Re Centaur Mining & Exploration Ltd
[2005] VSC 367
•20 September 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 6918 of 2005
IN THE MATTER OF CENTAUR MINING & EXPLORATION LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED) and CENTAUR NICKEL PTY LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED)
| ROBYN BEVERLEY MCKERN STEPHEN ANDREW HAWKE (as liquidators of Centaur Mining & Exploration Ltd and Centaur Nickel Pty Ltd) | Plaintiffs |
| V | |
| ROCHE MINING PTY LTD | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 August 2005 | |
DATE OF JUDGMENT: | 20 September 2005 | |
CASE MAY BE CITED AS: | Re Centaur Mining & Exploration Ltd | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 367 | |
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CORPORATIONS – Part 5.3A of the Corporations Act 2001 (Cth) – whether deeds of company arrangement had terminated pursuant to their terms and companies wound up and, if not, whether s.447A of the Corporations Act could and should be utilised to effect such termination as from the termination date provided by the deeds as varied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr R Brett QC Mr M Galvin | Deacons |
| For the Defendant | Mr B A Coles QC Mr S P Gardiner | Maddocks |
HIS HONOUR:
Questions arise in this proceeding concerning whether Centaur Mining & Exploration Ltd and Centaur Nickel Pty Ltd have been in liquidation since 2 August 2002 as a result of the termination of certain deeds of company arrangement on that date, or whether those deeds are still on foot. If the deeds are still on foot and the two Centaur companies (“the Companies”) are not in liquidation, the plaintiffs, who purport to be the liquidators, seek appropriate relief from the Court treating the deeds as having terminated on 2 August 2002 and the Companies having been placed into liquidation on that date.
Background Facts
The Companies were mining companies and Centaur Nickel Pty Ltd was a wholly-owned subsidiary of Centaur Mining & Exploration Ltd. On 14 March 2001 the directors resolved that each of the Companies was insolvent or was likely to become insolvent and that joint and several administrators be appointed pursuant to s.436A of the then Corporations Law. The Companies appointed two administrators, one of whom is the second plaintiff in this proceeding. On 15 March 2001 certain secured creditors appointed receivers and managers to the Companies.
The first meetings of creditors of the two Companies were held on 21 March 2001.
Creditors of the Companies were provided with a report by the administrators prior to the second meetings of creditors which were held on 14 May 2001.[1] In their report the administrators commented that, having regard to the existence of a deed of cross-guarantee between the Centaur Companies, it was appropriate to comment on their affairs as a “single entity”. In their report, after outlining the history of the Companies and their recent trading performance and their financial position, so far as it appeared at that time, the administrators told the creditors that there was a shortfall to secured creditors of some hundreds of millions of dollars and that the liabilities far exceeded the estimated net realisable value of the assets of the Companies. The administrators said that they expected that there would be no return to unsecured creditors from the realisation of assets. The administrators said that as yet there was no proposal for deeds of company arrangement, that there was no justification for returning insolvent Companies to their directors and that a winding up was recommended unless the creditors wished to adjourn the meetings for a period of up to sixty days. At the meeting on 14 May 2001, after discussion, a resolution was carried for an adjournment until 13 July 2001.
[1]The time for calling the meetings had been duly extended but apparently, although notices were sent to all creditors, the meetings were not advertised as required. There is no opposition to the granting of a curative order to deal with this procedural defect if one is thought to be necessary.
On 5 July 2001 the administrators reported to creditors in preparation for further meetings on 12 July 2001. The administrators outlined a number of proposals for deeds of company arrangement which had been received. One of the proposals (“the Freehills proposal”) was put forward on behalf of certain creditors with a view to giving the deed administrators time to explore ways of obtaining a better return for creditors. The purpose of the proposed deeds was described as being to further examine the affairs of the Companies, to explore the possibility of settlement of potential actions for insolvent trading and other claims. The administrators said that the proposal contemplated that the deed administrators have up to six months to conclude settlement negotiations with the directors and others, in addition to exploring possible means of realising value from tax losses. The administrators also noted in their report that the Companies in their current form were not solvent and it would be improper to return insolvent companies to their directors.
