I hasten to say, however, that this is not a criticism of him – in the time which had been available to prepare the report, and with the information at his disposal, he could do little more than guess. Even judges in the course of making an assessment of damages or compensation are required to adopt a figure which is little more than a guess, when the evidentiary basis for adopting a particular figure is very thin, but it would be wrong to use the thinness of the evidence as a reason for valuing that head of damages or item of compensation at zero: Jones v Schiffmann (1971) 124 CLR 303 at 308 per Menzies J; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83; Copyright Agency Limited v Department of Education of New South Wales (1985) 4 IPR 5; 59 ALR 172 at 183; University of Newcastle and Others v Audio-Visual Copyright Society Limited (1999) 43 IPR 505. Mr Warner can hardly be criticised for doing much the same. Furthermore, an attentive reader of the Second Report to Creditors would appreciate the insubstantial basis which there was for the figures which he had adopted. Mr Warner was right to point out, in the Second Report to Creditors, that the possibility of making these kinds of recovery was something which was open in a liquidation, and would not be open under the proposed deed.

113 In all these circumstances, I do not find that the inclusion of those particular estimates for litigation recoveries was something which amounted to the providing of false or misleading information to the creditors in the report.

114 I mention for completeness that, on the first day when he was being cross-examined, Mr Warner agreed that there were some errors shown in an estimated outcome statement annexed to his affidavit of 1 March 2005 relating to the return expected in a liquidation from open invoice debtors and retention debtors. Those admissions, were, as he explained in evidence on a later day, ones which he had made in error, as a result of not accurately recollecting the methodology he had used in deriving that estimated outcome statement. The figures concerning which he made those mistaken admissions were not repeated in any report to creditors. In these circumstances I shall ignore those mistaken admissions.

Liquidation Comparison in Addendum

115 The resources estimated to be available in a liquidation in the Addendum totalled $557,845. The difference from the Second Report to Creditors arose from valuing the John Holland retention debtor at nil. The total resources estimated to be available under a Deed were $746,527. The difference between the Addendum and the Second Report to Creditors in this respect arose not including any recoveries from John Holland, and including a $396,000 recovery from Barclay Mowlem for work in progress instead of the $400,000 which the Second Report to Creditors had estimated.

116 Total priority payments in a liquidation were estimated to be $465,255, and estimated to be $334,593 under a Deed. Essentially, the difference arose from the estimate for administrators’ remuneration increasing from $100,000 to $115,000.

117 Thus, the Addendum estimated the funds available for distribution to non-priority creditors in a liquidation at $92,590, and under a Deed at $411,934.

Liquidation Comparison in the Update

118 I have set out at para [63] above the estimate of recoveries from asset realisations under a Deed. In this report, Mr Warner showed the recoveries in a liquidation from insolvent trading and various voidable transactions as being “unknown”, and allowed nothing as a recovery for them. The total resources available in a liquidation were shown as being $340,262, and under a Deed at $536,276. The difference arose because the shortfall guarantee amount was treated as distributable under the Deed. As well, about $9,000 more of GST refund was available under a Deed than under a liquidation.

Payments to Creditors Outside the Deed

119 From the time that the Company made application to set aside Bidald’s statutory demand on 2 January 2004, Mr Kovacic has continually maintained that he disputes the debt which Bidald says it is owed. The “directors’ undertaking” of 28 February 2005 which Mr and Mrs Kovacic gave to Mr Warner (para [14] above) expressed a wish to propose a Deed of Company Arrangement, which would subordinate their own claims and allow “all remaining legitimate creditors” to be paid in full. Likewise, the estimated outcome statement annexed to Mr Warner’s affidavit of 1 March 2005 described the proposed deed as one, “to make a sum available under a DOCA to pay all valid creditors in full and take back control of the company.” From the outset in the administration, however, Mr Warner made clear to Mr Kovacic that it would be Mr Warner’s task to decide what creditors ought be admitted to participate in the Deed. Each of the reports which Mr Warner has sent to creditors has estimated two different dividends which might be payable under a deed, one dividend being if disputed creditors were admitted, the other being if disputed creditors were not admitted.

120 Bidald’s debt is, it seems, shown in the books of the Company. Bidald has submitted a proof of debt, and has been permitted to vote for the full amount of its claimed debt at both the first and the second meetings of creditors, and in the vote resulting from the “virtual meeting”.

121 From the beginning of the administration, it was Mr Kovacic or the New Company who paid ongoing wages of the employees. The employees had claims, however, for entitlements which had accrued prior to the date of the administration, concerning which they lodged proofs and voted at the second meeting of creditors.

122 By 13 July 2005 (the date on which Mr Kovacic swore an affidavit in these proceedings) eight of the ongoing employees (excluding Mr and Mrs Kovacic and Sandra Kovacic) had been paid all their employee entitlements, including holiday pay and superannuation entitlements. A ninth employee, Belinda Gilmore, had been paid her holiday pay entitlements, but not her superannuation entitlement. The eight employees who have been paid in full are ones who had given Mr Kovacic their proxy to vote at the second meeting of creditors. The evidence does not disclose precisely when, or in what circumstances, these payments to employees were made.

A practice seeking to achieve results at a creditors’ meeting by offering gratuities to other creditors, however publicly, would open up a fertile field for abuse. Significantly the stated object of Pt 5.3A to bring about a better return for the company creditors and members could readily be subverted by gratuities paid to achieve other objects. Such a practice is contrary to the policy of the Act and the public interest.”

