Le Meilleur Pty Ltd v Jin Heung Mutual Savings Bank Co Ltd

[2011] NSWSC 1115

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Le Meilleur Pty Ltd (subject to Deed of Company Arrangement); Le Meilleur Pty Ltd (subject to Deed of Company Arrangement) & Ors v Jin Heung Mutual Savings Bank Co Ltd & Anor [2011] NSWSC 1115
Hearing dates:	20, 21, 27 & 28 April, 3 May, 17 June 2011
Decision date:	15 September 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ward J
Decision:	Dismiss plaintiffs' originating process. Declarations in relation to Deed of Company Arrangement executed on 18 August 2010. Orders for termination of Deed of Company Arrangement and declaration that company entered into creditors winding up by reason of s 446A on 19 August 2010.
Catchwords:	CORPORATIONS - whether deed of company arrangement was in conformity with resolution passed at the second meeting of creditors and hence a binding instrument within the meaning of s 444B(6) of the Corporations Act 2001 (Cth) - whether second defendant voted by proxy for deed in circumstances where vote was carried "on the voices" and second defendant's proxy held multiple proxies - whether, if the deed is a binding instrument and second defendant is bound by it, the deed or part thereof should be terminated or second defendant granted relief against the operation of some or all of its terms - whether first and second defendants should be compelled pursuant to s 442C to deliver discharges of mortgages so contracts for sale entered into by deed administrators can be completed - HELD - deed is not a binding instrument within the meaning of s 444B(6) as it does not accord with the deed proposal the subject of the resolution on which creditors voted - second defendant not bound by deed since the manner in which a vote was taken at the meeting precludes finding that the holder of its proxy validly voted in favour of deed - accordingly, administration terminated by reason of s 446A and caused creditors voluntary winding up to arise - CIVIL PROCEDURE - application after close of submissions to amend plaintiffs' originating process to seek declaratory or other relief in relation to a claimed equitable charge or lien over land where Anshun raised - HELD - application dismissed
Legislation Cited:	Civil Procedure Act 2005 (NSW) Conveyancing and Law of Property Act 1881 (UK) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Insolvency Act 1986 (UK) Land Tax Management Act 1956 (NSW) Law of Property Act 1925 (UK) Local Government Act 1993 (NSW) Payroll Tax Act 2007 (NSW) Real Property Act 1900 (NSW) Supreme Court Rules 1970 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	ANZ Banking Group Ltd v Bangadilly Pastoral Co Ltd (1978) 139 CLR 195 Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14 Australasian Memory Pty Ltd v Brien [2000] HCA 40; (2000) 200 CLR 270 Baxter v British Airways plc (1988) 82 ALR 298 Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510 Brash Holdings Ltd (admin apptd) v Katile Pty Ltd [1996] 1 VR 24; (1994) 13 ACSR 504 Bridgecorp Finance Ltd v Corner [2005] NSWSC 225 Brooke v No 5 Lorac Avenue Pty Ltd (1994) 14 ACSR 717 Browne v Dunn (1893) 6 R 67 HL Champerslife Pty Ltd v Manojlovski & anor [2010] NSWCA 33; (2010) 75 NSWLR 245 City of Swan v Lehman Bros Australia Ltd [2009] FCAFC 130; (2009) 179 FCR 243 Cleary v Australian Co-operative Foods Ltd (Nos 2 and 3) [1999] NSWSC 991; (1999) 32 ACSR 701 Commercial & General Acceptance Corporation Ltd v Nixon [1981] HCA 70; (1981) 152 CLR 491 Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 Debis Financial Services (Aust) Pty Ltd v Allied Bellambi Collieries Pty Ltd [1999] NSWSC 935; (1999) 17 ACLC 1636 Deputy Commissioner of Taxation v Comcorp Australia (1996) 21 ACSR 590 Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 Ernest v Loma Gold Mines Ltd [1897] 1 Ch 1 Essex Securities Pty Ltd v Lunt [2006] WASC 58 Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251 Forsyth v Blundell (1973) 129 CLR 477 G and M v Armellin [2008] ACTSC 68; (2008) 219 FLR 359 Graeme Webb Investments Pty Ltd v St George Partnership Banking Ltd [2001] NSWCA 93; (2001) 38 ACSR 282 Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) (1997) 23 ACSR 274 H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694; 1 All ER 934 Hagenvale Pty Ltd v Depela Pty Ltd & Serrada Holdings Pty Ltd (1995) 17 ACSR 139 Hamilton and Fiorentino as Administrators of Kisoro Pty Ltd v National Australia Bank Ltd (1996) 66 FCR 12 Idoport Pty Limited & anor v National Australia Bank Ltd & 8 ors (15) [2000] NSWSC 1215 Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309; (2003) 204 ALR 327 Jiriwa Pty Ltd v Primary Industry Bank of Australia Ltd [2000] NSWSC 1094 Jones v Dunkel (1959) 101 CLR 298 Khouri v National Australia Bank Ltd [2007] NSWSC 987 Lehman Bros Holdings Inc v City of Swan [2010] HCA 11; (2010) 240 CLR 509 Mailman v Challenge Bank Ltd (1991) 5 BPR 11721 Matrix Film Investment One Pty Ltd & ors v Alameda Films LLC and Warner Bros Entertainment and Pictures Inc [2007] NSWSC 523 McFadden v Snow (1952) 69 WN (NSW) 8 McVeigh v Linen House Pty Ltd & Rugs Galore Australia Pty Ltd [2000] VSCA 4; (2001) 1 VR 31 Meadow Springs Fairway Resort Ltd (in liq) (ACN 084 358 592) v Balanced Securities Ltd (ACN 083 512 685) (No 2) [2008] FCA 471; (2008) 65 ACSR 563 Mentha v GE Capital Ltd (1997) 27 ACSR 696 National Commercial Banking Corporation of Australia Ltd v Solanowski (1984) NSW ConvR 55-194 New Beach Apartments Pty Ltd v Epic Hotels [2007] NSWSC 474 No 5 Lorac Avenue Pty Ltd v Brooke (1995) 16 ACSR 247 Nominal Defendant v Gabriel [2007] NSWCA 52; (2007) 71 NSWLR 150 Palk v Mortgage Services Funding Plc [1993] Ch 330; 2 All ER 481 Pioneer Park Pty Limited (in liquidation) v ANZ Banking Group Limited & ors [2005] NSWSC 832 Pitcher v Langford (1991) 23 NSWLR 142 Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589 Re Ansett Australia Ltd and Mentha [2001] FCA 1806; (2001) 115 FCR 376 Re ARV Aviation Ltd [1989] BCLC 664 Re Brashs Pty Ltd (1994) 15 ACSR 477 Re Capitol Films Ltd [2010] EWHC 3223 (Ch) Re Euco Ltd (in liq); Forrest Nursery Pty Ltd v Lopez (2006) 233 ALR 422 Re Kruger Engineering Pty Ltd [2006] NSWSC 1063; (2006) 60 ACSR 191 Re Ricon Constructions Pty Ltd (in liq) (1997) 43 NSWLR 174; 26 ACSR 655 Re Vanfox Pty Ltd [1995] 2 Qd R 445; (1994) 13 ACSR 209 Re Vouris; EPromotions Australia Pty Ltd v Relectronic - Remech Pty Ltd (in liq) [2003] NSWSC 702; (2003) 47 ACSR 155 Re Universal Distributing Co Ltd (1933) 48 CLR 171 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1985) 10 FCR 567; 75 ALR 601 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 Ryan v South Sydney Junior Rugby League Club Ltd [1975] 2 NSWLR 660 Sasson & Partners Pty Ltd v Fahevu Pty Ltd [1999] NSWCA 400 SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 Spendright Pty Ltd v Classfact Pty Ltd [2009] NSWSC 317 State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 Woolley v Colman (1882) 21 Ch D 169
Texts Cited:	Fisher & Lightwood, Law of Mortgage (13th edn) Ford's Principles of Corporations Law (online edn) Heydon, Cross on Evidence (online edn) Odgers, Uniform Evidence Law (7th edn) Ritchie's Uniform Civil Procedure Rules
Category:	Principal judgment
Parties:	Le Meilleur Pty Ltd (subject to Deed of Company Arrangement) (First Plaintiff) Kenneth Michael Whittingham (Second Plaintiff) Atle Crowe-Maxwell (Third Plaintiff) Jin Heung Mutual Savings Bank Co Ltd (First Defendant) NH Capital Co Ltd (Second Defendant) Port Stephens Council (Intervening Creditor) Greg Ramsey (Intervening Creditor) Chief Commissioner of State Revenue (Intervening Creditor) Community Association of DP 270021 (Intervening Creditor)
Representation:	Counsel S Golledge (20,21,27 April, 3 May, 17 June 2011)/P Russell (28 April 2011) (Plaintiffs) (and for Port Stephens Council as intervening creditor 17 June 2011) D Pritchard SC with J King (First Defendant) (and mention for Mr Greg Ramsey as intervening creditor 17 June 2011) No appearance for second defendant A Iluniono (Office of State Revenue as intervening creditor - 17 June 2011) Ms V McWilliam (Community Association as intervening creditor - 17 June 2011) Solicitors Blake Dawson (Plaintiffs) Sojong Lawyers Pty Ltd (First Defendant) Champion Legal (Chief Commissioner of State Revenue)(Intervening Creditor) Gadens Lawyers (Community Association of DP 270021)(Intervening Creditor)
File Number(s):	11/033912

Judgment

1. HER HONOUR : These proceedings were commenced by originating process filed on 2 February 2011. The plaintiffs seek relief in relation to the proposed sale of the Horizons Le Meilleur golf course and resort at Salamander Bay, Port Stephens. The first plaintiff (Le Meilleur) is the registered proprietor of the golf course and resort. The second and third plaintiffs are the persons appointed first as the voluntary administrators and then as deed administrators of Le Meilleur, which was placed in voluntary administration by resolution of its directors in late June 2010. A deed of company arrangement was executed by the deed administrators on 18 August 2010. The deed administrators have, since then, entered into contracts for the sale of both the golf course land and the business of Le Meilleur (i.e. the business operating the golf club at the course) to a third party (Brett Lawton Investments Pty Ltd as trustee for the Brett Lawton Super Fund), an entity associated with Mr Brett Lawton, the golf professional who is currently operating the golf course business under licence from the deed administrators.

1. The first and second defendants (Jin Heung Mutual Savings Bank Co Ltd and NH Capital Co Ltd, respectively) are banks operating in South Korea. Each holds a registered mortgage over the golf course land (but no security over Le Meilleur itself or its business) to secure borrowings by Le Meilleur's Korean parent company (Le Meilleur Constructions Co Ltd, to which I will refer in these reasons simply as the Korean parent company in order to avoid confusion between the two "Le Meilleur" entities).

1. There was no appearance by NH Capital at the hearing or during the course of the proceedings. On 31 March 2011, orders were made granting leave to the plaintiffs to proceed with their claims against NH Capital pursuant to Rule 11.4 of the Uniform Civil Procedure Rules 2005 (NSW).

1. Neither Jin Heung nor NH Capital has provided the deed administrators with a discharge of its respective registered mortgage over the land (necessary to permit the sale of the golf course land to proceed). In this regard, it is noted by Counsel for the deed administrators (Mr Golledge) that, as neither defendant holds any security over the other assets of Le Meilleur, if the mortgagees were to be in a position to enforce their security they could sell only the golf course and not the business currently operated at the golf course.

