Re Pilot Advisory Pty Ltd

In the case of Re Pilot Advisory Pty Ltd, the court was presented with an application to set aside a Deed of Company Arrangement (DOCA) under section 445D of the Corporations Act 2001 (Cth). The primary dispute involved the fairness of the DOCA to the plaintiff, Pilot Advisory Pty Ltd, and whether it was in the interests of creditors. The Administrators and Cloud 9 argued that the DOCA should proceed as it was beneficial to the creditors, while Pilot Advisory contended that the arrangement was unfairly prejudicial to it and should be set aside. The court was tasked with determining whether the DOCA met the criteria for unfairness under section 445D(1)(f) of the Act, as well as whether it could be set aside for other reasons under section 445D(1)(g) of the Act.

The court's reasoning focused on the nature and fairness of the DOCA to Pilot Advisory. It examined the distribution of sale proceeds from the sale of Cloud 9's assets and the implications of those distributions on Pilot Advisory's position as a creditor. The court found that the payments made to the shareholders and other persons, including Pilot Advisory, were not equitable and resulted in an unfair prejudice to Pilot Advisory. Furthermore, the court considered the potential for an increased tax refund, which could have significantly altered the financial position of the company and the claims of its creditors, including Pilot Advisory. Ultimately, the court determined that the DOCA was unfairly prejudicial to Pilot Advisory and should be set aside.

The final orders of the court included a mandate for the parties to prepare and submit a set of draft orders to be entered by the close of business on 17 January 2020. These orders were to reflect the findings and reasons provided in the court's decision. The court's ruling underscored the importance of equitable treatment of all creditors in corporate restructuring and highlighted the circumstances under which a DOCA may be deemed unfairly prejudicial and subject to termination.