244 In my view, where it has not been shown that any creditor voted in favour of the Deed because she, he, or it had been promised or even led to believe it might receive some benefit beyond that arising under the Deed itself, the fact that Mr Kovacic or the New Company later provides extra benefits to certain favoured creditors does not demonstrate any lack of good faith between the creditors.

245 This point is made more clearly if one considers what the situation would have been if the Deed had been performed, and had operated so that recoveries and distributions were exactly those which had been envisaged in the Second Report to Creditors. In that situation, it is hard to see that there would be any breach of good faith if Mr Kovacic had decided, after the Deed was entered, to pay, from his own pocket, extra money to certain of the creditors whom he favoured, and whom he had not led to expect any such benefit. When Bidald is in the situation of receiving, as things have eventuated, either no dividend, or a very small dividend, it is not Mr Kovacic’s making of the payments to favoured creditors outside the Deed which gives Bidald cause for complaint – rather, it is the Deed having been entered on the basis of the false or misleading information which I have earlier found.

246 I do not accept that the making of these extra payments outside the Deed establishes the ground in section 445D(1)(e).

The Terms of the Deed have been Varied in an Unfair Manner

247 Section 445A and 445B Corporations Act 2001 (Cth) provide:

“445A A deed of company arrangement may be varied by a resolution passed at a meeting of the company's creditors convened under section 445F, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting.

445B Court may cancel variation

(1) Where a deed of company arrangement is varied under section 445A, a creditor of the company may apply to the Court for an order cancelling the variation.

(2) On an application, the Court:

(a) may make an order cancelling the variation, or confirming it, either wholly or in part, on such conditions (if any) as the order specifies; and

(b) may make such other orders as it thinks appropriate.”

248 Mr Aldridge SC submits that, in the present case, there has been what amounts to a variation of the Deed, by a procedure which is not the statutorily approved one. The matter said to amount to such a variation is the failure to call a meeting when the Deed Fund did not reach $500,000, and the taking of the shortfall guarantee.

249 I do not accept that this ground is made out. What the ground in section 445D(1)(e) is concerned with is what the consequences will be of the working through of the Deed itself. This ground is not concerned with injustice or delay which arises from a cause other than effect being given to the Deed.

Clause 6 of the Deed is Unjust

250 Clause 6 of the Deed is quoted at para [53] above.

251 The Deed defines “Creditor” as meaning, in effect, everyone who would have had a provable debt against the company in a winding up, other than the Associated Creditors.

252 The argument that Clause 6 is unjust depends upon what is the correct construction of Clause 6. The injustice that is referred to is one which would arise if Clause 6 were effective to extinguish creditors’ debts immediately upon execution of the Deed.

253 Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 397 is a decision of Barrett J on 29 April 2005, giving reasons for the adjournment of the Winding Up Proceedings. The Company had contended that the adjournment could not be granted, for two reasons. The first was that the adjournment application was precluded by section 444E(2)(b) of the Act. His Honour held that was not so, because to make an adjournment application was not to “proceed with” the application for winding up. The Company’s second contention was that Clause 6 of the deed had removed the status of Bidald as a creditor, and so it did not have the standing to continue the Winding Up Proceedings in any way. His Honour rejected that contention, on the basis that even when a creditor who has begun winding up proceedings has been paid after the commencement of those proceedings, the proceedings did not lapse, and that was sufficient to enable the court to adjourn them. At [18] His Honour expressly stated that whether Bidald was a creditor of any kind at that date was unimportant for his basis of decision. Thus, his Honour did not need to consider the effect of Clause 6 of the deed.

254 As a matter of construction, clause 6 means that the claims of creditors are extinguished when the Deed has been fully performed. It is not a well drafted clause. However, to construe it as meaning that the creditors’ debts were extinguished at the time the Deed was entered would be ludicrously uncommercial. It would mean that, if immediately after the Deed had been adopted it was demonstrated that it was impractical and the creditors would receive nothing under it, the creditors would have no other right to be paid their debts. I doubt that any reasonable creditor would agree to that proposition. As well, a construction under which clause 6 extinguished all debts immediately on execution of the Deed is inconsistent with Clause 2.3, which proceeds on the basis that there would be some point in placing the Company into liquidation – if all the debts of all non-associated creditors had already been extinguished, there would be no such point. As well, Clause 3.2 makes provision for the Company to be liable for any outstanding employee entitlements during the period of the Administration. Those employees who are not Associated Creditors would have no such entitlements, if Clause 6 operated immediately on entry of the Deed. Clause 18 of the Deed provides for a moratorium on creditors enforcing debts or claims, before the termination of the Deed, or after termination unless the Deed is terminated pursuant to a default on behalf of the Company in compliance with its obligations under the Deed. There may well be room for argument about whether the terms of that moratorium, both as to whether it applies to a determination of the Deed by the court rather than a party, and also concerning whether, insofar as it restricts creditors’ rights of recovery after the deed is terminated, are ones which the court would regard as unjust. However those questions have not been argued in the present case, and it was probably premature to argue them. The point, for present purposes, is that Clause 18 contemplates that, at least sometimes, the moratorium will cease to have effect after the Deed has been terminated, and that is inconsistent with all claims of creditors having been extinguished immediately upon the Deed having come into operation.

255 When the argument that Clause 6 establishes the ground in section 445D(1)(e) depends upon a construction of Clause 6 which is not correct, that argument itself fails.

