Mighty River International Ltd v Hughes
[2017] WASCA 152
•11 AUGUST 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: MIGHTY RIVER INTERNATIONAL LTD -v- HUGHES [2017] WASCA 152
CORAM: BUSS P
MURPHY JA
BEECH JA
HEARD: 19-20 APRIL, 19 MAY & 10 AUGUST 2017
DELIVERED : 11 AUGUST 2017
FILE NO/S: CACV 30 of 2017
BETWEEN: MIGHTY RIVER INTERNATIONAL LTD
Appellant
AND
BRYAN HUGHES as administrator of MESA MINERALS LTD (subject to Deed of Company Arrangement)
DANIEL BREDENKAMP as administrator of MESA MINERALS LTD (subject to Deed of Company Arrangement)
First RespondentsMESA MINERALS LTD (subject to Deed of Company Arrangement)
Second Respondent
FILE NO/S :CACV 31 of 2017
BETWEEN :MIGHTY RIVER INTERNATIONAL LTD
Appellant
AND
MINERAL RESOURCES LTD
First RespondentMESA MINERALS LTD (subject to Deed of Company Arrangement)
Second RespondentBRYAN HUGHES as administrator of MESA MINERALS LTD (subject to Deed of Company Arrangement)
DANIEL BREDENKAMP as administrator of MESA MINERALS LTD (subject to Deed of Company Arrangement)
Third Respondents
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :MIGHTY RIVER INTERNATIONAL LTD -v- HUGHES & BREDENKAMP [2017] WASC 69
File No :COR 247 of 2016, COR 13 of 2017
Catchwords:
Bankruptcy and insolvency - Corporations - Administration - Deed of company arrangement - Whether 'holding' deed of company arrangement valid - Whether deed of company arrangement must specify some property that is to be available to pay creditors' claims - Whether deed of company arrangement is consistent with the objects of pt 5.3A
Legislation:
Corporations Act 2001 (Cth), s 435A, s 438A, s 439A, s 444A, s 445A, s 445F
Result:
Appellant's applications for leave to adduce additional evidence dismissed
Appeals dismissed
Respondents' notice of contention in CACV 30 of 2017 dismissed
Category: A
Representation:
CACV 30 of 2017
Counsel:
Appellant: Mr C R C Newlinds SC & Mr D Sulan
First Respondents : Mr J Stoljar SC & Ms J Taylor
Second Respondent : Mr J Stoljar SC & Ms J Taylor
Solicitors:
Appellant: Nova Legal
First Respondents : Clayton Utz
Second Respondent : Clayton Utz
CACV 31 of 2017
Counsel:
Appellant: Mr C R C Newlinds SC & Mr D Sulan
First Respondent : Mr J T Gleeson SC & Dr B Kremer
Second Respondent : Mr J Stoljar SC & Ms J Taylor
Third Respondents : Mr J Stoljar SC & Ms J Taylor
Solicitors:
Appellant: Nova Legal
First Respondent : Bennett + Co
Second Respondent : Clayton Utz
Third Respondents : Clayton Utz
Case(s) referred to in judgment(s):
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27
Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568
Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95; (2015) 297 FLR 1
BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414; (2011) 82 NSWLR 336
Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510
Britax Childcare Pty Ltd v Infa Products Pty Ltd (administrators appointed) [2016] FCA 848; (2016) 115 ACSR 322
Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384
City of Kwinana v Lamont [2014] WASCA 112; (2014) 201 LEGRA 334
Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503
Commissioner of Taxation v Comcorp Australia Ltd (1996) 70 FCR 356
Commonwealth v Rocklea Spinning Mills Pty Ltd [2005] FCA 902; (2005) 145 FCR 220
Deputy Commissioner of Taxation (Cth) v PDDAM Pty Ltd (1996) 19 ACSR 498
Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99; (2000) 34 ACSR 391
Devereaux-Warnes v Hall [2006] WASCA 268
Director General of Department of Transport v McKenzie [2016] WASCA 147
Director of Public Prosecutions v Mattiuzzo [2011] NTSC 60; (2011) 252 FLR 108
Elliott v Water Wheel Holdings Ltd (subject to deed of company arrangement) [2004] FCAFC 253; (2004) 209 ALR 682
Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139
IW v The City of Perth [1997] HCA 30; (1997) 191 CLR 1
Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216
Lehman Brothers Holdings Inc v City of Swan [2010] HCA 11; (2010) 240 CLR 509
M & S Butler Investments Pty Ltd v Granny May's Franchising Pty Ltd (1997) 24 ACSR 695
McVeigh v Linen House Pty Ltd [2000] VSCA 4; (2000) 1 VR 31
Mentha v Sydney Airports Corporation Ltd [2002] FCA 530; (2002) 120 FCR 310
Mercanti v Mercanti [2016] WASCA 206
Mighty River International Ltd v Hughes & Bredenkamp [2017] WASC 69
Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194
Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31
Mizuho Bank Ltd v Ackroyd [2016] NSWSC 1148; (2016) 311 FLR 451
Municipal Officers' Association of Australia v Lancaster (1981) 54 FLR 129
MYT Engineering Pty Ltd v Mulcon Pty Ltd [1999] HCA 24; (1999) 195 CLR 636
Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529
Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619
Ord Forrest Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 57; (1974) 130 CLR 124
Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Re Austcorp Group Ltd (administrators appointed) [2009] FCA 636
Re Evans and Tate Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte Jones [2007] WASC 235
Re Palandri Ltd; Ex Parte Cussen [No 2] [2008] WASC 154
Re Recycling Holdings Pty Ltd (2015) 107 ACSR 406; [2015] NSWSC 1016
Re Riviera Group Pty Ltd (administrators appointed) (receivers and managers appointed) [2009] NSWSC 585; (2009) 72 ACSR 352
Russo v Aiello [2003] HCA 53; (2003) 215 CLR 643
S v Australian Crime Commission [2005] FCA 1310; (2005) 144 FCR 431
Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252
Saunders v Public Trustee [2015] WASCA 203; (2015) 13 ASTLR 226
Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636
Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664
Tickner v Bropho (1993) 40 FCR 183
TiVo, Inc v Tivo International Corporation Pty Ltd (subject to deed of company arrangement) [2014] FCA 789
Vero Insurance Ltd v Kassem [2011] NSWCA 381; (2011) 86 ACSR 607
Wacando v Commonwealth [1981] HCA 60; (1981) 148 CLR 1
Young v Sherman [2001] NSWSC 1020; (2001) 166 FLR 96
Table of Contents
BUSS P's REASONS................................................................................................................ 8
The relevant facts and circumstances
The relevant provisions of the Mesa DOCA
The relevant provisions of the Act
The relevant principles of statutory construction
The proceedings before the master
The master's reasons
The master's orders
Might River's grounds of appeal
A distillation of the essential matters raised by Mighty River's grounds of appeal and submissions
The first and second questions: the purposes of pt 5.3A
The first and second questions: the nature, extent and standard of an administrator's investigation
The first and second questions: the Court's power to extend the convening period under s 439A(6)
The first and second questions: the statutory procedures for challenging a deed of company arrangement in Court
The first and second questions: the nature, character and contents of a deed of company arrangement
The first question: Mighty River's submissions
The first question: its correct determination
The second question: Mighty River's submissions
The second question: its correct determination
The third question: is the Mesa DOCA invalid?
Mighty River's applications to adduce additional evidence
Other matters
Conclusion
MURPHY JA's REASONS.................................................................................................... 67
Introduction
Part 5.3A
Mighty River's first contention
The administrators' reports to creditors and the DOCA
Mighty River's third contention
Mighty River's second contention
BEECH JA's REASONS........................................................................................................ 81
Introduction
Background facts
Mesa's deed of company arrangement
The master's reasons
The master's orders
Might River's grounds of appeal
Overview of pt 5.3A
The 'no property' point: must a deed of arrangement specify some property of the company that is to be available to pay creditors' claims?
Mighty River's second contention: does the DOCA invalidly seek to circumvent the requirement for an extension of time under s 439A(6)?
Mighty River's third contention: is the DOCA consistent with the objects of pt 5.3A?
Application to adduce additional evidence
Other matters
Conclusion
BUSS P: The prime issue in these appeals is whether a deed of company arrangement (the Mesa DOCA) entered into in respect of Mesa Minerals Ltd (the second respondent in appeal CACV 30 of 2017 and appeal CACV 31 of 2017) (Mesa) is a valid deed of company arrangement under pt 5.3A of the Corporations Act 2001 (Cth) (the Act).
The respondents referred to the Mesa DOCA as a 'holding DOCA' in that:
(a)the Mesa DOCA does not specify any property that will be available to satisfy the claims of Mesa's creditors and does not otherwise make provision for a return to creditors; and
(b)the Mesa DOCA creates a moratorium period in relation to the creditors' claims against Mesa, and provides that the deed administrators will carry out further investigations in relation to Mesa for up to six months after the execution of the Mesa DOCA and that the deed administrators may then present a proposal to a meeting of Mesa's creditors for restructuring or otherwise resuscitating Mesa.
That is the sense in which I will refer to the expression 'holding DOCA' in these reasons.
The prime issue raises for consideration:
(a)whether a 'holding DOCA' complies with and is a valid deed of company arrangement under pt 5.3A of the Act; and
(b)if a 'holding DOCA' does not comply with and is not a valid deed of company arrangement under pt 5.3A, whether the non‑compliance and the invalidity in relation to the Mesa DOCA may be cured by a declaratory order under s 445G(2) or s 445G(3) of the Act or by an order for the variation of the deed under s 445G(4) of the Act.
I agree with Murphy JA and Beech JA that both of the appeals should be dismissed. My reasons are as follows.
The relevant facts and circumstances
A detailed account of the relevant background facts and circumstances is set out in Beech JA's reasons. A description of the contents of the Administrators' first report to creditors dated 10 August 2016 and the Administrators' supplementary report to creditors dated 13 October 2016 is contained in Murphy JA's reasons. The following summary of the facts and circumstances which culminated in the execution of the Mesa DOCA is sufficient for the purposes of my reasons.
Mesa is listed on the Australian Stock Exchange. Its assets include a 50% interest in a joint venture concerning two manganese mines.
Mineral Resources Ltd (the first respondent in CACV 31 of 2017) (Mineral Resources) holds about 60% of Mesa's issued capital. Mineral Resources' subsidiary, Auvex Resources Ltd, holds an interest in the manganese joint venture.
