MXJ v Company X (admin apptd)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2023 00130

IN THE MATTER OF COMPANY X (ADMINISTRATORS APPOINTED)
MXJ	Plaintiff
v
COMPANY X (ADMINISTRATORS APPOINTED)	First Defendant
MATTHEW GOLLANT (IN HIS CAPACITY AS ADMINISTRATOR OF COMPANY X)	Second Defendant

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JUDGE:	WALKER JA
WHERE HELD:	Melbourne
DATE OF HEARING:	18 January 2023
DATE OF JUDGMENT:	13 February 2023
DATE OF REVISION:	3 March 2023 (for the inclusion of pseudonyms only)
CASE MAY BE CITED AS:	MXJ v Company X (admin apptd)
MEDIUM NEUTRAL CITATION:	[2023] VSC 42

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CORPORATIONS – External administration – Application for further extension of convening period for second meeting of creditors – Second meeting convened within time but adjourned – Where extension of time would enable finalisation of deed of company arrangement (‘DOCA’) – Where DOCA likely to result in greater return for creditors than liquidation – Where administrator consents to proposed further adjournment – Whether power to extend period of adjournment beyond that prescribed by Insolvency Practice Rules (Corporations) 2016 (Cth) s 75-140 engaged where meeting adjourned but not closed – Power sufficiently broad – Application granted.

Corporations Act 2001 (Cth) pt 5.3A, ss 436A, 447A; Insolvency Practice Rules (Corporations) 2016 (Cth) s 75-140.

Dixon, Re Pearson Contracting Pty Ltd [2020] FCA 1505; Georges, Re Vical NSW Pty Ltd (admin apptd) [2018] FCA 1974, followed.
Re Riviera Group Pty Ltd (admin apptd) (recs & mgrs apptd) (2009) 72 ACSR 352; Algeri, Re Colorado Group Limited (admin apptd) (recs & mgrs apptd) [2011] VSC 260, applied.
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, discussed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Tatti (solicitor)	Aitken Partners
For the First and Second Defendant	Ms K Lechner (solicitor)	Sinisgalli Foster Legal
For the Creditor	Mr R Watson-Jones (solicitor)	Snowton Saje Lawyers

HER HONOUR:

Introduction

Company X[1] is a company that previously engaged in the business of installing insulation. It is no longer trading. On 13 October 2022, Mr Matthew Gollant of CJG Advisory (the ‘administrator’) was appointed administrator of Company X pursuant to s 436A of the Corporations Act 2001 (Cth) (the ‘Act’). A first meeting of creditors was held on 25 October 2022. The administrator issued a report to creditors on 9 November 2022 (the ‘first report’). That report stated that the administrator’s opinion was that it was in the best interests of creditors for the second meeting to be adjourned to allow time for a potential deed of company arrangement (‘DOCA’) proposal to be prepared for consideration by creditors.
[1]Pseudonyms have been used in this judgment, including in quotations from affidavit material, to ensure that the parties to a proceeding under the Family Law Act 1975 (Cth) are not able to be identified.

A second meeting of creditors was convened on 17 November 2022 in accordance with s 439A of the Act. At that meeting the administrator adjourned the meeting to 19 January 2023.[2] While the precise date is not clear from the evidence before me, prior to 12 January 2023 MXJ, the director of Company X, provided a draft DOCA to the administrator. On 12 January 2023 the administrator issued a further report to creditors (the ‘second report’). That report stated that the administrator’s investigations to date indicated that a DOCA was likely to provide a superior return to creditors. The second report also stated that administrator’s opinion was that it was in the best interests of creditors for the second meeting to be further adjourned to allow time for consideration by creditors. The second report also stated that if the second meeting was not adjourned, it would be in the creditors’ interest to resolve to place Company X into liquidation. The second report recognised that no adjournment would be possible unless a court made orders permitting that to occur.
[2]Rule 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (the ‘Rules’) provides that a meeting convened under s 439A of the Act must not be adjourned to a day that is more than 45 business days after the first day on which the original meeting was held. 19 January 2023 was within that time.

The plaintiff, MXJ, is the sole director of Company X. She is also a creditor of Company X. By application filed on 16 January 2023, MXJ applied for orders to permit the adjourned second meeting of creditors to be held no later than 30 June 2023. The orders sought are as follows:

1.Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (‘Act’), Part 5.3A of the Act is to operate in relation to the administration of Company X (administrators appointed) (‘Company’) as if:
(a)section 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (‘Insolvency Practice Rules’) omitted the words ‘that is more than 45 business days after the first day on which the original meeting was held’ and included instead of the omitted words the words ‘later than 30 June 2023’;
(b)that Part allowed adjournment of the meeting convened under s 439A of the Act in relation to the Company to a day not later than 30 June 2023, despite the operation of s 75-140(3) of the Insolvency Practice Rules; and
(c)the requirement to hold a meeting of creditors of the Company within the convening period specified in s 439A(2) of the Act is satisfied by holding the adjourned meeting no later than 30 June 2023;

provided that the requirements of section 75-140 of the Insolvency Practice Rules are otherwise complied with in respect of such meeting.
2.Further or alternatively, pursuant to section 439A(6) of the Act, in respect of the Company, the Court extend the time allowed for the convening period no later than 30 June 2023.
3.Liberty be granted to any person who may be adversely impacted by paragraph 1 on no less than 5 business days’ notice to the Plaintiff and Defendants.
4.The Plaintiff is to serve a copy of any orders made on all known creditors of the Company as soon as practicable.
5. There be no order as to costs.
6.Such further and other orders that may be just and necessary.

As can be seen, MXJ relied on the Court’s power under s 447A(1) of the Act or, alternatively, under s 439A(6) of the Act.

The application was supported by an affidavit sworn by MXJ on 16 January 2023 and by written submissions from MXJ’s solicitors. The affidavit and the submissions set out the reasons why MXJ contends that the second meeting ought to be further postponed. In particular, those reasons include that the extension of time will enable MXJ to propose a DOCA and that the administrator is of the view that a DOCA is likely to result in a greater return for creditors than the company being immediately liquidated.

The administrator has consented to the orders permitting the further adjournment of the second meeting.

The placing of Company X into administration occurred against the backdrop of the breakdown of MXJ’s relationship with her husband, RZJ, which resulted in a proceeding in the Federal Circuit and Family Court (the ‘FCFC proceeding’). RZJ is also a creditor of Company X. He appeared by his solicitor at the hearing to oppose the orders sought by MXJ. He submitted that the orders ought not be made, principally because of the lack of evidence from the administrator in support of the application, and what he alleged were deficiencies in the administration of Company X, including concerns about the content of the draft DOCA that MXJ had put forward. He contended that this Court ‘cannot be satisfied that the DOCA proposal will provide a superior return to creditors than if [Company X] was wound up’.

I have concluded that, in the present circumstances, it is appropriate to make orders permitting the further adjournment of the second creditors’ meeting. Because the administrator has already convened the second meeting under s 439A of the Act within the time required by s 439A(1), and held that meeting within the time required by s 439A(2), but has adjourned rather than closed that meeting, there is real doubt as to whether the power under s 439A(6) is engaged. However, in light of the authorities referred to by MXJ in her submissions, I consider that the power conferred by s 447A(1) of the Act is sufficiently broad to permit me to make the orders sought, which will permit the second meeting of creditors to be adjourned for a period longer than that permitted by s 75-140(3) of the Rules.

