Surber v Lean

[2000] WASCA 380

SURBER & ANOR -v- LEAN & ORS [2000] WASCA 380

Reported Decision:	(2000) 23 WAR 445
Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2000] WASCA 380
Court:	THE FULL COURT (WA)
Case No:	FUL:126/2000	Heard:	5 OCTOBER 2000
Coram:	MALCOLM CJ KENNEDY J PIDGEON J	Delivered:	1/12/00
No of pages:	35	Judgment Part:	1 of 1
Result:	Appeal dismissed Order that purported variation of deed of company arrangement on 31 May 2000 was void
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Parties:	WILLIAM ELLIS SURBER BILLY-JO SURBER GRAEME TREVOR LEAN PROGOLF PTY LTD (Subject to a Deed of Company Arrangement) (ACN 009 223 698) COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LTD (ACN 074 707 458)
Catchwords:	Corporations Voluntary Administration Arrangements and Reconstructions Deed of company arrangement Resolution of creditors to vary deed Transfer of conduct of litigation from administrator to directors of company Whether consent of administrator required Whether deed a contract between the administrator and the company Application to set aside variations
Legislation:	Corporations Law (Cth), ss 124 - 127, s 129, s 435, s 436A, s 437A, s 437C(1), s 439C, s 444A, s 444B, s 445A, s 445B, s 445F, s 445G, s 446A and s 447D
Case References:	195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193 Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor (1994) 13 ACSR 504 In the Estate of Williams (1984) 36 SASR 423 MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636 Re GIGA Investments Pty Ltd (1995) 17 ASCR 547 Hamilton & Anor v National Australia Bank & Anor (1996) 19 ACSR 647 Knight v FP Special Assets Pty Ltd (1992) 174 CLR 178 Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : SURBER & ANOR -v- LEAN & ORS [2000] WASCA 380 CORAM : MALCOLM CJ

KENNEDY J
PIDGEON J

HEARD : 5 OCTOBER 2000 DELIVERED : 1 DECEMBER 2000 FILE NO/S : FUL 126 of 2000 BETWEEN : WILLIAM ELLIS SURBER

BILLY-JO SURBER
Appellants (Second Defendants)

AND

GRAEME TREVOR LEAN
First Respondent (Plaintiff)

PROGOLF PTY LTD (Subject to a Deed of Company Arrangement) (ACN 009 223 698)
Second Respondent (First Defendant)

COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LTD (ACN 074 707 458)
Third Respondent

Catchwords:

Corporations - Voluntary Administration - Arrangements and Reconstructions - Deed of company arrangement - Resolution of creditors to vary deed - Transfer of conduct of litigation from administrator to directors of company - Whether

(Page 2)

consent of administrator required - Whether deed a contract between the administrator and the company - Application to set aside variations

Legislation:

Corporations Law (Cth), ss 124 - 127, s 129, s 435, s 436A, s 437A, s 437C(1), s 439C, s 444A, s 444B, s 445A, s 445B, s 445F, s 445G, s 446A and s 447D

Result:

Appeal dismissed

Order that purported variation of deed of company arrangement on 31 May 2000 was void

Representation:

Counsel:

Appellants (Second Defendants) : Mr K L Christensen
First Respondent (Plaintiff) : Mr A Metaxas
Second Respondent (First Defendant) : No appearance
Third Respondent : No appearance

Solicitors:

Appellants (Second Defendants) : Tottle Christensen
First Respondent (Plaintiff) : Arthur Metaxas & Co
Second Respondent (First Defendant) : No appearance
Third Respondent : No appearance

Case(s) referred to in judgment(s):

195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193
Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor (1994) 13 ACSR 504
In the Estate of Williams (1984) 36 SASR 423
MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636




(Page 3)

Case(s) also cited:

Re GIGA Investments Pty Ltd (1995) 17 ASCR 547
Hamilton & Anor v National Australia Bank & Anor (1996) 19 ACSR 647
Knight v FP Special Assets Pty Ltd (1992) 174 CLR 178
Milankov Nominees Pty Ltd v Roycol Ltd (1994) 52 FCR 378

(Page 4)

1 MALCOLM CJ: This is an appeal against an order of Master Bredmeyer in Chambers dated 21 July 2000 by which the learned Master ordered that:

(a) the variations to the deed of company arrangement passed at a meeting of the creditors of Progolf Pty Ltd (Subject to a Deed of Company Arrangement) passed on 31 May 2000 are void; and

(b) the appellants pay the first respondent's costs of the application to be taxed,

be set aside and in lieu thereof it be ordered that the application be dismissed with costs. An order is also sought that the first respondent pay the appellants' costs of the application and of the appeal to be taxed without regard to the limits imposed by the Rules of the Supreme Court 1971.