At the meetings on 12 July 2001 it was resolved that the Companies execute deeds of company arrangement with respect to the Freehills proposal and a committee of creditors was appointed for each Company.
On 2 August 2001 a deed of company arrangement was executed in respect of each Company and the present plaintiffs were appointed deed administrators. The deeds provided for a moratorium on creditors’ claims during the “arrangement period” which was defined as the period commencing on the Commencement Date (2 August 2001) and ending on the Termination Date (3 months from the date of execution of the Deed, ie 2 November 2001). Clause 6.2 of the deeds empowered the deed administrators to extend the arrangement period for no more than three months if they were of the opinion that, in effect, the purposes of the deed could be achieved within such extended period.
Clause 2.1 of each of the deeds provided that their purpose was to permit the deed administrators to examine the affairs of the Companies, to examine the conduct of the directors (including but not limited to potential actions for insolvent trading) to explore with directors and any other relevant parties the possibility of settlement of potential actions for insolvent trading and any other claims and to explore the possibility of restructuring the debts and/or capital of the Companies – all with a view to obtaining a better return to unsecured creditors, avoiding the delay and costs of litigation and allowing the Companies to continue in existence. The deeds provided for the deed administrators to report to creditors and convene meetings of creditors prior to the conclusion of the arrangement period.
Of importance for the present proceeding, the deeds of company arrangement made express provision for their termination. Clause 6.1 provided that the deed would terminate upon the earlier of the happening of a number of events, which may be summarised as follows:
(a)the deed administrators determining that the purposes of the deed could not be achieved and the majority of creditors resolving to terminate the deed and that the Companies be wound up; or
(b)the termination date or extended termination date being reached and the majority of creditors resolving as in (a); or
(c) the termination date or extended termination date being reached and the majority of creditors resolving to accept a settlement with directors or others, or some other relevant scheme, as proposed by the deed administrators; or
(d)a court terminating the deeds pursuant to s.445D of the Corporations Law; or
(e)certain defined payments being made during the arrangement period.
The deed administrators convened meetings of creditors to be held on 12 November 2001. A circular accompanying the notice of meetings advised the creditors of a number of developments which in their view justified the extension of the deeds by the maximum period of three months. At the meetings held on 12 November 2001 the creditors resolved inter alia to extend the arrangement period to 2 February 2002.
The deed administrators convened a joint meeting of creditors to be held on 31 January 2002. A circular accompanying the notice of meeting again advised creditors of developments since the previous meetings and recommended a further extension to the arrangement period.
At the meeting of creditors on 31 January 2002, the firstnamed plaintiff as joint deed administrator explained that the purpose of the meeting was to decide on resolutions to extend the deeds of company arrangement and to give the deed administrators power with the approval of the committee of creditors to terminate the deeds of company arrangement and have the Companies go into liquidation within the extended period if the deed administrators formed the view that the purposes of the deeds could no longer be achieved. The creditors were advised of developments since the previous meeting. The firstnamed plaintiff further advised the meeting that the secured creditors had largely realised the secured assets and would be entitled to claim in any liquidation or under any deed for the unsatisfied balance of their debts which, the receivers suggested, was in the vicinity of $600M. The firstnamed plaintiff told the meeting that the current deeds of company arrangement expired on 2 February 2002 and, if that happened, the Companies would go into liquidation but that it was the view of the deed administrators that the deeds should be further extended. In addition, in response to a specific question, the firstnamed plaintiff told the meeting that if the deed administrators formed the view that there was no point in pursuing settlement negotiations with the directors, then they would terminate the deeds and the Companies would automatically go into liquidation. The answer thus given by the firstnamed plaintiff was inaccurate and no mention was made of the precise requirements of cl. 6.1(a) or (b) of the deeds.
The creditors resolved that the deeds be varied to provide that the termination date should be extended “by a further period of three months (that is to 2 May 2002) with an option for the deed administrators to extend the period by a further period of three months (that is to 2 August 2002) at their discretion”. A further resolution was carried in respect of each deed as follows:
“That the Deed of Company Arrangement be further varied to provide that the Deed Administrators, with the approval of the Committee of Inspection, have the discretion to terminate the Deed at which time the company will be wound up and the Deed Administrators will act as the liquidators.”
