P K Riddell Investments Pty Ltd v Onwards Up and Gone Pty Ltd
[2024] VSC 159
•4 April 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2023 05334
| P K RIDDELL INVESTMENTS PTY LTD (ACN 622 442 728) | Applicant |
| v | |
| ONWARDS UP AND GONE PTY LTD (ACN 166 276 277) | First Respondent |
| and | |
| OWNERS CORPORATION PS725889 | Second Respondent |
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JUDGE: | Waller J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 February 2024 |
DATE OF JUDGMENT: | 4 April 2024 |
CASE MAY BE CITED AS: | P K Riddell Investments Pty Ltd v Onwards Up and Gone Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 159 |
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CORPORATIONS – Deeds of company arrangement under Corporations Act2001 (Cth) Pt 5.3A – General principles regarding the breadth of application of a deed of company arrangement – Referral of question of law from VCAT – Whether a deed of company arrangement releases or otherwise bars Applicant’s claims in VCAT proceeding – Finding that while clause 12.3.1 of the deed of company arrangement is unenforceable, clause 12.3.2 extinguishes all of the Applicant’s claims against the First Respondent alleged in its Points of Claim in VCAT proceeding.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr F Brimfield | Johnston Construction Lawyers |
| For the First Respondent | Mr D Triaca | Strongman & Crouch |
| For the Second Respondent | Ms R Berman (solicitor) | R Berman Lawyers |
HIS HONOUR:
A. INTRODUCTION
In August 2020, the Applicant commenced proceedings in the Victorian Civil and Administrative Tribunal (‘VCAT’) seeking damages and injunctive relief in respect of water damage to its property.
On 25 October 2023, Woodward J, as President of VCAT, referred the following question of law to the Court pursuant to s 96 of the Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’).
Does the Deed of Company Arrangement entered into by the First Respondent on 28 May 2021 (‘DOCA’) release or otherwise bar the Applicant’s claims in VCAT proceeding BP 1522/2022, or any part thereof? (‘Question’).
For the reasons set out below, the answer to the Question is:
The DOCA extinguishes all of the Applicant’s claims against the First Respondent in VCAT proceeding BP 1522/2022 alleged in its Points of Claim dated 3 September 2020.
B. FACTUAL BACKGROUND[1]
[1]The facts set out below are drawn predominantly from the Statement of Agreed Facts filed on 05 December 2023.
39 Mahvo Street, Bentleigh in Victoria (more particularly described as Lot 107 on PS 725889D, CT Volume 11603 Folio 643) is a three storey apartment complex with 26 apartments (‘Property’).
The Property is a strata titled property with the Owners Corporation PS725889 (‘OC’) managing the common property.
On 1 December 2017, the Applicant became the registered proprietor of Unit 107 at the Property (‘Unit 107’) which is on the first floor of the Property.
The First Respondent is the owner of Unit 205 at the Property (‘Unit 205’) which is on the second (topmost) floor of the Property and sits partially above Unit 107.
Both Unit 107 and Unit 205 have balconies.
In August 2020, the Applicant commenced proceeding BP1522/2022 in VCAT (‘VCAT Proceeding’).
The VCAT Proceeding named:
(a) Pitard Knowles as First Respondent; and
(b) the OC as Second Respondent.
On 3 September 2020, the Applicant filed Points of Claim in the VCAT Proceeding (‘Points of Claim’). The Points of Claim alleged against each of the First and Second Respondents a cause of action under s 16 of the Water Act1989 (‘Water Act’), namely an unreasonable flow of water from the First Respondent’s land (Unit 205) and from the OC’s land (common property) to Unit 107, which the Applicant alleged caused it loss and damage.
The Applicant sought in its prayer for relief against both Respondents:
(a) a permanent injunction to stop the unreasonable flow of water; and
(b) damages.
The Applicant alleged, relying on expert reports filed in the VCAT Proceeding, that the cause of the unreasonable flow of water is failed waterproofing on Unit 205 or on common property.
The Applicant also alleged that its loss and damage comprises:
(a) the costs to rectify damage to Unit 107’s frame, stud walls, plaster walls, skirting, painting and carpet; and
(b) loss of rent.
The Respondents deny liability to the Applicant.
On 16 March 2021, the First Respondent changed its name from Pitard Knowles Pty Ltd to Onwards Up and Gone Pty Ltd.
On 29 March 2021, the First Respondent was placed into voluntary administration. Con Kokkinos of Worrells was appointed the administrator (‘Deed Administrator’).
On 19 April 2021, VCAT ordered that the proceeding as between the Applicant and the First Respondent be stayed.
On 18 May 2021, the Applicant submitted a proof of debt claim form to the administrator, claiming a debt of $87,302. The Deed Administrator subsequently admitted the claim and a dividend of $8,730 was paid to the Applicant against this proof of debt claim.
On 28 May 2021, the First Respondent entered into the DOCA.
The DOCA includes the following provisions:
2.3 As provided by section 444G of the Corporation Act, it is acknowledged that the Deed binds the Company, its officers and members, its creditors and Administrators.
…
12.3 Release of Claim by Secondary Creditors
12.3.1Upon payment to each of the Secondary Creditors of a final dividend under this Deed or if the Company and PK1 have fulfilled all of their obligations under the Deed towards the Secondary Creditors and no funds are available to pay a dividend, the Secondary Creditors hereby release and forever discharge the Company from all actions, claims, suits, causes of action, demands, proceedings and costs of whatsoever kind whether present, future, foreseeable or unforeseeable they have or may have against the Company.
12.3.2If the Deed Administrators have paid to the Secondary Creditors a final dividend under this Deed or if the Company and PK1 have fulfilled all their obligations under the Deed towards the Secondary Creditors and no funds are available to pay a dividend, all of those creditors' debts or claims, present or future, actual or contingent, due or which may become due by the Company as a result of anything done or omitted by or on behalf of the Company before the day when the administration began and each claim against the Company as a result of anything done or omitted by or on behalf of the Company before the day when the administration began are extinguished.
12.3.3For the avoidance of doubt, the releases set out at clauses 12.3.1 and 12.3.2 do not merge upon the issuance of a Notice that the Deed has been effectuated under clause 15.2 and are binding upon and inure to the benefit of the Company post termination of this Deed.
12.4 Deliver Form of Release
12.4.1Primary Creditors and Secondary Creditors shall accept the dividends paid under this Deed in full satisfaction and complete discharge of all debts or claims which they have or claim to have against the Company as at the initial appointment and each of them will, if called upon to do so, execute and deliver to the Company such forms of release of any such claim as the Deed Administrators require.