Factual background
MXJ’s affidavit

The evidence before me was contained in the affidavit of MXJ dated 16 January 2023. In addition to the facts set out above, MXJ relevantly deposed as follows:

B. Basis for Extension of the Adjournment of the Second Meeting of Creditors
13.As part of the Administration process, I was required to put forward a Deed of Company Arrangement Proposal (‘DOCA’) prior to the Second Creditors Meeting on 18 January 2023. I confirm I intend to put such a proposal forward and have provided the Administrator with a draft proposal.

…
15.One of the issues which is currently preventing me from finalising the DOCA proposal, and which will impact the Administrator’s ability to make a recommendation to creditors, is the uncertainty surrounding the tax owed by Company X Pty Ltd.
16.Specifically, at page 16 of the Creditors Report dated 9 November 2022, the Administrator notes as follows:
‘The Director disclosed in the ROCAP that the unsecured creditors of the Company were owed the amount of $339,345 with the major creditor being ING who are owed $300,000 for the Company’s guarantee of a related party debt.
To date the ATO has not submitted a claim, however I understand that there are outstanding tax lodgements.’
17.The uncertainty in relation to the tax owed is both in relation to returns which have not been lodged and also the real possibility that a number of lodged returns will need to be amended.
18.Tax returns have not been lodged for Company X for the following financial years:
(a)       Financial year end 30 June 2020;
(b)       Financial year end 30 June 2021; and
(c)       Financial year end 30 June 2022.

19. In addition, I note the following excerpts from the Creditor’s Report:
(a)At page 13, ‘Company X Pty Ltd’s liabilities have been incorrectly stated with related party loan accounts listed as a ‘negative asset’’; and
(b)At page 13, ‘Company X Pty Ltd’s balance sheet does not appear to have been updated correctly and does not appear to accurately represent Company X Pty Ltd’s financial position.’

20.Given the matters in paragraph 19(a) above, in order to comply with my taxation obligations, I am required to not only engage a tax professional to deal with my personal lodgements, but also amend the Company’s lodgements. The Administrator has agreed with my proposal to engage one tax professional to deal with both personal and Company tax obligations in order to regularise this issue.
21.Paragraph 3 of the Interim Orders made on 22 August 2022 in the Federal Circuit and Family Court of Australia (a proceeding to which I depose further to below) provided for me to:
‘Forthwith confirm the appointment of Russell Ridd to prepare the outstanding financial statements and income tax returns for Company X Pty Ltd and that I am to cooperate fully and provide Mr Ridd with all information, documents and access to any records he requires to complete that task’.

22.Despite my best efforts, I have been unable to progress the preparation of the outstanding financial statements and income tax returns for Company X. I have continuously reached out to Russell Ridd (‘Mr Ridd’) in an effort to progress matters but have, unfortunately, not received a response from Mr Ridd to date.
…
24.Noting the above issues, an accountant is required to be appointed to prepare and complete the outstanding financials. As such, my solicitors, Aitken Partners, wrote to RZJ’s lawyers, RNG Lawyers, on 6 December 2022 and 7 December 2022 proposing Mr Terry Stramotas of DKF Benjamin King Money (‘Mr Stramotas’) be appointed to review, amend, and lodge returns for Company X. At the date of filing this Affidavit, RZJ has not agreed to my proposal.
25.On 7 December 2022 my solicitors, Aitken Partners, wrote to the Administrator seeking his consent to Mr Stramotas being appointed to review, amend, and lodge returns for Company X. In addition, in circumstances where it is unlikely Mr Stramotas will be unlikely to complete the financials prior to the Second Creditors Meeting, Aitken Partners asked that the Administrator whether he would be agreeable to adjourning the meeting so to provide me with time to review the financials in order to put forward a DOCA proposal. …
26.The Administrator responded to Aitken Partners on 8 December 2022 agreeing to my proposal and stating as follows:
‘On the basis that your client intends to propose a DOCA that is superior to a Liquidation scenario I consent to the following:
My agreement to the appointment of accountants to prepare and amend any required income tax returns for the Company;
My consent for the Company to be joined to the Family Court proceedings solely for the purposes of obtaining an extension of the adjournment of the second meeting of creditors for the Company pursuant to IPR 75-140(3) for a period not exceeding 6 months. This consent is also on the basis that your client will indemnify the Company for all costs as a result of being joined.
This letter may be shown to the Court in support of the proposed application”.
27.On 10 January 2023, Mr Daniel Sizer of CJG Advisory (‘Mr Sizer’) emailed Aitken Partners advising the Administrator required me to put forward a draft DOCA proposal prior to consenting to an extension of the convening period.
28.Aitken Partners responded to CJG Advisory on 11 January 2023 stating as follows:
… our client instructs that she would be prepared to propose a DOCA in the terms of the enclosed proposal. As you will see, the Deed Fund would consist of not less than $75,000 which in our view would be superior to a liquidation scenario based on present information. However, our client has not yet settled on the precise figure she would propose given as you are aware, there are outstanding taxation issues which will need to be resolve in order to determine the true quantum of creditors.
For the avoidance of doubt, we note that the proposal is conditional on the Supreme Court granting the proposed application.

MXJ exhibited to her affidavit the two reports provided by the administrator, as well as the correspondence between her solicitors and the administrator referred to in her affidavit, and I have had regard to those documents, which provide independent verification of many of the matters to which MXJ deposed.

MXJ’s affidavit also set out the current creditors of Company X:

(a)       Australian Taxation Office in the sum of $6,500;
(b)       Business Solutions International in the sum of $7,700;
(c)       Enviroflex Insulations in the sum of $820.27;
(d)      Insulation Essentials in the sum of $16,103.19;
(e)ING in the sum of $302,000. I verily believe that ING has not communicated with the Administrator. This is likely because the Company guaranteed a personal loan for myself and my former husband, which was a loan against real property (a factory). That loan is secured by way of mortgage against that property which is registered in our personal names. Accordingly, ING are fully secured;

(f)       MXJ & RZJ Loan Account in the sum of $30,776.07;
(g)       RZJ in the sum of $16,125;
(h)      Lumo in the sum of $146.50;
(i)        Polyester Solutions in the sum of $3,001.79;
(j)        Stephen Woolcock in the sum of $945; and
(k)       MXJ in the sum of $4,066.

She deposed that she is a creditor of Company X because she paid the following amounts to the Company as a loan, as follows:

(a) $2,000 on 8 July 2022;

(b) $71.40 on 3 August 2022; and

(c) $1,994.60 on 14 September 2022.