1. Broadly, what the plaintiffs seek to do in these proceedings is to compel Jin Heung to comply with the Deed of Company Arrangement dated 18 August 2010 which was executed following a creditors' vote taken at the second meeting of creditors held pursuant to s 439A of the Corporations Act 2001 (Cth) on 24 July 2010. (In the case of NH Capital there is no suggestion that it voted for the Deed of Company Arrangement at the Second Creditors' meeting.)

1. In the alternative, an order is sought pursuant to s 442C(2)(c) of the Corporations Act (or in the exercise of the inherent power of the Court to direct a judicial sale of the property, if that inherent power survives or extends beyond that conferred by s 442C) granting the deed administrators leave to dispose of the property of Le Meilleur that is subject to the mortgages to the first and second defendants.

1. It is submitted by Mr Golledge that Jin Heung agreed to the sale process and voted (by proxy) in favour of the Deed of Company Arrangement (knowing that by so doing it was consenting to the sale of the golf course land) and that it should not now be permitted to resile from that position where to do so would cause substantial prejudice to unsecured creditors, the deed administrators (who it is said have incurred substantial liabilities in relation to the administration and, in particular, the operation of the golf course up until Mr Lawton took over the operation of the course) and Mr Lawton (the purchaser of the land under the contract for sale). It is submitted by Mr Golledge that adequate arrangements have been made in the interests of the secured creditors (for the purposes of the pre-condition for relief under s 442C) because they will obtain from the sale all that they could expect to receive if they were to appoint a receiver pursuant to their security. (As will be seen, however, in the case of both mortgagees it is likely that they will receive little, if anything, out of the sale. That is certainly the case with NH Capital.)

1. Jin Heung's position is that it is not bound by the terms of the Deed of Company Arrangement. First, it says that the Deed is not a deed of company arrangement within the meaning of s 444B(6) of the Corporations Act (on the basis that it is said to encompass a proposal different from that which was put to creditors in the material forwarded prior to the meeting and to which the resolution passed at the meeting, in its terms, refers). Second, and in the alternative, Jin Heung claims it is not a creditor who voted in favour (within the meaning of s 444D(2)) of the resolution pursuant to which the Deed of Company Arrangement was executed. Third, it is said that Jin Heung gave its proxy (for the meeting at which the resolution to enter into a deed of company arrangement was passed) in reliance upon misrepresentations made by or on behalf of the deed administrators and/or Le Meilleur and therefore that it should be relieved of the burden of the Deed of Company Arrangement.

1. The submission by the deed administrators that Jin Heung has resiled from a consent given in relation to the sale of the golf course land is disputed. Reliance is placed on the evidence of two of Jin Heung's officers (Messrs Youngdae Ryu and Kwanghee Yoon) and that of a director of both Le Meilleur and the Korean parent company (Mr Jong Shin Kang) to the effect that the position of Jin Heung has always been that the land could not be sold without its consent. This is disputed by the deed administrators who maintain that consent was given, subject at most to the qualification that the sale be at a reasonable price (and here, it is said, that is the case).

1. Reference is also made to the evidence of one of the accountants in the administrators' office, Ms Christine Park (with whom most of the contact between the deed administrators and the Le Meilleur entities had taken place), to the effect that, to her knowledge, "Mr Kang never wanted the Australian company to sell anything". (It is said that there was no change of position even by the Korean parent company, in relation to a sale at least until a separate settlement was reached by the Korean parent company with the deed administrators on 3 September 2010, to which I will refer in due course).

1. It is submitted by Senior Counsel for Jin Heung (Mr Pritchard SC) that the true characterisation of the position is that Messrs Ryu and Yoon saw the administrators as little more than local agents who were in a position to survey the market for a possible sale subject to their consent .

1. Mr Pritchard notes that if Jin Heung is bound by the Deed of Company Arrangement then the application under s 442C does not arise (though I interpose to note that it would still remain for consideration in the case of NH Capital), but goes on to submit that if Jin Heung is held not to be bound by the Deed of Company Arrangement then leave should not be given to permit the disposal of the secured property, on the basis that the Court cannot be satisfied, within the meaning of s 442C(3), that arrangements have been made adequately to protect the interests of Jin Heung as registered mortgagee. In that regard, reference is made to the uncertainty as to what amounts are claimed by the deed administrators in respect of their expenses and fees and as to how any claim for remuneration is to be allocated as between the proceeds of sale of the land and of the business (in effect, as between secured and unsecured creditors); as well as to the complaints made as to the reasonableness of the sale price obtained for the land.

1. By an interlocutory process filed on 9 March 2011, Jin Heung has cross-claimed for declaratory relief reflecting the position for which it contends (namely, a declaration that the Deed of Company Arrangement dated 18 August 2010 is not a deed of company arrangement within the meaning of s 444B(6) of the Act or, in the alternative, a declaration that Jin Heung is not bound by the Deed of Company Arrangement); alternatively, for orders that the Deed of Company Arrangement deed be terminated or that there be a declaration that it is wholly void (or that certain provisions of the Deed of Company Arrangement are void) or an order that Part 5.3 A of the Act is to operate in relation to Le Meilleur in such a way that s 444D(2)(a) does not operate in respect of the Deed of Company Arrangement; and, again in the alternative, an order that the deed administrators be restrained from giving effect to the sale.

1. At the conclusion of the hearing before me on 3 May 2011, I was informed that notice of the present application had not (as had previously been thought by the parties) been given to creditors of Le Meilleur. An adjournment of the proceedings was granted to permit such notification to be given (it being accepted that parties whose interests might be adversely affected should be given an opportunity to be heard as to the relief now sought by the deed administrators - Re Ansett Australia Ltd and Mentha [2001] FCA 1806; (2001) 115 FCR 376 at [383] - [384] per Goldberg J).

1. Such notice was duly given, following which four creditors filed interlocutory processes in the proceedings. Those creditors are, in no particular order, the Office State Revenue (which is both a secured creditor in relation to outstanding land tax and an unsecured creditor in relation to outstanding payroll tax, and which did not attend the meeting or vote in relation to the resolution to enter into the Deed of Company Arrangement), Port Stephens Council (a secured creditor in relation to outstanding Council rates, which did vote in favour of the Deed of Company Arrangement), the local Horizons Community Association (which is a secured creditor in relation to outstanding strata plan levies and which voted in favour of the Deed of Company Arrangement) and Mr Greg Ramsey, an unsecured creditor (who maintains he has at all times been sceptical of any payment being made under the Deed of Company Arrangement). Other than Mr Ramsey, the intervening creditors support the sale of the land and golf course to Mr Lawton and the grant of the relief sought by the deed administrators. Mr Ramsey (the only unsecured creditor, other than the Office of State Revenue to the extent of its payroll debt claim, to make any submissions on this issue) does not.

1. At the conclusion of the adjourned hearing, an application was made on behalf of the deed administrators to amend the originating process in order to seek relief (if that be necessary having regard to the determination of the other issues in the proceedings) in relation to a claimed equitable lien or charge over the golf course land to secure their expenses incurred in the administration of Le Meilleur (including costs incurred by them in the operation of the golf course). The late amendment of the originating process (prompted, it would seem, by an observation in closing submissions by Mr Pritchard on 3 May 2011 as to any such claim potentially being the subject of an Anshun estoppel) was opposed by Jin Heung.

Issues

1. The following issues arise for determination:

(i) In relation to the Deed of Company Arrangement dated 18 August 2010:

(a) whether it is a binding instrument within the meaning of s 444B(6) of the Corporations Act ;

(b) whether Jin Heung is bound by it (which requires a determination of the issue as to whether it voted by proxy for the Deed of Company Arrangement and whether any such vote was valid as a matter of law); and

(c) whether, if it is a binding instrument and Jin Heung is bound by it, the Deed of Company Arrangement or part thereof should be terminated or Jin Heung should be granted relief against the operation of some or all of its terms.

(ii) Whether orders should be made under s 442C of the Corporations Act or otherwise, compelling the two mortgagees to deliver discharges of mortgage so as to allow the existing contracts for sale to be completed.

(iii) Whether leave should be granted for the amendment of the plaintiffs' originating process in order to permit the deed administrators in these proceedings now to seek declaratory or other relief in relation to a claimed equitable charge over the golf course land.

Summary

1. Mr Golledge premised his clients' claim on the following factual propositions, that he invited me to find on the facts before me:

• that Jin Heung should be taken to have voted for the deed of company arrangement on 29 July 2010; (for the reasons set out below, even if Jin Heung's proxy responded affirmatively when the vote was called I do not accept that this was a valid vote on behalf of Jin Heung)
• that at the 15 July 2010 meeting between the officers of Jin Heung and the Korean parent company's director (Mr Kang), Jin Heung consented to the proposal that the golf course land would be sold by the administrators; (I accept that this is established by the evidence - although, critically, I consider that Mr Ryu gave that consent on the basis of an understanding that the administrators would consult with Jin Heung in relation to the sale and that Jin Heung would retain the ability to refuse to consent to any particular sale if it was not satisfied as to the reasonableness of the price at which the land was to be sold - at T 240, Mr Ryu explained what he understood by a reasonable price in that regard as one to which both the secured creditor and the administrators agreed.)
• that the present sale (to Mr Lawton) is at market value (and therefore not at an unreasonable price); (I agree that the present sale price falls within the market range for the golf course land; however, in considering whether the price could reasonably be seen by the first mortgagee, acting in good faith, as acceptable, account must in my view be taken not simply of where the sale price falls within the valuer's range but as to whether the administrators have explored fully the opportunity for a purchaser to be found at a higher price and as to the deductions proposed to be made from the sale price before any receipt by the first mortgagee of proceeds from the sale - in the circumstances I am not satisfied that the condition to which Mr Ryu was told Jin Heung's consent to the sale would be subject has been satisfied)
• that Jin Heung was aware from shortly after 15 July 2010 that the administrators were proposing to put the golf course property on the market and that it also knew that the creditors' meeting had approved that course and the administrators were going about the business of selling the golf course land; (I accept that from 15 July 2010, Jin Heung was on notice of the proposal that the administrators would begin to commence the process of finding a purchaser for the golf course land and that, from at least November 2010, it was aware that the administrators were taking steps to undertake that sale process - but I do not accept that Jin Heung was advised of the result of the 29 July 2010 creditors' meeting until receipt of the letter dated 30 July 2010 but posted on 2 August 2010 by the administrators' solicitors or that it was aware until November of the steps, or some of the steps, that had been taken in relation to the sale process).

1. For his part, Mr Pritchard submits that central to Jin Heung's case is the proposition that the bank only agreed to a proposal whereby the administrators were effectively acting in the place of Le Meilleur in order to explore a possible sale and that it did so understanding that it would be consulted in relation to any actual sale that the administrators proposed to enter (with an ability to withhold consent at that stage). I consider that the evidence establishes broadly that this was Mr Ryu's understanding, although I do not accept that it should be inferred that the understanding was formed on the basis of representations made on behalf of, or as agent for, the deed administrators.

1. Unfortunately, it seems to me that the parties are in their current position on the one hand because of a series of assumptions made by the deed administrators as to the position of the first mortgagee in relation to its rights (largely engendered by what it was told by the Korean parent company) without direct confirmation from Jin Heung as to its understanding of the position and its willingness to forego those rights and, on the other hand, because of the reliance placed by Jin Heung on representations made by the Korean parent company as to the manner in which its position would be protected (that do not accord with the way in which the deed administrators considered they were entitled to proceed). The unfortunate aspect of this is the impact of that situation on the interests of third parties - namely, the other creditors and (to a lesser extent as I consider that his is a case of a knowing assumption of commercial risk) the proposed purchaser of the golf course.