Section 445D(1)(f) – Oppression or Unfair Prejudice or Unfair Discrimination

256 This ground for setting aside the Deed contemplates that the oppression, prejudice or unfair discrimination arises from the terms or operation of the Deed itself. In substance, Bidald relies upon the same matters as it relied upon under section 445D(1)(e). The reasons why section 445D(1)(e) is not made out (subject to the matter I left undecided in para [224] above) also show that (subject to the same matter left undecided) section 445D(1)(f) is not made out.

Section 445D(1)(g) – Termination for Some Other Reason

The Deed is Part of a Scheme to Defeat the Legitimate Claims of the Plaintiff as a Creditor

257 Mr Aldridge SC points out, from at least the time when Bidald served a statutory demand on the Company in December 2003, the Company has contended that Bidald’s claimed debt is not really due. From the time that Mr and Mrs Kovacic first proposed a Deed in February 2005, their intention was that legitimate creditors would be paid, but not the disputed creditors. Mr Aldridge SC submits that the way in which the payments will end up having been made, both under the Deed and outside it, has worked out fairly close to what Mr Kovacic wished to happen. Further, it has worked out that way through Mr Kovacic deciding to not proceed with the John Holland contracts, taking over the employment of nearly all employees, and acquiring the plant and equipment for the New Company.

258 Mr Kovacic in cross-examination denied that his aim was to ensure that all employees and trade creditors were paid, but that Bidald and other disputed creditors were not paid. I do not accept that denial. Rather, in my view, Mr Kovacic has at all relevant times had a desire to see Bidald not paid if that were possible.

259 However, that does not provide a reason for terminating the Deed. Just as consistently as Mr Kovacic has maintained his view, Mr Warner has made it clear that he will carry out first the Company administration, and then the Deed administration, in accordance with his own views and duties. Once Mr Warner was in charge of the administration of the Company, and, later, of the Deed, Mr Kovacic did not have the capacity to carry his own aim out, other than by making payments to creditors additional to those the Deed provided, or by action which prevented money which would otherwise flow into the Deed Fund from reaching it. Action of the former kind is permissible when (as here) those benefits are not shown to have been given or held out before the Deed was entered. While termination of the John Holland contracts is of the latter kind, it has not been shown to have been done as a means of lessening payments to the Deed Fund. I am not persuaded that it provides a reason to terminate the Deed.

The Deed Allows an Insolvent Company to Continue to Trade

260 The availability of insolvency as a ground for winding a company up is part of a policy in the Corporations Act 2001 (Cth) that insolvent companies ought not be allowed to continue to trade. It is predictable that at least some people in the community will deal with a company on the assumption that the company is able to pay its debts as they fall due, and if the company is insolvent the making of such an assumption may well cause such people loss. The opportunity for a company to go into administration when it is insolvent, or the directors are of the view that it is or may become insolvent, is likewise consistent with the policy that insolvent companies should not trade. Consistently with that policy, it is established that it is undesirable, because of the risks to future creditors, to stay a winding up if it would allow the company to go forth free of the winding up but in a continuing state of insolvency: Re Denistone Real Estate Pty Ltd v Companies Act [1970] 3 NSWR 327. Proof of solvency is likewise a requirement for a termination of a winding up: Deputy Commissioner of Taxation v Markment Pty Ltd (in liq) [2005] NSWSC 1123 at [6].

261 The express words of section 445D(1)(g) are very broad, and should be applied in a way consistent with the policy of the Corporations Act 2001 (Cth), and other public policies to which the law gives effect. Giving effect to the general policy of the corporations law that insolvent companies should not continue to trade is well within a legitimate use of section 445D(1)(g).

262 Part 5.3A was introduced into the Corporations Law in 1992, on the recommendation of the Harmer Committee (Australian Law Reform Commission General Insolvency Inquiry Report No 45). The recommendation of that Committee concerning the enactment of section 445D(1)(g) was:

“This will enable the court to draw on the case law which has been developed in respect of our schemes of arrangement. Examples of public policy reasons which may lead a court to avoid or to terminate the deed and which have been cited in cases concerning schemes of arrangement are:

• the proposal has a fraudulent or wrongful purpose;

• the terms of an arrangement do not comply with the companies legislation generally …;

• the deed contemplates that the company would, after the arrangement set out in the deed has been carried out, continue commerce in an insolvent financial condition.”

Deputy Commissioner of Taxation v Portinex Pty Ltd

263 Thus it was not only consistent with the general policy of the Corporations Law, it was within the intention of Parliament in enacting section 445D(1)(g) itself, that a good reason for setting aside a deed of company arrangement is that the deed allows an insolvent company to be in a position to continue trading.

264 This Deed clearly allows the Company to trade once the Deed has worked its course. Further, if it were to do so, it would be trading while insolvent. That provides a further ground for a termination of the Deed.

265 In the witness box, in supplementary oral evidence-in-chief, Mr Kovacic proffered an undertaking to the Court that, if the Deed were not terminated, he would release the debt which the Company owed him.

266 Cross-examination established that the day when Mr Kovacic gave that evidence was the first time that the question of any such release had been raised with him, and that he had not had any independent legal advice about it. Even if I were to accept his undertaking (which I would hesitate to do, given the circumstances in which it was proffered) there is still a significant debt outstanding to Sandra Kovacic, and an even larger debt claimed by Mrs Kovacic, which are not covered by that undertaking. Sandra Kovacic’s debt alone, in its present state of being due on demand, would be enough to make the Company insolvent as soon as the Deed came to an end.