In relation to the family law proceedings referred to in paragraph 8 of her affidavit, MXJ deposed as follows:

36.RZJ issued family law proceedings in the Federal Circuit and Family Court of Australia on 17 August 2021. The family law proceedings are ongoing.
37.Aitken Partners filed an Application in a Proceeding on my behalf in the Federal Circuit and Family Court of Australia on 15 December 2022 seeking, among other things, the following interim orders:
(a)That all times be abridged for the Hearing of this urgent Application.
(b)That pursuant to Rule 3.03 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Company X (administrators appointed) (Company X) be joined to proceedings.
(c)The parties forthwith do all such acts and things and sign all documents necessary to appoint Mr Terry Stramotas of DFK Benjamin King Money as the Accountant for Company X, [another company], any and all other related entities, and personally to prepare outstanding taxation returns, other financials and amend any necessary taxation document.
(d)The costs associated with paragraph 3(c) be borne from Controlled Monies Account held by RNG Lawyers.
(e)Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (Act), Part 5.3A of the Act is to operate in relation to the administration of Company X as if:
i.section 75-140(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (Insolvency Practice Rules) omitted the words ‘that is more than 45 business days after the first day on which the original meeting was held’ and included instead of the omitted words the words ‘later than 30 June 2023’;
ii.that Part allowed adjournment of the meeting convened under s 439A of the Act in relation to the Company to a day not later than 30 June 2023, despite the operation of s 75-140(3) of the Insolvency Practice Rules; and
iii.the requirement to hold a meeting of creditors of the Company within the convening period specified in s 439A(2) of the Act is satisfied by holding the adjourned meeting no later than 30 June 2023 provided that the requirements of section 75-140 of the Insolvency Practice Rules are otherwise complied with in respect of such meeting.

(f)The costs incurred by Company X above be costs in the administration.

38.The Application in a Proceeding was listed for a Mention Hearing on 15 December 2022 before Judicial Registrar Taylor. Mr Dylan Chaplin-Burch, Principal, of Aitken Partners appeared on my behalf at the Mention Hearing.
39.At the Mention Hearing, Judicial Registrar Taylor advised the Federal Circuit and Family Court of Australia was unable to accommodate an urgent Hearing and instead listed the matter for a procedural hearing on 6 February 2023, by which date the Second Creditor’s Meeting would already have occurred. This is now the basis for my urgent Application to the Supreme Court of Victoria.
40.In the event that this Honourable Court grants my application, I propose to press for the orders in paragraph 34(c) [sic] above for the appointment of an accountant in order to deal with the lodgements deposed to above.

Relevant aspects of the administrator’s two reports

As noted above, exhibited to MXJ’s affidavit were the two administrator’s reports. The first report contains the following relevant passages:

Administrator’s Recommendation
In my opinion it is in the best interests of creditors for there to be an adjournment at the forthcoming meeting to allow time for a potential DOCA proposal to be prepared for consideration by creditors.

…
Note 8: Priority Creditors
The Director disclosed that RZJ may be owed an unknown amount of employee entitlements.
To date, RZJ has submitted a claim of $17,335 for his employee entitlements. I am currently investigating the validity of this claim, however I note that they may be offset by amounts owed to the Company.
I am not aware of there being any further undisclosed employee entitlements.
Note 9: Unsecured Creditors
The Director disclosed in the ROCAP that the unsecured creditors of the Company were owed the amount of $229,345 with the major creditor being ING who are owed $300,000 for the Company’s guarantee of a related party debt.
To date the ATO has not submitted a claim, however I understand that there are outstanding tax lodgements.
…
G.       DOCA PROPOSAL
To date no DOCA proposal has been received from the director or another party. As detailed above, I understand there is a mediation of the family law case between the director and RZJ on 18 November 2022.
It has been indicated that a potential DOCA proposal may be provided after this mediation depending upon the outcome.
For this reason, it is my intention to adjourn the second meeting of creditors on 17 November 2022 to enable a potential DOCA proposal to eventuate.
…
K.2     Company be wound up
Creditors may resolve that the Company be wound up and that I be appointed Liquidator. In these circumstances the Act deems that the Company entered into creditors voluntary liquidation on the date of my appointment as Administrator of the Company, 15 September 2022.
In my opinion it is in the best interests of creditors for there to be an adjournment to allow time for a potential DOCA proposal to be put forward by the Director or another party.
It is my intention to adjourn the meeting of creditors on 17 November 2022 pursuant to my powers under Section 75-140(1) of the Insolvency Practice Rules (Corporations) 2016.
K.3     Company execute the DOCA
As discussed above … no DOCA proposal has been received to date.
In my opinion creditors will be best served by an adjournment to allow time for a potential DOCA proposal to be put forward by the Director or another party.
It is my intention to adjourn the meeting of creditors on 17 November 2022 pursuant to my powers under Section 75-140(1) of the Insolvency Practice Rules (Corporations) 2016.
K.4     Adjournment
IPR section 75-140 provides that creditors may resolve, or I may decide, to adjourn the Second Meeting to a date that is not more than 45 business days after the date of the original meeting Second Meeting.
In my opinion it is in the best interests of creditors for there to be an adjournment to allow time for a potential DOCA proposal to be put forward by the Director or another party.
It is my intention to adjourn the meeting of creditors on 17 November 2022 pursuant to my powers under Section 75-140(1) of the Insolvency Practice Rules (Corporations) 2016.[3]

[3]Emphasis in original.

The second report contains the following relevant passages:

A.3     Update
I have received from the director a draft Deed of Company Arrangement (DOCA) proposal in the amount of not less than $75,000.
The director has advised that the amount she is prepared to offer will be dependent upon the outstanding taxation issues which are required to be resolved by an appointment of an independent accountant. The director has advised that she will be making an application for the extension of the convening period for the second meeting of creditors for this to occur. I am consenting to this application being made.
The director has estimated an ATO debt once the outstanding and amended tax returns are lodged for the Company will be approximately $100,000.
My investigations to date indicate that a DOCA will likely provide a superior return to creditors and more certainty. As a result, I am currently in the process of making an application to the Supreme Court seeking an extension of the convening period.
A.4     Second Meeting of Creditors
At the reconvened second meeting of creditors, to be held on 19 January 2023, I intend to adjourn the meeting if the Court has ordered that the convening period has been extended.
However, in the event that the Court does not order that that convening period has been extended, creditors will be asked to make a decision by passing a resolution in respect of the options available to them.
…
A.9      Administrator’s Recommendation
Should the Court grant the extension of the convening period, in my opinion it is in the best interests of creditors for there to be an adjournment at the forthcoming meeting to allow time for the potential DOCA proposal to be prepared for consideration by creditors. I intend to use my powers under IPR Section 75-140 to adjourn the meeting should the Court grant an extension of the convening period.
Should the Court not grant the extension to the convening period, in my opinion it will be in creditors’ interest to resolve to place the Company into liquidation as there is no DOCA proposal that is able to be executed.
…
D.1     Potential DOCA Proposal
I have received from the director a draft Deed of Company Arrangement (DOCA) proposal in the amount of not less than $75,000.
The director has advised that the amount she is prepared to offer will be dependent upon the outstanding taxation issues which are required to be resolved by an appointment of an independent accountant. The director has advised that she wishes for the Administrator to seek a deferring of the convening period for the second meeting of creditors for this to occur.
My investigations to date indicate that a DOCA of $75,000 or more will likely provide a superior return to creditors and more certainty. As a result, I am currently in the process of making an application to the Supreme Court seeking an extension of the convening period.
E.        ANTICIPATED RETURN TO CREDITORS
This Section provides creditors with updated information on the estimated financial outcomes to creditors.
I caution that the DOCA comparison is an estimated outcome on the potential DOCA proposal received from the director.