1. For the reasons set out below, I am of the view that:

(i)(a) the Deed of Company Arrangement is not a binding instrument within the meaning of s 444B(6) of the Corporations Act as it does not accord with the deed "proposal statement presented" to the meeting (i.e. the written proposal attached to the administrators' report) which was the subject of the resolution voted upon at the second creditors' meeting (notwithstanding that it broadly accords with the explanation of the effect of the deed proposal given by the deed administrator at the meeting) - the critical difference being whether the land was to be included in the proposed sale under the deed proposal.

(b) in any event, Jin Heung is not bound by the Deed of Company Arrangement, since the manner in which a vote was taken at the meeting (whether on the voices, as the minutes record, or by a show of hands, as one of the Community Association members recalled) precludes a finding that the holder of its proxy validly voted that proxy in favour of the Deed of Company Arrangement; and

(c) had I found both that the Deed was a binding instrument and that Jin Heung was bound by it (which on the findings above is not the case), I would have granted relief under s 445D or alternatively 445G of the Act to terminate the Deed on the basis that there was a material omission from the report forwarded to creditors' prior to the second meeting (as to what was to be the subject of the proposed sale and as to whether, or the basis on which, the first registered mortgagee was prepared to consent to a sale of the golf course land) or alternatively that there was sufficient doubt as to whether the Deed of Company Arrangement was entered into in accordance with the Act, so as to enliven a discretion to terminate the Deed (and that, in the circumstances, the discretionary considerations in favour of termination of the Deed outweighed those against its termination).

I consider that the evidence establishes that Jin Heung agreed on 15 July 2010 to give its consent to the proposed sale of the golf course land, and signed a proxy form to enable a vote in favour of the then proposed deed of company arrangement, in reliance on misrepresentations made by Mr Kang to the effect that Jin Heung would retain a right not to consent to a sale at least if that sale was at what Jin Heung considered to be an unreasonably low price in all the circumstances. While I do not accept that such a misrepresentation was made as agent for, or on behalf of, the deed administrators, it does mean (having regard to the deed proposal as explained to the creditors at the second creditors' meeting) that Jin Heung gave its proxy on a mistaken apprehension of the true position and I consider that it should be relieved from the effect thereof.

(ii) Had this second issue arisen, I would not have made orders under s 442C of the Corporations Act (or in the exercise of any inherent jurisdiction remaining in the Court), compelling Jin Heung to deliver a discharge of its mortgage so as to allow the existing contracts for sale to be completed, as I am not satisfied that arrangements have been made adequately to protect its position and I place weight, in this regard and in considering the exercise of any discretion had there been adequate protection for Jin Heung's position, on the sensitivity traditionally shown to the position of secured mortgagees. (NH Capital is, however, in a somewhat different position. I would have been inclined, had it been the only registered mortgagee not bound by the Deed, to have granted the relief sought under s 442C against it, as it seems clear that NH Capital will receive nothing in either event and it has not chosen to resist any such relief - nor is there anything to suggest that it was misled in the manner in which Jin Heung was misled as to the operation of the proposed deed.)

(iii) I refuse the application for leave to amend the originating process at this stage of the proceedings.

Background Facts

1. As noted earlier, Le Meilleur is the registered proprietor of the Horizons golf course and resort, from which it has operated a golf course business since 2005.

1. In January 2008, the Korean parent company obtained from Jin Heung a loan facility up to a maximum amount of AU$16,000,000 (that amount including the sum of 10,000,000,000 Korean Won, at the time equivalent to AU $11,875,779.35, advanced by the Korean parent company, together with interest due and payable under the facility). The loan agreement is dated 31 January 2008 and Le Meilleur is named therein as a co-borrower.

1. Some weight was placed by Mr Golledge on the perceived lack of any direct benefit obtained by Le Meilleur out of the funds drawn down under the loan facility. Mr Kang, however, gave evidence that a sum of $6.5m was used to repay the $6.5m purchase price (T 150) and that the Korean parent company had provided funding of some AU$5m on improvements for the golf course (T 145) (although whether this cash came directly from the Jin Heung loan funds is not clear to me).

1. The Jin Heung loan was secured, inter alia, by a personal guarantee from the chairman of the Korean parent company (Mr Kyung Tae Chung) and a first registered mortgage granted by the Korean parent company's wholly owned subsidiary (Le Meilleur) over the Horizons golf course and resort. (Indebtedness secured by the Jin Heung mortgage as at 28 July 2010 was in the order of $12.4 million and it is not suggested that this has been reduced.)

1. Reliance is placed by Mr Golledge (as support for the proposition that the present arrangements should be regarded as adequate protection for the interests of Le Meilleur as secured creditor) on the fact that Jin Heung approved the initial loan application and made the loan advance to the Korean parent company after what is said to have been a very rudimentary due diligence process (insofar as it did not undertake any first-hand investigation of the golf course property, nor did it obtain any advice on Australian securities law, notwithstanding that this transaction constituted the first occasion when Jin Heung had advanced money on the basis of security over foreign based assets). The loan approval was based upon a valuation of the golf course that was by then already 10 years old and had not been updated. (Mr Ryu's explanation of this, however, was that the Australian company was not the borrower - it was only offering security - and that as far as the bank was concerned it was sufficient that it be satisfied that the Korean parent company was reasonably run, for it to accept the golf course land as part of the security for the loan - T 245.)

1. In that regard, I am not persuaded that the test as to what amounts to adequate protection for the secured creditors' interests for the purposes of s 442C should necessarily be measured by reference to what those creditors may have considered adequate to protect their interests when the security first obtained (not least where, as is presently the case, it seems to be accepted that the secured creditor did not obtain any, or any detailed, legal advice as to its position as secured creditor at the time). A failure by the second creditor to act diligently in the protection of its own interests does not in my view mean that there is a lesser test of adequacy in relation to the protection required to be afforded to the secured creditor on the disposal of the property over which it holds security.

• 2009

1. In March 2009, the Korean parent company borrowed a further 3,000,000,000 Korean Won (this time from NH Capital), also on the security of a personal guarantee from Mr Chung (as well as the provision of other guarantees) and a second registered mortgage was granted over the golf course and resort.

1. In 2009, the Korean parent company began to experience financial difficulties. It defaulted on its Jin Heung facility in around December 2009 (T 230) and at some stage during 2009 (variously put at June or December (T 230) it entered into a "work out arrangement" with its Korean creditors (some 20 or more banks) to which Jin Heung, as one of the banks, gave its consent. There was cross-examination of both Mr Kang and Mr Ryu as to the effect of that work out arrangement (a copy of which was not in evidence as the only copy produced in Court was in Korean). As I understand it, it had the effect of placing a moratorium on the exercise by Jin Heung (or other creditors) of its rights under the securities held in relation to the Korean parent company's borrowings for a period of one year (subsequently extended for a further year to 30 June 2011 or perhaps the end of this year) at the conclusion of which, if the Korean parent company had not repaid its indebtedness (in the order of some AU$80m), then the secured creditors (including Jin Heung) would be free to exercise their rights to enforce payment by recourse to their securities (see T 246). The work out arrangement apparently did not encompass any provision whereby secured creditors might be required to accept a lesser sum in discharge of their debts (T 248). It seems solely to have effected a moratorium on enforcement of securities for a period of time (T 233), (during which it was said that the chairman would be seeking to realise certain shares or interests in oil company developments in Iraq). (Mr Ryu, in response to a question to that effect, said there was no reference to Mr Chung's guarantee in the workout arrangement.)

1. There seemed to be a suggestion in the course of argument that the moratorium imposed by the Korean banks' workout arrangement may have led Jin Heung, in 2010, to consider favourably a proposal for the sale of the golf course by the deed administrators (since it could not otherwise have enforced its security over the golf course land at that stage). However, as I understood Mr Ryu's evidence, it would always have been open to the Korean parent company's secured creditors to sell the golf course property with the borrower's (or Le Meilleur's) consent.

• 2010 Financial difficulties

1. Between March 2009 and June 2010, Le Meilleur was the subject of several winding up petitions. Its only business was the operation of the golf course and resort and, according to its financial statements, it had operated with trading losses in excess of $1,000,000 for each of the 2007, 2008, 2009 and 2010 financial years. One of the largest creditors of Le Meilleur was the Commissioner of Taxation. As at 1 April 2010, the Commissioner claimed that Le Meilleur was indebted to the ATO in the amount of $647,640.67 (though the amount giving rise to that debt is, as I understand it, the subject of an objection). (It was the ATO's statutory demand issued in mid 2010, which seems to have been what ultimately precipitated the entry of Le Meilleur into administration.)

1. During the course of 2010, Mr Kang retained the services of Ms Christine Park (a Korean speaking accountant working in Sydney with the deed administrators' firm, PKF) in an attempt to negotiate the deferral of recovery action by the Commissioner of Taxation. (Ms Park had for a number of years undertaken accountancy related advisory work for the Korean parent company and she accepts that she was a trusted adviser of the company.) Ms Park had given advice in relation to disputes with various creditors of the golf course business over the period leading up to the ATO negotiations.

1. In the course of those negotiations, a request was made on behalf of Le Meilleur for the ATO to defer recovery action for a period of time in order to enable Mr Chung to sell his shares in the overseas oil projects. The ATO refused that request.

1. By at least the end of April 2010, Ms Park had expressed the view to Mr Kang that the situation was very serious (advising that her conclusion was that the ATO "is going to process the repayment of liabilities in their own way" and that "ATO has strong rights more than expected" - see email dated 28 April 2010 at pp 137/138 of the Court Book). (I will henceforth refer to documents in the 7 volume Court Book simply by CB page number.)

1. On 31 May 2010, the ATO served its statutory demand on Le Meilleur pursuant to s 459E of the Corporations Act , claiming payment of $673,465.85. Mr Golledge submits that Mr Kang (and also Ms Park, though it is not clear why Ms Park would have had any particular interest in this) became concerned that if the Commissioner of Taxation continued with enforcement action (and, in particular, sought the winding up of the company), this would lead to a sale of the golf course at a very low price. (Mr Kang explained in the witness box that in Korea a property sold at auction in these circumstances would be expected to fetch a very low price - T 158.) Mr Golledge submits (and it seems to be the case) that it was the preference, amongst the directors of Le Meilleur and the Korean parent company, that the golf course should be retained if at all possible.

1. At this point, Ms Park (who accepted that she was held out by her employer as someone who specialised in advising and assisting companies involved in business and investment between Australia and Korea (T 101.50) but readily conceded in the witness box that she had no experience in insolvency law or with voluntary administrations (T 102.50)) sought advice from Mr Ken Whittingham, a partner in PKF's corporate recovery team (and a registered liquidator) as to the options available to Le Meilleur in light of the action by the Tax Office.

1. Ms Park says that she then conveyed to Mr Kang the effect of the general advice she had obtained from Mr Whittingham, including the possibility of appointing a voluntary administrator.

1. I note that Ms Park's evidence was that during the time that she advised Le Meilleur and the Korean parent company she dealt primarily with Mr Jae Soon Hyun (a local employee of Le Meilleur) and Mr Kang; and that her advice was generally given by telephone calls and emails. Ms Park's general practice does not seem to have been to prepare separate file notes of advice given by her (saying that all telephone conversations were covered by emails - T 106). (The one exception to which she referred in her oral evidence was a memorandum that she had prepared of specific points on which she had noted certain advice to give to Mr Kang - on 9 June 2010 - T 108.) Although Ms Park said that she had kept a diary (which she also said she had checked) in which she had noted two or three telephone conversations with Mr Kang in June/July 2010, she then said she had thrown the diary away - T107.