It was common ground that this variation of the deeds of company arrangement was valid and effective. It should be noted that the said variation of the deeds empowered the deed administrators, in their discretion, to terminate the deeds but only with the approval of the Committee of Inspection (which I will hereafter describe as “the committee of creditors”).
In due course the deed administrators opted to extend the termination date from 2 May 2002 to 2 August 2002.
A meeting of the committee of creditors of the Companies was held on 16 July 2002 in Perth. The firstnamed plaintiff chaired the meeting. A number of members of her firm were also present, as was a solicitor from Freehills who were solicitors to the deed administrators. Six members of the committee were also present, being representatives of various unsecured creditors (including the present defendant). The firstnamed plaintiff advised the committee “that there was no resolution to be put forward to the committee, rather that the meeting was to update members on the current status”[2]. The minutes of the meeting then record the following:
“2. Deed of Company Arrangement
2.1Ms McKern advised the Committee that the Deed will expire on 2 August 2002 and the companies will then automatically be placed into liquidation.
2.2Ms McKern also reminded the Committee that the resolution from the 31 January 2002 creditors meeting allows the Committee to place the company into liquidation prior to the expiry of the Deed, should they determine that the existing Deed could not meet its objectives.
2.3Ms McKern advised the Committee that whilst it appeared the objectives of the Deed could not be met, given the date and to avoid any doubt as to the commencement of the liquidation, she did not believe it necessary to place the company into liquidation prior to the expiry of the Deed.”
[2]Minutes page 2.
The firstnamed plaintiff’s advice to the committee that the deeds would expire on 2 August 2002 and that the Companies would then automatically be placed into liquidation again ignored the requirement of cl. 6.1(a) and (b) of the deeds for a resolution of the majority of creditors to terminate the deeds and further ignored the requirement of the deeds, as varied on 31 January 2002, that the committee of creditors approve any termination of the deeds by the deed administrators.
By the expiry of the arrangement period on 2 August 2002 it was apparent to the deed administrators, and the evidence makes clear, that the objectives of the deeds of arrangement had failed. No settlement of potential claims against the directors or other parties had materialised and no other prospect of obtaining a better return to unsecured creditors had emerged.[3] All of the assets of the Companies were sold by the receivers and managers for the benefit of the secured creditors. The only chance of a significant return for unsecured creditors now rests with such claims as might be brought in relation to preferences and other voidable transactions or in relation to alleged insolvent trading.
[3]The deed administrators had further assumed that it was not possible to bring any insolvent trading claim against the directors of the companies prior to them being placed into liquidation. This was a common assumption at the time – but now see ASIC v Plymin (2003) 46 ACSR 126 and Elliot v ASIC (2004) 205 ALR 594.
As a result of the belief of the deed administrators that the deeds terminated on 2 August 2002 and that the Companies thereby were automatically placed into liquidation, the deed administrators filed notices with ASIC on 5 August 2002 notifying that a special resolution for the winding up of the Companies was taken to have been passed in that “circumstances existed, which under the terms of the deed of company arrangement executed by the company, result in the termination of the deed and the winding up of the company”.