F.2 The Company Be Wound Up
…
Should the Court grant the extension of the convening period, in my opinion it is in the best interests of creditors for there to be an adjournment at the forthcoming meeting to allow time for the potential DOCA proposal to be prepared for consideration by creditors. I intend to use my powers under IPR Section 75-140 to adjourn the meeting should the Court grant an extension of the convening period.
Should the Court not grant the extension to the convening period, in my opinion it will be in the creditors’ interest to resolve to place the Company into liquidation as there is no DOCA proposal that is able to be executed.
F.3 The Company to Execute a DOCA
A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with. It aims to provide a better return to creditors than an immediate winding up. A DOCA binds all unsecured creditors, even if they vote against the proposal.
At present, no formal DOCA offer has been received from any party that is able to be voted on by creditors.
Accordingly, creditors are at present unable to vote to accept a DOCA proposal.[4]
[4]Emphasis in original.

The draft DOCA

The draft DOCA provided by MXJ to the administrator, which was exhibited to her affidavit, contained the following relevant clauses:

2.That the purpose of the DOCA is that the Company can emerge from Voluntary Administration having ensured all employee entitlements are met in full and a return to all other unsecured creditors that is materially greater than that which might be achieved following a winding up of the Company.

…
5.The Deed Proponent will resume responsibility for the management of the Company upon the DOCA coming into effect.

…
Lodgements and Taxation Obligations
14.The Deed Proponent will use her best endeavours to appoint a suitability qualified professional to review all lodgements made by the Company with the Australian Taxation Office, where necessary cause amended lodgements to be filed, and otherwise cause the Company’s taxation lodgements to be brought up to date not less than 30 days prior to the second meeting of creditors being held.

DOCA Funds
15.The Deed Proponent will pay or cause to be paid (in accordance with paragraph 16) to the Administrator a Deed Contribution in an amount to be proposed prior to the second meeting of creditors, and after the lodgements referred to in paragraph 12 are completed, which will be in the sum of not less than $75,000 (DOCA Fund).

16. The DOCA Fund shall be paid as follows:
(a)all trade receivables and other debts payable to the Company as at the date of the appointment of the Administrator, and up to the date on which the DOCA is executed, will be collected to (or otherwise paid by the Company to) the Deed Administrator; and
(b)the balance, if any, shall be paid by the Deed Proponent within 14 days of her receiving payment in respect of her family proceeding (and the DOCA shall contain terms ensuring that the Deed Administrator is kept apprised of when those funds are likely to be paid, so long as such information does not breach section 121 of the Family Law Act1975).

A letter from RZJ’s solicitors to the administrator

RZJ did not file any affidavit material, but he put before the Court a letter from his solicitors, Snowton Saje, to the administrator dated 7 January 2023 (the ‘Snowton Saje letter’). Given the urgency with which the matter had been brought on, MXJ and the administrator did not object to me receiving that letter, even though it was not put before the Court by way of affidavit. However, they did not accept that the contents of the letter were accurate or relevant, and MXJ submitted, in effect, that I should give it little weight.

The Snowton Saje letter was written prior to the provision of the draft DOCA to the administrator. It was not sent or copied, or otherwise provided, to MXJ. The letter was in response to an application made in the FCFC proceeding for orders joining Company X to that proceeding (the ‘FCFC application’) and extending the time for the convening of the second meeting. It stated that RZJ opposed that application. It further contended that:

(a) the material filed by MXJ in support of the FCFC application was ‘demonstrably deficient’ and incapable of supporting an order for further adjournment of the second meeting; and

(b) it was therefore incumbent on the administrator to address the statutory criteria and principles in the material the administrator was required to file in the FCFC by 31 January 2023.

The Snowton Saje letter stated that the administrator had ‘asserted that a DOCA would facilitate a greater return for creditors than if [Company X] was wound up’. However, the letter went on, there was no proposed DOCA, thus the administrator was not in a position to evaluate the benefits of a DOCA compared to the likely return to creditors in a liquidation scenario. I was not taken in the course of the hearing to any material where the administrator had made the assertion attributed to him.

The Snowton Saje letter went on to refer to, and raise concerns about, an affidavit filed by MXJ in the FCFC proceeding. That affidavit is not before me, and no submissions were addressed to me in relation to those aspects of the Snowton Saje letter.

The Snowton Saje letter stated that the writer has instructions to seek the removal of the administrator, disallowance of the administrator’s remuneration, and appointment of an alternative liquidator. In those circumstances the letter contended that the administrator’s joinder to the FCFC proceeding would be appropriate and necessary. The letter also foreshadowed an application for orders under ss 447A and/or 447B of the Act ‘to overcome abuses by MXJ of her voting power’. There was no evidence before me that any applications of the kind foreshadowed had been made, nor was there evidence concerning the matters that might underpin such applications.

The Snowton Saje letter then observed that a judicial registrar would not have jurisdiction to determine MXJ’s application for joinder or to make the orders permitting the further adjournment of the second meeting, thus it was unlikely that the FCFC application could be heard or determined on the day of the forthcoming hearing in that court.

Relevant legislation

An administrator appointed under pt 5.3A of the Act must convene a meeting of the company’s creditors in order to determine whether to appoint a committee of inspection and, if so, who its members are to be.[5] That meeting must be held within eight business days after the administration begins.[6] The administrator convened that first meeting of creditors of Company X within the prescribed time.
[5]Section 436E(1).
[6]Section 436E(2).

Division 3 of pt 5.3A provides that the administrator of a company under administration is to assume control of the company’s affairs. In particular, by s 437A(1), the administrator is given ‘control of the company’s business, property and affairs’ and is given power to carry on, terminate or dispose of all or part of the business and dispose of any of its property. Division 4 provides that an administrator is to investigate the company’s affairs. Specifically, s 438A requires the administrator ‘[a]s soon as practicable after the administration of a company begins … [to] investigate the company’s business, property, affairs and financial circumstances’ and to form an opinion about whether it would be in the interests of the company’s creditors for the company to execute a DOCA; for the administration to end; or for the company to be wound up.

Section 439A of the Act deals with the convening and holding of the second meeting. That section relevantly provides as follows:

(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).
(2)The meeting must be held within 5 business days before, or within 5 business days after, the end of the convening period.

(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.

Relevantly for present purposes, I note that s 439A(6) makes express provision for extending the convening period; and ss 439A(7) and (8) impose particular rules in relation to an application for an extension of time that is made after the period referred to in s 436A(5)(a) or (b), as the case may be.

Section 439C provides that, at a meeting convened under s 439A, the creditors may resolve that the company execute a DOCA, that the administration should end, or that the company be wound up.

As noted above, the second meeting was held on 17 November 2022, in compliance with s 439A(1) of the Act, and was then adjourned under s 75-140(1)(b) of the Rules. Section 75-140 of the Rules provides as follows:

(1)       A meeting may be adjourned from time to time and from place to place:
(a)       by resolution; or
(b)       by the person presiding at the meeting.
(2)The meeting must not be adjourned to a day that is more than 15 business days after the first day on which the original meeting was held.
(3)Despite subsection (2), a meeting convened under section 439A of the Act must not be adjourned to a day that is more than 45 business days after the first day on which the original meeting was held.
(4)Unless otherwise provided by the resolution by which it is adjourned:
(a)if any of the persons entitled to attend the adjourned meeting is entitled to physically attend the adjourned meeting—the meeting is adjourned to the same location or locations as were specified for the original meeting; and
(b)if the original meeting was held using virtual meeting technology—participation in the resumed meeting by means of the technology must be provided in the same manner as set out in the notice for the original meeting.