• 9 June 2010 - advice re voluntary administration

1. By email to Mr Kang and Mr Hyun on 9 June 2010 (CB 725), Ms Park reported on "the outcome from the discussion with our expert [Mr Whittingham] in the morning", stating that "It [the outcome] is Voluntary Winding Up" with the appointment of "our company" (PKF) as administrator. The email referred to the need to inform the banks in Korea of the meeting but went on to say that "we may be able to do paper work by appointing an attorney (Power of Attorney)".

1. The email noted that the administrator would investigate the creditors "and start the process of disposing of company assets in order to pay off the company's debts" but that if the company's financial status improved during the period of administration they might be able to withdraw the voluntary administration. Alternatively, it was said, "another company may purchase Le Meilleur's assets and business and we may put a condition that they purchase the assets with mortgages". The email noted that generally "it" (presumably the administration process) lasts about 3-4 months "but I think up to 6 months may be sufficient" (the reference to 6 months perhaps responding to the topic that later became contentious - namely, as to whether Ms Park had represented to the Korean parent company that the administration process would in effect give it 6 months to find the funds to meet the debts owing to Le Meilleur's creditors).

1. Ms Park said in cross-examination that the reference to a power of attorney in that email was responding to a query from Mr Kang (T 108), though there is no record of such a query and it would seem inconsistent with Mr Kang's response (below) to her 9 June email, in which reference was made as to the Korean bank mortgagee having knowledge of the process.

1. Ms Park accepted in cross examination (at T 276) that the gist of what she had advised Mr Kang in the 9 June email was that the assets of the company (presumably by that referring to the land) could be purchased subject to the existing mortgages. She explained that the bank was considering various options, one of which was "if the new company or the transfer of the assets to company and the, the mortgage were to follow with the assets" T 113.31. (She also suggested that the email was just "shorthanded language in Korea" and said she thought "they understood what I am trying to say in Korean" T 112.44). Ms Park went on to comment that "the bank should agree with that" (i.e. the transfer of the land with the mortgages) T 113.40 but Mr Pritchard notes that when asked why the bank should agree, she was unable to give an explanation.)

1. Mr Kang responded to the 9 June email with a number of queries, including as to how the golf course would operate if the voluntary winding up took place and asked "Is it possible for the Korean bank, the mortgagee here to know the situation?" (CB 728). He also commented that "According to Mr Hyun we could get around it [presumably the ATO winding up threat] by getting the bank in Korea to appoint a liquidator" [or receiver] and asked how to go about that.

1. Pausing there, one odd feature of the process by which the Korean emails were translated was that there were on occasion copies of what seemed to be the same email but with a slightly different translation (albeit both bearing an accreditation stamp) - so, for example, the email at CB 728 was slightly different in translation to the copy appearing at CB 732, except that the latter recorded Ms Park's responses to the questions posed of her by Mr Kang. Nevertheless, the thrust of the varying translations seemed broadly the same.

1. Ms Park's response as to the question raised in relation to the Korean bank mortgagee's knowledge or possible knowledge or the process was "You should sort it out with Mr Hyun. I think it is best to appoint a proxy" (CB 732). (Ms Park did not seemingly respond at least at that stage to a query as to the possibility posed by Mr Kang that the Korean banks could appoint either a liquidator (or receiver), though a response to that was later given on 1 July 2011.)

1. Ms Park agreed in the witness box that the effect of her response as to the proxy was that she had asked the directors of Le Meilleur to obtain a proxy from the Korean banks for the first creditors' meeting (though I note that ultimately none was in fact obtained for that meeting).

• 18 June 2010 - recommendation to appoint voluntary administrator

1. By 18 June 2010, it was apparently the recommendation of Mr Whittingham's firm (PKF) that the directors of Le Meilleur appoint a voluntary administrator. Ms Park sent an email to Mr Kang, copied to Mr Hyun (CB 737) on that day in which she said it was a "dire situation" and warned that if other creditors took action "before us, none of the actions PKF is proposing will be carried out and the company will have to leave the golf course, which will be then reported to the current bank " (my emphasis) (which rather suggests that it was understood that there had been no contact at that stage with Jin Heung). This is consistent with Ms Park's evidence (at T 109.15) that as at early June 2010 Mr Kang was "worrying about to tell bank". In her 18 June 2010 email, Ms Park said:

Prior to that [the first creditors' meeting then contemplated to be held on 2 July], if the bank which is at the top of the list of the creditors fills out a proxy form, PKF can vote as its proxy on the day. As it is possible that the ATO or other creditors can reject PKF, just the afore-mentioned proxy form is believed to be necessary.

1. Ms Park asked Mr Kang to hurry (and she also asked him to pay the amount owed to PKF so that it would be eligible to become the 'liquidator'). (She suggested in the witness box that this should be translated as "please make decision in hurry" - T 116, but then conceded that there was no reference to "decision" in the email). (I interpose to note that I have proceeded on the basis of the translations (by accredited translators) into English of the Korean documents; rather than (as was the case in the above exchange) any differing translations of the documents proffered in oral evidence by Ms Park.)

1. Ms Park accepted that she expected Le Meilleur to persuade the bank as to why it was a good idea to give the proxy - T 119.25 - and she agreed in the witness box that the reason she had told Le Meilleur that it was necessary to get a proxy from the bank "was to ensure that [PKF] would be the administrator" and to avoid PKF being removed by the other creditors.

1. In the 18 June email, Ms Park told Mr Kang that even if the winding up process commenced it could later be withdrawn "and another company can be created to take over the business and move the mortgage of the current bank", commenting that this would be 'even better' as the current debt would be cancelled.

• Appointment of voluntary administrators

1. On 23 June 2010, Ms Park sent to Mr Hyun and Mr Kang, by email, documents to be signed and returned in order to effect the appointment of the administrators, including the minute of a directors' meeting to be held for that purpose.

1. On 24 June 2010, (the day before a winding up petition of another creditor was returnable before the Supreme Court of Queensland), the directors of Le Meilleur (Mr Kang, Mr Chung and Mr Soo Yeon Kim), at a meeting held in Korea, passed a resolution appointing Mr Ken Whittingham and Mr Atle Crowe-Maxwell as joint and several administrators of the company pursuant to s 436A of the Corporations Act . (By email on 24 June, Mr Kang, forwarding the signed minutes of meeting, asked Ms Park to do her best "to make sure there is no problem with the golf course" and to send "the proxy form from the Korean bank" and said "Today we have to start persuading them" (CB 769).) On the same day, notice was issued by the administrators advising of their appointment and convening a meeting of creditors on 6 July 2010.

1. Also on 24 June 2011, Blake Dawson, acting for the administrators, wrote to the lawyers acting for the petitioning creditor in Queensland (CB 775) notifying them of the appointment of administrators to the company and seeking their client's consent to an adjournment of the winding up application on the basis that there was "a viable restructuring proposal offering a potential better return for creditors". That proposal was to restructure Le Meilleur so it could continue to trade "and the Business/Land perhaps sold to a purchaser in the future once the Business has recovered". (A similar letter was to be sent to the ATO which had indicated that it would be a supporting creditor on that winding up application.) Relevantly, the writer of this letter clearly drew a distinction between the land held by the company and the business of the company that was conducted on the land (pointing out in no uncertain terms that the former was subject to registered mortgages and the latter was, in the writer's opinion, "not particularly valuable").

• 25 June 2010 meeting

1. On 25 June 2010, a meeting was held at Le Meilleur (at which Mr Hyun and Mr Sang Yong Chung were in attendance for the company and Ms Park and Mr Whittingham and others from PKF). The minutes (at CB 976 and again at CB 981, the latter with Ms Park's annotations in Korean), which were prepared by staff from the administrator's office and translated by Mr Kevin Kye of that office (T 121), record that there was a discussion as to two options available to Le Meilleur, those being identified as:

1. Entering into a Deed of Company Arrangement

2. Enter into sale of business.

1. The minutes state that option 1 (explained on at least one version as allowing Le Meilleur to finalise the administration process should head office complete the sale of the Iraq investments and transfer funds to Le Meilleur) was agreed to be the most beneficial (based on the points listed in the minutes). Option 2 (the sale of business) was said to be not "a desired outcome as proposed company (to buy the business) has to transfer the sale consideration which is expected to [be] significant" (at CB 976 this was put as being "not viable as the head office does not have enough funds").

1. A separate item on the minutes was headed "Obtaining Proxy". The minutes record that it was agreed that obtaining a proxy from "Bank in Korea" was very important and that Mr Hyun should obtain the proxy from Jin Heung "as soon as possible". The minutes also recorded that "The power of attorney accords rights to make a number of decisions concerning the administration on behalf of the Savings Bank [Jin Heung]". (Mr Pritchard submits that there can be no doubt that Mr Whittingham appreciated the importance of securing the mortgagees' proxy at that stage.)

1. Ms Park says that before those minutes were sent (under cover of her email of 1 July 2010), to Mr Kang she read and agreed with them - T 121. Mr Whittingham, however, disputed the accuracy of the minutes (T 29.50) in that he did not accept that he would have given the advice there attributed to him as to the resignation of directors and he also said that the discussion of the options available would not have been as set out in items 1 and 2 (T 30.3ff).

1. Mr Whittingham accepted that the options there identified (and discussed at the meeting) were, first, a deed of company arrangement (involving negotiation with creditors to settle on a discount amount and a "possible" sale of business) and, secondly, a sale of business. However, Mr Whittingham insisted that the reference to "transfer the sale consideration" in the explanation of option 2 meant "the business and the land go together" - T 31.27 (though this is by no means what his lawyers were outlining to the petitioning creditors at that stage - there talking separately about the Business and the Land though not discounting the possibility of a sale of the "Business/Land" in the future).

1. Mr Pritchard notes that Mr Whittingham insisted that the business and the land were intermixed (T 41) and that references to "the business" included the land itself (even though he knew by early/mid June that the company (Le Meilleur) had no charge over its assets and business and was otherwise unencumbered (T 32.34) and knew that he needed to obtain the mortgagees' consent to any sale of the land (T 32.45; T 33.23)).

1. Remarkably, even by the time of the hearing, Mr Whittingham said he did not distinguish between the land and the business (T33.28) (though forced to concede that there was a conceptual or theoretical difference between the two) and was not prepared to accept that any of the proposals in relation to the sale of the business did not also include the sale of the land.

1. As at this point, however, it seems that the proposal under consideration by PKF (or at least that being described by Blake Dawson to creditors) was simply a restructuring proposal with the possibility of a sale of the "Business/Land" at a later time once the business had recovered.

• 1 July 2010

1. By email on 1 July 2010, with which the 25 June meeting minutes were sent, Ms Park summarised the then current situation for Mr Kang and Mr Hyun (CB 974). She emphasised that it was important to obtain a proxy from the bank, which was the largest creditor (noting that creditors might vote against PKF's appointment because of possible conflicts of interest arising from the fact that PKF had been the company's accounting firm).

1. The email referred to a "liquidation process called Deed of company arrangement" by which the company could be "recovered" or could be liquidated and its assets disposed of through negotiations with its creditors. It referred to the sale of the business (again, with no specific reference to any sale of the land). Ms Park also expressed the view that the nomination of a receiver by the bank was not a "good option" as "this will pit PKF against another institution appointed by the bank which we are not sure will act in our favour" and noted that the PKF partner "Ken" to whom she had spoken numerous times had "promised to do his best on Le Meilleur's side".