Since 2 August 2002 the plaintiffs have acted as if they were liquidators of the Companies being wound up under creditors’ voluntary liquidations. They obtained orders from this Court on 27 February 2004 inter alia extending the time within which they, as liquidators, might make application under s.588FF(1) of the Corporations Act 2001 (Cth) (“the Act”) to 13 August 2005. The plaintiffs have generally purported to conduct the affairs of the Companies as if they were in liquidation and, as appears from an affidavit of the firstnamed plaintiff, they have:
“(a) held annual general meetings of members and creditors;
(b)progressed work in relation to potential insolvent trading claims, including soliciting proposals from third party litigation funders for the potential court proceedings;
(c)liaised with and provided assistance to ASIC during its extensive investigations into the Companies, including responding to notices from ASIC for the production of documents;
(d)obtained access to transcripts of ASIC’s examinations performed under the Australian Securities and Investments Commission Act 2001 (Cth);
(e)issued notices under section 104-145 of the Income Tax Assessment Act enabling shareholders to crystallise their tax losses on their shareholdings;
(f)reached a financial settlement with the receivers and managers in regard to a dispute over the validity of the secured creditors’ charge over certain of the Companies’ assets;
(g) participated with the receivers and managers of the Companies in the settlement of various disputes with third parties;
(h)constituted committees of inspection of both Companies;
(i)convened and attended meetings of those committees;
(j)made reports to creditors and the committee of inspection;
(k)prepared and lodged with ASIC forms 524 Liquidators account of receipts and payments; and
(l)negotiated with creditors and former creditors regarding potential preference claims and other disputes.”
In amplification of the above material contained in the affidavit of the firstnamed plaintiff, the plaintiffs tendered without objection a document (exhibit “A”) setting out further information concerning the creditors and developments in the supposed liquidation of the Companies. It appears from this document that the Companies have claims from unsecured creditors totalling about $790M, including secured creditors whose security has been exhausted with a residual claim of about $700M, and that the Companies have some 418 other unsecured creditors representing the balance of the said sum. The document further shows that the plaintiffs have reviewed potential preference claims, comprising payments made to certain creditors in the period relevant for the purposes of preference claims. The plaintiffs have made demands on about 200 creditors in relation to alleged preferential payments. They are considering up to 32 separate proceedings regarding alleged preferential payments totalling some $32M. Further, the plaintiffs have compromised a number of claims in relation to alleged preferences and uncommercial transactions and have received or are entitled to receive substantial monetary sums under those settlements.
In the foregoing circumstances this proceeding was initiated by the plaintiffs, by originating process dated 30 June 2005, claiming inter alia a declaration that the Companies had commenced to be wound up on 2 August 2002 or, if not, seeking appropriate orders pursuant to s.447A of the Act. A number of possible orders were canvassed in the course of argument but all had the aim of achieving the result in substance that Part 5.3A of the Act should operate in relation to the Companies as if the said deeds of company arrangement provided for their winding up upon termination of the deeds on 2 August 2002. The defendant, Roche Mining Pty Ltd is an unsecured creditor of Centaur Mining & Exploration Ltd and, as a creditor that might be the subject of a preference claim if the liquidations had commenced on 2 August 2002, was joined as defendant and appeared by counsel to oppose this application.
Did the winding up of the Companies commence on 2 August 2002?
It was submitted on behalf of the plaintiffs that in substance the deed administrators had exercised their discretion and decided to terminate the deeds of arrangement pursuant to their power to do so under the variation effected by resolution of the creditors at the meeting on 31 January 2002. It was further submitted that in substance the committees of creditors had approved of the said decision of the deed administrators. On the other hand it was submitted on behalf of the defendant that there had to be an exercise by the deed administrators of a positive discretion to terminate the deed attended by the approval of the committee of creditors whereas, on the evidence, the plaintiffs had plainly not exercised any such discretion but rather they had affirmatively abstained from doing so and further, on the evidence, there could be no suggestion that the committee of creditors had given any approval as required by the deeds as varied.
It is clear that the deed administrators intended that the deeds should terminate on 2 August 2002 but, as they stated to the committee of creditors that such termination was automatic, I do not think that their conduct can be objectively characterised as amounting to an exercise of their express power or discretion under the deeds to terminate them. Even if the conduct of the deed administrators should be characterised as amounting to an exercise of their power or discretion to terminate the deeds, it is clear that the committee of creditors was not asked to approve any such decision. I do not think that the mere acquiescence of the committee of creditors in the state of affairs which was described to them by the plaintiffs can be considered or treated as amounting to “approval” within the meaning of the variations to the deeds.
Accordingly, in my view, the plaintiffs have failed to establish their primary claim to a declaration that the Companies had commenced to be wound up on 2 August 2002.