(5)The convenor of the meeting or a person nominated by the convenor must, by the end of the next business day, give notice of the adjournment to the persons to whom notice of the meeting must be given under section 75‑10.
(6)If a meeting is adjourned to a day more than 6 business days after the passing of the resolution by which it is adjourned, the company must cause notice of the day, time and place of the resumption of the meeting to be lodged in accordance with subregulation 5.6.75(4) of the regulations at least 5 business days before that day.
(7)A resolution passed at a meeting resumed after an adjournment is passed on the day it was passed.

The consequence of s 75-140(3) is that the adjournment of the second meeting cannot continue beyond 24 January 2023 (being 45 business days after 17 November 2022, the first day on which the second meeting was held).

This Court’s power to make the orders sought

As noted above, MXJ relies on s 447A(1) as the principal source of power to make the orders she seeks. In the alternative, she relies on s 439A(6). Neither the administrator nor RZJ made submissions in relation to the source of the Court’s power to make the orders sought.

In Dixon, Re Pearson Contracting Pty Ltd, O’Bryan J said that it was not clear to him that s 439A(6) has any operation in circumstances such as the present, where the second meeting has already been convened within time, but has been adjourned.[7] I share that doubt.
[7][2020] FCA 1505, [21] (‘Pearson Contracting’).

However, in addition to the specific power to extend the convening period found in s 439A(6), s 447A(1) of the Act provides a more general power for a court to make such order as it thinks appropriate regarding how pt 5.3A will operate in relation to a particular company. The nature and scope of that power was discussed by the High Court in Australasian Memory Pty Ltd v Brien.[8] In that case the High Court held that, notwithstanding the express power to extend the convening period found in s 439A(6), together with special rules governing the application of that power in ss 439A(7) and (8), s 447A permits the making of orders which would alter how s 439A is to apply.[9]
[8](2000) 200 CLR 270; [2000] HCA 30.
[9](2000) 200 CLR 270, 281 [24] (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ); [2000] HCA 30. That is, the scope of the power conferred by s 447 is not limited by the principle articulated in Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1, 7 (Gavan Duffy CJ and Dixon J); [1932] HCA 9 to the effect that, where the legislature has given a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it by implication excluded the operation of other general powers in the same statute which might otherwise have been relied upon. The High Court held that it is not correct to characterise s 447A as a 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. The evident legislative intention of s 447A is to permit alterations to the way in which pt 5.3A is to operate.

In addition, the High Court observed that the orders that had been made in that case were not orders of a kind which could have been made under s 439A(6); they did not have the effect of extending the convening period; rather they altered the requirement imposed by s 439A(2) to hold the meeting after the end of the convening period. Thus no question of the intersecting operation of ss 439A(6) and 447A(1) arose.[10]
[10](2000) 200 CLR 270, 281 [23] (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ); [2000] HCA 30.

Likewise, in the present case the orders sought would not have the effect of extending the convening period; rather, they would have the effect of displacing the prohibition found in s 75-140(3) of the Rules on a meeting convened under s 439A being adjourned to a day that is more than 45 business days after the first day on which the original meeting was held.

In Georges Re Vical NSW Pty Ltd (admin apptd), Yates J concluded that s 447A gives a court power to extend the period of adjournment permitted under s 75-140(3):

Section 447A provides that the Court may make such orders as it thinks appropriate about how pt 5.3A is to operate in relation to a particular company. The extension that is sought is specifically with respect to the period referred to in r 75-140(3) of the Rules which, of course, is not found in pt 5.3A of the Act. Nevertheless, I am satisfied that I have the power to make the orders that are sought.
A similar question arose in Re Porter as joint administrators of Priceright Construction Pty Ltd (admin apptd) (2006) 57 ASCR 206; NSWSC 324. The question in that case was whether s 447A of the Act could be invoked to provide that pt 5.3A of the Act was to operate in respect of a particular company on the basis that reg 5.6.18(2) of the Corporations Regulations 2001 (Cth) did not apply. Barrett J reasoned that such an order could be made in reliance on s 447A because, even though the time limit was one prescribed by the particular regulation, the orders sought were still about how pt 5.3A of the Act was to operate in relation to the company concerned. See also Re Keystone Group Holdings Pty Ltd (Receivers & Managers Appointed) (Administrators Appointed) [2017] NSWSC 454, especially at [14]–[15].
The same reasoning applies in the present case. Although r 75-140(3) mandates that the period of adjournment in respect of a meeting convened under s 439A of the Act must not be more than 45 business days after the first day on which the original meeting was held, an order invoking the facility provided by s 447A of the Act, and which has the effect of modifying the stipulated maximum period, is still an order about how pt 5.3 is to operate, particularly in relation to a meeting that is required to be held under s 439A of the Act.[11]

[11][2018] FCA 1974, [25]–[27] (‘Georges’). See also Holzman, Re Aus Confec Pty Ltd (admin apptd) [2020] FCA 181, [12] (Yates J); Pearson Contracting [2020] FCA 1505, [22]–[23] (O’Bryan J); Porter, Re Priceright Construction Pty Ltd (admin apptd) (2006) 57 ASCR 206; [2006] NSWSC 324; Re Keystone Group Holdings Pty Ltd (recs & mgrs apptd) (admin apptd) [2017] NSWSC 454, [14]–[15] (Gleeson JA).

In Pearson Contracting O’Bryan J held that an order can be made under s 447A(1) stipulating that pt 5.3A of the Act is to operate in relation to a particular company as if:

(a) s 75-140(3) of the Rules provided for a longer period of adjournment of the second meeting;

(b) pt 5.3A allowed adjournment of the second meeting for that longer period; and

(c) the requirement to hold the second meeting within the convening period specified in s 439A(2) of the Act is satisfied by holding the adjourned meeting within the longer period.[12]

[12][2020] FCA 1505, [24].

I consider Yates J’s decision in Georges and O’Bryan J’s decision in Pearson Contracting to be correct.[13]
[13]I further note that, even if I did not hold that view, I would decline to follow them only if I considered that they were ‘plainly wrong’: see, eg, Barodawala v Perinparajah (No 2) [2022] VSC 247, [45]–[48] (Garde J); Re Brashs Pty Ltd (1994) 15 ACSR 477, 483 (Hayne J); [2007] FCA 922; Duckworth v Water Corporation (2012) 261 FLR 185, 191 [31] (Edelman J); [2012] WASC 30. I do not consider them to be plainly wrong, and no party submitted that they are wrong.

For these reasons, I consider that this Court has power to make the orders sought by MXJ pursuant to s 447(1) of the Act. However, I consider that there is doubt about whether the orders sought could be made under s 439A(6) in circumstances where the second meeting has already been convened within time, but has been adjourned.[14]
[14]Pearson Contracting [2020] FCA 1505, [21] (O’Bryan J).

Does MXJ have standing to seek the orders sought?

Section 447A(4) relevantly provides that an application may be made under that section by a creditor of the company, or ‘any other interested person.’