Mighty River International Ltd (the appellant in CACV 30 of 2017 and CACV 31 of 2017) (Mighty River) holds about 13.5% of Mesa's issued share capital. Mighty River is a creditor of Mesa in an amount of about $69,000.
On 13 July 2016, Bryan Hughes and Daniel Bredenkamp (the first respondents in CACV 30 of 2017 and the third respondents in CACV 31 of 2017) (the Administrators) were appointed as voluntary administrators of Mesa.
On 25 July 2016, the first meeting of Mesa's creditors was held. On 10 August 2016, the Administrators issued a report to creditors pursuant to s 439A of the Act.
On 17 August 2016, the second meeting of Mesa's creditors was held. At the meeting the creditors resolved to adjourn the second meeting for 45 business days. On 13 October 2016, the Administrators issued a supplementary report pursuant to s 439A of the Act.
On 20 October 2016, the second meeting of Mesa's creditors was reconvened. At the meeting the creditors resolved to enter into a deed of company arrangement pursuant to pt 5.3A of the Act.
On 3 November 2016, the Administrators executed the Mesa DOCA. The Administrators are the administrators (the Deed Administrators) of the Mesa DOCA.
The relevant provisions of the Mesa DOCA
The relevant provisions of the Mesa DOCA are as follows.
The Mesa DOCA contains recitals to the effect that:
A.The Administrators were appointed to Mesa pursuant to s 436A of the Act on 13 July 2016.
B.At a second meeting of creditors on 20 October 2016, the creditors of Mesa resolved that Mesa execute a deed of company arrangement substantially in the same terms as the Mesa DOCA, and that the Administrators be appointed administrators of the Mesa DOCA.
C.The objective of the Mesa DOCA is 'to provide sufficient time for the Administrators to conduct further investigations into [Mesa's] property and affairs, and to explore the possibility of a restructure or recapitalisation of [Mesa] to determine the likely outcomes to creditors and form an opinion as to whether a deed of company arrangement or liquidation is in the best interests of creditors of [Mesa]'.
D.The Administrators have consented to their appointment as administrators of the Mesa DOCA.
'Claim' means any debt, claim or liability, present or future, certain or contingent, ascertained or sounding in damages against Mesa as at the 'Relevant Date'. The 'Commencement Date' is defined, in effect, as 3 November 2016. The 'Term' is defined as the period from the Commencement Date to the 'Termination Date'. The 'Termination Date' is the date on which the Mesa DOCA terminates, whether under cl 18.1, cl 18.2 or otherwise. 'Priority Claim' means the Claim of any person whose claim would be entitled to priority under s 556 of the Act if Mesa were being wound up, the winding up being deemed to have commenced on the 'Relevant Date'. The 'Relevant Date' means the day on which Claims must have arisen if they are to be admissible under the Mesa DOCA, namely 13 July 2016. 'Creditors' means all creditors of Mesa as at the Relevant Date. 'Proposal' means a written proposal by an interested party submitted to the 'Deed Administrators' for restructuring Mesa or a sale of its assets or both. The 'Deed Administrators' means, relevantly, the persons named as administrators of the Mesa DOCA and any replacement appointed in accordance with the Act or the Mesa DOCA.
By cl 3, the Deed Administrators accept the appointment as deed administrators and agree to act as deed administrators during the Term or until, amongst other events, they are removed from office in accordance with the Mesa DOCA or under the Act.
By cl 5.1, the Deed Administrators are given the responsibility for the day to day management, control, supervision and administration of Mesa's business and affairs and the administration and implementation of the Mesa DOCA.
By cl 5.2, the Deed Administrators retain sole power and control over the assets of Mesa.
By cl 6, the directors of Mesa may only exercise the powers vested in them by the Mesa DOCA or delegated to them in writing by the Deed Administrators.
Clause 4 provides that the Deed Administrators are the agents of Mesa in carrying out their functions and duties under the Mesa DOCA, and cl 7, in broad terms, excludes personal liability on the part of the Deed Administrators.
Clause 8 provides:
8.Property available for distribution
Subject to any variation of this deed, there will be no property of the Company [that is, Mesa] available for distribution to Creditors under this deed.
Clause 9 provides:
9.Purpose
9.1Investigation of Company's claims
The Deed Administrators are to investigate any claims that they are aware the Company [that is, Mesa] may have against any third parties, and obtain legal advice in relation to such claims where appropriate.
9.2Reconstruction of the Company
The Deed Administrators are to seek Proposals to reconstruct the Company with a view to reaching a position where the Company's securities may be re-quoted for trading on the ASX, including Proposals for the partial or full sale of the Company's assets. The time for submission of Proposals to the Deed Administrators is not to extend beyond the Termination Date.
9.3Consideration of Proposals
Before any Proposal may be accepted, the Deed Administrators must convene a further meeting of Creditors and put the Proposal (including the Deed Administrators' recommendations in relation to same) to the meeting, together with the key terms of any further deed of company arrangement (or proposed variation to this deed), creditors' trust deed or other mechanism designed to give effect to the Proposal.
9.4Deed Administrators' powers and duties with respect to Proposals
Without limiting the generality of clause 5, the Deed Administrators have the power to:
(a)negotiate with any interested parties in relation to any Proposal, grant exclusivity and enter into formal arrangements for the realisation of the Company's assets and undertakings in whole or in part, and/or restructure and recapitalisation that is in the Deed Administrators' opinion, in the interest of Creditors as a whole, subject to the approval of Creditors;
(b)investigate possible recovery actions which may be brought by the Deed Administrators or by the Company's liquidators in the event that the Company goes into liquidation;
(c)call for, investigate (including the power to seek further information from Creditors), determine, compromise or otherwise deal with any Claim;
(d)provide information to Creditors and third parties as the Deed Administrators see fit;
(e)appoint and remove Directors and officers of the Company;
(f)do anything that is incidental to the exercise of any power or the performance of any duties set out in this deed; and
(g)do anything else that is necessary or convenient for the purpose of exercising their powers or performing their duties under this deed.
Clause 10 creates a moratorium in favour of Mesa during the period from the Commencement Date to the Termination Date, whereby creditors cannot claim against Mesa. Clause 10 provides:
10.Moratorium and deferral of debts
Subject to section 444D of the Act and clause 12, there will be a moratorium in favour of the Company [that is, Mesa] from the Commencement Date until the Termination Date, and during that moratorium a Creditor (whether the Creditor's debt or claim is or is not admitted or established under this deed) must not:
(a)(Wind up): wind up or take or concur in any step to wind up the Company or, without limiting the generality of the foregoing, present any application for the winding up of the Company or continue to prosecute any application presented on or before the Commencement Date for the winding up of the Company;
(b)(Institute proceedings): except for the purpose and to the extent provided in this deed, institute or prosecute any legal proceedings or continue to prosecute any legal proceedings instituted on or before the Commencement Date in relation to any debt or liability incurred or alleged to have been incurred by the Company on or before the Relevant Date;
(c)(Enforce debt): take or concur in any step or any further step for the purpose of enforcing, whether by way of legal or equitable execution or otherwise, any judgment debt owed by the Company or arbitration award against the Company at the Relevant Date, or any Interest on that judgment debt or award;
(d)(Set off): exercise any right of set‑off or defence, cross claim or cross action to which that Creditor would not have been entitled had the Company been wound up on the Relevant Date; or
(e)(Arbitration): commence or take any further step in any arbitration against the Company or to which the Company is a party in relation to any matter arising or occurring before the Relevant Date.
Clause 11 provides that the Mesa DOCA may be pleaded by Mesa against any Creditor in bar of any Claim that is subject to the Mesa DOCA, whether or not the Claim is admitted or established under the provisions of the Mesa DOCA.
Clause 13.1 provides that, for the avoidance of doubt and for the purposes of s 444DA(1) of the Act, any eligible employee Creditors will be entitled to a priority at least equal to what they would have been entitled to if the property were applied in accordance with s 556, s 560 and s 561 of the Act.
Clause 15 provides:
15.Reporting
The Deed Administrators will:
(a)on at least a bi-monthly basis, prepare and provide reports to Creditors which will provide an update on the progress of the investigations and recapitalisation process.
(b)by no later than the Sunset Date, prepare and provide to Creditors a report to the Company's [that is, Mesa's] creditors (Report) outlining:
(i)the results of the Deed Administrators' investigations into possible recovery actions available to a liquidator of the Company (should the Company be subsequently placed into liquidation);
(ii)a summary of any Proposals received by the Deed Administrators; and
(iii)if the Deed Administrators consider a Proposal is likely to result in a better return to creditors than either a liquidation of the Company or the acceptance of any other Proposal (Recommended Proposal), then the Deed Administrators are to provide full details of the Recommended Proposal (including the likely return to creditors under the Recommended Proposal);
(c)within 5 Business Days of issuing the Report, to convene a meeting of creditors pursuant to section 445F of the Act to determine whether:
(i)this deed should be varied so as to accommodate the Recommended Proposal (or any other Proposal); or
(ii)this deed should be terminated and the Company placed into liquidation. (emphasis added)
The 'Sunset Date' is defined as 3 May 2017.
Clause 16.1 provides that the Deed Administrators 'may' convene a meeting of Creditors from time to time in accordance with s 445F of the Act. It also provides that they 'must' convene such a meeting when required to do so under s 445F(1)(b).
By cl 18.1, the Mesa DOCA is to continue in operation until it is terminated by a Court order under s 445D of the Act; by a resolution of Creditors at a meeting convened under s 445F of the Act and in accordance with cl 16; or by the happening of events which by the terms of the Mesa DOCA automatically terminate the Mesa DOCA without recourse to the Court or a meeting of Creditors.
By cl 18.2, if the Deed Administrators determine that it is no longer practicable or desirable to carry on the business of Mesa or to implement the Mesa DOCA, the Deed Administrators:
(a)may cease to carry on the business of Mesa, except so far as is necessary for the beneficial winding up of Mesa;
(b)must summon a meeting of Creditors for the purpose of passing a resolution under s 445C(b) of the Act; and
(c)must forward to each Creditor within a specified period an up-to-date report about the position of Mesa, accompanied by financial statements and certain other information.
Clause 19.3 provides that if there is any inconsistency between the provisions of the Mesa DOCA and the Act then the Act will, to the extent of the inconsistency, prevail and the Mesa DOCA will be interpreted accordingly.
The relevant provisions of the Act
Part 5.3A of the Act was amended by the Insolvency Law Reform Act 2016 (Cth). The amendments came into effect on 1 March 2017.