• 5 July 2010 proposal

1. The first specific proposal for a sale of the land, as such, was in a letter dated 5 July 2010 from Blake Dawson to Jin Heung addressed to a Korean address (a separate letter in the same terms being sent addressed to NH Capital again at a Korean address). The letter was copied to a lawyer in Korea (Mr Jong Hyun Park) and, via a post office box address, to Sojong Lawyers, the Sydney solicitors who had acted for the banks in connection with the registration of their mortgages over the golf course) (CB 997). Those letters were received by the Sydney solicitors (on about 8 July 2010) and sent on to the Korean lawyer for the banks. However, Jin Heung denies receipt of the 5 July 2010 letter at or about that time and says it had no knowledge of any proposal for a deed of company arrangement (or a sale of the business including the land) at that time.

1. Relevantly, the proposal there put by the administrators (it being expressly noted that Jun Heung's security did not extend to all of the assets of the company but was limited to its registered real property mortgages and hence that the only entity that could sell both the land and the business together as a package was the administrators) was a proposal that the administrators " Take steps to sell the business operated by the Company on the mortgaged lands together with the mortgaged lands and consult regularly with the Bank regarding the sale "; admit the bank for the full amount of its secured debt; and pay the bank its secured debt from the proceeds of sale of the mortgaged lands, in priority to unsecured debts but subject to the ordinary costs and expenses of the sale.

1. Mr Whittingham seemed to read this letter as support for his contention that "business" included land. He said that, because he did not need the bank's consent to sell the business, the request for consent meant that "the business must inherently include the land" T 35.21.) Although it is conceivable that consent being sought from the bank at that stage could have related to the concern that the bank not move to appoint a receiver (to which reference had been made by Mr Kang in his earlier emails and was seemingly a matter of concern at that time) and hence a letter referring to consent in relation to the sale of the business would not necessarily require a reference to the land to be read into the letter, I accept that the Deed of Consent there referred to related to the sale of the land. However, the terms of the 5 July letter themselves tell against Mr Whittingham's contention that business included land, since the letter itself clearly distinguishes in terms between the land and the business operated on the land.

1. Mr Whittingham accepted that the 5 July letter was written on his instructions (T 34). The letter noted that a Deed of Consent would be prepared if the proposal was accepted and that this would contain the above terms "and preserve the rights of the Bank to deal with its security". The Deed of Consent, it was said, would also provide that the reasonable costs of the administrators would be taken from the proceeds of any sale of the mortgaged property before there was a return to the bank.

1. The letter referred to approaches said to have been made to the administrators in relation to a sale of the business and the mortgaged lands and said that the administrators were "poised to commence sale discussions subject to the Bank's approval". It concluded with the statement that the writers would be pleased to meet with the representatives of the bank by telephone conference or in person with local representatives (though no steps seem to have been taken on the part of the deed administrators to facilitate this - at least at this stage).

1. As noted earlier, Jin Heung denies receipt of this letter. There was (not surprisingly, therefore) no response to that proposal before the first meeting of creditors the following day (and, indeed, by 26 July 2010, when Blake Dawson emailed Sojong Lawyers prior to the second creditors' meeting, it was clear that there had been no response and they were then trying to find a means of contacting the bank). When asked about this, Mr Whittingham maintained that his solicitors had tried to telephone the bank and that he had caused them "continually [to] chase the bank either directly or through the solicitors" (T 36) but was unable to point to any such communications at that stage (a call for any such communications being later answered by reference to two email communications on 26 and 27 July 2010 respectively - CB 1450/1452, in the first of which Blake Dawson acknowledged the advice received that morning from Mr Kwon that he was not presently instructed on behalf of either of the Korean banks).

• 6 July 2010 - first meeting of creditors

1. The first meeting of creditors (held pursuant to s 436E of the Corporations Act ) was convened on 6 July 2010. Although there had been discussion (referred to above) between the deed administrators, Ms Park and the local representatives of Le Meilleur as to the obtaining of a proxy from the Korean banks for the purposes of voting at the first meeting of creditors, none was obtained. There is no suggestion that either of the Korean banks participated in the first creditors' meeting (whether in person or by proxy).

1. Mr Whittingham accepted in the witness box that at the time of the first creditors' meeting it was not contemplated by anyone that anything (i.e. the land or the business) would be sold (T 37). Mr Whittingham advised the meeting in general terms that the company proposed to continue to trade and that there was a financial commitment to improve current conditions of the golf course and facilities. As at the first meeting what was then proposed by the directors was a compromise for creditors that would see full trading operations and full payment out of employees.

1. In the witness box, Mr Whittingham accepted that he had told the meeting that it appeared the mortgagees were happy with the administrators being in control of the property (T 38). He says that this was based on the verbal reports received (through Ms Park) from the Korean parent company (T 39.3). As at that stage, however, there seems to have been no factual foundation to support such an assertion to the creditors - since there is no evidence that Jin Heung's officers had been approached at that stage (whether by the Korean parent company or by anyone on behalf of the administrators). Indeed, Mr Kang, prior to the first meeting, was referring to the possibility that the mortgagee bank might seek to appoint a receiver. (I do not suggest that Mr Whittingham was knowingly misleading the creditors in this regard. However, the significance of Mr Whittingham's willingness to make such an assertion, based on no more than what had been conveyed to him through Ms Park by the Korean parent company, it seems to me, is that it marks a tendency by the administrators to proceed on the basis of assumed facts - and is relevant when considering the weight of discretionary factors.)

1. The administrators continued to operate the resort following their appointment, initially with some financial support from the Korean parent company. In the present proceedings, the deed administrators have given evidence that throughout the voluntary administration period the resort traded at a weekly loss and that, in continuing to operate the resort, they accrued (unpaid) liabilities of approximately $314,000. Mr Whittingham (who was, as between himself and Mr Crowe-Maxwell, the person principally responsible for the administration) has deposed that the deed administrators took that step because of their view that closure of the resort would significantly reduce the prospects of obtaining the best possible price in any subsequent sale of the company's assets.

• 9 July 2010 - indicative deed proposal

1. Following the first creditors' meeting, Mr Whittingham forwarded a letter dated 9 July 2010 (CB 1044) to the directors of the Korean parent company in which he noted that the current intention of the directors was to continue to own and operate the golf resort through a deed of company arrangement. The letter set out the key elements of an indicative deed proposal and the information that Mr Whittingham said he would need in order to be able to recommend a deed of company arrangement to the creditors. That letter noted that the proposed deed proposal would require contributions from the Korean parent company in the vicinity of $2,978,702, with a proposed time frame for funding to be the payment of $1m within 14 days and monthly payments of $204,783.66 for the six months following. It also required a commitment to a capital expenditure program with a minimum of $750,000 within 12 months (not all of which was earmarked for the golf course land - some being referable, for example, to the proposed marketing activities).

1. In the witness box, Mr Whittingham accepted that his letter was a proposal put by him to the directors of Le Meilleur for their consideration as to a possible deed of company arrangement going forward and that the letter was also in the nature of a proposal to be put by the directors to the second creditors' meeting. Relevantly, that letter (sent at a time when there had been no response by Jin Heung to the earlier 5 July proposal involving a sale of the land and a Deed of Consent) set out two alternative proposals.

1. Mr Whittingham accepted that the first proposal in this letter involved the Korean parent company putting into a fund a sum in the order of $2.9 million (to be used to pay Mr Whittingham's expenses, the priority creditors in full, and then the unsecured creditors (at 50 cents in the dollar) and then used in the making of improvements to the property). The letter highlighted in bold that if funding payments were not received, as agreed in any deed proposal, then Mr Whittingham would be required immediately to convene a meeting of creditors and the company would likely be placed into liquidation. As Mr Pritchard notes (and Mr Whittingham accepted in the witness box), that first proposal did not involve any consideration of a sale (whether of the business alone or together with the land).

1. Mr Whittingham's letter of 9 July also outlined an alternative deed of company arrangement proposal, which was coupled with a combined sale of the "Property and Company", under which there would be a contribution by the Korean parent company of sufficient moneys to cover administrators' fees and expenses, employee entitlements, legal cots, petitioning creditors costs and marketing costs and expenses; the sale of the business and property (out of which remaining priority creditors would be paid on settlement of the sale of the business and property) and under which there would be no distribution to unsecured creditors. This alternative "DOCA and sale scenario" was acknowledged to require consent from the mortgagees but was said to be a better option than a liquidation scenario.

1. Pausing there, in the correspondence by this stage a very clear distinction can be seen to be drawn between the business (or, as I read it, of the 'Company' as it is put in the second or alternative proposal in the above letter) and the mortgaged property (since otherwise the reference to the sale of the business " together with the mortgaged lands" in the 5 July letter and the reference to the " combined sale " in the second of the proposals contained in the 9 July letter would make no sense).

1. The terms in which this correspondence was couched make the suggestion by Mr Whittingham that later references solely to the "business" also included the land very difficult to sustain. (Also of note is that the proposal that was put to Jin Heung (in the 5 July letter it says it did not receive) required not only the consent of the secured mortgagee but also contemplated that there would be an obligation of regular consultation in relation to the sale of the property (something the lack of which was the source in due course of further complaint by Jin Heung).)

1. Mr Whittingham agreed (at T 41) that the alternative deed of company arrangement and sale proposal was very different from the initial funding proposal considered at the first creditors' meeting.

• 15 July 2010 events

1. On 15 July 2010, Mr Whittingham sent an email to Ms Park (CB 1154) pressing for a deed of company arrangement proposal in writing from the Korean parent company that day (failing which he said that they would have to recommend liquidation). The email noted three deed of company arrangement possibilities - the first, being "as per our letter $2.9M over time..no sale"; the second being "as per our letter (alternative doca) Approx $1.1m and sale"; and the third, a "sale with Korean Bank mortgagees receiving no monies from discharging their mortgages..all monies to go towards costs and creditors. Head office to satisfy mortgagees. Mortgagee confirmation required." Mr Whittingham requested an immediate additional advance of approximately $100,000 as a sign of good faith and to allow the business to trade on and/or for there to be a sale.

1. In the witness box Mr Whittingham was unsure whether "no sale" under the first option set out in that email meant no sale of the land or no sale of the business or both. However, it seems quite clear (and Mr Whittingham ultimately accepted) that the first option was that corresponding to the initial proposal in the 9 July letter (which had also contained the figure of $2.9m) and did not involve a sale. (Further, Mr Whittingham saw nothing extraordinary in the proposition that the secured mortgagees might give up their mortgages for no share of the sale proceeds at all - which was the effect of the third option - T 42.3).

1. Ms Park, presumably in response to the email from Mr Whittingham pressing for a deed proposal from the directors, conveyed to Mr Kang and Mr Hyun by email on the same day (CB 1152) the three options, noting that the first was to "reorganize and start the restart the business"; that the second was for the holding company to pay $1m by August or early September and "to dispose of the golf course afterwards" and the third was immediately to dispose of the golf course, noting that a letter of acceptance by Jin Heung would be needed.

1. The response from Mr Kang to that email raised an issue that became a source of contention between the Korean parent company and the deed administrators. Mr Kang maintained that the reason the company had chosen to proceed along the voluntary administration path was that it was told by Ms Park, in effect, that this would give the Korean parent company a 6 month period in which to find the money to meet the Australian company's indebtedness (perhaps along the lines of the workout arrangement apparently then in place with the Korean parent company's creditors).