MXJ submits that she has standing to seek the orders sought because she is a creditor of Company X and because she is otherwise an ‘interested person’. Neither the administrator nor RZJ disputed that MXJ has standing, and I accept that she does have standing. She gave uncontradicted evidence that she is a creditor of the company, which means she has standing by reason of s 447A(4)(b). In addition, I consider that as a director of Company X she is an ‘interested person’, noting that the term is one ‘of wide scope’, which ‘should be construed liberally in the context of s 447’.[15]
[15]Re Nillumbik Community Church Inc (admin apptd) [2010] VSC 136, [30] (Davies J), referring to Allatech Pty Ltd v Construction Management GroupPty Ltd (2002) 41 ACSR 587, 591 [18]–[20] (Austin J); [2002] NSWSC 293.

Considerations relevant to the exercise of power conferred by s 447A(1)

Although MXJ’s application was not opposed by the administrator, it was opposed by RZJ. It appears from the terms of the Snowton Saje letter that the parties were broadly in agreement as to the relevant authorities concerning the circumstances in which the discretion conferred by s 447A ought to be exercised. I outline the key authorities below.

In Algeri; Re Colorado Group Limited (admin apptd) (recs & mgrs apptd), Judd J said as follows:

When an application is made for an extension of time to convene a meeting, the court will attempt to strike a balance between the expectation that the administration will be conducted relatively speedily and summarily, and the need to ensure that undue speed will not prejudice sensible and constructive actions directed towards maximising the return for creditors and shareholders. Where the relevant business group is large and complex, or there is a prospect of successful realisation of assets through negotiations with third parties, as in the present case, the administration process is often given more time. There is no place for a predisposition against granting an extension.[16]

[16][2011] VSC 260, [24].

The guiding principle is whether or not the objects of pt 5.3A of the Act will be served by the orders sought. Section 435A of the Act sets out those objects as follows:

The object of this Part, and Schedule 2 to the extent that it relates to 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.

In the oft-cited case of Re Riviera Group Pty Ltd (admin apptd) (recs & mgrs apptd), Austin J observed that extensions of the convening period under s 439A(6) have been granted in cases for a range of reasons, relevantly including the following:

(a) the time needed to execute an orderly process of disposal of assets;

(b) the time needed for thorough assessment of a proposal for a deed of company arrangement; and

(c) that additional time is likely to enhance the return for unsecured creditors.[17]

[17](2009) 72 ACSR 352, 355 [13]; [2009] NSWSC 585.

MXJ submitted, and I accept, that cases concerning extensions of the convening period under s 439A(6) are also relevant to the appropriate exercise of the discretion to make orders of the kind sought by MXJ under s 447A(1).[18]
[18]See Re Acquire Learning & Careers Pty Ltd (admin apptd) [2017] VSC 572, [12] (Gardiner AsJ) (‘Acquire Learning’).

Further extensions of the convening period have also been granted under s 447A(1) to enable the terms of a DOCA to be finalised.[19]
[19]Acquire Learning [2017] VSC 572, [13] (Gardiner AsJ), citing Gothard, Re Sherwin Iron Ltd (admin apptd) (recs & mgrs apptd) (No 2) [2015] FCA 401.

The parties’ submissions in support of the orders sought
MXJ’s submissions

MXJ submitted that it is in the best interests of creditors to permit the second meeting to be further adjourned. She pointed to the following matters in support of that submission:

First, the Administrators have now prepared two detailed reports which set out their investigations to date. In their Second Report, as well as in correspondence and via their lawyer, they consent to the relief which has been sought by the Plaintiff.
Second, the basis on which they consent is a detailed DOCA Proposal which has been provided to them in draft form by the Plaintiff. On the basis of that draft proposal, the Administrators have formed the view that it will ‘…likely provide a superior return to creditors and more certainty.’ Their basis is recorded in the comparison table provided in their Second Report.
Third, there is a good reason for the Plaintiff only providing the same in draft form. Not only do the Administrators not take issue with the same, the basis has been explained in their First Report to Creditors, and by the Plaintiff herself.
In circumstances where it is clear that the Australian Taxation Office is a creditor, but the quantum of the same is not known, it is not practicable for such a proposal to be finalised and is the basis on which the amount she has proposed has been expressed to be ‘not less than’ rather than a fixed amount.
Fourth, the creditor pool is relatively small and apart from a small number of priority creditors (which the Administrator has noted may be offset against other amounts owed to the Company), consists of unsecured creditors.
The major creditor (leaving aside tax) is ING whom have to date, not provided a proof of debt. That is not surprising in circumstances where the Company liability is contingent given it is a guarantee of a personal debt. Given that the unsecured creditor pool consists of smaller amounts, the Plaintiff submits that there is little prejudice in terms of the moratorium period continuing.
Fifth, the Courts have granted extensions of time to enable DOCA proposals to be finalised.
Sixth, the Plaintiff further submits in support that the Court can have regard to the situation where orders are not made and the Company is likely to be placed into liquidation.
Having regard to the Second Report to creditors, a ‘high’ liquidation scenario is (on the present available information) the equivalent to a ‘low’ DOCA return. A DOCA return could be as high as 87 cents in the dollar, compared to a liquidation of 10 cents in the dollar.
Having regard to the First Report issued, the Administrators did not identify any:
(a)       preference claims;
(b)       uncommercial transactions;
(c)       unreasonable director related transactions;
(d)      related entity transactions; or
(e)       unfair loans.
The First Report, which has not been contradicted in the Second Report, also does not suggest that there is likely to be an insolvent trading claim against the Plaintiff. …
Seventh, though minor, it is relevant to note that the Company is not presently trading, and therefore the Administrators are not under any additional burden should the administration continue.
Finally, the way the relief sought has been drafted includes two additional protections. The first is that the Administrator is at liberty to call the meeting at any time prior to 30 June 2023 should he deem it proper to do so. For instance, if the Plaintiff does not secure orders in the family law proceeding, he can bring the meeting on sooner.
The second is the requirement of service on all creditors who may not have had the opportunity to appear on the application and be heard given it has been brought on urgently. The preservation of liberty to apply affords them the opportunity to come before the Court if necessary and be heard.[20]

[20]Emphasis in original. Citations omitted.

MXJ supplemented her written submissions with oral submissions. In particular, MXJ took the Court to the table in the second report where the administrator set out his estimates of the return to creditors upon acceptance of a DOCA compared to upon liquidation.[21] That table included both a low estimate and a high estimate for each. The ‘DOCA low’ estimate was 10 cents in the dollar; the ‘DOCA high’ estimate was 87 cents in the dollar. In contrast, the ‘liquidation high’ estimate was 10 cents in the dollar, whereas the ‘liquidation low’ estimate was zero cents in the dollar. MXJ pointed out that the liquidation high estimate is equivalent to the DOCA low estimate — that is, it is only on the most optimistic liquidation scenario that the return to creditors would be likely to equal the most pessimistic DOCA scenario. MXJ also submitted that because the quantum of the company’s taxation debt is unknown, the DOCA proposal may be amended before it is put to the creditors for consideration.
[21]Set out at [15], above.

MXJ also submitted that the application for orders enabling the second meeting to be adjourned is not about whether the DOCA proposal ‘is good, bad or ugly or will ultimately be accepted by creditors’. She accepted that the proposal might not be accepted, but submitted that the orders sought concern only the opportunity for the creditors to consider a DOCA proposal and decide whether to accept it. She further submitted that the extension period sought would be sufficient to enable the taxation issues to be resolved and a DOCA proposal finalised.