12.4.2For the avoidance of doubt, the releases referred to at clause 12.4.1 do not merge upon the issuance of a Notice that the Deed has been effectuated under clause 15.2 and are binding upon, and inure to the benefit of the Company post termination of this Deed.
12.5.1Subject to Section 444D of the Corporations Act, this Deed may be pleaded by the Company against any creditor not holding a registered security over assets of the Company, in bar of any debt or claim that is admissible under this Deed and an unsecured creditor (whether the creditors debt or claim is or is not admitted or established under this Deed) must not:
12.5.1.2except for the purpose and to the extent provided in this Deed, institute or prosecute any legal proceedings in relation to any debts incurred or alleged to have been incurred by the Company before the initial appointment.
12.5.1.3take any steps (including any step by way of legal or equitable execution) in any proceedings pending against or in relation to the Company at the initial appointment.
12.5.2 For the avoidance of doubt, the prohibitions on recovery action referred to at clause 12.5.1 do not merge upon the issuance of a Notice that the Deed has been effectuated under clause 15.2 and are binding upon, and inure to the benefit of the Company post termination of this Deed.
…
15.2 Notice That Deed has been Effectuated
If the Deed Administrators are satisfied that the payments required by clause 6.1.2 have been made and a final dividend has been paid to the Secondary Creditors in accordance with clause 6.2.1.1, they shall prepare and execute a Notice to that effect …
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16.7Interpretation
16.7.1This Deed shall, so far as possible, be interpreted and construed so as not to be invalid, illegal or unenforceable in any respect, but if a provision, on its true interpretation or constructions is held to be illegal, invalid or unenforceable:
16.7.1.1That provision must, so far as possible, be read down to the extent that it may be necessary to ensure that it is not illegal, invalid or unenforceable and is made reasonable in all the circumstances so as to give a valid operation.
16.7.1.2If the provision or part of it cannot be effectively read down, that provision or part of it must be deemed to be void and severable and the remaining provisions of this Deed shall not in any way be affected or impaired and shall continue notwithstanding that illegality, invalidity or unenforceability.
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17.2Definitions
17.2.6Claim: means a debt payable by, or a claim against, the Company (whether present or future, certain or contingent, ascertained or sounding only in damages) being debts or claims the circumstances giving rise to which occurred before the Appointment Date that would be admissible to proof against the Company in accordance with Division 6 of Part 5.6 of the Act, if the Company had been wound up and the winding up is taken to have commenced on the Appointment Date.
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17.2.32Secondary Creditors: means the unsecured creditors of the Company who are not Primary Creditors or Non-Participating Creditors.
On 16 March 2022, the Applicant received a final dividend from the Deed Administrator in accordance with the terms of the DOCA.
On 16 June 2022, the Deed Administrator:
(a) notified the director of the First Respondent that it declared that the DOCA had been wholly effectuated and that the DOCA was terminated; and
(b) notified creditors of the First Respondent that the DOCA had been fully effectuated.
On 13 May 2022, the First Respondent filed Points of Defence in which it pleaded, amongst other things, that the DOCA extinguished the Applicant’s claims against the First Respondent.
On 23 August 2023, Woodward J informed the parties that he considered that VCAT lacked jurisdiction[2] to determine the First Respondent’s application for summary dismissal under s 75 of the VCAT Act, because insofar as it concerned the effect of the DOCA and the Corporations Act 2001 (Cth) (‘Corporations Act’) it raised a federal matter.
[2]Referring to Thurin v Krongold Constructions (Aust) Pty Ltd (2022) 407 ALR 187.
On 25 October 2023, Woodward J made orders referring the Question to the Court and directing that no other action should be taken in the VCAT Proceeding until determination of the Question by the Court.
C. SUBMISSIONS
Applicant’s Submissions
The Applicant conceded that the DOCA extinguishes any monetary claims it had against the First Respondent which had accrued prior to the date specified in the DOCA, being the date on which the administration commenced (‘Relevant Date’).
However, the Applicant submitted that the Court should answer the Question in the negative as follows:[3]
The Deed of Company Arrangement entered into by the First Respondent on 28 May 2021 does not release or bar the Applicant’s claims in VCAT Proceeding BP 1522/2020 insofar as the Applicant seeks injunctive relief, and damages for loss which occurred after 28 May 2021.
[3]Applicant’s Outline of Submissions, [51]. Reference to 28 May 2021, being the date of the DOCA, appears to be an error as the relevant date is the date on which the administration commenced: Corporations Act 2001 (Cth) s 444A(4)(i).
The Applicant made three key submissions. First, deeds of company arrangement are authorised by statutory provisions and the words of the deed cannot extend its operation beyond the limits of the statute. The deed must therefore be read down to conform to the statutory scheme. Secondly, the meaning of ‘claim’ must be interpreted through this lens, such that it does not include non-monetary claims and therefore the Applicant’s claim for an injunction is not released or barred by the DOCA. Thirdly, the Applicant’s claim for damages includes, in part, damages that arose after the Relevant Date in which case a new cause of action arose that is not released or otherwise barred by the DOCA.
Deeds of company arrangement under the Corporations Act
The Applicant submitted that the operation of a deed of company arrangement is binding by force of the Corporations Act which authorises its existence, not by force of its own contractual language; the obligations under a deed have such force as the statute provides and no further.[4]
[4]Applicant’s Outline of Submissions, [38].
In oral submissions, counsel for the Applicant argued that, to the extent that a deed of company arrangement exceeds its statutory authority, it is ineffective to bind creditors and must be read down.[5] The DOCA specifically contemplates the reading down of invalid, illegal or unenforceable clauses.[6]
[5]Transcript of Proceedings (27 February 2024) 50.14–51.16.
[6]Ibid 51.13–51.19.
It was submitted that the wide release provided by cl 12.3.1 of the DOCA is ineffective under the Corporations Act as it purports to encapsulate all claims present and future, monetary and non-monetary alike.[7]
[7]Applicant’s Outline of Submissions, [37].
It was submitted that cl 12.3.1 must be read down to exclude non-monetary claims and any claims arising after the Relevant Date.
The meaning of ‘claim’
It was submitted that deeds of company arrangement are only able to release monetary claims in order to serve their purpose of giving a financially beleaguered company a fresh start.[8]
[8]Ibid [31].
It was submitted that the starting point in interpreting the scope and effect of the DOCA is the wording of the enabling sections of the Corporations Act, rather than the wording of the DOCA.[9] In particular, regard must be had to s 444D(1) of the Corporations Act which provides:
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).
[9]Ibid [38].