1. Ms Park agreed (at T 122) that Mr Kang had told her that the reason the company had followed the advice to go into voluntary administration was that the holding company needed 6 months to obtain funds from the oil deposit investments and had said that if PKF could give it about 6 months to pay then he would sign the Deed of Company Arrangement. However, she was adamant that she had not promised this - she said that she had instead said she would check with Mr Whittingham - T 123 (although, as pointed out by Mr Pritchard, no such response was contained in her affidavit).

1. Relevantly, in this context, by email on 15 July 2010 (CB 1146), Mr Kang advised that "We commenced under the assumption that an adequate period of deferral could be secured if we were to opt for voluntary liquidation through you" noting that if the company had $1m available by early August then it would be more than enough to pay the tax default and other charges such as council rates. He explained that additional funding was difficult and suggested that since the Korean bank held on security the land of the golf resort and the shares that accord it the right to manage Horizon it could initiate the liquidation process. His complaint seemed to be that he had been told that there could be a deferral of up to six months, yet the proposal put to him did not contemplate any such postponement. (Issue was also taken as to the size of the administrators' reported fees.)

1. Mr Kang's email, sent at a time before the dispute as to what had been resolved at the second creditors' meeting had arisen, thus provides support for his version of the advice that had led the Korean parent company to enter into voluntary administration.

1. As noted, Ms Park confirmed that this issue was raised with her but denied that she had given any such confirmation. Perhaps tellingly, she said in the witness box "6 months time is very challenging one", without it being clear whether she meant by that that it had been difficult to bring about a 6 month moratorium or that it had been challenging in managing the client's expectations in that regard (or something else altogether). She did not deny Mr Kang's account in paragraph [24] of his affidavit in this regard and ultimately conceded that this was because it was correct.

1. Mr Kang also deposed to conversations with Ms Park in which he says she told him that the bank could sign a proxy and that if it did the bank would not be bound to go ahead with the sale if the price was unreasonable. (Mr Ryu gave similar evidence as to what he says was conveyed to him by Mr Kang.) Ms Park denies saying that the bank would have no problem exercising its rights as first mortgagee. In this regard, Ms Park gave conflicting accounts of what she understood would be the effect of entry into administration with or without a deed under which the property could be sold.

1. At T 125.47, Ms Park confirmed that it was her belief that if the company entered into voluntary administration then the bank could not exercise its power (though it was unclear whether she was referring to a power to sell the land or a power to appoint a receiver or some other power). She later said (at T 126) that "as long as they consent to DOCA administrator will control) but at T 126.88 that she did not have the belief that the appointment of a voluntary administrator would prevent the bank exercising its rights under the mortgage. By T 128, she was back to the understanding initially expressed:

As long as they agree to appoint voluntary administration, voluntary administrator will have the responsibility and power to run the business and sell asset.

1. The confusion seemed to be as to whether she considered that the bank would lose the ability to veto a sale simply by reason of the appointment of the voluntary administrator (which she said on more than one occasion) or if that would only occur if a deed of company arrangement was approved. After inconsistent answers, Ms Park eventually confirmed that it was her opinion as at June 2010 that it was the former (T 130).

1. (I accept that no criticism can be made of Ms Park as to her inexperience in the area of voluntary administration. However, it seems to me that what the cross-examination did clearly reveal was that Ms Park's ability to convey consistent, reliable and accurate advice to Mr Kang was likely to have been compromised by that lack of understanding of insolvency principles.)

1. Ms Park herself said that she had not been as specific in what she said to Mr Kang (T130.12) as she was in the witness box when she confirmed the belief that she had held, namely that "once the bank agrees to do this proposal the bank's rights will be transferred to the administrator", which she later clarified as saying that once the bank voted by proxy to appoint Mr Whittingham as administrator it was "giving up its rights to mortgage" (T 130) (advice that she said Mr Whittingham had told her T 130.41 but he denied). Given the inconsistency in Ms Park's position, the suggestion that "Mr Kang understood the procedure" seems to me to be optimistic (T 131).

1. Ms Park considered that the administrator, once appointed, would start selling the land and the business (T 130) and that this would be so whether or not the bank had voted for Mr Whittingham's appointment (if the majority of other creditors voted for it) - T 135. Her explanation as to why any further consent was necessary after an administrator had been appointed (if the appointment had the effect she thought it did) was that the banks could still appoint a receiver (T 131).

• Meeting with Jin Huang 15 July 2010

1. With that background in mind, and noting Ms Park's advice to Mr Kang that it was important to obtain a proxy to appoint PKF (T 124), I turn to the meeting that took place on 15 July 2010 between Mr Kang and the two officers of Jin Heung (Messrs Ryu and Yoon) at which Mr Kang gave them the proxy form for completion and there was a discussion as to the voluntary administration. Mr Kang says that at that meeting he sought the consent of Jin Heung to the directors' deed proposal and that he told Messrs Ryu and Yoon that the proposal for a deed of company arrangement which was being put forward included provision for the sale of the golf course. Mr Kang says that he explained that a sale by the administrators was preferable to any sale by the Tax Office because it would be at market price.

1. Mr Ryu's evidence (at [13] of his affidavit) was that Mr Kang said at that meeting that there could not be a sale without the bank's consent even after the voluntary administration. Mr Yoon (who swore two affidavits the later correcting a mistake as to the date on which the relevant conversation took place) gave similar evidence although he did not contribute it to a conversation in which Ms Park's advice was being conveyed. Mr Kang's evidence accords with that of Mr Ryu.

1. Relevantly, there is a contemporaneous record of what was said at that meeting, in that the bank officers asked Mr Kang to send them a letter confirming what he had told them at the meeting about the deed of company arrangement proposal and in compliance with that request on that same day Mr Kang sent a document dated 15 July 2010 (CB 1144) on the letterhead of the Korean parent company addressed to Mr Yoon, team leader of the Yeouido branch of Jin Heung. Mr Pritchard relies on this letter as corroboration for the fact and terms of the conversation alleged by Jin Heung to have occurred on that date.

1. Mr Kang's letter requested cooperation regarding the sale of the golf club property "in a way favourable to us and your bank because we have been ordered to sell the security by the Taxation Office due to our tax default" (a perhaps unintentional misstatement of the position). It stated that that there had been an order from the Taxation Office to sell the security and that if it proceedings with the sale process the company and Jin Heung would suffer more financial damage because the security would be disposed of at a significantly diminished value. Consent was sought to sell through the voluntary administration process. The letter then stated:

3. If the contract price that our administrator proceeds with is unreasonably low, you may refuse to discharge the mortgage and suffer no loss. Accordingly, we seek your cooperation and provide proxy to let us appoint an administrator and sell the property at a higher price which is better than realizing the property through the Tax Office's procedures

1. Mr Pritchard relies on this letter as demonstrating what was said and relied upon by Jin Heung in signing the proxy (and notes that it is consistent with the evidence of the bank's Korean lawyer (Mr Park) as to what Mr Ryu told him had occurred - namely that Le Meilleur had appointed an administrator and had an arrangement not to infringe on Jin Heung's rights).

1. Mr Golledge emphasises that the 15 July letter did not say that Jin Heung would have 'control' of the sale nor did it say that Jin Heung could object to any sale that the administrator achieved (rather, it referred to a contract price that is unreasonably low). Mr Golledge further submits that Jin Heung has not been able to point to any documentary evidence (nor is it admitted by either Mr Whittingham or Ms Park) that Mr Kang or the Jin Heung bank officers ever discussed with the deed administrators this proposed caveat over the sale (i.e. that the bank would have a right of veto whether or not that be one limited to the circumstances in which a sale was at an unreasonably low price). It is submitted that this was something put to the bank by Mr Kang entirely at his own initiative. (To the extent that this suggests that other advice may have been conveyed by Mr Kang at the administrators' initiative then this would seemingly be contrary to the administrators' primary position that Mr Kang was not their agent.)

1. No little weight is placed on the 15 July meeting by Mr Golledge because it is said (in response to the submissions made for Jin Heung regarding the alleged ambiguity of the final deed proposal), that no submission as to the ambiguity of what was there being proposed can be sustained having regard to the conversations between Mr Kang and Jin Heung's officers in which it was put to Jin Heung that if the deed proposal was approved the property would be sold. (Mr Golledge accepts that there is evidence that suggests there might be some precondition attached to a sale but says there can be no suggestion that there was any misapprehension by Jin Heung that what the bank was being asked as at 15 July to authorise was the sale of the property by the deed administrators. I accept that is the case. However, the imposition of the condition is a critical factor in that regard.)

1. Further, as at 15 July 2010, there was no formulated deed proposal (since Mr Whittingham was at that stage still impressing upon Ms Park the urgency of obtaining one). Therefore, to the extent that it is suggested that the bank officers were giving their support for a deed proposal, this must be understood as giving approval to the course of action as then explained by Mr Kang. Mr Golledge submits that Messrs Ryu and Yoon must have appreciated that they were consenting to an arrangement whereby the deed administrators would be able to sell the land even if the amount produced would not pay in full the secured debt, (subject only perhaps to the proviso that the bank could object if that sale was at an unreasonably low price). However, it is not clear that the bank officers appreciated that this was the case. Mr Golledge also notes that in giving that consent the bank officers took no advice from any person with knowledge or experience of Australian insolvency law.

1. Mr Kang's position at the relevant times seems to have been one whereby he was seeking to preserve the ability of the Korean parent company to retain the golf course land. I think an inference is open to be drawn that (to some extent at least) he was doing so by presenting to the deed administrators on the one hand and Jin Heung on the other hand whatever he thought would assist in achieving that objective.

1. Mr Kang says he was told by Ms Park (and this is consistent with the tenor of the email communications at the outset) that "if the bank got involved in the voluntary administration, once it become aware of it she won't be able to help us any more" (at T 160.22). He also said that "we were concerned about matter of getting bank approval because they were in middle of workout arrangement", something that may explain why Jin Heung was not approached by Mr Kang at an earlier stage (and may be the real explanation for the question as to whether it was possible for the bank to know about the process - i.e., Mr Kang might well have been attempting to find out how much or how little he could assume the bank would actually be told rather than seeking to facilitate full communication with the bank).

1. As to the first reason, it is submitted that the Real Property Act 1900 (NSW) creates a system of title by registration and is the sole source of the court's powers with respect to Torrens land; and that ss 90 and 103(7) of the Conveyancing Act 1919 (NSW) are strong indications that the legislature intended that any inherent power existing with respect to old system land would not apply to land under the Real Property Act (the court's powers in relation to land under that Act being as conferred on the court by that Act).

1. As to the second, Mr Pritchard contends that the inherent jurisdiction has not survived the provisions of the Corporations Act in this regard. Mr Pritchard notes that no cases were cited by the deed administrators in which an administrator who is subject to s 442C(1) had sought an exercise of the inherent power in the absence of satisfaction of s 442C(2). Insofar as reliance was placed by Mr Golledge on authorities in which the inherent power was or was apparently exercised, Mr Pritchard submits that they are distinguishable or do not support the contention that the inherent power survives.

1. Reference was made to the decision in New Beach Apartments Pty Ltd v Epic Hotels [2007] NSWSC 474. There, White J considered the question as to the jurisdiction to compel a mortgagee to discharge its security even though its debt had not been fully repaid (from [14], referring to the powers conferred by s 103 of the Conveyancing Act 1919 (NSW) and the explanation of its legislative history (or that of equivalent provisions) in various cases. His Honour referred to the decision of Young J (as his Honour then was) in Yarrangah Pty Ltd v National Australia Bank Ltd [1999] 9 BPR 17,061 (at [22]-[23] and [29]-[30] in which his Honour had come to the view that the probability was that there was an equitable power to award judicial sale at the suit of a mortgagor where the circumstances showed that there was clear prejudice from the application of the ordinary methods of foreclosure or sale under a power of sale. Such jurisdiction, White J noted, was to be exercised by analogy in the circumstances in which the power under s 103 could be exercised.