267 Thus, this ground is made out.

Departure in Practice From the Terms of the Deed

268 A repeated theme of Mr Aldridge’s submissions is that the affairs of the Company are not being administered in the way that was represented to the creditors would occur before the Deed was adopted. Quite apart from the shortfall in recoveries and distributions, the Company has not continued in existence and will not do so (though the New Company will carry on the core of the business of the Company), the plant and equipment has been sold rather than retained, the employees have all transferred to the New Company, there has been no meeting of creditors called pursuant to Clause 2.3, and in lieu Mr Warner has obtained the shortfall guarantee. Thus, quite independently of the shortfall in distributions, the creditors are now presented with a significantly different situation to that which was presented to them before they adopted the Deed. The difference is so substantial that what is actually happening is fundamentally different to the arrangement the creditors voted to accept.

269 I accept that submission. In my view what is being put into effect is not the proposal which was put to the creditors, but rather an ad hoc improvisation which has had a historical starting point in the proposal which was put to the creditors. I am satisfied that this basis for termination is made out.

Discretion to Set Aside

270 Even if one or more of the statutory preconditions for terminating a deed are made out, there is a further step, of the court actually deciding in its discretion that it should do so: Joseph Khoury & Sons v Zambena Pty Ltd (1999) 217 ALR 527 at 540 (Fitzgerald JA).

271 In exercising the discretion, the court should bear in mind

ex debito justiciae

Deputy Commissioner of Taxation

(Cth) v Pddam Pty Ltd

Interests of the Creditors

272 There is some authority that the “primary consideration” is the interest of creditors: Deputy Commissioner of Taxation (Cth) v Comcorp Australia Ltd (1995) 13 ACLC 1671 at 1684 (appeal on other grounds dismissed: (1996) 70 FCR 356; (1996) 14 ACLC 1616); Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 289. Indeed, the fact that a majority of creditors favour the deed is itself a factor in favour of not terminating it under section 445D: GreekOrthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 282 or avoiding it under section 445G: Deputy Commissioner of Taxation(Cth) v Pddam Pty Ltd (1996) 19 ACSR 498 at 512.

273 In deciding what weight to attribute to the vote of the creditors, the court can take into account the extent to which the voting

Bathurst City Council v Event Management Specialist Pty Ltd (admin apptd) and Others

274 In the present case, that entitles lesser weight to be accorded to the votes of the related creditors. However, to the extent that the proofs of Mr Kovacic and Sandra Kovacic were admitted to vote, while I am not making any final decision about their entitlement to the debt which they claim, I do decide that Mr Warner correctly decided on the material before him that there was a sound basis for admitting those proofs. As well, no suggestion has been made in these proceedings that the debts claimed by Mr Kovacic or Sandra Kovacic are non-existent or exaggerated. Thus, when they are creditors, it would be wrong to discount their votes completely. There is no suggestion that either of them have received any preferential payments from the Company or entered any uncommercial transactions with it – indeed, Mr Kovacic has been putting his own money into the Company in the period immediately before presentation of the winding up summons. The extent of any discounting of their votes depends upon the extent of the apparent risk that they were subjected to of being subject to an insolvent trading action. And concerning that, no basis has been suggested for any possible insolvent trading action against Sandra Kovacic.

275 In my view it is also open to the Court, in deciding what weight to attribute to the vote of creditors, to take into account the extent to which the voting was influenced by, or dependent upon, the votes of creditors for whom it was a matter of complete monetary indifference whether there was a winding up or a Deed because they would receive the same amount under either alternative. That has particular application in the present case to the votes of the employees. However, in the present case it does not warrant the discounting of the votes of the employees, because, even though their dividends would be the same under a winding up or a Deed, they had an interest in the Deed being adopted, because it would better ensure their continued employment. That is the type of interest which the objectives of Part 5.3A recognise as legitimate.

276 In taking into account the interests of the creditors, one factor is whether the creditors would be better off under the Deed than in a liquidation: Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 282. In approaching that question, it would be wrong to regard “under the Deed” as referring strictly to the benefits which the creditors are entitled to through the operation of the Deed according to its terms. If that approach were taken, the amount payable by Mr Kovacic under the shortfall guarantee would not be taken into account. Rather, the Court should look at a comparison between the situation that the creditors will be in if the Deed is brought to an end, and the situation that they will be in if it is not brought to an end. Even though the payment under the shortfall guarantee is not distributable to creditors in accordance with the strict terms of the Deed, there is no real doubt that, when and if it is received by Mr Warner, it will be held by him on trust for distribution amongst the creditors.

277 The more likely scenario for operation of the Deed is that the disputed creditors will be admitted. Thus, total distributions to creditors, if the Deed remains on foot, are likely to be not more than five cents in the dollar. Even that figure depends upon Mr Kovacic making the payments under the shortfall guarantee. There has been no real examination of his capacity to pay, but neither has an attack been made upon it. However, Mr and Mrs Kovacic have significant indebtedness to BankWest, which is secured (para [8] above). As well BankWest is a creditor of the Company for (now) around $378,000, and Mr and Mrs Kovacic have given a secured guarantee of that debt. There is a very real possibility that expenses (and in particular legal costs and other expenses connected with these present proceedings) will exceed Mr Warner’s estimate in the Updating Report (para [80] above). Even in the Updating Report, Mr Warner estimated the likely maximum distribution under a Deed, without committing himself to a view about what the actual recoveries were likely to be. In my view, whether the non-priority creditors will receive anything at all if the Deed continues is a matter of speculation.