2 The application before the Master was made pursuant to s 445B and s 445G of the Corporations Law ("the Law") to void or vary a deed of company arrangement. The orders sought were as follows:

"1. An order declaring void the amendments to the Deed of Company Arrangement between the applicant and the respondents as passed by the meeting of creditors of the first respondent on 31 May 2000;

2. alternatively, the said Deed of Company Arrangement be varied to include an indemnity to the applicant for his costs including those of any potential liability to the Town of Claremont as may be determined in CIV 1978 of 1997 in terms satisfactory to the applicant and to be secured by bank guarantee;

3. alternatively, the said Deed of Arrangement be declared void and the applicant be appointed liquidator of the first respondent; and

4. an order that the respondents pay the applicant's costs to be taxed."

3 At the commencement of the hearing of the appeal the first respondent, who was the plaintiff at first instance, applied for and was granted without opposition leave to amend the orders sought by inserting an additional par 4 and renumbering the existing par 4 as par 5. The new par 4 is as follows:

(Page 5)

"4. Alternatively, the amendments to the Deed passed on 31 May 2000 be declared void unless within 7 days the second defendants provide to the plaintiff an indemnity secured by Bank Guarantee for the plaintiff's potential liability to the Town of Claremont in CIV 1978 of 1997;"

The amendment was not opposed by the appellants, who were the second defendants below. Neither the second respondent nor the third respondent appeared on the appeal.

4 Section 445B of the Law provides that where a deed of company arrangement is varied under s 445A, a creditor of the company may apply to the Court for an order cancelling the variation. The first respondent is the administrator under a deed of company arrangement and was held by the learned Master to be a creditor of the company on the basis that he was owed fees of approximately $76,000. Section 445G provides that:

"(1) Where there is doubt, on a specific ground, whether a deed of company arrangement was entered into in accordance with this Part or complies with this Part, the administrator of the deed, a member or creditor of the company, or the Commission, may apply to the court for an order under this section.

(2) On an application the court may make an order declaring the deed or a provision of it to be void or not to be void as the case requires on the ground specified in the application or some other ground.

(3) On an application the court may declare the deed, or a provision of it, to be valid, despite a contravention of a provision of this Part, if the court is satisfied that:


(a) the provision was substantially complied with; and

(b) no injustice will result for anyone bound by the deed if the contravention is disregarded.


(4) Where the court declares a provision of a deed of company arrangement to be void, the court may by order vary the deed, but only with the consent of the deed's administrator."

(Page 6)

5 The issues raised by the appeal are, first, whether the provisions of Pt 5.3A of the Law require an administrator of a deed of company arrangement to consent to any variation of that deed made pursuant to s 445A of the Law as a condition that such variation be effective. Secondly, whether a deed of company arrangement is a contract between the company subject to the deed and the administrator of that deed or otherwise. Thirdly, whether the first respondent had standing to bring the application as a creditor of the company under s 445B of the Law. Fourthly, whether, in the absence of any admissible evidence of prejudice to the first respondent arising from the variations to the deed of company arrangement, such variations should have been held to be effective in law. Fifthly, whether this is a case in which the Court should declare any provision of the deed to be void and vary the deed with the consent of the administrator.

6 On 20 July 1998 the company resolved that, in the opinion of each director voting for the resolution, the company was insolvent, or was likely to become insolvent at some future time, and an administrator of the company should be appointed pursuant to s436A of the Law. On the same date the company appointed the first respondent as administrator. On 14 October 1998 the creditors of the company resolved pursuant to s439C(a) of the Law that the company execute a deed of company arrangement. By s 444A(2) of the Law the first respondent was required to accept appointment as administrator of the deed, as the creditors did not appoint anyone else to be administrator of the deed. The first respondent consented to be such administrator.