1. His Honour appears to have accepted that there was such a jurisdiction albeit one reserved for special or exceptional circumstances (referring to Yarrangah and Palk in that regard). Insofar as New Beach involved an apparent exercise of the inherent power, Mr Pritchard notes that the first mortgagee had consented to the sale in question and that only the second mortgagee objected (as to price). It is submitted that as the first mortgagee had also served a s 57(2)(b) notice with the intention of exercising its power of sale if the sale could not otherwise proceed, it had effectively invited the court to exercise its own power of sale. Thus it is said that the case is distinguishable.

1. White J affirmed his view that the Court has an inherent jurisdiction to order judicial sale of Real Property Act land by analogy to the circumstances in which the power under s103 of the Conveyancing Act can be exercised in relation to old system land, that jurisdiction being reserved for special or exceptional cases, in Spendright Pty Ltd v Classfact Pty Ltd [2009] NSWSC 317 at [11]. Mr Pritchard, who contends that there is no such inherent jurisdiction and that White J is incorrect in this regard, notes that Spendright involved an application under s 442C, in which the first mortgagee had again consented to the sale ([12]) and it was arguable that the consent of the second mortgagee had been withdrawn its initial consent. In any event, his Honour appears to have granted the leave in question under s 442C(2)(c) ([19]) ('for abundant caution') ([15]).

1. Having regard to the concession that there would be no basis for relief in the exercise of the inherent jurisdiction if a claim under s 442C were not made out, and my earlier findings, I do not need to determine this controversy.

Interests of third parties

1. The position of third parties is relevant not only to the balancing exercise to be carried out as between the interests of secured and unsecured creditors but generally in the exercise of discretion on the various applications that have been made.

1. As to the interests of third parties, Mr Pritchard submits that no contractual liability will be incurred by any of the parties to the existing sale contracts by reason of orders made with respect to the Deed of Company Arrangement, as the administrators have a contractual right to avoid the sale ab initio in the event that the mortgages are not discharged. He further points out that the expenses apparently incurred by the deed administrators and Mr Lawton in relation to the sales contracts were incurred with full knowledge of the present circumstances.

1. As to unsecured creditors, Mr Pritchard notes that, in the main, the creditors who did appear and who addressed me in relation to the relief sought in these proceedings were secured not unsecured creditors and submitted that it was telling that there had been little or no evidence from the deed administrators in that regard.

1. As to the creditors, as noted earlier, an opportunity was afforded for those who might be adversely affected by the outcome of the proceedings to make submissions. Four such creditors made submissions, the substance of which I summarise below. Those parties were: the Office of State Revenue (in respect of $772,062.00 for unpaid land tax for which it has the benefit of a statutory charge pursuant to the provisions of the Land Tax Management Act 1956 (NSW); Port Stephens Council (in respect of $259,182 in unpaid council rates which have the benefit of a statutory charge pursuant to the Local Government Act 1993 (NSW)); the Horizons Community Association (claiming unpaid strata levies of $47,754); and an unsecured creditor (Mr Greg Ramsey) who is owed moneys for his time as the golf professional at the golf course.

1. The deed administrators also note that there are substantial amounts due in respect of their remuneration, costs and expenses associated with preserving and maintaining the secured property, which it is said are secured by an equitable lien in favour of the administrators. (It is further submitted by Mr Golledge that this equitable lien this includes even Mr Lawton (pursuant to the salvage principle) who may take priority over the interests of a fixed charge holder; see Universal Distributing Co Ltd (1933) 48 CLR 171 and Meadow Springs Fairway Resort Ltd (in liq) (ACN 084 358 592) v Balanced Securities Ltd (ACN 083 512 685) (No 2) [2008] FCA 471; (2008) 65 ACSR 563 .)

1. As to the suggestion that the administrators (and/or Mr Lawton) are entitled to the benefit of an equitable lien over the secured property which ranks ahead of a legal mortgage, Mr Pritchard noted that it had not (though could have) been raised as an issue in this case (it being this particular submission that prompted the amendment application at the conclusion of the hearing, to which I will shortly turn).

1. Turning briefly to the interests of the creditors who intervened in the proceedings, I comment as follows.

• Chief Commissioner of State Revenue

1. The position of the OSR is that, as at 23 May 2011 the OSR is a creditor of Le Meilleur for the amount of $916,848.66. The OSR's debt is comprised of $806,590.93 in unpaid land tax owing for the land tax years 2009, 2010 and 2011 in respect of land tax assessments which have been levied against the golf course and resort under the Land Tax Management Act and $110,257.73 in unpaid payroll tax owing for the payroll tax years 1 July 2008 to 30 June 2009 and 1 July 2009 to 23 June 2010 in respect of payroll tax assessments which have been levied by the OSR against the Company under the Payroll Tax Act 2007 (NSW). (Mr Pritchard notes that objections have been lodged and are being considered by that office.

1. Pursuant to s 47(1) of the Land Tax Management Act , land tax payable by Le Meilleur to the OSR is a first charge on the land, in priority over all other encumbrances, on all of the land owned by the company. Payroll tax is not afforded any such priority.

1. The OSR notes that it incurred costs in seeking to become substituted as supporting creditor in the winding up of the company. On 9 August 2010 the OSR consented to the winding up proceedings being discontinued against Le Meilleur. It did so on the basis, first, that the deed administrators would be empowered to sell the golf course and resort as quickly as practicably possible; second, that, given the deed administrators' background knowledge of the golf course and resort since their appointment, it would be more efficient and cost effective for them to effect that sale as opposed to a newly appointed liquidator; and, third, that the OSR would be paid as a priority creditor in full for the outstanding land tax levied against the golf course and resort.

1. The OSR submits that it has, as an office of the Crown, been extremely patient in waiting as long as it has for payment of the land tax which it has, along with all other state taxes, a duty to collect as quickly and as efficiently as possible for the benefit of the State's public purse. In that regard it is submitted (and there is no reason to doubt) that the OSR has been very co-operative with the deed administrators in performing their obligations under the Deed of Company Arrangement.

1. The sale that has been achieved by the deed administrators is supported by the OSR as one that will result in the OSR being paid within weeks as opposed to being paid in months or years if the application to postpone the sale succeeds, or if the mortgagees choose to exercise their "prerogative" to decide if and when to sell the golf course and resort. It is said that n the event that the application by Jin Heung succeeds the OSR will have to consider taking its own action to enforce its statutory charge which will increase the OSR's costs.

• Port Stephens Council

1. The Council is a creditor of Le Meilleur for the claimed amount of $297,835.18, relating to unpaid quarterly rates and charges for the years 2008 onwards in respect of Council rates and for $25,243.35 in unpaid licensing fees levied in relation to a driving range operated on the Council's land. The debts will increase over time as they are liable to late payment penalties and interest.

1. The Revenue Coordinator of the Council (Mr Craig Barrass) has deposed to his receipt of the July 2010 report to creditors and that he noted that the Council would be treated as a priority creditor and would be paid out in full out of the proceeds of sale of the golf course for the outstanding rates and charges. He further deposes that neither he nor anyone else from the Council attended the second creditors' meeting (though he supported the sale of the land) as a matter of Council policy so as not to compromise any of its rights as a secured creditor under s 550 of the Local Government Act .

1. The Council has an interest in being paid in full out of the sale. Mr Barrass contrasts that position with the position in which the Council will be if the relief sought is not given - namely that it cannot recover its debt against the land in the short term as s 713 of the Act provides that the Council cannot apply to sell the land until the rates and charges have been outstanding for 5 years and that there would be significant costs incurred by the Council associated with such a sale which would be avoided if the sale proceeded through the Deed of Company Arrangement. It is thus submitted that the Council will be prejudiced if the Deed does not proceed.

• Community Association

1. The Community Association of Deposited Plan 270021 also intervened. The Chairman of the Association, and a member of the golf club, Mr Peter Rickard, who attended the second creditors' meeting has deposed that the Association is a creditor in the sum of $79,370.65 in respect of levies outstanding by Le Meilleur.

1. Mr Rickard has deposed to the support of the association for the sale of the golf course and resort to Mr Lawton. He has deposed to the need to maintain the golf course and resort in order to maintain the value of the properties that form part of the Community Association. Mr Rickard has also deposed to his personal observation of the maintenance and upkeep of the golf course over the last ten years and to the deterioration of the course and facilities since 2006. Copies of photographs and complaints made about the state of the course were exhibited to his affidavit.

1. Mr Rickard says that he has made enquiries of Mr Lawton and the golf courses managed or licensed by entities associated with him and has deposed to his belief as to the successful management of those golf courses. He has also deposed to the improvement since Mr Lawton took over the management of the golf course and the increased membership of the club. Mr Rickard has expressed concerns of owners of condominiums and apartments leased back to the golf club and resort as to their value if the golf course is not properly maintained and run.

1. Finally he has deposed to the impact on tourism in the area if the golf course is not properly maintained.

1. In summary, the Association points to what it believes to be Mr Lawton's proven record of successful management of golf courses; the improvement in the maintenance and running of the resort since it was licensed by him; the need to maintain the value of the property of the members of the Association for the golf course and resort to be well maintained and run; the need for certainty for members who may wish to sell their property; the financial detriment that the Association will suffer if the resort is not able to make its financial contributions and the lack of a viable alternative plan for proper maintenance of the golf course and resort in the future.

1. Mr Rickard's opinion is that the positions of the members of the golf course and Association will be "safeguarded" if Mr Lawton continues to operate and manage the golf course and resort.

Greg Ramsey

1. Mr Ramsey was the general manager of the golf club and resort from 13 April 2008 to 7 March 2011. He is an unsecured creditor of the company for the sums of $36,641.14 and $26,284.83 respectively, for which proofs of debt have been accepted by the administrators. He has experience as a golf professional.

1. Mr Ramsey also had dealings for some years with Le Meilleur and has expressed familiarity with the operations of the Australian company and its relationship with the head office in Korea to which he deposes in his affidavit. He expresses the view that head office in Korea controlled all payments even on a day to day basis. He formed the view that he debt would have to be written off, having regard to the awful payment history of the Australian company and was sceptical as to the proposal for deed of company arrangement on that basis.

1. Mr Ramsey notes that there was no meeting of creditors called when the Korean company defaulted on payment under the Deed. He considered it to be "too good to be true". As far as Mr Ramsey is concerned, he considers it unlikely that he stands to receive anything under the deed and expressed the view that had there been no deed he would have been in no worse position. He expresses support for the relief sought by the Korean bank. He supports the need to keep the club open and has deposed that if the bank needed someone to operate the course on a daily basis he would be prepared to walk back into Horizons. As a professional golfer, he is of the opinion that he would be able to operate Horizons very well.

Conclusion as to position of third parties

1. I accept that there is an obvious interest on the part of the priority creditors in the sale proceeding and that no criticism can be attached to them in having chosen (where that has been possible, and in the case of the Council for example it has not yet been in a position to enforce any charge over the land) not to enforce rights to wind up Le Meilleur and enforce payment of their debts (but to await the outcome of the deed of company arrangement process). In the case of the OSR, I accept that it may well have been better off had it proceeded with the winding up application in 2010. That said, each must be said to have taken its decision against the background that challenges to deeds of company arrangement are not unknown (and, at least insofar as the written deed proposal was concerned, on the basis that the proposal did not include a sale of the land in any event). I do not consider that the legitimate interests of the priority creditors warrant a refusal to exercise discretion in favour of Jin Heung or a decision to exercise a discretion under s 442C (had it arisen).