S.447A of the Corporations Act
In the alternative, it was submitted on behalf of the plaintiffs that s.447A of the Act empowered the Court to make, and the Court should make, an order varying the terms of the deeds of company arrangement so that they should terminate on 2 August 2002 and so that the Companies should have been placed in liquidation on that date.
The first question which arises is whether the Court has power under s.447A to grant the relief which is sought.
It was accepted by the defendant that, in general, the Court had power pursuant to s.447A of the Act to vary a deed of company arrangement provided that an order made in that respect was one which could properly be characterised as an order of the kind contemplated by the section, namely, an “order … about how this Part is to operate in relation to a particular company”. It was recognised that the cases in general supported the power of the Court to utilise s.447A so as to vary a deed of company arrangement.[4]
[4]See Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607, 611 per Young J; Milankov Nominees Pty Ltd v Roycol Pty Ltd (1994) 14 ACSR 296; Mulvaney v Rob Wintulich (1995) 18 ACSR 384; Hamilton v National Australia Bank Ltd (1996) 137 ALR 231, 258 per Lehane J; Re Paradox Digital Pty Ltd [2001] WASC 182; Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd (subject to deed of company arrangement) (2004) 49 ACSR 1, 15 per Goldberg J.
However Mr Coles QC, who appeared with Mr Gardiner of counsel on behalf of the defendant, submitted that the order sought by the plaintiffs was not one which sought to deal with any inadequacy or gap in the provisions of Part 5.3A[5] but rather was inappropriately sought to be utilised (in effect) to rescue the plaintiffs from the consequences of their conduct. Mr Coles further submitted that s.447A was couched in terms which were prospective and that the Court might make an order as to how Part 5.3A “is to operate” albeit that the terms of the order might operate on events that had already happened[6] but that if the order simply operated as to the past it would less readily fall into the category or type of order that could properly be made. Mr Coles submitted that an order of the kind sought in the present case would do little more than operate as a retrospective order by the Court winding up the Companies. He said that it would be a wholly retrospective order operating not on past events but on the “non-exercise of discretion and the non-calling of a meeting”. The order would essentially be a wholly retrospective order which did not fulfil in any, even nominal, sense the statutory imperative that the Court’s order was to be an order as to how Part 5.3A “is to operate with respect to a particular company”. In concluding his submission Mr Coles said that if the Court acceded to the plaintiffs’ application it would be nothing more than an ex post facto winding up order and that that was not an order which the Court could or should make.
[5]See Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24, 26-27 per Brooking, JD Phillips and Hansen JJ.
[6]Citing Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, 282.
The submissions advanced by the defendant can be subjected to the High Court’s analysis of the scope of s.447A of the Act in Australasian Memory Pty Ltd v Brien.[7] In that case, the administrator of a company convened the second meeting of creditors at a time other than that required by s.439A(2) of the Act. At the meeting the creditors resolved to wind up the company. Statutory demands issued by the liquidators of the company were subsequently set aside on the basis that the second meeting had not been convened in accordance with s.439A(2). Non-compliance with s.439A(2) meant that the administration had ended by reason of s.435C(3). An application was made after the said termination of the administration for an order having the effect of altering the timing requirement of s.439A(2) so as to validate the intended consequences of what had in fact been done. The High Court (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ) held that s.447A of the Act enabled such an order to be made. Relevantly to the present case, the High Court said:[8]
[7](2000) 200 CLR 270.
[8](2000) 200 CLR 270, 282-284.
“The second limitation suggested in argument was that s 447A(1) is limited to authorising the making of prospective rather than retrospective orders. The terms "prospective" and "retrospective" are terms that are sometimes used in different senses and we think it better not to use them here. In the end, this suggested limitation may be no more than a general way of expressing what we have identified as the fourth limitation -- that s 447A does not apply unless there is a continuing administration or extant deed of company arrangement. If the two contentions are separate, it is convenient to deal with them together.