278 It is not possible to reach any firm conclusions about the amounts that are likely to be recovered under a liquidation (para [100] ff above).

279 While prediction of the likely outcome in a liquidation cannot be made at the present time, it can, however, be said that there was a real risk that Mr Kovacic would be subject to an insolvent trading claim if the Company were to go into liquidation. He has been prepared to give the shortfall guarantee, although under no obligation to do so, rather than see the Company go into liquidation. These factors justify a discounting of his views, in considering the interests of the creditors.

280 Another factor is whether the extent of the loss which creditors would sustain if the company were to be in liquidation rather than under a deed constitutes a hardship to those creditors: Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 282.

281 Of the creditors who voted against liquidation in the “virtual meeting” Mr Kovacic was by far the largest creditor. He voted for the Deed even though he would receive no distribution under it at all. The next largest creditor was BankWest, with its claim for $378,139. That claim is secured by the assets of Mr and Mrs Kovacic, as well as being owed by the Company. The next largest creditors who voted against liquidation are John Holland (claiming $273,600) and Sandra Kovacic (claiming around $84,000), followed by Malouf Solicitors (claiming around $25,000) and two other corporations claiming around $19,000, and $13,000 respectively. Other creditors are for smaller amounts. There is no reason to believe that termination would impose a detriment so severe that it counted as hardship on any of them, even if it meant that they received no dividend instead of a 5% dividend. For Malouf Solicitors, for instance, termination of the Deed would mean that it would receive nothing, instead of at the very maximum $1,281.09.

282 In an application to terminate a deed of arrangement under the Bankruptcy Act 1966 (Cth), the fact that the dividend to creditors under a scheme of arrangement will be relatively insignificant is a factor which the court can take into account in deciding, in the exercise of its discretion, whether it should order the termination of the arrangement (Paton v Campbell Capital Ltd (1993) 46 FCR 30 at 32-33); that same principle applies here. Any dividend to creditors if the Deed continues in existence is likely to be small.

283 The holding of the virtual meeting has relevance for the exercise of discretion. Even though an administration comes to an end once a Deed of Company Arrangement has been executed, and it is no longer possible for there to be a meeting of creditors for the purpose of the administration (Emanuele v Australian Securities Commission (1995) 63 FCR 54; (1995) 19 ACSR 1 at 14), it can be appropriate in some cases for the court to seek the views of the majority of creditors and to give weight to them: Emanuele v Australian Securities Commission (1995) 19 ACSR 1 at 15; Deputy Commissioner of Taxation (Cth) v Comcorp Australia Ltd (1995) 13 ACLC 1671 at 1684 (appeal on other grounds dismissed: (1996) 70 FCR 356; (1996) 14 ACLC 1616); Deputy Commissioner of Taxation (Cth) v Pddam Pty Ltd (1996) 19 ACSR 498 at 512; GreekOrthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 287-288. Likewise, it can be appropriate for the administrator of the deed to seek out the views of those creditors, and to do so by circular rather than by an actual meeting: GreekOrthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 288-289.

284 However, when the virtual vote has the difficulties which I have identified at para [205] ff above, and when its outcome (para [70] above) was that a small majority in value of the unrelated creditors favoured liquidation, I do not regard the result of that meeting as a very important factor in deciding where the interests of the creditors lies.

285 In all these circumstances, I do not find that the interests of the creditors favour either termination of the Deed, or its remaining on foot.

Public Interest

286 It by no means follows that if the creditors would be better off under the Deed than with a liquidation, the Deed will be allowed to stand. As Fitzgerald JA (with whom Beazley JA and Davies A-JA agreed on this point) said in Joseph Khoury & Sons v Zambena Pty Ltd [1999] NSWCA 402; (1999) 217 ALR 527 at 543-4, [80]:

“ … the Court should not the encourage the notion that “anything goes” provided only that that a deed of company arrangement provides some benefit for dissatisfied creditors. Commonly, companies proposing deeds of company arrangement are insolvent and what is proposed involves some benefit for unsecured creditors. That cannot be permitted to be used by those who promote such proposals as a critical factor which warrants the court’s refusal to terminate or declare void such deeds, especially when different groups of unsecured creditors are treated differently.”

“especially”

287 There are decisions of both the Full Federal Court and the New South Wales Court of Appeal, which are hard to reconcile with the notion that there is any “primary consideration” – rather, the discretionary power is to be exercised having regard to both the interest of the creditors as a whole and in the public interest, which latter expression includes considerations of commercial morality and the interests of the public at large: Emanuele v Australian Securities Commission (1995) 63 FCR 54; (1995) 19 ACSR 1 at 15; Joseph Khoury & Sons v Zambena Pty Ltd (1999) 217 ALR 527 at 541, [68] per Fitzgerald JA. To the same effect is Sydney Land Corp Pty Ltd v Kalon Pty Ltd (1997) 26 ACSR 427 (Young J). In my view, the discretion is to be exercised in accordance with these decisions of appellate courts, and not with any concept of there being any “primary consideration”.