The Mesa DOCA was executed on 3 November 2016. The originating process in each primary proceeding in relation to the Mesa DOCA was filed before the amendments came into effect. Each appeal notice was filed on 24 March 2017.
By s 1617 of the Act, the relevant amendments made by the Insolvency Law Reform Act do not affect appeals or reviews of proceedings if the proceedings were brought before the commencement of the Insolvency Law Reform Act.
Accordingly, the relevant amendments do not apply to these appeals.
At the material time, the provisions of the Act of relevance to these appeals were as follows.
Part 5.3A is headed 'Administration of a company's affairs with a view to executing a deed of company arrangement' and comprises s 435A ‑ s 451D.
Division 1 of pt 5.3A is headed 'Preliminary' and comprises s 435A ‑ s 435C.
By s 435A, the object of pt 5.3A is expressed as follows:
The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b)if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company.
Section 435C specifies when the administration of a company begins and ends. The administration begins when an administrator of the company is appointed under s 436A, s 436B or s 436C. The administration ends on the happening of whichever event of a kind referred to in s 435C(2) or s 435C(3) happens first after the administration begins.
By s 435C(2), the normal outcome of the administration of a company is that:
(a)a deed of company arrangement is executed by the company and the deed's administrator; or
(b)the company's creditors resolve under s 439C(b) that the administration should end; or
(c)the company's creditors resolve under s 439C(c) that the company be wound up.
Section 435C(3) provides, however, that the administration of a company may also end in other ways, as specified in that subsection. In particular, by s 435C(3)(a), the administration of a company may end because the Court orders, under s 447A or otherwise, that the administration is to end, for example, because the Court is satisfied that the company is solvent.
Division 2 of pt 5.3A is headed 'Appointment of administrator and first meeting of creditors' and comprises s 436A ‑ s 436G.
Section 436A(1) empowers a company, by writing, to appoint an administrator of the company if the board has resolved to the effect that:
(a)in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and
(b)an administrator of the company should be appointed.
Section 95A(1) provides that a person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. By s 95A(2), a person who is not solvent is insolvent.
Section 436E is concerned with the purpose and timing of the first meeting of creditors of a company under administration. It provides, relevantly:
(1)The administrator of a company under administration must convene a meeting of the company's creditors in order to determine:
(a)whether to appoint a committee of inspection; and
(b)if so, who are to be the committee's members.
(2)The meeting must be held within 8 business days after the administration begins.
(3)The administrator must convene the meeting by:
(a)giving written notice of the meeting to as many of the company's creditors as reasonably practicable; and
(b)causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;
at least 5 business days before the meeting.
…
(4)At the meeting, the company's creditors may also pass a resolution:
(a)removing the administrator from office; and
(b)appointing someone else as administrator of the company.
So, the first meeting of creditors involves in essence two issues. First, whether someone else should be appointed as the administrator (s 436E(4)). Secondly, whether a committee of inspection should be appointed and, if so, who should be its members (s 436E(1)).
Part 5.3A does not empower the court to extend the period in which the first meeting of creditors must be held.
Division 3 of pt 5.3A is headed 'Administrator assumes control of company's affairs' and comprises s 437A ‑ s 437F.
Section 437A(1) provides that, while a company is under administration, the administrator:
(a)has control of the company's business, property and affairs; and
(b)may carry on that business and manage that property and those affairs; and
(c)may terminate or dispose of all or part of that business, and may dispose of any part of that property; and
(d)may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration.
Division 4 of pt 5.3A is headed 'Administrator investigates company's affairs' and comprises s 438A ‑ s 438E.
Section 438A imposes on the administrator of a company under administration a duty to investigate the company's affairs and to form an opinion about a number of matters. It provides:
As soon as practicable after the administration of a company begins, the administrator must:
(a)investigate the company's business, property, affairs and financial circumstances; and
(b)form an opinion about each of the following matters:
(i)whether it would be in the interests of the company's creditors for the company to execute a deed of company arrangement;
(ii)whether it would be in the creditors' interests for the administration to end;
(iii)whether it would be in the creditors' interests for the company to be wound up.
Division 5 of pt 5.3A is headed 'Meeting of creditors decides company's future' and comprises s 439A ‑ s 439C.
Section 439A imposes on the administrator of a company under administration a duty to convene a meeting of the company's creditors within the convening period as fixed by s 439A(5) or extended under s 439A(6). It provides:
(1)The administrator of a company under administration must convene a meeting of the company's creditors within the convening period as fixed by subsection (5) or extended under subsection (6).
Note:For body corporate representatives' powers at a meeting of the company's creditors, see section 250D.
(2)The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.
(3)The administrator must convene the meeting by:
(a)giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and
(b)causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;
at least 5 business days before the meeting.
Note: For electronic notification under paragraph (a), see section 600G.
(4)The notice given to a creditor under paragraph (3)(a) must be accompanied by a copy of:
(a)a report by the administrator about the company’s business, property, affairs and financial circumstances; and
(b)a statement setting out the administrator’s opinion about each of the following matters:
(i)whether it would be in the creditors’ interests for the company to execute a deed of company arrangement;
(ii)whether it would be in the creditors’ interests for the administration to end;
(iii)whether it would be in the creditors’ interests for the company to be wound up;
and also setting out:
(iv)his or her reasons for those opinions; and
(v)such other information known to the administrator as will enable the creditors to make an informed decision about each matter covered by subparagraph (i), (ii) or (iii); and
(c)if a deed of company arrangement is proposed - a statement setting out details of the proposed deed.
Note:For electronic notification, see section 600G.
(5)The convening period is:
(a)if the day after the administration begins is in December, or is less than 25 business days before Good Friday ‑ the period of 25 business days beginning on:
(i)that day; or
(ii)if that day is not a business day - the next business day; or
(b)otherwise - the period of 20 business days beginning on:
(i)the day after the administration begins; or
(ii)if that day is not a business day ‑ the next business day.
(6)The Court may extend the convening period on an application made during or after the period referred to in paragraph (5)(a) or (b), as the case requires.
(7)If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, the Court may only extend the convening period if the Court is satisfied that it would be in the best interests of the creditors if the convening period were extended in accordance with the application.
(8)If an application is made under subsection (6) after the period referred to in paragraph (5)(a) or (b), as the case may be, then, in making an order about the costs of the application, the Court must have regard to:
(a)the fact that the application was made after that period; and
(b)any other conduct engaged in by the administrator; and
(c)any other relevant matters.
By s 439B(2), a meeting convened under s 439A may be adjourned from time to time, but the period of the adjournment, or the total of the periods of adjournment, must not exceed 45 business days.
Section 439C provides that, at a meeting convened under s 439A, the creditors may resolve:
(a)that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or
(b)that the administration should end; or
(c)that the company be wound up.
Division 6 of pt 5.3A is concerned with the protection of the company's property during administration. By s 440A(1), a company under administration cannot be wound up voluntarily, except as provided by s 446A. By s 440B, during the administration of a company, various restrictions apply in relation to the exercise of the rights of a person in property of the company, or other property used or occupied by, or in the possession of, the company. By s 440D(1), during the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except with the administrator's written consent or with the leave of the Court and in accordance with such terms (if any) as the Court imposes. By s 440F, during the administration of a company, no enforcement process in relation to property of the company can be begun or proceeded with, except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. By s 440G, during the administration of a company, there are restrictions on an officer of a court (including a sheriff) taking action to levy execution under court orders in relation to the company's property. Division 7 is concerned with the rights of secured parties, owners or lessors. Division 8 specifies the powers of the administrator. Division 9 deals with the administrator's liability and indemnity for the debts of the administration. By s 443A, the administrator of a company under administration is, in general, liable for debts he or she incurs in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator. By s 443D, the administrator of a company under administration is, in general, entitled to be indemnified out of the company's property in respect of, amongst other liabilities, those debts.
Division 10 of pt 5.3A is headed 'Execution and effect of deed of company arrangement' and comprises s 444A ‑ s 444J.
Section 444A(1) provides that s 444A applies where, at a meeting convened under s 439A, a company's creditors resolve that the company execute a deed of company arrangement. By s 444A(2), the administrator of the company is to be the administrator of the deed, unless the creditors, by resolution passed at the meeting, appoint someone else to be administrator of the deed. By s 444A(3), the administrator of the company must prepare an instrument setting out the terms of the deed. Section 444A(4) provides:
The instrument must also specify the following:
(a)the administrator of the deed;
(b)the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors' claims;
(c)the nature and duration of any moratorium period for which the deed provides;
(d)to what extent the company is to be released from its debts;
(e)the conditions (if any) for the deed to come into operation;
(f)the conditions (if any) for the deed to continue in operation;
(g)the circumstances in which the deed terminates;
(h)the order in which proceeds of realising the property referred to in paragraph (b) are to be distributed among creditors bound by the deed;
(i)the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed.
By s 444A(5), the instrument is taken to include the prescribed provisions, except so far as it provides otherwise.
Section 444B applies where an instrument is prepared under s 444A.
Section 444B(2) provides that the company must execute the instrument within:
(a)15 business days after the end of the meeting of creditors; or
(b)such further period as the Court allows on an application made within those 15 business days.
By s 444B(5), the proposed administrator of the deed must execute the instrument before, or as soon as practicable after, the company executes it.
Section 444B(6) provides that, when executed by both the company and the deed's proposed administrator, the instrument becomes a deed of company arrangement.
Section 444D specifies the effect of a deed of company arrangement on creditors. It provides:
(1)A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i).
(2)Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security interest, except so far as:
(a)the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or
(b)the Court orders under subsection 444F(2).
(3)Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as:
(a)the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or
(b)the Court orders under subsection 444F(4).
(3A)Subsection (3) does not apply in relation to an owner or lessor of PPSA retention of title property of the company.
Note: Subsection (2) applies in relation to an owner or lessor of PPSA retention of title property of the company. Such an owner or lessor is a secured creditor of the company (see section 51F (meaning of PPSA retention of title property)).
(4)Section 231 does not prevent a creditor of the company from becoming a member of the company as a result of the deed requiring the creditor to accept an offer of shares in the company.
Section 444DA is concerned with giving priority to eligible employee creditors. Section 444DA(1) provides:
A deed of company arrangement must contain a provision to the effect that, for the purposes of the application by the administrator of the property of the company coming under his or her control under the deed, any eligible employee creditors will be entitled to a priority at least equal to what they would have been entitled if the property were applied in accordance with sections 556, 560 and 561.