The words of s 447A do not suggest that s 447A cannot be used if the subject company had been under administration but, by operation of other provisions of Pt 5.3A, that administration had come to an end. The subject matters with which the section deals are "a particular company" and the operation of Pt 5.3A in relation to that company. The subject is not a particular administration. It may be accepted that the expression "how this Part is to operate" is an expression that looks to the future, not the past. But this temporal requirement is satisfied if orders made under s 447A are orders that have effect only from the time of their making. It does not preclude the making of an order with future effect, but in respect of past matters or events. Such an order would be an order about how Pt 5.3A "is to operate" (that is, is to operate thereafter) in relation to the subject company.
Upon closer examination, it can be seen that the second and third suggested limitations (only prospective effect, and no effect on vested rights) are also closely connected. The unstated premise which lies behind the asserted temporal limitation upon the operation of s 447A is that to make an order which would reinstate an administration which had ended would be to interfere with rights that had accrued because the administration had ended. Similarly, to appeal to general principles of statutory construction and argue that the section should not be interpreted as permitting the making of orders which would affect accrued or vested rights invites attention not only to the breadth and content of the asserted principle of construction but also to the premise that reinstatement of an administration by an order under s 447A would affect accrued or vested rights.
…
Reference to accrued or vested rights makes it necessary to distinguish between two kinds of case that may arise following termination of an administration. In particular, it is necessary to identify the circumstances in which rights may accrue in the period between the end of an administration and the making of an order varying the operation of Pt 5.3A in a way that would, in effect, reinstate the terminated administration.
In the first kind of case, steps are taken by members or officers of the company, or by third parties, which are predicated upon the termination of the administration other than by entering a deed of company arrangement or going into liquidation. For example, shares in the company are traded; directors resume the management of the company and deal with its assets or take other like steps on the assumption that the administration is at an end and there is neither a deed of company arrangement nor a winding up. In the second kind of case, steps are taken that are predicated upon the company having validly entered a deed of company arrangement or gone into liquidation.
The consequences of making an order, the effect of which would be to reinstate the administration, would be very different in the two kinds of case identified. In the first, to reinstate the administration may well be inconsistent with the rights which were created in the intervening period. Would a transfer of shares in that intervening period be affected by the prohibition on dealings contained in s 437F? Would a transfer of property of the company made in that period be affected by the prohibition contained in s 437D? In the second kind of case, however, there would be no inconsistency between the varied operation of Pt 5.3A and the rights that have accrued in the intervening period, if the order gave legal validity to the premise for the parties' conduct.
Whether there would be no power to make an order under s 447A(1) in the first of the two kinds of case we mention, or whether there would be an insuperable discretionary obstacle to its making, are points we need not examine. The present case is of the second type we have identified. The steps taken by officers of the Company and by third parties (such as those who bought the assets of the Company) were predicated upon the Company's creditors having validly resolved that the Company should go into liquidation. The orders of Santow J which are now impugned were orders which remedied the irregularities which affected the validity of the premise for those steps. No rights which may have accrued in the intervening period are adversely affected by that order. The making of the order might be said, in some cases, to operate to perfect the rights which the parties to the transaction intended to create but even if that is so, it is no reason to read down s 447A.”
It was not suggested that the relief sought in the present case would adversely affect any accrued or vested rights.
Australasian Memory was a case where the administration had terminated at a time and in a manner other than that which was intended as a result of failure to comply with a provision of Part 5.3A and in which s.447A was utilised to alter the relevant provision (ie the time fixed by such provision) so as to “cure the irregularity” and to achieve what was originally intended and “rescue” the intermediate transactions. The facts in the present case are different in that there are deeds of company arrangement which have not been terminated but transactions and acts have taken place on the assumption that the deeds had terminated (and that the Companies were in liquidation as a result). The “irregularities” in the present case arise from non-compliance with the deeds of company arrangement rather than with any provision of Part 5.3A. Nevertheless to my mind the similarities are greater than the differences. In each case a set of circumstances arose or has arisen with which Part 5.3A is inadequate to deal. In addition, there is a need to recognise that by 2 August 2002 the objects of Part 5.3A[9] would no longer have been served by an extension of the deeds of company arrangement or the prolongation of any administration and, furthermore, since 2 August 2002 steps had been taken and transactions had taken place which required protection.
[9]See s.435A of the Act.