It was submitted that a claim in the ordinary legal sense is distinct from a ‘claim’ under the Corporations Act.[10] The Applicant’s claim for an injunction is not a ‘claim’ within the meaning of s 444D(1) of the Corporations Act.[11] The meaning of ‘claim’ in s 444D(1) of the Corporations Act is to be interpreted in the same manner as s 553(1) of the Corporations Act.[12] That is, a claim which is provable in the company’s winding up.[13]
[10]Ibid [34].
[11]Ibid [22].
[12]Ibid [27]–[31].
[13]Ibid [32].
A ‘claim’ which is provable in a company’s winding up is based on the existing legal right to participate in the division of a company’s assets.[14] There is no dispute that the Applicant is a ‘creditor’ of the First Respondent within the meaning of the Corporations Act.[15] But the Applicant’s claim for an injunction to abate the flow of water is not a ‘claim’ that is caught by s 444D or s 553 of the Corporations Act because it is not an assertion of a right to participate in the division of a company’s assets.[16]
[14]Ibid [33] (emphasis added).
[15]Ibid [22].
[16]Ibid [35]–[36].
Damages after the Relevant Date
It was submitted that the statutory scheme provides in s 553 for a temporal limitation for all ‘debts or claims the circumstances giving rise to which occurred before the relevant date’.[17]
[17]Transcript of Proceedings (27 February 2024) 17.19–17.30; Corporations Act 2001 (Cth) s 553.
It was submitted that cl 12.3.1 is inconsistent with the statutory scheme provided by s 553 as it contains no such temporal limitation, instead purporting to release and discharge the First Respondent from all ‘actions, claims, suits, causes of action, demands, proceedings and costs of whatsoever kind whether present, future, foreseeable or unforeseeable’.
It was submitted that any damages that arose after the Relevant Date are not released by the DOCA.[18] The cause of action arising under s 16(1) of the Water Act is a statutory codification of the tort of nuisance insofar as it pertains to an unreasonable flow of water. A tort of nuisance can comprise a continuing state of affairs, in which case a cause of action arises each time the nuisance is committed or furthered.[19] The same logic for continuing nuisance should apply to Water Act claims so that a fresh cause of action arises as the unreasonable flow of water remains a continuing state of affairs.[20] Because the Applicant’s action for damages includes, in part, damages that arose after the Relevant Date and it is alleged that the Applicant continues to suffer an unreasonable flow of water,[21] this claim is not released or otherwise barred by the DOCA.
[18]Applicant’s Outline of Submissions, [45]–[47].
[19]Ibid [15]–[18].
[20]Ibid [19]–[20], [47].
[21]Ibid [20].
First Respondent’s Submissions
The First Respondent submitted that the Court should answer the Question in the affirmative as follows:
The Deed of Company Arrangement entered into by the First Respondent on 28 May 2021 releases or bars the Applicant’s claims in VCAT Proceeding BP 1522/2020, or any part thereof.
It was submitted that the DOCA extinguished any claims the Applicant may have had against it. The First Respondent relied on three propositions. First, the extent to which the First Respondent is released depends on the wording of the DOCA itself. Secondly, the payment of the final dividend triggered the release under cl 12.3.1 and cl 12.3.2. The breadth of the release is significant; it applies to any future or contingent loss and damage claimed by the Applicant and extends to both monetary and non-monetary claims. Thirdly, and in any event, the Applicant’s cause of action crystallised prior to the Relevant Date and therefore was released and barred by operation of the DOCA.
Deeds of company arrangement under the Corporations Act
It was submitted that the object of Pt 5.3A of the Corporations Act is to provide for the affairs of an insolvent company to be administered in a way that maximises the chances of the company continuing in existence. Or, if that is not possible, in a way that provides a better return for the company's creditors and members than would result from an immediate winding up.[22] The provisions of Pt 5.3A establish that effect is to be given to the will of the requisite majority to creditors who vote at the relevant meeting. The deed of company arrangement vests control of the company’s future in the creditors and provides them with flexibility regarding the future of the company.[23]
[22]First Respondent’s Outline of Submissions, [9].
[23]Ibid [6].
It was submitted that the legislative scheme includes a number of protective measures. Section 445D gives the Court power to terminate a deed where a deed is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more creditors of the company, or is contrary to the interests of creditors as a whole. Section 600A gives the Court power to set aside a resolution passed at a creditors’ meeting in circumstances where the passing of the resolution is contrary to the interests of the creditors as a whole or is likely to unreasonably prejudice the interests of the defeated creditors.[24]
[24]Ibid [7].
The First Respondent submitted that if the Applicant was in any way dissatisfied with the provisions of the DOCA, it could have applied to the Court and availed itself of these protective measures. It did not do so. On the contrary, it engaged in the process with the administrator and was paid out on its proof of debt claim.[25]
[25]Ibid [8].
Section 444G makes a deed binding on the company, its officers and members, and the deed's administrator.[26] Section 444D(1) states that a deed binds all creditors of the company, insofar as it concerns claims arising on or before the relevant date specified in the deed under s 444(4)(i).[27]
[26]Ibid [10].
[27]Ibid [11]; First Respondent’s Reply Submissions, [23]–[24].
Pursuant to s 444H, a deed releases a company from a debt only insofar as the deed provides for the release and the creditor concerned is bound by the deed. Therefore, s 444H provides that the extent to which a company is released depends on the wording of the deed itself.[28]
[28]First Respondent’s Outline of Submissions, [12]–[13], [28].
The extent of the release
It was submitted that the breadth of the release contained in the DOCA is such that all claims made by the Applicant’s Points of Claim are released and barred, whether monetary or non-monetary.[29]
[29]Ibid [5].
It was submitted that cl 12.3.1 and cl 12.3.2 operate to release the First Respondent from all claims, including those made in the Applicant’s Points of Claim filed in VCAT, provided that all liabilities were deemed paid and satisfied in full.[30] The payment of the final dividend on 16 March 2022 extinguished the Applicant’s claims in their entirety.[31] Under cl 12.4.1, the Applicant accepted the dividend under the DOCA in full satisfaction and complete discharge of all debts or claims which they had or claim to have had against the First Respondent.[32]
[30]Ibid [28].
[31]Ibid [29].
[32]Ibid [31].
The payment of the final dividend triggered the release under cl 12.3.1 and cl 12.3.2.[33] The breadth of the release is significant, it goes beyond damages claimed on 28 May 2021; it applies to any future or contingent loss and damage claimed by the Applicant.[34] The release applies to the Applicant’s claims for both damages and injunctive relief.[35] The release applies to foreseeable claims, which encompasses an injunction against some hypothetical future rain event which is dependent on circumstances which were present prior to the Relevant Date.[36]
[33]Ibid [34].