By s 444E(2), until a deed of company arrangement terminates, a person bound by the deed cannot make an application for an order to wind up the company or proceed with such an application made before the deed became binding on the person. Further, by s 444E(3), the person cannot begin or proceed with a proceeding against the company or in relation to any of its 'property' or begin or proceed with enforcement process in relation to 'property' of the company, except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. In s 444E(3) an extended definition of 'property' applies. See s 444E(4).
By s 444G, a deed of company arrangement also binds the company, its officers and members and the deed's administrator.
Division 11 of pt 5.3A is headed 'Variation, termination and avoidance of deed' and comprises s 445A ‑ s 445H.
Section 445A provides that a deed of company arrangement may be varied by a resolution passed at a meeting of the company's creditors convened under s 445F, but only if the variation is not materially different from a proposed variation set out in the notice of meeting.
By s 445B(1), where a deed of company arrangement is varied under s 445A, a creditor of the company may apply to the Court for an order cancelling the variation. By s 445B(2), on an application, the Court may make an order cancelling the variation, or confirming it, either wholly or in part, on such conditions (if any) as the order specifies and may make such other orders as it thinks appropriate.
Section 445C specifies when a deed of company arrangement terminates. It provides:
A deed of company arrangement terminates when:
(a)the Court makes under section 445D an order terminating the deed; or
(b)the company's creditors pass a resolution terminating the deed at a meeting that was convened under s 445F by a notice setting out the proposed resolution; or
(c)if the deed specifies circumstances in which it is to terminate ‑ those circumstances exist; or
(d)the administrator of the deed executes a notice of termination of the deed in accordance with section 445FA;
whichever happens first.
By s 445CA, the creditors are not entitled to pass a resolution under s 445C(b) unless there has been a breach of the deed and the breach has not been rectified before the resolution is passed.
Section 445D specifies when the Court may terminate a deed of company arrangement. It provides:
(1)The Court may make an order terminating a deed of company arrangement if satisfied that:
(a)information about the company's business, property, affairs or financial circumstances that:
(i)was false or misleading; and
(ii)can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed;
was given to the administrator of the company or to such creditors; or
(b)such information was contained in a report or statement under subsection 439A(4) that accompanied a notice of the meeting at which the resolution was passed; or
(c)there was an omission from such a report or statement and the omission can reasonably be expected to have been material to such creditors in so deciding; or
(d)there has been a material contravention of the deed by a person bound by the deed; or
(e)effect cannot be given to the deed without injustice or undue delay; or
(f)the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be:
(i)oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or
(ii)contrary to the interests of the creditors of the company as a whole; or
(g)the deed should be terminated for some other reason.
(2)An order may be made on the application of:
(a)a creditor of the company; or
(b)the company; or
(ba)ASIC; or
(c)any other interested person.
By s 445E, where, at a meeting convened under s 445F, the company's creditors pass a resolution terminating the deed and the notice of the meeting set out a proposed resolution that the company be wound up, the creditors may also resolve at the meeting that the company be wound up.
Section 445F deals with the convening, by the administrator of the deed, of a meeting of the company's creditors to consider a proposed variation or termination of the deed. It provides:
(1)The administrator of a deed of company arrangement:
(a)may at any time convene a meeting of the company’s creditors; and
(b)must convene such a meeting if so requested in writing by creditors the value of whose claims against the company is not less than 10% of the value of all the creditors’ claims against the company.
(2)The deed's administrator must convene the meeting by giving written notice of the meeting:
(a)to as many of the company’s creditors as reasonably practicable; and
(b)at least 5 business days before the meeting.
Note:For electronic notification, see section 600G.
(3)The notice given to a creditor under subsection (2) must:
(a)set out each resolution (if any) under section 445A or paragraph 445C(b) that the deed's administrator proposes that the meeting vote on; and
(b)if the meeting is convened under paragraph (1)(b) of this section - set out each proposed resolution under section 445A or paragraph 445C(b) that is set out in the request.
(4)At a meeting convened under this section, the deed’s administrator is to preside.
(5)A meeting convened under this section may be adjourned from time to time.
Section 445FA is concerned with the lodgement with ASIC of a notice of termination of a deed of company arrangement. It provides:
(1)If a company is subject to a deed of company arrangement, and:
(a)the administrator of the deed has applied all of the proceeds of the realisation of the assets available for the payment of creditors; or
(b)the administrator of the deed has paid to the creditors:
(i)the sum of 100 cents in the dollar; or
(ii)any lesser sum determined by the creditors at a general meeting; or
(c)all of the following conditions are satisfied:
(i)the company's obligations under the deed have been fulfilled;
(ii)the obligations of any other party to the deed have been fulfilled;
(iii)creditors' claims under the deed have been dealt with in accordance with the deed;
the administrator of the deed must:
(d)certify to that effect in writing; and
(e)within 28 days, lodge with ASIC a notice of termination of the deed.
(2)The notice of termination must be in the prescribed form.
Note: For termination of the deed, see section 455C.
Section 445G specifies when the Court may declare a deed of company arrangement or a provision of it 'to be void or not to be void' and when the Court may declare the deed or a provision of it 'to be valid, despite a contravention of a provision of [pt 5.3A]'. It provides:
(1)Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or ASIC, may apply to the Court for an order under this section.
(2)On an application, the Court may make an order declaring the deed, or a provision of it, to be void or not to be void, as the case requires, on the ground specified in the application or some other ground.
(3)On an application, the Court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the Court is satisfied that:
(a)the provision was substantially complied with; and
(b)no injustice will result for anyone bound by the deed if the contravention is disregarded.
(4)Where the Court declares a provision of a deed of company arrangement to be void, the Court may by order vary the deed, but only with the consent of the deed's administrator.
By s 445H, the termination or avoidance, in whole or in part, of a deed of company arrangement does not affect the previous operation of the deed.
Division 11A of pt 5.3A is concerned with the deed administrator's accounts. Division 12 is concerned with the transition to a creditors' voluntary winding up.
Division 13 of pt 5.3A is headed 'Powers of Court' and comprises s 447A ‑ s 447F.
Section 447A provides:
(1)The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.
(2)For example, if the Court is satisfied that the administration of a company should end:
(a)because the company is solvent; or
(b)because provisions of this Part are being abused; or
(c)for some other reason;
the Court may order under subsection (1) that the administration is to end.
(3)An order may be made subject to conditions.
(4)An order may be made on the application of:
(a)the company; or
(b)a creditor of the company; or
(c)in the case of a company under administration ‑ the administrator of the company; or
(d)in the case of a company that has executed a deed of company arrangement ‑ the deed's administrator; or
(e)ASIC; or
(f)any other interested person.
As to creditors' meetings, s 439B(1) states that the administrator is to preside at a meeting convened under s 439A, and s 445F(4) states that at a meeting convened under s 445F the deed's administrator is to preside. Otherwise, the conduct of creditors' meetings is dealt with by the Corporations Regulations 2001 (Cth). Subject to some exceptions, reg 5.6.12 ‑ reg 5.6.36A apply (reg 5.6.11(2)) to the convening and conduct of, amongst other things, any creditors' meeting convened under pt 5.3A. By reg 5.6.19(1), resolutions put to the vote are to be decided on the voices, unless a poll is demanded before or on the declaration of the result of the voices. By reg 5.6.21, resolutions put to a poll are carried if a majority of creditors voting (whether in person, by attorney or by proxy) vote in favour, and if the value of the debts owed by the company to those creditors is more than half the total debts owed to all the creditors voting.
The relevant principles of statutory construction
In Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, French CJ, Hayne, Crennan, Bell and Gageler JJ observed:
'This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text' (Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46 [47]). So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself [39].
See also Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 [31] (French CJ, Gummow, Hayne, Crennan & Kiefel JJ); Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 [22] (French CJ, Hayne, Kiefel, Gageler & Keane JJ).
The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The statutory text is the surest guide to Parliament's intention. The meaning of the text may require consideration of the context, which includes the existing state of the law, the history of the legislative scheme and the general purpose and policy of the provision (in particular, the mischief it is seeking to remedy). See CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey & Gummow JJ); Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] (McHugh, Gummow, Kirby & Hayne JJ); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue(NT) [2009] HCA 41; (2009) 239 CLR 27 [47] (Hayne, Heydon, Crennan & Kiefel JJ).
The purpose of legislation must be derived from the statutory text and not from any assumption about the desired or desirable reach or operation of the relevant provisions. See Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 [26] (French CJ & Hayne J). The intended reach of a legislative provision is to be discerned from the words of the provision and not by making an a priori assumption about its purpose. See Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194 [21] (Gleeson CJ, Hayne, Callinan & Heydon JJ).
A section in a statute which specifically states the purposes or objects of the statute is relevant to the proper construction of the statute. See Tickner v Bropho (1993) 40 FCR 183, 191 ‑ 192 (Black CJ), 207 - 209 (Lockhart J), 215 ‑ 216 (French J); Russo v Aiello [2003] HCA 53; (2003) 215 CLR 643 [5] (Gleeson CJ). It is necessary to consider the method by which Parliament has implemented the specified purposes or objects. See Municipal Officers' Association of Australia v Lancaster (1981) 54 FLR 129, 152 (Evatt & Northrop JJ). The purposes or objects must be read and understood in the context of the statute as a whole. See IW v The City of Perth [1997] HCA 30; (1997) 191 CLR 1, 12 (Brennan CJ & McHugh J).
The view has been expressed that a section in a statute which specifically states the purposes or objects of the statute cannot cut down the meaning of another provision of the statute if that meaning is, in its textual and contextual surroundings, plain and unambiguous. See, for example, Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31, 78 (Cole JA); S v Australian Crime Commission [2005] FCA 1310; (2005) 144 FCR 431 [22] (Mansfield J); Director of Public Prosecutions v Mattiuzzo [2011] NTSC 60; (2011) 252 FLR 108 [14] (Riley CJ). This view has been based primarily on similar observations in Wacando v Commonwealth [1981] HCA 60; (1981) 148 CLR 1, 15 ‑ 16 (Gibbs CJ), 23 (Mason J) in relation to a preamble to a statute being used in determining the proper construction of the statute. It is unnecessary in the present case, with respect, to consider the correctness of the view expressed in such cases as Rosemount Estates, S and Matthiuzzo.
As Crennan J noted in Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619, '[s]econdary material seeking to explain the words of a statute cannot displace the clear meaning of the text of a provision (Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at 538 [22] per Gleeson CJ, Gummow, Hayne and Heydon JJ), not least because such material may confuse what was "intended … with the effect of the language which in fact has been employed" (Hilder v Dexter [1902] AC 474 at 477 per Earl of Halsbury LC)' [99]. That statement of principle applies to extrinsic evidence admissible at common law and also to extrinsic evidence admissible under s 15AB of the Acts Interpretation Act 1901 (Cth). In other words, the statutory text, and not non‑statutory language seeking to explain the statutory text, is paramount. See Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529 [22] (Gleeson CJ, Gummow, Hayne & Heydon JJ).