The present case is analogous to “the second kind of case” referred to in Australasian Memory[10], namely, a case in which steps have been taken that are predicated upon[11] the valid termination of the deeds of company arrangement and upon the valid commencement on 2 August 2002 of the winding up of the Companies. In the present case, as in this “second kind of case”, there is no inconsistency between the varied operation of Part 5.3A and the rights that have accrued in the intervening period, if the order gives legal validity to the premise for the parties’ conduct.[12]
[10](2000) 200 CLR 270, 283 at [30].
[11](2000) 200 CLR 270, 283 at [31].
[12](2000) 200 CLR 270, 283 at [31].
Comparably with Australasian Memory,[13] the steps taken by the plaintiffs and by third parties (such as those who have compromised claims against them made by the plaintiffs in their assumed capacity as liquidators) were predicated upon the deeds of company arrangement having been validly terminated and the Companies validly placed into liquidation.
[13](2000) 200 CLR 270, 283 at [32].
In my view the Court has the power under s.447A of the Act to grant the relief claimed by the plaintiffs. The orders sought by the plaintiffs would take effect from the time of their making but would operate, as did the orders in Australasian Memory, to alter the legal effect and status of past matters or events. Specifically the orders made would operate on the event constituted by the expiry of the termination date specified by the deeds of company arrangement as varied.
Given my conclusion that the Court has the power pursuant to s.447A of the Act to grant the relief which the plaintiffs seek, I consider that there is a strong case for granting that relief. As at 2 August 2002 the Companies had no assets and were hopelessly insolvent. The purposes of the deeds of company arrangement had by then wholly failed and their continuation was futile. It was wholly improbable that the creditors or the committee of creditors would have voted for a further extension of the deeds of company arrangement. It was inconceivable that the Companies should be returned to the control of their directors. There was no alternative but to place the Companies into liquidation, at the latest, on 2 August 2002. No other sensible course was available. It was and still is in the interests of the body of unsecured creditors, as a whole, to have the Companies placed into liquidation on 2 August 2002 so that liquidators might pursue such steps as were open to them to recover moneys for the benefit of unsecured creditors whether by proceedings in relation to preferential payments, voidable transactions, insolvent trading or otherwise.
Of course it has been open and still remains open to terminate the deeds pursuant to the express provisions of the deeds with the consequent liquidation of the Companies. If this were done, any liquidators would still be in a position to seek to recover moneys for the benefit of unsecured creditors. However relevant time limits under the Act would prevent attempts to recover preferential payments and possibly other moneys at this stage. This fact, together with potential problems in relation to the fees of the purported liquidators between 2 August 2002 and the date of any such new liquidations appear to be part of the motivation for the present application. Additionally, as I have said, steps have been taken and transactions entered into by the plaintiffs on the assumption by them and the other parties to the transactions that the Companies were in liquidation. It would be contrary to the interests of creditors as a whole and not in the public interest if any of these transactions (in particular compromises of claims) had to be set aside or were threatened by attempts to set them aside. It seems to me that it is just, convenient and in the interests of unsecured creditors that the relief sought by the plaintiffs should be granted. In the light of these matters, this is an appropriate case for the making of an order, of the kind sought, as to how Part 5.3A is to operate in relation to these Companies.
An order will be made that Part 5.3A is to operate in relation to these Companies in such a way as to empower the Court to vary the deeds of company arrangement so as to provide that the said deeds automatically terminated on 2 August 2002 and that the winding up of the Companies commenced on that date and a variation will be ordered accordingly.
As the secondnamed plaintiff no longer wishes to remain as liquidator it will be ordered that he be removed as requested and, for the reasons appearing from the firstnamed plaintiff’s affidavit, leave will be granted to appoint (in addition to the firstnamed plaintiff) Samuel Charles Davies and Colin Macintosh Nicol as liquidators of the Companies and it will be ordered that they be appointed accordingly.
The plaintiffs should produce minutes of proposed orders to accord with these reasons and also (as this is not opposed) covering any of the procedural irregularities referred to in their written submissions in respect of which it is considered that any order is necessary.
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