288 The “interests of the public” which the court can take into account include applying public policy. Just as a termination of the winding up which is agreed to by all creditors can be refused by the court if it is contrary to public policy (Re Denistone Real Estate Pty Ltd v Companies Act [1970] 3 NSWR 327), so the court can apply public policy in deciding whether to bring an administration to an end: Deputy Commissioner of Taxation v Woodings (1995) 16 ACSR 266 at 275 (Wallwork J). Likewise, public policy can be applied in deciding to bring a Deed of Company Arrangement to an end.

289 One public policy which can be applied is the policy against allowing an insolvent company to continue to be in a position to trade: para [260] ff above). That policy applies in the circumstances of this case.

290 For a director to avoid public examination about the affairs of the Corporation, and the possibility of the type of clawback litigation which is possible in a winding up, by making a payment to creditors, can also be a factor in favour of termination: cf Paton v Campbell Capital Ltd (1993) 46 FCR 30 at 32. It is in a relevant sense “detrimental to commercial morality” to dispense with the opportunity which the winding up law provides for the investigation of the affairs of a failed company: Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22 at 26; Emanuele v Australian Securities Commission (1995) 63 FCR 54; (1995) 19 ACSR 1 at 15.

291 How much weight is given to the fact that the affairs of the company will not be investigated depends upon whether there are circumstances which suggest that investigation is called for. Sometimes, the fact that only a small dividend will be paid to creditors is itself such a circumstance: Lancaster v NZI Capital Corporation Ltd (Sheppard J, Federal Court of Australia, 3 September 1991 unreported, but quoted and approved in Paton v Campbell Capital Ltd (1993) 46 FCR 30 at 32). Sometimes, the fact that it appears that there may be prospects of preference or uncommercial transaction or insolvent trading recoveries can be such a circumstance. In the present case, it is clear that only a small dividend will be paid to creditors, if any dividend at all. There is some basis for believing that insolvent trading recoveries might be possible, but the evidence concerning that topic is fairly slight, and any actual recoveries would depend on a liquidator obtaining the funding to sue.

Importance of the False or Misleading Information

292 Even if there has been false or misleading information included in a report, or if material information has been omitted from the report, it does not follow that, if the creditors had full and accurate information, they would have voted against the deed: Commissioner of Taxation v Comcorp Australia Ltd and others (1996) 70 FCR 356 at 400 per Carr J (with whom Lockhart J agreed). It is possible for false or misleading information given to creditors to be material, but still not of sufficient importance to justify terminating the Deed. What matters is how important that information is likely to have been in arriving at a decision how to vote: Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 at 282.

293 In the present case, the false or misleading information, if corrected, was likely to lead to an estimate that the Deed would result in no return to non-priority creditors at all. That is a matter likely to have been highly important. Indeed, when Mr Warner wrote to Mr and Mrs Kovacic on 9 March 2005 about the possibility of proposing a Deed he said:

“ The DOCA must give creditors a better return than if the company was wound up (ie liquidated).

Under the liquidation scenario the creditors will not receive a dividend. Consequently a DOCA providing a distribution to creditors that exceeds this (say 1 cent in the dollar) could be put to the creditors. However it is unlikely the creditors would agree such a compromise. In my experience creditors rarely accept an offer unless it is commercially attractive. A return of thirty to forty cents in the dollar being a minimum that the creditors might accept.”

294 Even though the information that the Company would continue to trade was false or misleading, in circumstances where the New Company is continuing to trade, and is thereby fulfilling the same purposes relevant to the interests of the creditors that would have been fulfilled if the Company itself had continued to trade, I do not regard that mis-statement as one which is entitled to weight in deciding whether or not to terminate the Deed.

Acting on an Application by a Disputed Creditor

295 Another factor which Mr Lucarelli submits I should take into account in is that the courts should be reluctant to exercise the power to terminate a Deed at the behest of a creditor whose debt is disputed. While he cited no authority, I accept that the fact that a debt is said to be disputed can be a proper factor to take into account.

296 However, the weight to be given to that factor will depend upon the apparent strength of the dispute. In the present case, there has already been a trial before Master Macready on the question of whether the debt is disputed, on which the Company lost. I recognise that the evidence presented on that issue at that trial was sketchy, and much of it was rejected as inadmissible, but I see no reason why the Company should not be regarded as having put such case as it had forward on that occasion. The question of whether Bidald was in truth a creditor of the company was never raised as a preliminary issue in these present proceedings. Bidald is shown as a creditor in the books of the company. Mr Warner is clearly of the view that Bidald has enough of a claim to be a creditor to warrant it voting at the second meeting of creditors. On the present evidence, what Mr Kovacic regards as a dispute about the existence of Bidald’s debt appears to be without substance.

297 I mention that under section 445D(2), an order under section 445D may be made on the application of, inter alia, a creditor of the company, or any other interested person At the least, if it is not actually a creditor, Bidald has standing to apply for an order under section 445D as “any other interested person”.

Delay

298 Delay in bringing the application is a particularly important discretionary factor: Re Carey Builders Pty Ltd (1997) 23 ACSR 754; Khoury v Zambena (1997) 23 ACSR 344 at 352. Here, the application was brought promptly.

Other Matters

299 Some other factors which can in some circumstances be relevant to the exercise of discretion, but which are not relevant in the circumstances of the present case, are listed in Khoury v Zambena (1997) 23 ACSR 344 at 352-353 (Young J) (decision affirmed in Joseph Khoury & Sons v Zambena Pty Ltd (1999) 217 ALR 527).

Conclusion on Discretion

300 In all these circumstances, the appropriate course is to terminate the Deed.

Other Matters Arising

301 In light of that conclusion, it is not necessary to give separate consideration to whether the Deed should be set aside under section 445G, or 600A.