The function of a definition in a statute is not, except in rare cases, to enact substantive law. Rather, its function is to provide aid in construing the substantive enactment that contains the defined term. The meaning of the definition depends on the context, and the purpose or object, of the substantive enactment. See Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 [103] (McHugh J); Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568 [12] (McHugh J).
The proceedings before the master
By its originating process (COR 247 of 2016 which is the subject of CACV 30 of 2017), filed on 16 November 2016, Mighty River, as plaintiff, sought relief against the Administrators, as first defendants, and Mesa, as second defendant, relevantly as follows:
(a)a declaration that the Mesa DOCA was of no force and effect;
(b)an order terminating, alternatively setting aside, the Mesa DOCA; and
(c)an order that the resolution passed by the creditors at the second meeting of Mesa's creditors on 20 October 2016 be set aside.
By its originating process (COR 13 of 2017 which is the subject of CACV 31 of 2017), filed on 3 February 2017, Mineral Resources, as plaintiff, sought relief against Mesa, as first defendant, the Administrators, as second defendants, and Mighty River, as third defendant, relevantly as follows:
(a)an order pursuant to s 445G(2) of the Act declaring that the Mesa DOCA is not void; and
(b)alternatively, an order pursuant to s 445G(3) of the Act validating the Mesa DOCA.
The master's reasons
On 20, 21, 22 and 23 February 2017, Master Sanderson heard COR 247 of 2016 and COR 13 of 2017. On 16 March 2017, he published his reasons for decision. See Mighty River International Ltd v Hughes & Bredenkamp [2017] WASC 69.
Mighty River contended before the master that a 'holding DOCA' is inconsistent with the objects of pt 5.3A of the Act as expressed in s 435A. The Mesa DOCA was inconsistent with the purposes of pt 5.3A in that it did not maximise the chances of Mesa continuing in existence and it did not result in a better return to creditors than would result from Mesa's immediate winding up. Rather, the Mesa DOCA was intended merely to preserve the status quo so that the Administrators could carry out further investigations and formulate some future proposal which may or may not improve the chances of Mesa continuing in existence or result in a better return to creditors.
Mighty River argued that there is power in the Act for the court to extend the convening period for a meeting of creditors. A 'holding DOCA' subverts the role of the court and extends the convening period by means which do not comply with the Act. Everything that can be done under a 'holding DOCA' can be done by the court extending the convening period.
The Administrators and Mineral Resources argued that there was nothing in the Act which prohibited a 'holding DOCA'. Counsel for Mineral Resources argued that there are two 'gateways'. The first is to apply to the court for an approved extension of the convening period. The second is the use of a 'holding DOCA'. It is a commercial decision for the Administrators as to which 'gateway' should be adopted and their decision is subject to review by the Court including the exercise by the Court of its power to set aside the 'holding DOCA'.
The master held, 'on balance', that 'the use of [a holding]
DOCA is a valid exercise of power' [133]. The master reasoned:
I am satisfied the use of [a holding] DOCA is a valid exercise of power. I accept the submission there are two gateways and Mr Hughes has chosen one. It is an exercise of professional judgment and there is nothing to suggest that in this case his judgment miscarried. Nor am I satisfied the [Mesa] DOCA itself is invalid. I accept both arguments put by counsel for Mineral Resources and the Administrators. It will always be a question of professional judgment on the part of the administrator as to which of the two gateways are accessed. In this case I am not satisfied Mr Hughes has taken the wrong path [113].
The master gave two additional reasons why he was 'reluctant to set aside [the Mesa DOCA]':
First, the aim of pt 5.3A is to maximise returns to all interested parties. The Part clearly anticipates a limited role for the court. It allows the directors to make a decision to appoint administrators and it allows creditors to make decisions as to how or whether the company should be restructured. There seems to be nothing inherently wrong with the creditors meeting as a whole resolving to enter into a Holding DOCA. It is consistent with the intents and purposes of the Act.
Further, it is clear from Mr Hughes' evidence Holding DOCAs are in widespread use. If that is so (and there is no reason to doubt what Mr Hughes says), it would be a bold step to rule that such Holding DOCAs are impermissible. It would have a profound effect on insolvency practice. It is often said that decisions in Commonwealth legislation must show a degree of conformity to allow for consistent outcomes. Those views generally relate to decisions of judges at first instance conforming with decisions in other jurisdictions; they certainly require a judge at first instance in one state to follow a decision of an intermediate court of appeal in another state. But I think the principle can be taken further. If national insolvency practice sanctions Holding DOCAs and their use is widespread, then the uncertainty created by a first instance decision ruling against their validity could create significant problems. This is one of those situations where if Holding DOCAs are found not to be consistent with the Act, then it is a matter which should be determined at least by an intermediate court of appeal [114] ‑ [115].
The master said that if he had been of the view that a 'holding DOCA' was not 'sanctioned by the Act' he 'would not have reached the conclusion that the challenge to [the Mesa DOCA] ought be dismissed' [116].
The master concluded that Mighty River's claim in COR 247 of 2016 should be dismissed and that it was unnecessary to make any orders on Mineral Resources' claim in COR 13 of 2017 [117].
The master's orders
On 22 March 2017, the master heard from the parties as to the formal orders that should be made.
In COR 247 of 2016 the master ordered, relevantly, that Mighty River's claim against the Administrators and Mesa be dismissed.
In COR 13 of 2017, despite his conclusion at [117] of his reasons that it was unnecessary to make any orders on Mineral Resources' claim, the master made, relevantly, a declaratory order, pursuant to s 445G(2) of the Act, that the Mesa DOCA was not void.
Might River's grounds of appeal
Mighty River's grounds of appeal in CACV 30 of 2017 against the order in COR 247 of 2016 are as follows:
1.The learned Master erred in finding that the [Mesa DOCA] is valid under Part 5.3A of the Corporations Act 2001 (Cth).
2.The learned Master:
a.erred in failing to give any or any adequate reasons for concluding that the mandatory requirement in s 444(4)(b) that property is to be available for distribution to creditors was satisfied by the terms of the [Mesa DOCA];
b.alternatively to (a), erred in finding that the [Mesa DOCA] complies with the mandatory requirement of s 444(4)(b) in circumstances where he should have held that, on its proper construction, there is no property available for distribution under the terms of the [Mesa DOCA].
3.The learned Master erred in finding that the [Mesa DOCA] is valid under Part 5.3A on the ground that the administrators may choose one of two gateways being (a) the bringing an application to extend the convening period under s 439A(6) or (b) the executing [of] a holding deed of company arrangement …
4.The learned Master erred in finding that the [Mesa DOCA] is consistent with the objects of Part 5.3A as set out in s 435A in circumstances where he should have found that the [Mesa DOCA] neither maximises the chance of the business continuing nor produces any return to creditors …
5.The learned Master:
(a)erred in failing to give any or any adequate reasons for rejecting the appellant's arguments that the [Mesa DOCA] ought to be terminated under s 445D, or declared void under s 445G(2), or that the resolution of creditors ought to be set aside under s 600A(2);
(b)alternatively to (a), erred in rejecting the appellant's arguments that the [Mesa DOCA] ought to be terminated under s 445D, or declared void under s 445G(2), or that the resolution of creditors ought to be set aside under s 600A(2) in circumstances where the [Mesa DOCA]:
(i)does not fulfill [sic] the mandatory requirement of s 444A(4)(6) in circumstances where there is no property available for distribution under the terms of the [Mesa DOCA];
(ii)circumvents the requirement under s 439A(6) for the administrator to make an application to extend the convening period;
(iii)is not consistent with the objects of Part 5.3A as set out in s 435A in circumstances where the [Mesa DOCA] does not maximise the chance of the business continuing or otherwise produce any return to creditors; and
(iv)was entered into following a resolution of creditors which was only carried by the support of the majority creditor, [Mineral Resources] and its related creditor, which resolution is not in the interests of the creditors as a whole.
6.The learned Master erred in taking into account the following irrelevant and/or erroneous matters as relevant to his decision:
(a)that holding deeds of company arrangement are said by [the Administrators] to be in widespread use …;
(b)that ruling the [Mesa DOCA] is beyond power or impermissible would have a profound effect on insolvency practice …;
(c)that national insolvency practice sanctions the use of holding deeds of company arrangement;
(d)that a first instance decision ruling the [Mesa DOCA] to be invalid could create significant problems …;
(e)that any finding that the [Mesa DOCA] is invalid should be determined by an intermediate court of appeal …
7.The learned Master ought to have declared that the [Mesa DOCA] is of no force and effect or is void under s 445G(2) or otherwise ordered that it be terminated.
Mighty River's grounds of appeal in CACV 31 of 2017 against the order in COR 13 of 2017 are to the following effect:
1.The master erred in failing to give any or adequate reasons for the declaration which he made pursuant to s 445G(2) of the Act.
2.In the alternative to ground 1, the master erred in making the declaration in circumstances where that declaration was inconsistent with his reasons to the effect that no orders were required in COR 13 of 2017.
3.In the alternative to grounds 1 and 2, the master erred in making the declaration in circumstances where the Mesa DOCA:
(a)does not fulfil the mandatory requirements of s 444A(4)(b) in circumstances where there was no property available for distribution under the terms of the Mesa DOCA;
(b)circumvents the requirement under s 439A(6) for the Administrators to make an application to extend the convening period; and
(c)is not consistent with the objects of pt 5.3A as set out in s 435A in circumstances where the Mesa DOCA does not maximise the chance of the business continuing or otherwise produce any return to creditors.
4.The master ought to have dismissed Mineral Resources' originating process in COR 13 of 2017.
It is unnecessary to deal with Mighty River's complaints about the adequacy of the master's reasons in relation to s 444A(4)(b) (ground 2 in CACV 30 of 2017) because success on that issue would not, ultimately, advance Mighty River's position on the issues of construction.
Also, it is unnecessary to deal with Mighty River's complaints about alleged errors in the master's approach and reasoning in relation to the issues of construction. The submissions of the parties to this court focused, appropriately, upon the proper construction and application of pt 5.3A and not upon the master's alleged errors.