[34]Ibid [33].
[35]Ibid [39].
[36]Ibid [37].
The purpose of a DOCA is to provide a fresh start or clean slate to restore an insolvent company to financial health and maximise its chances of continuing to exist. It is therefore necessary to relieve the company of its obligations post the Relevant Date; this is why both future and contingent claims are included in the DOCA.[37]
[37]Ibid [40].
The Applicant’s claim arose prior to the Relevant Date
In oral submissions, counsel for the First Respondent argued that should cl 12.3.1 be read down by the Court as going beyond what was provided for in the statutory scheme, in any event cl 12.3.2 is enough to release and bar the Applicant’s claim.[38]
[38]Transcript of Proceedings (27 February 2024) 67.30–68.12.
It was submitted that the relevant facts and circumstances on which the Applicant’s claim relies all occurred prior to the Relevant Date. The Points of Claim were filed on 3 September 2020 and all expert reports relied on were completed prior to the Relevant Date.[39] The Applicant’s Points of Claim relied on these documents to allege an unreasonable flow of water pursuant to s 16(1) of the Water Act.[40]
[39]First Respondent’s Outline of Submissions, [21]–[22], [25], [29]; First Respondent’s Reply Submissions, [16]–[18], [25]–[26].
[40]First Respondent’s Outline of Submissions, [22], [29].
It was submitted that liability under s 16(1) of the Water Act arises where damage to property is caused by an unreasonable flow of water. These elements were all alleged to have occurred prior to the Relevant Date.[41] Any future hypothetical flow of water would need to demonstrate these elements to enliven a new claim against the First Respondent.[42] The Applicant’s cause of action had crystallised prior to the Relevant Date and therefore was released and barred by operation of the DOCA.[43]
[41]Ibid [36]; First Respondent’s Reply Submissions, [25]–[26].
[42]First Respondent’s Reply Submissions, [27].
[43]First Respondent’s Outline of Submissions, [23]–[27], [36].
The meaning of ‘claim’
The First Respondent submitted that the Applicant’s attempt to divide the cause of action into monetary and non-monetary claims should be rejected.[44]
[44]First Respondent’s Reply Submissions, [4].
It was submitted that the s 16(1) Water Act cause of action is the Applicant’s only claim in this proceeding.[45] Section 19(3) of the Water Act gives VCAT jurisdiction to grant certain remedies for a breach of s 16(1), where the elements of the statutory cause of action, including damage or economic loss suffered, are made out.[46] The possibility of injunctive relief does not create a separate ‘claim’ arising from the same facts and circumstances that have been the subject of a proof of debt.[47]
[45]Ibid [3].
[46]Ibid [5].
[47]Ibid [6].
The Applicant’s claim as contained in the Points of Claim falls within the definition of ‘claim’ defined in the DOCA. This definition is consistent with ss 444D and 553 of the Corporations Act,[48] that is a claim which is provable in the winding up of the company.[49] The claim was a claim provable in a winding up;[50] it was a provable claim against the company.[51]
[48]Ibid [8]–[12].
[49]Ibid [20].
[50]Ibid [19].
[51]Ibid [21].
It was submitted that the Applicant’s claim arose before the Relevant Date.[52] That claim is released and barred by operation of the DOCA.[53] Where the underlying s 16(1) Water Act claim is released and barred, injunctive relief pursuant to s 19(3)(a) is not available.[54]
[52]Ibid [16].
[53]First Respondent’s Outline of Submissions, [23]–[27], [36].
[54]Ibid [37].
Second Respondent’s Position
The Second Respondent made no submissions and took no active part in the proceeding before the Court.
D. CONSIDERATION
Deeds of company arrangement under the Corporations Act
Part 5.3A of the Corporations Act provides for the administration of a company's affairs with a view to executing a deed of company arrangement.[55]
[55]Corporations Act 2001 (Cth) pt 5.3A heading.
The relevant provisions of the Corporations Act are as follows:
PART 5.3A—ADMINISTRATION OF A COMPANY’S AFFAIRS WITH A VIEW TO EXECUTING A DEED OF COMPANY ARRANGEMENT
Division 1—Preliminary
435A Object of Part
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.
…
Division 10—Execution and effect of deed of company arrangement
444A Effect of creditors’ resolution
(1)This section applies where, at a meeting convened under section 439A, a company’s creditors resolve that the company execute a deed of company arrangement.
(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.
(3)The administrator of the company must prepare an instrument setting out the terms of the deed.
(4)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.
(5)The instrument is taken to include the prescribed provisions, except so far as it provides otherwise.
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444D Effect of deed on creditors
(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).
…
444H Extent of release of company’s debts
A deed of company arrangement releases the company from a debt only in so far as:
(a)the deed provides for the release; and
(b)the creditor concerned is bound by the deed.
PART 5.6—WINDING UP GENERALLY
…
Division 6—Proof and ranking of claims
Subdivision A—Admission to proof of debts and claims
553 Debts or claims that are provable in winding up
(1)Subject to this Division and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.
The general scheme of Pt 5.3A of the Corporations Act was summarised by the plurality of the High Court in Lehman Brothers Holdings Inc v City of Swan in these terms:[56]
The Part is drafted in a way that emphasises the need for prompt action in implementing its provisions, and prompt decisions by creditors about the fate of a company to which administrators are appointed. As the statement of the object of Pt 5.3A in s 435A makes plain, the central concern of the Part is regulation of the administration of an insolvent company.
[56]Lehman Brothers Holdings Inc v City of Swan (2010) 240 CLR 509, 519 [21] (French CJ, Gummow, Hayne and Kiefel JJ) (‘Lehman Brothers’).
In Mighty River International Ltd v Mineral Resources Ltd, the High Court considered the validity of a deed of company arrangement generally. In finding that the deed was consistent with the object of Pt 5.3A of the Corporations Act, Kiefel CJ and Edelman J (with Gageler J agreeing) referred to an ‘intended flexibility’ in pursuing that object:[57]
The object of Pt 5.3A is set out in the opening section of the Part, s 435A. That object is to administer an insolvent company in a way that (a) maximises the chance of the company, or its business, continuing in existence, or (b) if that is not possible, provides a better return for the company’s creditors and members than would result from an immediate winding up of the company. This object is pursued by an intended flexibility or, put another way, by a wide variety of different possible deeds of company arrangement.
