Diakos v Pacific Steel Constructions Pty Ltd, in the matter of Pacific Steel Constructions Pty Ltd (No 2)

In Diakos v Pacific Steel Constructions Pty Ltd, the applicants sought leave to proceed with an application for further variation of deeds of company arrangement (DOCA) and for the DOCAs to be varied to extend the time for completion of the refinancing. The respondents, including Pacific Steel Constructions Pty Ltd, opposed the application. The matter was heard by Justice Edelman in the Federal Court of Australia.

The primary legal issues before the Court were whether the applicants were entitled to leave to proceed with the application under section 444E(3) of the Corporations Act 2001 (Cth) and whether the Court should exercise its discretion to vary the DOCAs under section 447A of the Act. The applicants argued that the variation was necessary to avoid prejudice to creditors and to further the objectives of the Act, including maximising the chances of the companies continuing in existence or achieving a better return for creditors than an immediate winding up.

Justice Edelman found that the applicants were entitled to leave to proceed with the application, as they were persons bound by the DOCAs and the variation would further the objectives of the Act. The Court noted that the variation would not prejudice the creditors and was in their interests, as it would allow time for the refinancing to be completed and for the outgoing secured creditors to attend to various matters. The Court held that the variation was appropriate and exercised its discretion under section 447A to vary the DOCAs accordingly.

The Court made orders granting leave to the applicants to proceed with the application and varying the DOCAs to extend the time for completion of the refinancing. The deed administrators were required to provide a copy of the orders to the creditors within five business days, and the deed administrators, creditors, and any other person with a sufficient interest were granted liberty to apply in relation to the orders.

This decision highlights the Court's willingness to exercise its discretion to vary DOCAs in appropriate circumstances, particularly where the variation is in the interests of creditors and furthers the objectives of the Act.