302 While both counsel recognised the limitation which section 444E(2) imposed on proceeding with the Winding Up Proceedings while the Deed was on foot, they agreed, very sensibly, that it was appropriate to make, at the hearing, such submissions as they would wish to make if the Deed were to be terminated. Mr Aldridge SC drew attention to section 446B(1), which provides:

“The regulations may prescribe cases where -

…

(b) a company that has executed a Deed of Company Arrangement (even if the deed has terminated);

is taken to have passed a special resolution under section 491 that the company be wound up voluntarily.”

303 Regulation 5.3A.07(1)(a) of the Corporations Regulations 2001 (Cth) prescribes one such case as being where the Court makes an order under section 445D terminating the deed. He also points out that Regulation 5.3A.07(4) deems the company to be taken to have nominated the administrator of the Deed of Company Arrangement to be liquidator for the purposes of the winding up, and deems the creditors to be taken not to have nominated anyone. In the ordinary course, if a Deed were to be terminated, the effect would, therefore, be that Mr Warner and Mr Worrell, as Deed Administrators, would be taken to have been nominated as liquidators for the purposes of the winding up.

304 Mr Aldridge SC submits that it would be inappropriate that the administrators become liquidators, or that the Company be taken to be wound up voluntarily. Instead, Bidald seeks to have the Company wound up in insolvency in the Winding Up Proceedings. He therefore submits that an order should be made under section 447A that Regulation 5.3A.07 does not operate with any effect in relation to the Company, that an order should be made in the Winding Up Proceedings that the Company be wound up under section 459A of the Act, and that Bidald’s nominee, Mr Sheahan, be appointed as liquidator.

305 Mr Lucarelli submitted that, if a liquidator other than the Deed Administrators was to be appointed, it should be someone other than Mr Sheahan. He gave two reasons. The first was that maintaining the appearance of impartiality would favour the appointment of someone nominated by neither party. The second was that Mr Sheahan’s fees, at $500 per hour for a partner’s time, were at the higher end of the market range of fees for liquidators.

306 When Mr Sheahan is not alleged to have any connection with the Company or Bidald previously, other than indicating his consent to act if appointed, and he is otherwise qualified to act, the mere fact that he has been nominated by Bidald is not a reason for declining to appoint him.

307 Very soon after the second criticism was made, Mr Aldridge SC obtained and tendered a consent by Mr Sheahan to act for lower fees than those at which he had originally consented. Those fees are around the middle of the market range.

308 The substantial ground for a winding up under section 459A is made out, in that the Company is clearly insolvent. In my view it is appropriate that it be wound up by the Court, and that Mr Sheahan be appointed as liquidator.

309 To minimise costs so far as possible, I propose to make a costs order now. However, I do so without having heard the parties, and on the assumption that no principle or factual circumstance bears upon the costs order other than that costs should follow the event. I shall reserve leave to the parties to otherwise argue.

Orders

1. That the Deed of Company Arrangement made 6 April 2005 between Miles Special Builders Pty Limited (joint administrators appointed) (ACN 060 644 966), Mile Kovacic, and Anthony Warner and Ivor Worrell (joint administrators of Miles Special Builders Pty Limited) be terminated.

2. That Part 5.3A Corporations Act 2001 (Cth) is to operate in relation to Miles Special Builders Pty Ltd (subject to a Deed of Company Arrangement) so that Regulation 5.3A.07 does not operate with any effect in relation to the Company.

3. That the plaintiff’s costs of these proceedings be paid by the Company.

4. That order 3 not be entered until 21 days after the date of delivery of reasons for judgment in this matter.

1. That any further compliance with the Rules concerning this matter be dispensed with.

2. That the Company be wound up in insolvency.

3. That John Sheahan be appointed as liquidator of the Company.

4. That the costs of the plaintiff of these proceedings be paid from the assets of the Company.

5. That order 4 not be entered until 21 days after the date of delivery of reasons for judgment in this matter.

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Citations

Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235

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Cited Sections

CITATION:	Bidald Consulting v Miles Special Builders; Bidald Consulting v Miles Special Builders [2005] NSWSC 1235
HEARING DATE(S):	23/9/05, 26/9/05 & 2/11/05
JUDGMENT DATE :	9 December 2005
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Deed terminated. Company wound up.