[57]Mighty River International Ltd v Mineral Resources Ltd (2018) 265 CLR 480, 489 [7] (Kiefel CJ and Edelman J, Gageler J agreeing at 506 [58]) (‘Mighty River International’).
The Full Court of the Supreme Court of Victoria in Brash Holdings Ltd v Katile Pty Ltd accepted in general terms that the purpose of a deed of company arrangement is ‘to resolve, once and for all, the financial position of the company as it stood on the day specified in the deed, in order to allow the company a fresh start for the future’.[58]
[58]Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24, 28 (Brooking JD, Phillips and Hansen JJ) (‘Brash Holdings’), quoted in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd (2015) 297 FLR 1, 46 [219].
The purpose of a deed achieving a ‘fresh start’ for a financially beleaguered company is implicit in the statutory scheme of Pt 5.3A of the Corporations Act.[59]
[59]Smith v Sandalwood Properties Ltd [2019] WASC 109, [82] (Vaughan J) (‘Smith v Sandalwood’).
To this end, the effect of the provisions of the Corporations Act and the Corporations Regulations 2001 (Cth) with regard to creditors’ meetings is that ‘effect is to be given to the will of the requisite majority of creditors who vote at the relevant meeting’.[60] The adoption of a deed of company arrangement by a majority of creditors affects the rights of dissentients, which may be modified or even replaced by the rights they will have under the deed.[61]
[60]Lehman Brothers (n 56) 521 [31] (French CJ, Gummow, Hayne and Kiefel JJ).
[61]Ibid 521–2 [33] (French CJ, Gummow, Hayne and Kiefel JJ).
In Mighty River International, Gageler J stated:
Fundamental to the scheme of Pt 5.3A, as recognised in the reasoning of the plurality in Lehman Bros Holdings Inc v City of Swan, is the policy of allowing creditors themselves to decide, in accordance with the majoritarian decision-making rules prescribed at the relevant time in Pt 5.6 of the Corporations Regulations 2001 (Cth) and now in Div 75 of the Insolvency Practice Rules (Corporations) 2016 (Cth), what course of action is in their own best interests. The purpose of the strict time limits on the convening of a meeting of creditors after a company is placed in administration is to allow creditors to make their own decision as to what course is in their own best interests as soon as is practicable.[62]
[62]Mighty River International (n 57) 506–7 [61].
But a deed of company arrangement is more than merely a contract. As Gleeson CJ, Gaudron, Gummow and Hayne JJ said in MYT Engineering Pty Ltd v Mulcon Pty Ltd:
No doubt a deed of company arrangement will contain stipulations and promises of a kind found in contracts between parties. But a deed of company arrangement is more than a set of promises between those who are parties to it … First, it is a document that, on execution, effects a change in status of the company — from a company under administration to a company subject to a deed of company arrangement. Secondly, it is … a document that contains terms that bind 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)” (s 444D(1)). Those obligations stem from the combined operation of the deed of company arrangement and the Law, not from any contractual bargain between the persons bound, and are imposed on all creditors — not just those who voted in favour of any composition or moratorium reflected in the deed of company arrangement.[63]
[63]MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636, 649 [25] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).
It is this combined operation of the terms of the deed of company arrangement and the Corporations Act that gives the deed its full operation and effect.
Meaning of ‘claim’
The first issue arising in this proceeding involves the meaning of ‘claim’ under the DOCA. In particular, whether that term distinguishes between monetary and non-monetary claims. The starting point is the wording of s 444D(1) of the Corporations Act:
Effect of deed on creditors
(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).
In considering the question of construction and determining which claims may be compromised by a deed of company arrangement, the plurality in Lehman Brothers said:[64]
The provisions of the Act examined thus far in these reasons provide no compelling reason to confine the terms upon which creditors might agree to the compromise of claims against the company by the making of a deed of arrangement under Pt 5.3A. The subject matter, scope and purpose of the provisions that have been mentioned readily yield the inference that the subject matter of the compromise or arrangement must be debts or claims against the company. And the debts or claims the subject of the compromise or arrangement can, and ordinarily will, extend to any debt or claim that would be provable in a winding up. That is, in the words of the provision identifying provable debts and claims (s 553(1)), the debts or claims the subject of the compromise or arrangement, whether by way of moratorium or release, will be ‘all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date’.
[64]Lehman Brothers (n 56) [38] (French CJ, Gummow, Hayne and Kiefel JJ).
The Full Court in Brash Holdings considered the meaning and operation of s 444D of the Corporations Act for the effects of a deed of company arrangement on the administration of a company. Justices Brooking, Phillips and Hansen considered that the ambit of the word ‘claims’ in s 444D will be the same as the words ‘debts’ and ‘claims’ in s 553 of the Corporations Act.[65]
[65]Brash Holdings (n 58) 34. Followed in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151, 171–2, [42] (‘IATA v Ansett Australia’); Lam Soon Australia Pty Ltd v Molit (No 55) Pty Ltd (1996) 70 FCR 34, 39–40 (‘Lam Soon’); and BE Australia WD Pty Ltd v Sutton (2011) 82 NSWLR 336, 347–8, [52]–[54], 368, [129] (‘BE Australia’).
In Sons of Gwalia Ltd v Margaretic, Hayne J considered the meaning of ‘claims’ and ‘debts’, holding that the legislative intention underpinning s 553 is that provable claims in a winding up are to be defined widely:[66]
What is meant, in s 553, by ‘debts or claims the circumstances giving rise to which occurred before the relevant date’? How does that expression apply in the present matters? Those questions have not previously been considered by this Court, or by any Australian intermediate court.
In construing the temporal limit that is imposed by s 553, it is important to recognise the generality of other expressions used in s 553 in defining what debts and claims are to be admissible to proof. The section speaks of ‘all debts payable by, and all claims against, the company’. It amplifies those expressions by the parenthetical reference: ‘present or future, certain or contingent, ascertained or sounding only in damages’. If the words of the section were not wholly sufficient (as they are) to indicate an intention to define provable claims very widely, the Report of the Australian Law Reform Commission on the General Insolvency Inquiry (the Harmer Report), read with the Explanatory Memorandum for the Bill that became the 1992 Act, puts the point beyond any doubt. The Harmer Report identified a basic aim of insolvency laws as being ‘to deal comprehensively with all of the debts and liabilities of the insolvent’ and said that, ‘[i]n the case of a company, the aim is to deal with all the claims against a company so that its affairs can be fully wound up or so that it can resume trading’ (emphasis added). The Harmer Report concluded that ‘[t]he categories of claims which are admissible should be as wide as possible so that the financial affairs of the insolvent are dealt with comprehensively’. Otherwise, as the Harmer Report pointed out, ‘if the creditors are unable to make their claims in the insolvency, they are unable to recover at all (unless they have a basis for action against either directors of the company or a guarantor of the company’s debts or unless the winding up is stayed)’. The Explanatory Memorandum for the Bill that became the 1992 Act said that the reforms embodied in the new provisions of ss 553-553E ‘reflect[ed] the recommendations of the Harmer Report’.