A distillation of the essential matters raised by Mighty River's grounds of appeal and submissions
The essential matters raised by Mighty River's grounds of appeal and submissions may be distilled to the following questions.
First, will a deed of company arrangement, purportedly executed under pt 5.3A, be invalid if the deed does not specify, pursuant to s 444A(4)(b), some property of the company that is to be available to pay creditors' claims?
Secondly, will a deed of company arrangement, purportedly executed under pt 5.3A, be invalid if the deed creates a moratorium period in relation to the creditors' claims against the company, and provides that the deed administrator will carry out further investigations in relation to the company for a period in excess of the convening period specified in s 439A(5) and that, after the further investigations have been completed, the deed administrator may present a proposal to a meeting of the creditors for restructuring or otherwise resuscitating the company?
Thirdly, is the Mesa DOCA invalid on one or more of the bases referred to in the first and second questions?
The first and second questions: the purposes of pt 5.3A
Part 5.3A is an important aspect of the law with respect to corporate insolvency. Parliament enacted pt 5.3A in response to the recommendation of the Harmer Committee (Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988) (the Harmer Report)). A new voluntary procedure for insolvent companies was necessary because the four voluntary procedures then normally available (namely, a scheme of arrangement, an official management, a creditors' voluntary winding up and a court winding up) did not provide a satisfactory range of alternatives. The Harmer Report was critical of the procedure for a scheme of arrangement:
The procedure for a scheme of arrangement is cumbersome, slow and costly and is particularly unsuited to the average private company which is in financial difficulties. The time taken to implement a scheme varies but in general is at least two to three months. The legal and accountancy costs of even a relatively straightforward scheme are substantial [46].
The explanatory memorandum accompanying the Corporate Law Reform Bill 1992 (Cth), which introduced pt 5.3A, stated that pt 5.3A was intended to provide for speed and ease of commencement of administration, minimisation of expensive and time‑consuming court involvement and formal meeting procedures, flexibility of action and ease of transition to other insolvency solutions where an administration does not by itself offer all of the answers [449].
The legislative policy disclosed by the objects stated in s 435A is that an insolvent company should have an opportunity for its business, property and affairs to be administered with a view to the company, or as much as possible of its business, continuing in existence, or, if that is not possible, to provide a better return for its creditors and members than would result from an immediate winding up of the company.
In Commonwealth v Rocklea Spinning Mills Pty Ltd [2005] FCA 902; (2005) 145 FCR 220, Finkelstein J noted that, as set out in s 435A, pt 5.3A has two distinct, but not inconsistent, objects. The first object is to facilitate the resuscitation of a sick or failing company or its business. The second object, if the first is not achievable, is to facilitate the more efficient realisation of a company's assets than by an immediate winding up. A deed of company arrangement is the means by which each object is to be attained. His Honour observed that when the purpose of the deed is to preserve the company or its business:
(a)pt 5.3A does not assume that the creditors will be paid in full;
(b)to the contrary, pt 5.3A assumes that it might often be necessary to extinguish some creditors' claims; and
(c)pt 5.3A does not assume that the creditors will be treated equally or that they will be given the same priority as in a winding up because those outcomes could easily obstruct or derail the attempt to keep the company or its business afloat when the available property or revenue is inadequate [30].
Although s 435A expressly states the objects of pt 5.3A, it is not an exhaustive statement of every legislative purpose that is to be taken into account in applying the provisions of pt 5.3A. See Vero Insurance Ltd v Kassem [2011] NSWCA 381; (2011) 86 ACSR 607 [81] (Campbell JA; Meagher JA agreeing). However, any purpose of pt 5.3A that is to be inferred or implied must be derived from the statutory text. See BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414; (2011) 82 NSWLR 336 [137] ‑ [138] (Campbell JA; McColl JA agreeing).
Section 435A acknowledges that a deed of company arrangement might involve the company or its business ceasing to exist. However, that will be the outcome only 'if it is not possible for the company or its business to continue in existence'. See Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510 [218] ‑ [219] (Campbell J) and the cases there cited.
Campbell J recognised in Bidald Consulting that:
Section 435A regards it as something to be aimed at that the company or its business continue in operation, in whole or part. This includes the possibility that, even though the company does not continue in existence, the business or part of it continues, perhaps run by some other entity. It is within the policy of the Part for the business to be kept alive so far as it can, regardless of who might be running it, rather than have the destruction of the business which sometimes comes with a liquidation where it is not possible for the liquidator to sell the business as a going concern [220]. (original emphasis)
In Mizuho Bank Ltd v Ackroyd [2016] NSWSC 1148; (2016) 311 FLR 451, Hammerschlag J, after stating that the policies underlying pt 5.3A are to maximise the chances of a beleaguered company staying alive and to maximise return, continued:
To this end, [Pt 5.3A] contains provisions which restrict the exercise of rights and the bringing or proceeding with proceedings against the company. These provisions include s 440B(1), which restricts the exercise of third party rights in property of the company or property used or occupied by or in the possession of the company, except with the administrator's written consent or the leave of the Court. They include ss 440D and 440F which are respectively in the following terms:
440D Stay of proceedings
(1)During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a)with the administrator's written consent; or
(b)with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
440F Suspension of enforcement process
During the administration of a company, no enforcement process in relation to property of the company can be begun or proceeded with, except:
(a)with the leave of the Court; and
(b)in accordance with such terms (if any) as the Court imposes.
These restrictions are aimed at preserving the company's position to afford time to facilitate the achievement of the underlying policy. They give the administrator time to assess and report on the company without the distraction of proceedings; they put a brake on legal and associated costs, allowing time for the development of proposals which might preserve the value of the company as a going concern; they give the creditors time to consider their position for the purposes of the creditors' meeting and may prevent a creditor from obtaining some advantage over other creditors or potential creditors. In National Australia Bank Ltd v King (2003) 45 ACSR 413 at 417, Barrett J (as his Honour then was) observed that s 440J(1) fits into this body of provisions intended to ensure that administration takes an orderly course enabling creditors to make, at the second meeting, an informed decision as to where their interests lie [27] ‑ [28].
The first and second questions: the nature, extent and standard of an administrator's investigation
Part 5.3A contemplates that a decision will be made promptly as to whether a company should execute a deed of company arrangement, or the administration should end, or the company should be wound up. The tight time frame specified in pt 5.3A can be extended by the Court, but upon it being decided that the company should execute a deed of company arrangement that decision should be implemented expeditiously. See Mentha v Sydney Airports Corporation Ltd [2002] FCA 530; (2002) 120 FCR 310 [55] (Goldberg J).
The case law recognises that the nature, extent and standard of an administrator's investigation is necessarily affected by the tight time frame in pt 5.3A. See, for example, Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139, where Cohen J said:
The intention [of Parliament in enacting pt 5.3A] was, as has been indicated in several cases, to provide a more expeditious and less expensive way of assisting those creditors and members than under the greater formality of a winding up or of the entry into a scheme of arrangement. One result, however, is that an administrator, constrained as he or she is by the time limits imposed under [pt 5.3A], cannot carry out a detailed investigation of a company in the same way as can a liquidator, and accordingly the administrator's actions must be looked at in the light of that more restricted range of activities which are available to him. A further result, when dealing with a deed of company arrangement under [pt 5.3A], is that the amount of detailed information which would be given to creditors in a scheme of arrangement under s 411 of the Corporations Law is not available, again because of time restrictions and the need to have material sent to the creditors quickly (145 ‑ 146).
More recently, in Britax Childcare Pty Ltd v Infa Products Pty Ltd (administrators appointed) [2016] FCA 848; (2016) 115 ACSR 322, Burley J summarised the position as follows [88]:
The administration process operates in circumstances where those controlling the relevant company have accepted that it is insolvent. It has been accepted that the investigation conducted in the administration process is intended by Parliament to be a 'swift and practical' one; Perpetual Trustee Co Ltd v Mustang Marine Australia Services Pty Ltd [2010] NSWSC 1429 (Mustang Marine) at [109]. Consistent with this, the administrator's investigation is necessarily a preliminary investigation which involves the administrator carrying out his or her investigations in a manner which is modified in light of the tight timeframe and associated constraints provided for by Pt 5.3A. An administrator, so constrained, cannot carry out a detailed investigation of at [sic] company in the same way as can a liquidator, and accordingly the administrator's actions must be looked at in the light of that more restricted range of activities which are available to him or her; Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (ACN 069 549 042) (subject to deed of company arrangement) (No 2) (2011) 82 ACSR 300; [2011] FCA 178 (Mediterranean Olives) at [61] ‑ [62].
The first and second questions: the Court's power to extend the convening period under s 439A(6)
In Re Austcorp Group Ltd (administrators appointed) [2009] FCA 636 [18], Lindgren J commented on the Court's power to extend the convening period under s 439A(6); notably, on the balance to be struck between Parliament's expectation that the procedures under pt 5.3A will be relatively swift and summary, on the one hand, and undue speed not being allowed to prejudice sensible and constructive actions with a view to maximising the return for creditors and any return for shareholders, on the other:
The overlapping considerations affecting the exercise of the discretion whether to extend the convening period may be summarised as follows:
(a)the court should recognise the objective of speed of administration that was associated with the introduction of Pt 5.3A by the Corporate Law Reform Act 1992 (Cth) as from 23 June 1993. The court should also recognise the objectives stated in para 507 of the explanatory memorandum associated with the Bill for that Act, that it was expected that the power to extend the period would be exercised infrequently since it is an important objective of Pt 5.3A that creditors be fully informed about the company's position as early as possible and have an opportunity to vote on its future as soon as possible: Mann v Abruzzi Sports Club Ltd (1994) 12 ACSR 611 (Young J) at 612; Re Geraldton Building Co Pty Ltd(Admins Apptd); Ex parte Trevor [2000] WASC 320 (Owen J) at [5];
(b)the function of the court is to strike an appropriate balance between the legislature's expectation that the administration will be a relatively swift and summary procedure, and the requirement that undue speed should not be allowed to prejudice sensible and constructive actions directed towards maximising the return for creditors and any return for shareholders: Re Diamond Press Australia Pty Ltd [2001] NSWSC 313 (Barrett J) at [10]; Re Pan Pharmaceuticals Ltd (2003) 46 ACSR 77 (Lindgren J) (Pan Pharmaceuticals) at [42]; Re New Horizons Corporation; Ex parte De Vries [2004] NSWSC 253 (Austin J) at [5].