7 The deed, which was prepared by the first respondent in his capacity as administrator of the deed in accordance with s 444A(2), was duly executed and is dated 4 November 1998. The parties to the deed, as originally drawn, were the first respondent as the deed administrator, the company and the appellants, who were both directors of the company. The deed provides that the first respondent (in his capacity as administrator of the deed) is to prosecute the company's claim for damages against the Town of Claremont. That action is pending in this Court, action number CIV 1978 of 1997, the trial of which is due to commence on 4 December 2000. By cl 3.4 of the deed, the first respondent is empowered to settle the action at any time, provided he acts in good faith. The appellants agreed to advance to the company a loan of an amount sufficient to pay the costs of prosecuting the action. They had advanced $180,000 for that purpose to the date of the hearing before the learned Master.

(Page 7)

8 By a later deed, undated but made in or about January 1999, the parties to the deed and the Commonwealth Development Bank agreed to vary the deed to the extent that the Bank was made a party. The learned Master noted that the details of the latter deed of variation were not relevant to the present matter, except that it was noted that it was signed by the first respondent and the company. It was assumed that it or a counterpart of it (as provided in cl 25 of the later deed) provided that it may be executed in any number of counterparts. The learned Master further assumed that the appellants and the Bank signed a separate counterpart or counterparts.

9 The position when the application was heard by the learned Master was that the first respondent had prosecuted the action to the point where it had been entered for trial. At that time the trial of a preliminary issue on the pleadings had been set for 2 August 2000. The solicitors for the company in the action, Pye & Quartermaine, were appointed for that purpose prior to the appointment of the first respondent as administrator under the deed.

10 It appears that the first respondent and the appellants have fallen out. As recorded by Master Bredmeyer, the first respondent's concerns were as to the sufficiency of the pre-trial preparation of the action; the sufficiency of expert evidence proposed to be adduced at the trial; a lack of co-operation on the part of the solicitors for the company; and concern on the part of the administrator about his potential liability for costs, should the action be dismissed. In his affidavit sworn on 8 June 2000 the administrator says that:

"4. Prior to and since my appointment as Administrator for the Deed of Company Arrangement the first respondent has retained Pye & Quartermaine as solicitors to act for the Company in the prosecution of a claim against the Town of Claremont in this Honourable Court ('the Claim'). The Claim has proceeded to the stage where it has been entered for hearing, trial dates are expected to be in the next four months. The second respondents have made the loan as defined in the Deed of Company Arrangement and on or about 7 June 2000 paid a further $80,000 to Pye & Quartermaine to cover the anticipated costs of going to trial.

5. Mr R H Pringle QC of counsel has been retained to act for the Company in the Claim.

(Page 8)

6. Apart from the Claim the first respondent as at 4 November 1998 had no other assets save for some minor items of plant and equipment charged to the third respondent. That plant was sold and the third respondent received the proceeds of sale.

7. In the course of preparation of the Claim for hearing, I have been dissatisfied with proposed expert evidence provided by Arthur Andersen, the firstnamed second respondent's delay in providing a proof of this evidence for the trial as he is the critical witness and I have concerns as to the merits of the damages claim which is being pursued for approximately $2.2 million.

8. I have also conveyed to Pye & Quartermaine my concerns as to the lack of any proposed witness with expertise in golf course management and who has first hand knowledge of patronage levels and an understanding of issues relevant to marketing.

9. Pye & Quartermaine acted as solicitors for the first and second respondents for a number of years prior to my appointment and by reason of that relationship were prepared to act for the first respondent in prosecution of the Claim. Prior to the 31 May 2000 I was of the view that Pye & Quartermaine were treating the second respondents and not me as their client."

11 In support of this assertion, the first respondent refers to a copy facsimile from Minter Ellison, solicitors, to Pye & Quartermaine dated 18 May 2000. This states that:

"We refer to your facsimile dated 19 April 2000 in relation to our request for your clients to provide further discovery. Your client is taking an extremely narrow view of the pleadings which, in our view, is unreasonable.

We have requested documents that are relevant to the matters in dispute as detailed in our letter to you dated 11 April 2000.