[66]Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160, 223–4 [171]–[172] (emphasis in original), citing Law Reform Commission, General Insolvency Inquiry (Report No 45, 1988) vol 1, 315 [774], [777]; and Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) [849].
In Smith v Sandalwood , Vaughan J considered the meaning of ‘claim’ in s 444D(1) of the Corporations Act and the statutory purpose of Pt 5.3A. His Honour said that nothing was to be made from the use of ‘debts’ and ‘claims’ in s 553(1) compared with the use of only ‘claims’ in s 444D(1). His Honour noted:[67]
[67]Smith v Sandalwood (n 59) [79]–[82] and the authorities contained within.
The words of s 553 indicate an intention to define provable claims widely. That is consistent with one of the basic aims of insolvency laws - being to deal comprehensively with all claims against a company so that its affairs can be fully wound up or so that it can resume trading. As the majority in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd explained:
Generally speaking, the modern law of bankruptcy serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably amongst creditors; the second is to ensure that one creditor does not obtain an undue advantage over others; and the third is to bring about the discharge of the debtor from future liability for the debtor's existing debts, so that the debtor may start afresh. (emphasis added)
In adopting, for Pt 5.3A (and s 444D(1) in particular), the conception of ‘creditor’ and ‘claim’ that prevails in winding-up, the courts have relied on the object of Pt 5.3A. For example, in Brash Holdings Ltd v Katile Pty Ltd the Full Court preferred the submission that:
… the purpose of [a] deed of company arrangement [is] to resolve, once and for all, the financial position of the company as it stood on the day specified in the deed, in order to allow the company a fresh start for the future. (emphasis added)
To better facilitate a fresh start for an insolvent company which pursues external administration through Pt 5.3A it is necessary that the terms ‘creditor’ and ‘claim’ be understood as being broad in their ambit. That conclusion is consonant with the legislative ancestry of the language employed in s 444D(1). As Finkelstein J explained in Re National Express Group Australia (Swanston Trams) Pty Ltd; Thiess Infraco (Swanston) Pty Ltd v Smith, the accepted understanding of the term ‘claim’ - a critical concept for a DOCA (see s 444D(1)) - has its genesis in bankruptcy law. Echoing the Full Court in Brash Holdings Ltd v Katile Pty Ltd Finkelstein J noted:
… the evident purpose of bankruptcy … is to permit all creditors to share in the distribution of the assets of the bankrupt and to leave the debtor thereafter free from the liability of previous obligations.
Justice Vaughan also accepted that a ‘claim’ for the purposes of ss 444D or 553 is a claim which is ‘provable in the company’s winding up’.[68] His Honour went on, saying ‘the word “claims” is used as a single expression to cover what s 553 divides into debts and claims in the context of a winding-up’.[69]
[68]Ibid [76]. See also Brash Holdings (n 58) 34–6; IATA v Ansett Australia (n 65) 171–2, [42]; City of Swan v Lehman Brothers Australia Ltd (2009) 260 ALR 199, 237 [138] (‘City of Swan v Lehman Brothers’); Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd (2015) 231 FCR 17, 23 [31]; Lam Soon (n 65) 39–40.
[69]Smith v Sandalwood (n 59) [78]. See also Brash Holdings (n 58), 34.
The learned authors of Austin & Black’s Annotations to the Corporations Act note that a claim which is provable in the company’s winding up is one ‘founded on an existing legal right for asserting a right to participate in the division of the company’s assets’.[70]
[70]LexisNexis, Austin & Black’s Annotations to the Corporations Act (online at 20 March 2024) Chapter 5, Division 6 – Proof and Ranking of Claims, ‘Subdivision A – Admission to Proof of Debts and Claims [ss 553–564]’ [5.553].
In BE Australia, Campbell JA noted that there is an important distinction between a claim in the ordinary legal sense and a claim under the Corporations Act:[71]
However, just because something is a ‘claim’ in one sense of the word does not mean necessarily mean that it is a ‘claim’ within the meaning of s 553. The particular shade of meaning that ‘claim’ has in s 553 can be ascertained from the purpose of the section. That purpose is that all the legal obligations to which a company is subject should be ascertained, and each of them valued as at a common date, so that those obligations can be taken into account in a winding up or other administration that is under way. Someone has a ‘claim’ within the meaning of s 553 if he or she has a basis, founded on an existing legal right, for asserting a right to participate in the division of the assets of the company.
[71]BE Australia (n 65) 363 [105] (McColl JA agreeing at 340 [1]).
These authorities confirm that the claims that may be compromised by a deed of company arrangement are those that have a basis, founded on an existing legal right, for asserting a right to participate in the division of the company’s assets. The reference to ‘a right to participate in the division of the company’s assets’ indicates that the claims that may be compromised by a deed of company arrangement are in the nature of monetary claims or at least something that may be valued and taken into account in a winding up or other administration that is under way. Whether the Applicant’s claim to injunctive relief can be characterised as a discrete non-monetary claim which is not extinguished by the DOCA will be considered below.[72]
[72]See paragraphs [98]–[107] below.
Is clause 12.3.1 valid?
A further issue involves the validity of cl 12.3.1 of the DOCA which provides:
12.3.1Upon payment to each of the Secondary Creditors of a final dividend under this Deed or if the Company and PK1 have fulfilled all of their obligations under the Deed towards the Secondary Creditors and no funds are available to pay a dividend, the Secondary Creditors hereby release and forever discharge the Company from all actions, claims, suits, causes of action, demands, proceedings and costs of whatsoever kind whether present, future, foreseeable or unforeseeable they have or may have against the Company.
Clause 12.3.1 purports to release claims whether ‘present, future, foreseeable or unforeseeable’ that Secondary Creditors such as the Applicant have against the First Respondent. No temporal limitation is specified. In addition to ‘claims’ cl 12.3.1 also refers to ‘actions … suits, causes of action, demands, proceedings and costs of whatsoever kind’.
The DOCA defines ‘Claim’[73] to mean ‘a debt payable by, or a claim against, the Company (whether present or future, certain or contingent, ascertained or sounding only in damages) being debts or claims the circumstances giving rise to which occurred before the Appointment Date that would be admissible to proof against the Company …’.