1. As to the Community Association, I accept that there is a concern as to the effect of the decision on the value of property in the area and tourism generally (having regard to the possibility that the golf course might close or that it might not be maintained). That, of course, was a risk to which any purchaser of a lot in the strata scheme would be subject. Moreover, Mr Pritchard submits that there cannot be an assumption made as to the course that Jin Heung would adopt (having regard to sensible commercial self-interest) in the short term if the relief it seeks is granted). It is by no means clear that the termination of the Deed will result (as the deed administrators have asserted) in the closure of the course or the termination of the licence arrangements with Mr Lawton. Mr Ramsey seems willing and able to step into the breach in that regard.

1. As to Mr Ramsey's perhaps understandable scepticism as to the benefit of the Deed proceeding, I have noted it but ultimately do not consider that it lends weight to the grant or otherwise of relief.

(iv) Application to amend the Originating Process

1. On the resumption of the hearing, the deed administrators (by leave) filed an Interlocutory process seeking leave to amend the Originating Process so as to bring a claim for relief against the golf course property by way of an equitable charge and based on principles arising from the High Court decision in Universal Distributing Co Ltd .

1. The purpose of the amendment was to seek to preserve a right which the deed administrators say they presently have (regardless of the outcome of the argument about the existing contract for sale of the land), to claim an equitable charge over the golf course property in respect of their remuneration, costs and expenses incurred in preserving and maintaining the mortgaged property. That right is said to be one which is very different to those asserted, on behalf of Le Meilleur in the proceedings to date (although it has been referred to in the evidence and is mentioned in the closing submissions). Mr Golledge quite candidly noted that the application was brought, in part out of abundant caution, but also out of necessity given the views expressed by Mr Pritchard in closing argument to the effect that such a claim, if made subsequently in fresh proceedings, would be the subject of an Anshun estoppel defence (and given the attitude of the solicitors for Jin Heung when the deed administrators solicitors' raised the question in correspondence after argument had finished.)

1. Mr Golledge submitted that the overriding purpose of the Civil Procedure Act 2005 (NSW) and Rules (the just, quick and cheap resolution of the issues truly in dispute) favoured the amendment. He conceded that the amendment might necessitate a further hearing in this case but submitted that the disposition of the issue in that way would be more expeditious than if the claim had to be started afresh (potentially to be the subject of an Anshun based strike out application) and then otherwise determined on its merits by a judge who would be coming to the factual background entirely afresh. In those circumstances, it was submitted the public interest in the finality of litigation must give way to the interests of justice in the particular circumstances of this case and this application.

1. The deed administrators proposed that, if leave to amend were to be granted, then the determination of any issue raised by the amended claim should await the court's decision on the s 444D and s 442C applications. It was submitted that it would only be if those applications fail (or Jin Heung succeeded in obtaining relief from the Deed of Company Arrangement) that the need for this additional claim would arise (since, if the deed administrators were successful in their original applications, the terms of the deed would provide an adequate substitute for the equitable lien and no further hearing would then be necessary).

1. It is submitted that if their present application fails, the deed administrators should not be deprived of the opportunity of establishing an equitable hen over the property in respect of work undertaken and costs and expenses incurred by them in preserving and maintaining the secured property for the benefit of the mortgagee who was well aware that such expenses were being incurred.

1. In Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 258 ALR 14, the High Court considered the factors relevant to the exercise by the court of a discretion whether to permit an amendment to pleadings before the court. There, their Honours were critical of what French CJ described as an "unduly permissive approach" to amendment applications. French CJ said (at 17 [6]) in relation to the decision in Queensland v J L Holdings :

However, to the extent that statements about the exercise of the discretion to amend pleadings in that case suggest that case management considerations and questions of proper use of court resources are to be discounted or given little weight, it should not be regarded as authoritative.

1. His Honour considered (at 17 [4]) that where an amendment application was "made late in the day, was inadequately explained, necessitated the vacation or adjournment of the dates set down for trial, and raised new claims not previously agitated apparently because of a deliberate tactical decision not to do so", the party making the application bears a heavy burden to show why, under a proper reading of the applicable Rules of Court, leave should be granted.

1. The majority (Gummow, Hayne, Crennan and Kiefel JJ) noted at 47 [116] that there may be a point of distinction between their view and that of the Chief Justice as to what J L Holdings holds, their Honours did not understand there to be any difference as to the principles to be applied in amendment applications.

1. Here, the application for amendment is made even later than it was in Aon and the explanation for the lateness seems to have been an apprehension arising from the comments of opposing Counsel in closing submissions. I do not think that this warrants the amendment to the pleadings at this stage of the proceedings.

1. It was recognised in Aon that there may be cases where it may properly be concluded the parties had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. It was said by the majority at 45 [103]:

Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules.

1. It seems to me that it cannot be said that the plaintiffs have not had a sufficient opportunity to plead their case.

1. Mr Pritchard submitted that fatal to the application was the suggestion that any hearing of the new claim be deferred until a later point (after my judgment in the main proceedings), referring to the potential for adverse credit findings to be made which might then cause issues for the same trial judge then to hear the balance of the case).

1. In Idoport Pty Limited & anor v National Australia Bank Limited & 8 ors (15) [2000] NSWSC 1215 at para 7, Einstein J summarised the applicable principles when considering an application for the separate determination of an issue. In so doing, his Honour noted that the power of the court in this regard is a discretionary power which must be exercised judicially but cannot otherwise be fettered; that the court is enjoined to give effect to the overriding purpose of the Supreme Court Rules 1970 (NSW) (namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings); and that the court begins with the proposition that it is ordinarily appropriate that all issues in the proceedings should be disposed of at the one time and thus that it is for the party who wishes to have a question separately determined to show that it is desirable for this to occur.

1. The principles enunciated by Einstein J in relation to the former Pt 31 r 2 of the Supreme Court Rules are equally applicable to the court's exercise of discretion under its successor (r 28.2 of the Uniform Civil Procedure Rules ) (citing Pioneer Park Pty Limited (in liquidation) v ANZ Banking Group Limited & ors [2005] NSWSC 832; Matrix Film Investment One Pty Limited & ors v Alameda Films LLC and Warner Bros Entertainment and Pictures Inc [2007] NSWSC 523).

1. Einstein J, in Idoport , said [at 7]:

Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances:

(a) Where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Limited v O'Neill [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan & Simmie & Co Pty Limited [1978] VR 670 at 671 per Young CJ and Jenkinson J;

(b) Where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their disputes themselves and thus avoid further litigation: Tallglen v Pay TV Holdings Pty Limited (1996) 22 ACSR 130 at 141-142 per Giles CJ in Comm D;

(c) Where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Limited v O'Neill (supra at 606 per Kirby P), Tallglen v Pay TV Holdings Pty Limited (supra at 142 at Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA.

1. Had the question of separate determination of the issues posed in the hearing of the matter by me do date from the determination of a claim to an equitable charge or lien by the administrators been raised at the outset, it is conceivable that the view could have been taken that the case was one falling within (a) of his Honour's categories - since it would on one view not be necessary for the lien claim to be determined if the administrators' remuneration and fees were to be paid in accordance with the Deed of Company Arrangement (though even there a doubt may arise as to what the position would be as to the allocation of the fees as between the respective proceeds of sale). And it is possible that the determination might quell the litigious controversies between the parties. However, what would clearly not be the case would be that the matter would fall within (c). Mr Pritchard quite candidly indicated that issues of credit as to the administrator might be raised on the lien claim and was not able to indicate that there would not be an objection by his client to me then hearing the balance of the claim in that event.

1. Einstein J also set out the circumstances in which he considered that, conversely, the separate determination of an issue would rarely be an appropriate procedure. Those included where there are intertwined issues of fact or law (such that the determination of the separate question would not have any substantial effect on the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation); where there is a commonality of witnesses and issues of credit; and where there is a possibility that the resolution of the separate issue will not finally determine the issue but merely result in an appeal from that decision in relation to that separate issue creating a multiplicity of proceedings, interruptions to the court and undesirable fragmentation of the proceedings.

1. It seems to me that it the present is clearly a case within one or more of the above characteristics. Therefore, it would not have been appropriate in my view for there have been an order at the outset for separate determination of the issues which would now remain if leave to amend were to be granted. In those circumstances, I do not consider it appropriate to grant leave for the amendment of the claim. I take heed of the cautionary note sounded by Einstein J in Idoport :

The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings, (citing Tallglen v Pay TV Holdings Pty Limited, Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J) and Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J). (my emphasis)

1. Of course, on one view it might be said that further litigation now seems inevitable in any event (given the ruling I have made on the substantive issues and the likelihood that the deed administrators will wish to recover part or all of their expenses and remuneration). However, the lateness of the time at which the application was raised and the commonality of at least one of the main witnesses makes it not an appropriate case in my view to grant leave to amend where that would necessarily give rise to what is in effect a separate determination of issues in the proceedings.

1. The perceived benefit of the application is to preclude the possibility of an estoppel arising under the principles in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589). For that to be the case, it would have to be established that the claim "was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it". In Anshun at [602] - [603] Gibbs CJ, Mason and Aickin JJ said in this regard:

... Generally speaking it would be unreasonable not plead a [matter] if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why any party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of a particular issue, motives extraneous to the actual litigation, to mention but a few.

1. Allsop P i n Champerslife Pty Ltd v Manojlovski & anor [2010] NSWCA 33; (2010) 75 NSWLR 245 at [4] emphasised that the mere fact that the matter could have been raised does not mean it should have been raised (for the operation of the Anshun principle. The test remains one of reasonableness having regard to the circumstances.

1. I accept that if there were a strong possibility that an Anshun estoppel might lie against the deed administrators to preclude the bringing in later proceedings a claim they now seek to make, this would be a relevant factor in the exercise of discretion as to whether leave to amend should be granted. It is not appropriate that I determine whether, in the present circumstances, an Anshun estoppel would be established, not least because issues such as the reasonableness of not raising this claim at the outset were not debated before me and because it may later fall to be considered by another judge. Suffice to say that I do not consider the possibility of an Anshun estoppel is sufficient at this stage to warrant an amendment which would cause potential difficulties in relation to the hearing of the balance of the proceedings.

Orders

1. For the reasons set out above I propose to make the following orders:

1. Order that the originating process filed 2 February 2011 be dismissed.

2. Declare that the document executed by the plaintiffs "Deed of Company Arrangement" and dated 18 August 2010 is not a deed of company arrangement within the meaning of s 444B(6) and s 444D of the Corporations Act 2001 .

3. Declare that the failure of the company within the period specified in s 444B(2) to execute a deed of company arrangement in conformity with the resolution passed on 29 July 2010 had the effect pursuant to s 4446A(1)(b) of causing the company to enter into a creditors' winding up imposed by s 446A with Messrs Whittingham and Crowe-Maxwell as liquidators as and from 19 August 2010.

4. Declare that Jin Heung Savings Bank Co Limited did not validly exercise a vote by proxy in favour of the resolution to enter into the said deed of company arrangement on 29 July 2010.

1. I will hear submissions from the parties as to the appropriate form of orders and any submissions as to costs at an appropriate time.

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Decision last updated: 16 September 2011