In relation to the fact that there is currently an application on foot in the FCFC proceeding for the orders now sought before this Court, MXJ’s solicitor informed the Court that in the event this Court were minded to make the orders sought, he had instructions to give an undertaking that MXJ would withdraw her application for the orders she seeks in paragraph (e) of her FCFC application,[22] being orders in the same form as sought in this proceeding.
[22]See [13], above.

The administrator’s submissions

The administrator made very brief oral submissions, indicating that he supported MXJ’s application for the orders permitting the further adjournment of the second meeting. In relation to the likely return to creditors under a DOCA and under a liquidation, the administrator submitted that what is likely to eventuate is neither the high or the low estimate, but somewhere in the middle. He submitted that the administrator has supported the proposed adjournment of the second meeting to allow relevant taxation returns to be completed so that the administrator can know the true amounts owning, which will then inform his decision as to whether a DOCA would be appropriate. He submitted that, to the extent that there are issues concerning the form of the draft DOCA, those would be relevant to the recommendations he may ultimately make to creditors, rather than being relevant to the issues before this Court in relation to the proposed orders.

The administrator also submitted that he has not taken the step of appointing an accountant to address Company X’s tax returns because of the limited funding available.

RZJ’s submissions against the making of the orders sought

RZJ filed written submissions and made oral submissions contending that this Court ought not make the orders sought.

First, he contended in his written submissions that there is currently an extant application in the FCFC proceeding seeking the same relief, for which timetabling orders have been made, which remains undisposed, and which has not been stayed or withdrawn. He submitted that adjudication of the application by this Court would ‘constitute a form of interference by this Court in what is essentially a matrimonial dispute’ between RZJ and MXJ at a time when the FCFC is seized of that dispute. He contended that this Court lacked information concerning the progress of that dispute, the orders that have been made in it, the evidence filed in it (some of which colours and contradicts the evidence filed in this Court) and the basis upon which RZJ contends that the appointment of the administrator was an attempt to circumvent orders made in the FCFC proceeding. Thus, he contended, this Court would be at risk of proceeding in an uninformed fashion that would be prejudicial to RZJ.

In oral argument he accepted that, given that the FCFC was unable to accommodate a hearing of the application prior to the date by which the second meeting was required to be held, it was not an abuse of process for MXJ to make the application to this Court. Nor did he contend that this Court lacked jurisdiction to make the orders. However, he maintained his contention that this Court lacked information relevant to whether the orders ought to be maintained. He also submitted that the administrator lacked information about the FCFC proceeding that could be relevant to the administration.

RZJ further submitted that the Court was not properly informed about the matters relevant to the application by MXJ exhibiting to her affidavit ‘a report to creditors prepared more than two months ago’ (ie the first report). He contended that the second report contained no additional detail and did not disclose any further investigations or analysis by the administrator. He pointed out that, by reason of the Snowton Saje letter, the administrator was on notice that RZJ considered the administrator’s evidence to be important to the determination of MXJ’s application. He submitted that this Court ought to draw an adverse inference from the administrator’s unwillingness to make the application himself, or give sworn evidence in support of the application. He did not clearly identify what the adverse inference was. He submitted that this Court should be ‘reluctant to exercise its discretion solely upon the director’s testimony’. I note that he did not seek to cross-examine MXJ.

RZJ also submitted that the draft and contingent nature of the DOCA proposal is not a valid basis upon which the administrator can properly form a view as to whether the proposal provides a better return to creditors than immediate liquidation.

RZJ further submitted that the relevant statutory test is whether the administration of the company (in this case by way of a DOCA) will result in a better return for creditors than immediate liquidation. In this case, he submitted, ‘the Court cannot be satisfied that the DOCA proposal will provide a superior return to creditors than if the company was wound up’. In support of that submission he referred to various deficiencies with the draft DOCA, including the terms of paragraph 16 of the draft DOCA. However, in his oral submissions RZJ accepted that it is not necessary for the Court, on an application of this kind, to be satisfied that there is a DOCA proposal in existence that will result in a better return for the company.

In his oral submissions RZJ developed some of the written submissions outlined above. In addition he submitted that the administrator does not have available to him evidence filed in the FCFC proceeding that is relevant to the administration, because Company X is not a party to the FCFC proceeding. He submitted that if Company X were joined to that proceeding, then the administrator would be in a better position by reason of being able to appraise that material.

RZJ also submitted that if Company X went into liquidation, it would be possible later for an administrator to be appointed: there is no ‘drop dead date by which a DOCA proposal must be put forward and accepted by creditors’. He was further critical of the delay on the part of MXJ in providing a DOCA and of what he contended was a lack of real investigation or analysis by the administrator after the adjournment of the second meeting.

When asked about what prejudice he would suffer by reason of the making of the orders, RZJ raised again his concerns about the conduct of the administration and the DOCA. While he accepted that the consequence of the making of the orders would be only to permit the administrator to hold the second meeting at some time prior to 30 June 2023, and thereby to permit the creditors to vote on the course to be taken, he raised concerns about the possible manner in which MXJ might exercise her voting power at any future creditors’ meeting.

RZJ submitted that ‘the whole of the administration process is an attempt to circumvent orders of the Family Court … and to avoid the consequences … of some of those orders that were made’. In that regard RZJ sought an opportunity to put on affidavit evidence concerning the conduct of the administration, including what were said to be deficiencies in the administrator’s declaration of independence. However, RZJ also accepted that, if orders permitting the adjournment of the second meeting were to have any utility, they needed to be made on 18 January 2023 and thus an adjournment to permit him to put on affidavit evidence was not really practicable.

Finally, RZJ submitted that, if this Court were minded to make the orders sought, the orders ought to be framed so as to permit the Federal Circuit and Family Court to vary the effect of the orders.

MXJ’s submissions in reply to RZJ

In reply to RZJ’s submissions, MXJ submitted that most of RZJ’s submissions were irrelevant to the application before this Court. In particular, he submitted that issues concerning the conduct of the administration and the adequacy or otherwise of the draft DOCA are not relevant to whether orders ought to be made permitting the further adjournment, in order to permit the administrator to consider a revised DOCA and, potentially, to permit the creditors to have an opportunity to determine whether to approve the entry into a DOCA.

Consideration

I have concluded that MXJ’s submissions should be accepted and the orders she seeks should be made. In particular, in light of:

(a) the administrator’s consent to the orders;

(b) his view that a DOCA, if one can be finalised, will likely provide a greater return to creditors than liquidation; and

(c) the evidence that a draft DOCA has been provided to the administrator by MXJ,

I consider that it is appropriate to grant orders permitting the further adjournment of the second creditors’ meeting in order to enable the terms of a DOCA to be finalised and, if it is finalised, for the creditors then to consider it.

In reaching that conclusion, I note that the draft DOCA contains some matters that might raise concerns for a prudent administrator, and for creditors. In particular, cl 16 of the draft DOCA provides for the obligation on the Deed Proponent (ie MXJ) to make a payment into the DOCA Fund to crystallise after she receives a payment in respect of the FCFC proceeding. It thus appears that if she does not receive such a payment, she will not be obliged to make any payment into the DOCA Fund. It is of course possible that the outcome of the FCFC proceeding will be that she will not receive any such payment. Or it is possible that any such payment will not be received for some years, depending on the progress of the FCFC proceeding.