[73]‘Claim’ has an upper case initial letter in the definition clause 17.2 whereas ‘claim’ appears with a lower case initial letter in cl 12.3.1.
Applying this definition to the word ‘claim’ in cl 12.3.1 would provide a temporal limitation consistent with ss 444D(1) and 444A(4)(i). However, it would not do so in respect of ‘actions … suits, causes of action, demands, proceedings and costs of whatsoever kind’. On its face, therefore, cl 12.3.1 does not comply with Pt 5.3A of the Corporations Act.
In City of Swan v Lehman Brothers, the Full Court of the Federal Court considered the peculiar nature of a deed of company arrangement. Justice Stone said that ‘the deed has such force as the statute provides and no more’.[74] Justice Rares said that ‘a deed of company arrangement is a statutory mechanism, not a consensual or voluntary instrument’[75] and ‘[t]he only way that, and the extent to which, the creditors are to be bound by a deed is by force of the express provisions of Pt 5.3A, unless particular creditors have consensually become parties to the deed by giving covenants for which the Act has not provided’.[76]
[74]City of Swan v Lehman Brothers (n 68) 201 [5].
[75]Ibid 219 [63].
[76]Ibid 224 [86].
The Court has power, on an application under s 445G, to make an order declaring a provision of a deed of company arrangement to be void where, for instance, it does not comply with Pt 5.3A. The Court also has a more general power, on an application under s 447A, to make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. It has been held that s 447A empowers the Court to vary or amend a deed of company arrangement.[77]
[77]Ansett Australia Ltd v Ansett Australia Ground Staff Superannuation Plan Pty Ltd (2002) 41 ACSR 598, 602 [19] (Warren J).
No application pursuant to s 445G or s 447A was made in this proceeding, nor does the Question referred to this Court by VCAT contemplate such an application being made. Subject to issues of interpretation and construction, the Question must be answered by reference to the DOCA entered into by the First Respondent on 28 May 2021 not by reference to an amended or varied version of that instrument.
In Re Antqip Hire Pty Ltd, Rees J had to consider whether a particular provision in a deed of company arrangement should be struck down. Justice Rees determined that, consistent with the authorities, ‘DOCAs should be construed as statutes, or more precisely, as subordinate legislation’.[78] Her Honour then discussed a number of rules in this regard:[79]
As to rules of statutory construction which may assist, and drawing heavily on Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters (Professional) Australia), the general principles of statutory construction apply equally to the interpretation of subordinate legislation although the context in which the subordinate legislation is to be construed includes the legislation under which it is enacted: [14.10]. The validity of subordinate legislation may be challenged if it deals with a subject outside the scope of the empowering provision upon the authority of which it was purportedly made: at [10.10]–[13.40]. When subordinate legislation is open to two constructions, on one of which it would be within the empowering provision and on the other ultra vires, the first should be adopted: [14.60]. Where a provision of subordinate legislation is not authorised by the empowering legislation, the provision may in some circumstances be severed or read down so as to preserve the validity of the balance of the subordinate legislation, including by textual surgery using the ‘blue pencil’ rule so that the valid portion operates independently of the invalid portion or, failing that, by treating the text as modified so as to achieve severance where in so doing there is no change to the substantial purpose and effect of the impugned provision, in particular, there is not left substantially a different law from what it would otherwise be: at [13.210] citing Harrington v Lowe (1996) 190 CLR 311 at 328.
[78]Re Antqip Hire Pty Ltd [2020] NSWSC 487 [70] (‘Re Antqip Hire’), cited with approval in Commissioner of Taxation v Yeo as Liquidator of Ready Kit Cabinets Pty Ltd (in liq) [2020] FCAFC 199 [25].
[79]Re Antqip Hire (n 78) [71].
The DOCA being considered in this case specifically contemplates how it is to be interpreted and construed in the event that a provision is held to be illegal, invalid or unenforceable.
Clause 16.7 provides:
Interpretation
16.7.1This Deed shall, so far as possible, be interpreted and construed so as not to be invalid, illegal or unenforceable in any respect, but if a provision, on its true interpretation or constructions (sic) is held to be illegal, invalid or unenforceable:
16.7.1.1That provision must, so far as possible, be read down to the extent that it may be necessary to ensure that it is not illegal, invalid or unenforceable and is made reasonable in all the circumstances so as to give a valid operation.
16.7.1.2If the provision or part of it cannot be effectively read down, that provision or part of it must be deemed to be void and severable and the remaining provisions of this Deed shall not in any way be affected or impaired and shall continue notwithstanding that illegality, invalidity or unenforceability.
In Re Antqip Hire, Rees J held that the relevant clause of a deed of company arrangement was to be read as being subject to the Corporations Act and that any apparent inconsistency could be resolved by adding the words ‘subject to the Corporations Act’ at the commencement of the relevant clause.[80]
[80]Ibid [82].
While some of the difficulties identified in respect of cl 12.3.1 might be remedied by adding the words ‘subject to the Corporations Act’ at the commencement of the clause, I do not consider that cl 12.3.1 can be effectively read down to the extent necessary to ensure that it is not illegal, invalid or unenforceable. While the word ‘claim’ is referred to in ss 444D and 553 and may be read down by adding the words ‘subject to the Corporations Act’, the words ‘actions … suits, causes of action, demands, proceedings and costs of whatsoever kind’ are not referred to in s 444D and s 553 and therefore would continue to subsist in the clause without temporal limitation.
Clause 16.7.1.2 provides that where a provision cannot be effectively read down, that provision must be deemed to be void and severable and the remaining provisions of the DOCA shall not in any way be affected or impaired and shall continue notwithstanding that illegality, invalidity or unenforceability.
In the circumstances cl 12.3.1 is deemed to be void and severable from the remaining provisions of the DOCA.
Does cl 12.3.2 contain a separate release?
The invalidity and severance of cl 12.3.1 is not the end of the matter.
Clause 12.3.2 is an independent provision which operates to extinguish all claims which a Secondary Creditor has ‘against the Company as a result of anything done or omitted by or on behalf of the Company before the day when the administration began’.
It provides:
If the Deed Administrators have paid to the Secondary Creditors a final dividend under this Deed or if the Company and PK1 have fulfilled all their obligations under the Deed towards the Secondary Creditors and no funds are available to pay a dividend, all of those creditors’ debts or claims, present or future, actual or contingent, due or which may become due by the Company as a result of anything done or omitted by or on behalf of the Company before the day when the administration began and each claim against the Company as a result of anything done or omitted by or on behalf of the Company before the day when the administration began are extinguished.