At times, the master's reasons and the parties' submissions on appeal referred to the question of whether a 'holding DOCA' is valid. In my view, the question of validity of the DOCA should not be addressed by reference to the shorthand phrase 'holding DOCA', at least unless the defining characteristics of a holding DOCA are identified. Mighty River's submissions did not clearly identify the features of the DOCA, or the class or classes of purported deeds of company arrangement, that render it invalid on the ground of Mighty River's second contention. The relevant features relied on by Mighty River would seem to be the following, in combination:
1.The DOCA does not provide for any property to be available to satisfy creditors' claims.
2.The DOCA provides for the Administrators to undertake ongoing investigations of the Company's affairs, and of the possibility of a proposal for restructuring the Company or a sale of its assets.
3.The DOCA contemplates the possibility of a subsequent proposal for a deed of company arrangement, by way of variation to the DOCA, under which property of the Company is made available to satisfy creditors' claims.[130]
[130] Appeal ts 84 ‑ 86, 199 ‑ 201.
For the reasons that follow, I am not persuaded that a deed of company arrangement with these features is not a 'deed of company arrangement' within the meaning of pt 5.3A or is otherwise invalid, nor that the DOCA is, by reason of these features, invalid. I am not persuaded that there is anything in the text or structure of pt 5.3A that makes the DOCA non‑compliant with the provisions of that part.
Both the explanatory memorandum[131] and the observations of the plurality in Lehman Brothers Holdings v City of Swan[132] emphasise that, apart from what is said in s 444A(4), s 444A(5), s 444BA and s 444BB, all contained in div 10, pt 5.3A is silent about, and does not seek to limit, both the nature and the content of the arrangement between the company and its creditors that may be made by and expressed in a deed of company arrangement.
[131] Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) 65 [577].
[132] Lehman Brothers Holdings v City of Swan [37], [39].
For the reasons already explained, in my view it is open to creditors to resolve to enter into a deed of company arrangement that does not provide for any property of the company to be available to satisfy their claims. An example of such a deed of company arrangement is one that simply provides for a moratorium in relation to the creditors' claims. A deed of company arrangement providing for a moratorium on creditors' claims thereby deals with those claims. Thus it meets the requirement that the subject matter of an arrangement or compromise made in and through a deed of company arrangement be debts or claims against the company.[133] That is true of the DOCA in the present case: it provides for a moratorium on creditors' claims for the period the DOCA is in force.[134] The DOCA also provides that the administrator promises to undertake specified steps, creating obligations owed to and enforceable by Mesa. These features of the DOCA suggest that it is within the broad ambit of arrangements or compromises permissibly the subject of a deed of company arrangement within pt 5.3A.
[133] Lehman Brothers Holdings v City of Swan [38].
[134] Clause 10.
The inclusion of an obligation on the part of the administrator of the deed to undertake further investigations of the company's affairs in a deed of company arrangement does not take the deed of company arrangement outside the scope of pt 5.3A. There is nothing inimical to the objects or scheme of pt 5.3A in a deed providing for investigations by a deed administrator to see whether the company's assets can be augmented by claims, for example, against former directors. Nothing in the Act requires that all investigations be concluded while the company is under administration.
The same is true of a provision for the deed administrators to continue to seek proposals for the restructure of the company or sale of its assets, and the contemplation in the deed that, if such a proposal is received, the deed of company arrangement might be varied to provide for property of the company to be made available to satisfy creditors' claims. Pt 5.3A expressly empowers the administrator of a deed of company arrangement to convene a meeting of the company's creditors for the purpose of considering a resolution to vary the deed of company arrangement and expressly empowers the creditors to vary the deed of company arrangement at such a meeting.[135] The terms of an original deed of company arrangement do not limit the breadth of possibilities of a varied deed of company arrangement. The only limit on the breadth of the creditors' power to vary a deed of company arrangement is of a procedural character: a variation must be not materially different from a variation proposed under the notice of meeting.[136]
[135] Section 445A, 445F.
[136] Section 445A.
Section 445F reflects a recognition that during the period of operation of a deed of company arrangement, the creditors may, at different times, determine that the deed of company arrangement should deal with their claims in different ways. The section is, in that way, another element of the flexibility that is provided to creditors in determining the fate of the company to which administrators were appointed.
In this setting, it is difficult to see why pt 5.3A should be construed as impliedly prohibiting provisions in a deed of company arrangement under which a deed administrator continues to seek a proposal or further proposals to provide funds or property through which the company can satisfy creditors' claims.
In my view, a deed of company arrangement with the features identified in [372], and the DOCA in this case, do not defeat the statutory intention revealed by s 439A and, in particular, s 439A(6). Section 439A imposes strict deadlines. Those deadlines can only be extended by court order. The object of these provisions was explained in the explanatory memorandum as being to ensure that creditors are fully informed about the company's position as early as possible and have an opportunity to vote on its future as soon as possible.[137] That has been accepted in many cases as the objective of these provisions.[138] The execution of the DOCA in this case, or a deed of company arrangement with the features identified in [372], does not defeat, but rather meets, that objective. In the present case, the creditors were given the opportunity to vote on the future of Mesa in a timely way: the proposal to enter the DOCA was put to creditors. The creditors, by majority, made a decision that Mesa should enter into the DOCA.
[137] Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) 92 [507].
[138] See, for example, Re Riviera Group [9]; Re Evans and Tate Ltd (Administrators Appointed) (Receivers and Managers Appointed); Ex parte Jones [2007] WASC 235 [19]; Re Palandri [4]; see also Lehman Brothers Holdings v City of Swan [21]; Australian Gypsum v Dalesun [187].
Mighty River also submits that any opinion formed by an administrator in recommending a holding DOCA is not an opinion of the character required by s 439A.[139] It submits that recital C of the DOCA shows the deed was the result of an opinion that was not of the required character.[140] On Mighty River's construction, an administrator who has been unable to form an opinion as to a deed of company arrangement involving, without variation, a return to creditors, must apply for an extension under s 439A(6).[141] However, Mighty River accepts that contention is a consequence of its submission as to the proper construction of s 444A(4)(b) and s 439A; it is not an indication favouring its construction.[142]
[139] Appeal ts 46, 49, 85.
[140] Appeal ts 76.
[141] Appeal ts 76.
[142] Appeal ts 49, 85 - 86, 200 - 201.
I accept that a result of my construction is that there may be situations where an administrator might have two means of proceeding: to apply to the court for an extension of the convening period; or to propose to the creditors that the company enter into a deed of company arrangement that involves taking further steps and making further investigations with a view to obtaining proposals for the restructure of the company or sale of its assets. For the reasons I have given, I do not think that this result is inconsistent with the scheme of the objective intention revealed by pt 5.3A. I am unable to discern from pt 5.3A any implied prohibition on the creditors of a company agreeing, under a deed of company arrangement, to administer the business affairs and property of a company in a manner which might have been followed by an administrator after a successful application under s 439A(6).
I also accept that in such situations which of these two alternative paths is taken will determine who must commence an application to court and so who bears any onus.[143] By definition, an application to extend the convening period must be made by an administrator, who thereby bears the onus of persuasion. A creditors' resolution that the company enter a deed of company arrangement does not, of itself, require any application to the court. The fact that an aggrieved creditor or other interested party would bear an onus in any application to set aside or terminate the deed reflects the statutory starting point that effect is to be given to the will of the requisite majority[144] who vote at the meetings.[145] That starting point is subject to the exercise of the court's powers under s 445D and s 600A. Those who seek the exercise of these powers must make out the case for it. I do not think that militates against my preferred construction of pt 5.3A.
[143] See Mighty River's submission summarised in [348(4)].
[144] Namely a majority of creditors voting and where those in favour hold more than half of the total debts held by those voting, reg 5.6.21.
[145] Lehman Brothers Holdings v City of Swan [31].
Mighty River asserts by its second contention that a purported deed of company arrangement that has the effect of circumventing the specific provisions in s 439A is not a valid deed. That assertion has some echoes with contentions unsuccessfully advanced by the appellants in Australasian Memory v Brien. In Australasian Memory v Brien, the appellants argued that the court's power under s 447A should not be construed as encompassing power to alter the way in which s 439A applies to the company. One of its submissions in support of that was that to do so would enable the specific provisions of s 439A, which include an express power to extend the times fixed by the section, to be circumvented. In rejecting that submission, the High Court said as follows:[146]
The particular question that arises in the present appeal is whether an order can be made under s 447A(1) to alter the way in which s 439A(2) applies to the Company. Asserting that this question should be answered in the negative offers no reason for reaching the conclusion that is asserted. In particular, to say that s 447A(1) cannot be understood as permitting the 'circumventing' of other 'specific' provisions of Pt 5.3A amounts to no more than an assertion of the answer to the question that arises; it offers no reason for reaching the conclusion proffered. Reasons for reaching any conclusion about the construction of the provision must be sought, at least in the first instance, in the statutory language.
…
… s 447A is not properly described as a general power standing apart from the scheme found in Pt 5.3A. Section 447A is an integral part of the legislative scheme provided for by Pt 5.3A. In its terms, it enables the making of orders which alter the way in which 'this Part is to operate in relation to a particular company'. That is, it permits the making of orders which would alter how s 439A is to apply. It is not right to seek to characterise s 447A as some general source of power to which resort cannot be had because to do so would 'circumvent' the statutory limitations upon the exercise of the power that is given by s 439A(6) to extend the convening period. So to characterise s 447A is to give to all of the other provisions of Pt 5.3A a fixed and unchanging operation in relation to all companies. Yet the evident legislative intention of s 447A is to permit alterations to the way in which Pt 5.3A is to operate.
[146] Australasian Memory v Brien [16], [24].
For the reasons I have given, I am not persuaded that the scope of the broad provisions of pt 5.3A enabling a company and its creditors to make arrangements as to the creditors' claims against the company should be read down by reference to a need to avoid circumventing the provisions of s 439A(6).
Mighty River's second contention fails.
Mighty River's third contention: is the DOCA consistent with the objects of pt 5.3A?
Mighty River submits that:
1.In order to be valid, the DOCA must fulfil one of the purposes of s 435A.[147]
2.That is because the execution of the DOCA by the Administrators on behalf of the Company was an exercise of statutory power and such power can only be exercised for the purposes of fulfilling the objects of pt 5.3.[148]
3.The question of whether execution of the DOCA fulfils a statutory purpose is to be answered by reference to the DOCA as executed, and not by reference to the possibility that, at a later time, the DOCA may be varied and the varied DOCA may fulfil the objects of pt 5.3.[149]
4.The DOCA is not consistent with the objects of pt 5.3A as set out in s 435A in that the DOCA does not maximise the chance of the business continuing as a going concern and does not produce any return to creditors.[150]
For a number of related reasons, I do not accept these submissions.