CATCHWORDS:	CORPORATIONS – voluntary administration – Deed of Company Arrangement – termination of – construction of section 445D(1) Corporations Act 2001 – circumstances of application of section 445D(1)(a) and (b) – interrelationship of section 445D(1)(a) and (b) – meaning of “false or misleading” – meaning of “material” – role of informal seeking of views of creditors in deciding materiality – whether failure to call meeting of creditors in circumstances when Deed required it to be called is a material contravention of the Deed – whether winding up proceedings being on foot prevents Deed Administrator from calling meeting of creditors to consider placing company into liquidation – whether a Deed can provide for the de facto winding up of the company – in what circumstances payment of different amounts to creditors bound by a Deed is permissible – role of good faith between creditors in operation of Deed - section 445D(1)(e) does not apply to action contrary to the Deed – relevance of a Deed allowing an insolvent company to continue to trade – relevance of substantial departure in practice from proposal put to creditors at time Deed was adopted – operation of discretion to set aside Deed – relevance of interests of creditors – relevance of public interest – public interest factors which can be taken into account – significance of provision of false or misleading information – whether termination to be affected on application by person said to be a disputed creditor – procedure to achieve winding up by the Court when Deed terminated – BANKRUPTCY – arrangements with creditors without sequestration – composition under the general law – whether, and in what circumstances, special benefits can be provided to one creditor bound by a composition – juristic basis of prohibition on one creditor bound by a composition receiving a special benefit – role of consideration in compositions – CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – consideration – role of consideration in composition between debtor and creditors – juristic basis on which Court prevents one creditor bound by a composition from receiving a special benefit – PROCEDURE – contempt, attachment and sequestration – action out of Court frustrating litigation in Court – when a contempt
LEGISLATION CITED:	Annual Holidays Act 1944 Bankruptcy Act 1966 (Cth) Corporations Act 2001 (Cth) Corporations Law Corporations Regulations 2001 (Cth) Industrial Relations Act 1996 Long Service Leave Act 1955 Trade Practices Act 1974 (Cth)
CASES CITED:	AG Australia Holdings Limited v Burton & Anor [2002] NSWSC 170; (2002) 58 NSWLR 464; (2002) 58 IPR 268 Argyle Art Centre v Argyle Bond & Free Stores [1976] 1 NSWLR 377 Re Bartlett Researched Securities Pty Ltd (1994) 4 ACSR 707 Beard v Prestige Baking Industries Pty Ltd (1981) 36 ALR 307; 52 FLR 384 Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 397 Bidald Consulting v Miles Special Builders [2005] NSWSC 171 Brambles Holdings Ltd v Trade Practices Commission (1980) 32 ALR 328 Re Carey Builders Pty Ltd (1997) 23 ACSR 754 Commissioner of Taxation v Comcorp Australia Ltd and others (1996) 70 FCR 356; 14 ACLC 1616 The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Commonwealth of Australia v Rocklea Spinning Mills [2005] FCA 902 Cook v Lister (1863) 13 CB (NS) 543 Copyright Agency Limited v Department of Education of New South Wales (1985) 4 IPR 5; 59 ALR 172 Re Cufari; Ex parte Commissioner of Taxation v Huppatz (1992) 34 FCR 544 Dallinger v Halcha Holdings Pty Ltd (in admin) & Anor (1995) 14 ACLC 263 Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22 Deputy Commissioner of Taxation (Cth) v Comcorp Australia Ltd (1995) 13 ACLC 1671 Deputy Commissioner of Taxation (Cth) v Pddam Pty Ltd (1996) 19 ACSR 498 Deputy Commissioner of Taxation v Comcorp Australia Ltd [1997] 4 Leg Rep SL3 Deputy Commissioner of Taxation v Markment Pty Ltd (in liq) [2005] NSWSC 1123 Deputy Commissioner of Taxation v Woodings (1995) 16 ACSR 266 Re Denistone Real Estate Pty Ltd v Companies Act [1970] 3 NSWR 327 E. T. Fisher & Co Pty Ltd v English Scottish and Australian Bank Ltd (1940) 64 CLR 84 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125 Emanuele v Australian Securities Commission (1995) 63 FCR 54; (1995) 19 ACSR 1 Ex parte Milner; In re Milner (1885) 15 QBD 605 Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274 Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139 Hall v Dyson (1852) 17 A & E 785 Hills v Mitson (1853) 8 Exch 751 Hirachand Punamchand v Temple [1911] 2 KB 330 Re Jacobs; ex parte O'Connor (1984) 1 FCR 1 James v ANZ Banking Group Ltd (1986) 64 ALR 347 Jones v Schiffmann (1971) 124 CLR 303 Joseph Khoury & Sons v Zambena Pty Ltd [1999] NSWCA 402; (1999) 217 ALR 527 Kalon Pty Ltd v Sydney Land Corporation Pty Ltd (1998) 26 ACSR 593 Khoury v Zambena (1997) 23 ACSR 344 Lam Soon Australia Pty Ltd (admin apptd) v Molit (No 55) Pty Ltd (1996) 22 ACSR 169 Lancaster v NZI Capital Corporation Ltd (Sheppard J, Federal Court of Australia, 3 September 1991, unreported) McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2 NZI Capital Corporation Ltd v Lancaster (1991) 30 FCR 441 Paton v Campbell Capital Ltd (1993) 46 FCR 30 Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460 Scuderi v Morris (2001) 39 ACSR 592 Re Segal; Lensworth Finance Ltd v Segal (1975) 9 ALR 154; 45 FLR 85 In re Septimus Parsonage & Co Ltd [1901] 2 Ch 424 Sydney Land Corp Pty Ltd v Kalon Pty Ltd (1997) 26 ACSR 427 University of Newcastle and Others v Audio-Visual Copyright Society Limited (1999) 43 IPR 505 Welby v Drake (1825) 1 C & P 557; 171 ER 1315 Wynsix Hotels (Oxford Street) Pty Ltd v Toomey [2004] NSWSC 236 Young v Sherman (2002) 170 FLR 86; (2002) 20 ACLC 1559
PARTIES:	Bidald Consulting Pty Ltd - Plaintiff Miles Special Builders Pty Ltd - Defendant
FILE NUMBER(S):	SC 2858/04; 2583/05
COUNSEL:	M R Aldridge SC; V E Whittaker - Plaintiff G Lucarelli - Defendant
SOLICITORS:	Kemp Strang - Plaintiff Colin Biggers & Paisley - Defendant