Clause 12.3.2 does not suffer from the same deficiencies affecting cl 12.3.1. It contains a temporal limitation such that only those claims against the Company resulting from anything done or omitted by or on behalf of the Company before the day when the administration began are extinguished. The language of cl 12.3.2 is substantially similar to the relevant prescribed provision which, pursuant to s 444A(5), every deed of company arrangement is taken to include.[81]
[81]Corporations Regulations 2001 (Cth) sch 8A cl 6.
It is also significant that the Applicant accepts that the DOCA extinguishes any monetary claims it had against the First Respondent which had accrued prior to the date on which the administration commenced. That is plainly the effect of cl 12.3.2.
Is the claim for injunctive relief extinguished by the DOCA?
The Applicant’s claim to injunctive relief is not a free-standing non-monetary claim. The Water Act gives VCAT the power to grant injunctive relief in exercising its jurisdiction in relation to a cause of action arising under s 16(1).
Once an applicant makes out the necessary elements of that cause of action, the respondent is liable to pay the applicant damages in respect of the applicant’s injury, damage or loss. In exercising its jurisdiction under s 16(1) VCAT may also grant injunctive relief.
The relevant provisions are:
16 Liability arising out of flow of water etc.
(1)If—
(a)there is a flow of water from the land of a person onto any other land; and
(b)that flow is not reasonable; and
(c)the water causes—
(i)injury to any other person; or
(ii)damage to the property (whether real or personal) of any other person; or
(iii)any other person to suffer economic loss—
the person who caused the flow is liable to pay damages to that other person in respect of that injury, damage or loss.
…
19 Jurisdiction of Tribunal
(1)The Tribunal has jurisdiction in relation to all causes of action (other than any claim for damages for personal injury) arising under sections 15(1), 16, 17(1) and 157(1) of this Act or at common law in respect of the escape of water from a private dam.
(3)In exercising jurisdiction conferred by subsection (1), the Tribunal—
(a)may by order, whether interim or final, grant an injunction (including one to prevent an act that has not yet taken place) if it is just and convenient to do so; or
(ab)may make an order for payment of a sum of money awarding damages in the nature of interest; or
(b)may make an order that is merely declaratory.
The Applicant’s Points of Claim allege that:
(a) from about June 2019 to present, Unit 107 has suffered and continues to suffer water ingress;[82]
[82]Applicant’s Points of Claim dated 3 September 2020, [6].
(b) the water ingress suffered by Unit 107 is caused by a flow of water (the ‘Water Flow’) from:
(i) the balcony of Unit 205, owned by the First Respondent; and
(ii) the common property adjacent to the balcony, owned by the OC;[83]
(c) the Water Flow is unreasonable because the Applicant has not authorised it, and because it has caused damage to the Applicant’s property.[84]
[83]Ibid [9].
[84]Ibid [10].
Particulars of loss and damage are provided by reference to a number of expert reports all of which pre-date the Relevant Date.
Although there is an allegation that Unit 107 has suffered and continues to suffer water ingress, the Water Flow that is alleged to be unreasonable and which has caused damage to the Applicant’s property is the water ingress suffered by Unit 107.
All the elements of the cause of action arising under s 16(1) of the Water Act are alleged to exist as at 3 September 2020 being the date on which the Points of Claim were filed. The Applicant’s cause of action therefore accrued prior to the Relevant Date.
That cause of action, if made out, gave rise to a liability on the part of the First Respondent to pay damages to the Applicant. As such, it may be characterised as being a claim having a basis, founded on an existing legal right, for asserting a right to participate in the division of the company’s assets.
Having regard to the terms of cl 12.3.2 the claim against the First Respondent resulted from something done or omitted by or on behalf of the First Respondent before the day when the administration began.
As such, the Applicant’s cause of action against the First Respondent arising under s 16(1) of the Water Act is extinguished by reason of cl 12.3.2 of the DOCA. The Applicant’s claim for injunctive relief against the First Respondent in respect of that cause of action is also extinguished.
Is there a claim for damages arising after the Relevant Date?
The Applicant’s Points of Claim do not allege that the Applicant has suffered any loss and damage by reason of something done or omitted by the First Respondent after the date on which the administration commenced. It is alleged that the Water Flow is unreasonable because it has caused damage to the Applicant’s property.
I do not accept that the Points of Claim plead a continuing cause of action. There is no allegation that the continuing flow of water is not reasonable. Nor is there an allegation that the continuing flow of water is continuing to cause loss and damage to the Applicant.[85]
[85]See Body Corporate 18236 v Body Corporate 25805 [2003] VCAT 1342, [36] where Macnamara DP held that each separate unreasonable flow of water constitutes a separate statutory tort contrary to the Water Act if it is demonstrated that it has caused damage.
The Applicant sought to rely on an affidavit of Jillian Johnston affirmed on 9 May 2023 as evidence that the continuing flow of water into Unit 107 is continuing to cause loss and damage to the Applicant. The First Respondent objected on the basis that the affidavit was hearsay, had not been tendered before VCAT and the matters referred to in it were not included in the Statement of Agreed Facts filed on 5 December 2023.
For the purposes of answering the Question referred to this Court by VCAT I do not consider it appropriate to have regard to the affidavit. In determining the ambit of ‘the Applicant’s claims in VCAT proceeding BP 1522/2022’ referred to in the Question it is appropriate that I have regard only to the Applicant’s Points of Claim in which those claims are expressed.
If the Points of Claim were amended to include a claim for loss and damage by reason of something done or omitted by the First Respondent after the date on which the administration commenced, then the DOCA would not operate to extinguish such a claim.
However, the Applicant’s claims against the First Respondent as currently pleaded in its Points of Claim are extinguished by reason of cl 12.3.2 of the DOCA.
E. ORDERS
I will make orders as follows.
The question of law referred to the Court pursuant to s 96 of the VCAT Act on 25 October 2023 be answered as follows:
Question: Does the Deed of Company Arrangement entered into by the First Respondent on 28 May 2021 (‘DOCA’) release or otherwise bar the Applicant’s claims in VCAT proceeding BP 1522/2022, or any part thereof?
Answer: The DOCA extinguishes all of the Applicant’s claims against the First Respondent in VCAT proceeding BP 1522/2022 alleged in its Points of Claim dated 3 September 2020.
If the parties are unable to agree on an appropriate order as to costs, then by 4.00 pm on 11 April 2024, each party is to file and serve submissions of no more than three pages on the question of costs. Any unresolved issues as to costs will be determined on the papers.
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