[147] Appellant's submissions [89], [94].
[148] Appellant's submissions [94] ‑ [96], appeal ts 85.
[149] Appellant's submissions [94].
[150] Appellant's submissions [96].
The purpose and effect of the object section (s 435A) is to inform the construction of pt 5.3A, not to provide the criterion against which the validity of a deed of company arrangement is to be assessed. Section 435A is directed to the object of pt 5.3A, which in turn informs the proper construction of the provisions of pt 5.3A. The validity of a deed of company arrangement is to be assessed by reference to the provisions of pt 5.3A, not by asking whether the deed in fact, in the court's view, achieves one of the purposes stated in s 435A.
It is, as the High Court observed in Lehman Brothers, a conspicuous feature of pt 5.3A that commercial judgments about the future of the company and the merits of proposals are left to the decision of a meeting of creditors. It is not for the court to make its own assessment of whether a particular proposed deed of company arrangement presents a better prospect of returns for creditors than immediate winding up of the company. That is a question for the creditors. As the master found,[151] the DOCA imposes obligations on the Administrators to investigate claims, seek proposals and then report on the outcome of those steps, to inform the creditors' decision as to what should occur. In voting for the DOCA, the (majority of) creditors chose to accept a moratorium on their debts while those steps were taken. That reflects a commercial judgment that the taking of those steps was more likely to produce a better return for creditors than an immediate winding up of the company.
[151] Primary reasons [105] - [106].
Further, the master made findings that nothing in the evidence supported Mighty River's assertion that the DOCA was, compared to liquidation, in any way worse from the perspective of creditors or the efficacy of the process of realisation, and that the DOCA had the distinct advantage over liquidation in that it preserved the value of Mesa's listing on the Australian Stock Exchange.[152] Those findings were supported by the evidence of Mr Hughes,[153] and not challenged on appeal.
[152] Primary reasons [111].
[153] ts 170, 172 ‑ 173, 183,206 ‑ 207.
Thus, the DOCA was directed to achievement of a better return to creditors than would be achieved by an immediate winding up of the company. It was not entered for a purpose foreign or inimical to the objects stated in s 435A.
Further, I agree with Murphy JA's observations [234] ‑ [236] as to the third contention.
For these reasons, I do not accept Mighty River's third contention.
Application to adduce additional evidence
Since the completion of the hearing of the appeal on 20 April 2017, Mighty River has made three applications in each appeal for leave to adduce additional evidence in the appeal.[154] In substance, the proposed additional evidence relates to the Sunset Date Report prepared by the Administrators in May 2017, and to the conduct of and results of the consequent meeting of creditors held on 11 May 2017. The court sat to hear the first of these applications on 19 May 2017. The court received the evidence on a provisional basis, with a ruling on its admissibility to be made in the course of its reasons for decision on the appeal.[155]
[154] In CACV 30 of 2017, applications dated 10 May 2017, 22 May 2017 and 8 August 2017; in CACV 31 of 2017, applications dated 8 May 2017, 22 May 2017 and 8 August 2017.
[155] Appeal ts 241 ‑ 242.
Pursuant to directions made on 19 May 2017, Mighty River filed detailed submissions in relation to the first two applications in each appeal. Among other things, those submissions elucidated how Mighty River contended the proposed additional evidence bore on the proper exercise of the court's discretion under s 445D, s 445G(2) or s 445G(3). It is convenient to begin with those first two applications in each appeal.
Mighty River seeks to adduce the additional evidence for two purposes.
First, if Mighty River succeeds in its primary contention as to the proper construction of pt 5.3A, Mighty River relies on the evidence as relevant to the exercise of the court's discretion under s 445G(2) or (3), or under s 445D. I would not admit the evidence on this basis since, as I have explained, in my view Mighty River fails on the question of statutory construction and so no question of discretion is reached.
Secondly, Mighty River submits that the circumstances revealed by the proposed additional evidence provide a new vitality to the claim it made in the primary proceedings under s 445D. Mighty River submits that:
(1)one of its grounds of appeal (namely ground 5(a) in CACV 30 of 2017) against the master's orders was lack of reasons;
(2)that ground was not abandoned;
(3)the ground should succeed, with the consequence that this court should re‑exercise the discretion under s 445D;
(4)on a re‑exercise of the discretion, the court takes into account the facts and circumstances at the time of the re‑exercise; it is not limited to the circumstances at the time of the primary decision;
(5)the additional evidence should be received on this basis;
(6)in this respect, the court has no discretion but has a 'duty' to receive the evidence.[156]
[156] Appeal ts 219 ‑ 221, 234 ‑ 236; appellant's submissions dated 26 May 2017 [20] ‑ [33]; appellant's submissions dated 12 June 2017 [4] ‑ [13].
I do not accept that the proposed additional evidence should be received on this basis. In my opinion, for the reasons that follow, to admit the proposed evidence would be to permit Mighty River to run a substantially different case in relation to s 445D from the case it ran before the master, and would permit Mighty River to go substantially beyond its grounds of appeal.
Before the master, Mighty River ran its case on the basis that its claim under s 445D was based upon its contentions that the DOCA did not comply with the requirements of pt 5.3A, and was founded upon its contentions as to the proper construction of that part.[157] Mighty River's written submissions to this court said that, in the court below, the same arguments based on the construction of pt 5.3A were relied on in support of the s 445D claim.[158] Nothing in Mighty River's oral submissions on 19 April 2017 and 20 April 2017 suggested otherwise.
[157] Points of claim [63] - [65], Blue AB 62 - 63; see also Mighty River's oral opening submissions ts 109 ‑ 110.
[158] Appellant's submissions in CACV 30 of 2017 [99].
The case under s 445D which Mighty River now seeks to make, even if it fails in its construction of pt 5.3A, asserts that:
(1)the Sunset Date Report contravenes the provisions of the DOCA, so that in preparing the Sunset Date Report, the administrators materially contravened the provisions of the DOCA[159];
(2)it should be found that the contraventions of the DOCA by the Administrators were knowing and deliberate;[160]
(3)as a result of the events since the hearing of the appeal:
(a)there has been a material contravention of the deed by the deed administrators: s 445D(d);
(b)effect cannot be given to the deed without injustice or undue delay: s 445D(e);
(c)'the deed … or an act or omission under the deed … is unfairly prejudicial to or unfairly discriminatory against the appellant': s 445D(f); and
(d)the deed ought to be terminated for some other reasons: s 445D(g).[161]
[159] Appellant's submissions dated 26 May 2017 [8] ‑ [10].
[160] Appellant's submissions 26 May 2017 [16(f)] [32]; appellant's submissions 12 June 2017 [27] and [31].
[161] Appellant's submissions 26 May 2017 [26].
Before the master, Mighty River did not refer to s 445D(d) in its points of claim or otherwise. As I have said, before the master, Mighty River's claim in relation to s 445D was founded on its construction of pt 5.3A.
Mighty River has not applied to amend its points of claim.
Mighty River asserts, in effect, that there is no need for it to amend its points of claim. It submits that once ground 5(a) succeeds, in that it is shown that the master erred in failing to give adequate reasons, the court must exercise its discretion under s 445D based upon the facts current at the time of the re‑exercise of the discretion. Mighty River refers in that regard to what is said in Allesch v Maunz.[162]
[162] Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172 [29] ‑ [31].
I accept that, in an appeal against an exercise of discretion, if the appeal succeeds and the appellate court decides to re‑exercise the discretion, rather than remit the matter, then generally speaking at least, the appellate court would do so by reference to circumstances as they then exist.[163] However, that does not mean that, on appeal, a party's case is at large. To the contrary, in considering whether to permit additional evidence to be adduced on appeal, finality in litigation is a powerful consideration. Except in the most exceptional circumstances, a party is bound by the conduct of his or her case at trial.[164] The present proceedings were conducted by reference to points of claim and defence. The points of claim identified the matters upon which Mighty River relied in support of its claim for relief under s 445D. The case to be considered and determined on appeal is the case pleaded and determined below, subject to any successful application to amend.
[163] Allesch v Maunz [29] - [31].
[164] Devereaux-Warnes v Hall [2006] WASCA 268 [2], [26]; Saunders v Public Trustee [2015] WASCA 203; (2015) 13 ASTLR 226 [87].
For these reasons, I would not admit the proposed additional evidence the subject of Mighty River's first two applications in each appeal.
This conclusion is confirmed by, but is not dependent upon, the fact that on 10 May 2017 Mighty River commenced new proceedings in the General Division of this court (COR 96 of 2017), as amended on 28 June 2017, ventilating, among other things, the complaints in relation to the Sunset Date Report and the conduct of and results of the creditors' meeting on 11 May 2017. The relief sought includes an order that the DOCA be terminated pursuant to s 445D(1)(d), (e), (f) and (g) and a declaration that Mesa be wound up pursuant to s 446AA. To my mind, for the reasons already given, those complaints are new and are properly the subject of new proceedings.
Mighty River's third applications were made on 8 August 2017. At the hearing of those applications on 10 August 2017 the applications were dismissed, with reasons to be published later. These are my reasons. The additional material the subject of these applications is said to establish a further material contravention of the DOCA by the Administrators. My reasons for dismissing the applications substantially correspond with the reasons set out above relating to the first two applications. Insofar as the additional material is said to bear on discretion, no question of discretion is reached. Insofar as the additional evidence is said to support a claim under s 445D that is independent of the contention that the DOCA does not comply with pt 5.3A, for the reasons already given, in my opinion, to admit the evidence on this basis would be to permit Mighty River to run a substantially different case on s 445D from the case it ran before the master.
Other matters
As I have said, Mighty River accepts that if it fails to show that the DOCA does not comply with pt 5.3A, its appeal in CACV 31 of 2017 fails.[165] I take that to mean that ground 2 of that appeal is not pursued. To the extent that were not so, I would dismiss the ground. There is no error in indicating in reasons a view as to whether relief is necessary, then, after hearing from the parties, determining that it was appropriate to grant the declaration. In any event, success on ground 2 would not sustain Mighty River's appeal; whether the appeal succeeds hinges on whether the deed of company arrangement fails to comply with pt 5.3A.
[165] Appeal ts 93.
It is not necessary to deal with the Administrators' notice of contention.
Conclusion
For the reasons I have given, I do not accept any of the three planks of Mighty River's appeals. Consequently, the appeals must be dismissed. I would also dismiss the Administrators' notice of contention.
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