However, I accept MXJ’s submission that the role of this Court is not to evaluate the draft DOCA to determine whether it will provide for a better return to creditors, or to determine whether it is a sensible and prudent proposal. That is so for two reasons:

(a) First, it is a draft proposal, rather than a final proposal, and it is not clear that this is the form of a DOCA proposal that will ultimately be put to the creditors, or recommended by the administrator, at the second meeting. As MXJ submitted, there is a reason why only a draft DOCA has been provided to date, namely the lack of information about the quantum of the debt owed to the Australian Taxation Office. Nor is there any evidence that the administrator has accepted that the terms of the draft DOCA are appropriate.

(b) Secondly, I reject RZJ’s submission that it is necessary for this Court, on an application of this kind, to form the view that a proposed DOCA will provide a better return to creditors than an immediate winding up. It is a matter first for the administrator to determine whether a proposed final DOCA is one that he will recommend to creditors; and even if the DOCA in its present form is ultimately recommended to creditors by the administrator, it will then be a matter for the creditors to determine whether they wish to approve the entry into the DOCA, in accordance with the voting procedures in the Act. To the extent that RZJ has concerns about those voting procedures, it is open to him to seek appropriate relief, as foreshadowed in the Snowton Saje letter; but that is a matter for a different application.

Related to the immediately preceding points, RZJ’s contention that he will suffer prejudice if the orders are made relies upon his complaints about the conduct of the administration and his concern that MXJ will ‘abuse’ her voting power at a creditors’ meeting. However, there is no evidence before this Court in relation to either of those matters. In any event, other remedies are available in relation to such matters, as foreshadowed in the Snowton Saje letter.

I note that there is some uncertainty as to whether the proposed extension of time to 30 June 2023 will be sufficient to enable the outstanding matters concerning Company X’s taxation returns to be resolved, given that the dispute between MXJ and her estranged husband appears to have precluded certain necessary steps being taken in relation to those matters, which in turn has meant that the quantum of Company X’s taxation debt is unknown. The relationship breakdown has resulted in the FCFC proceeding which, it appears, has not moved swiftly.

I also note that, as set out above, MXJ initially sought the proposed orders under s 447A(1) in the FCFC, together with an order joining Company X to that proceeding and an order that the parties do all such things necessary to appoint Mr Terry Stramotas of DFK Benjamin King Money as the accountant for Company X and related entities, and personally prepare outstanding taxation returns. She has deposed that, if the order she seeks before this Court are granted, she will press for the orders she has sought in the FCFC in relation to the appointment of an accountant and the preparation of taxation returns. Her evidence is that a ‘procedural hearing’ is scheduled in the FCFC proceeding for 6 February 2023. It remains unclear whether an order of the kind foreshadowed is likely to be made on that day. Alternatively, as I raised with the parties in oral argument, given the broad powers conferred on an administrator under s 437A of the Act it may be possible for the administrator to appoint an accountant for Company X.

Ultimately, I do not consider these uncertainties to outweigh the desirability of an extension of time directed to enabling the potential finalisation of a DOCA that can then be put before the creditors. Although there is some risk that a DOCA will not be able to be finalised within the proposed extension of time, nonetheless the opportunity for the parties to attempt to do so is appropriate, particularly in circumstances where Company X is no longer trading. The effect of the orders sought is to provide a reasonable period (of less than six months) in which the second meeting is to be held. In addition, it is open to the liquidator to call the second meeting at any time prior to 30 June 2023, including with a view to the creditors resolving to wind up Company X pursuant to s 439C of the Act, should the circumstances suggest to him that that is the appropriate course.

In relation to the fact that there is at present an application in the FCFC proceeding for the same orders sought before this Court, I consider that there is a cogent justification for that state of affairs — namely, that the FCFC was unable to accommodate a hearing prior to the meeting sought to be further adjourned. In those circumstances, there can be no contention that the bringing of the same application before this Court was in any way improper, let alone an abuse of process,[23] and RZJ ultimately did not press such an argument. In that regard I also note the undertaking MXJ has given to withdraw her application in the FCFC for the same orders sought before this Court.
[23]See Commissioner of State Revenue v Aidlaw Pty Ltd (No 2) [2010] VSC 405, [8]–[10] (Davies J); Thirteenth Corp Pty Ltd v State (2006) 232 ALR 491, 505 [41] (Jessup J); [2006] FCA 979.

I accept RZJ’s submission that this Court does not have before it evidence concerning the progress of the FCFC proceeding, the orders made in it, the evidence filed in it and the basis on which RZJ contends that the appointment of the administrator was an attempt to circumvent orders made in the FCFC proceeding. However, I do not consider that those matters are relevant to whether this Court should make orders permitting the further adjournment of the second meeting. Those issues, to the extent they bear upon the administration of the company, could properly be raised in other proceedings, such as those foreshadowed in the Snowton Saje letter.

Nor do I consider that it is appropriate to draw any adverse inference based on the fact that the administrator did not bring the application, and did not put on evidence in support of it. I understood these submissions to draw upon Jones v Dunkel.[24] The principle articulated in that case applies where there is an unexplained failure by a party to give evidence, to call witnesses or to tender documents or other evidence. In appropriate circumstances, this may lead to an inference that the uncalled evidence would not have assisted the party. However, a court is not bound to draw an adverse inference. Moreover, where the inference is drawn, the rule cannot be used to convert conjecture into suspicion: the failure to call a witness or give evidence ‘cannot fill gaps in the evidence, as distinct from enabling an available inference to be drawn more comfortably’.[25]
[24](1959) 101 CLR 298; [1959] HCA 8.
[25]Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61, [49] (Bathurst CJ, Bell P and White JA). See also Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361, 385 [64] (Heydon, Crennan and Bell JJ); [2011] HCA 11.

In the present context I do not consider that the failure of the administrator to make the application or to himself give evidence is unexplained. There is a logical justification for the administrator’s position, namely to avoid incurring unnecessary costs, which would potentially impact on the return to the creditors. Further, given that the administrator’s reports were put into evidence by MXJ, it was open to the administrator to take the view that the necessary evidence was already before the Court and he did not need to provide any further evidence. Second, it is unclear what further conclusion or proposition a Jones v Dunkel-type inference would support; none was articulated by RZJ, and it is not appropriate for me to speculate in that regard.

Finally, I note that the orders include liberty to apply for any person with a sufficient interest. This provides an additional safeguard, enabling a creditor who has not been heard to come before the Court to seek some variation of the orders.

For these reasons I will grant the orders sought.

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Citations

MXJ v Company X (admin apptd) [2023] VSC 42

Most Recent Citation

Sev.en Gamma a.s. v IG Power (Callide) Pty Ltd (Administrators Appointed) [2024] FCA 30

Cases Citing This Decision

2

In the matter of Markenzo Pty Ltd (admins apptd) and Thorley Sand & Gravel Pty Ltd (admins apptd) [2025] NSWSC 515

Sev.en Gamma a.s. v IG Power (Callide) Pty Ltd (Administrators Appointed) [2024] FCA 30

Cases Cited

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Statutory Material Cited

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Dixon, in the matter of Pearson Contracting Pty Ltd as Trustee for Pearson Family Trust (Administrator Appointed) [2020] FCA 1505

Australasian Memory Pty Ltd v Brien [2000] HCA 30

Anthony Hordern & Sons Ltd v Amalgamated Clothing And Allied Trades Union of Australia [1932] HCA 9

[2023] VSC 42

13 February 2023