Given your client's attitude in relation to the pleadings, it will be necessary for our client to amend its pleadings to clarify those issues which you do not believe are currently in issue on the

(Page 9)

pleadings, such as your client's overall care of the entire area of the golf course.

We also note that in your letter dated 19 April 2000, you said that you are still considering whether or not two further expert reports need to be produced one of which will be directed to the estimate of player numbers on which your client's expert relies. Given that the assumption as to player numbers is crucial in terms of any finding as to quantum (based on the latest expert report your client has served), your decision on this matter is not one you can reasonably state is minor.

On 19 November 1999, the court made orders requiring you to enter this matter for trial. These orders were made predominately [sic] due to suggestions to the court that your clients were desirous of having this matter determined at the earliest possible date as a result of financial detriment being suffered by them. On that occasion, the plaintiff was ordered to provide all expert reports no later than 24 January 2000. It is now mid May 2000 and we are still to be advised as to whether the plaintiff intends to provide further expert reports.

Because of your client's attitude in relation to further discovery, and given the delay in the provision of expert reports, we are now applying to countermand your clients' entry for trial. A copy of this application will be served on you shortly.

This letter is provided for the purposes of Order 59 Rule 9 of the Supreme Court Rules."

12 As to this document (referred to as "GTL3") the first respondent says in par 9 of his affidavit:

"Prior to my receipt of 'GTL3' I was not informed by Pye & Quartermaine that there was any default by the first respondent with directions made by the Court for prosecution of the Claim. Furthermore, in about mid-March 2000 I arranged to meet with Gavin Buckingham of Arthur Andersen to discuss with him his proposed expert report and my concerns as to its adequacy. I went to the office of Arthur Andersen at the appointed time and date. I waited for 30 to 45 minutes before Mr Buckingham telephoned me from out of the office. He said to me words to the effect that:

(Page 10)

9.1 he was not going to be interviewed or cross-examined by me;

9.2 he was taking instructions from Pye & Quartermaine and not from me.

Arthur Andersen have been accountants to the first respondent since the company's incorporation so far as I am aware. Annexed hereto and marked 'GTL4' is a copy of Pye & Quartermaine's letter to me dated 17 March 2000."

13 The letter from Pye & Quartermaine to the first respondent dated 17 March 2000 was as follows:

"Thank you for your facsimile of today's date.

We note your agreement with regard to the conservative and united approach to the Bank.

As to the concerns raised in your facsimile the following points may assist:

1. The majority of the losses in the company are capital losses rather than trading losses. They relate particularly to a number of ventures commencing in 1987 and have nothing to do with the Lake Claremont Golf Course or to Bill Surber's management of other courses such as Bayswater.

2. It was the proposed improvement in the course rather than Mr Surber (as an individual or a manager) which was the key factor anticipated to attract golfers. As you are aware the number of golfers using the Course (or expected to use) is a key criteria used for a calculation of damages.

3. Gavin Buckingham is not acting as an expert in relation to golf courses. He is an expert providing an opinion as to losses/damages based on factual criteria and assumptions as suggested by Counsel.

4. See comment as to 3 above. Note that this aspect, where in dispute, will be covered by evidence by Bill Surber and from Dr Riggert.

(Page 11)

5. We note your comments. The Town has little option but to either defend or settle. You are already in receipt of a copy of its defence as pleaded. We will provide any updates or amendments to you when the same are served upon us and become available. It is of interest that many of their denials can be factually demonstrated in documents discovered by them to be incorrect.

During a telephone conversation with Gavin Buckingham this morning, he mentioned to the writer that you were wishing to 'interrogate him' in relation to his report. His only concern as to this course of action would be the running up of additional costs. However, he stated that you were quizzing him in relation to factual and legal issues rather than in relation to his function as a [sic] expert. It is proper for him to limit his responses to his area of expertise.

It is to be noted that the final report from Arthur Andersen is anticipated to be somewhat different to the preliminary report, deleting certain information, and containing new data, assumptions and information. A draft of the same should be available either late today or early Monday. Under the circumstances it seems inappropriate for there to be a meeting with Gavin Buckingham prior to our meeting with the Bank. The time to so consider the report in detail surely is following it being checked, commented upon and finalised.

We agree that 'the real fight' is with the Town and that no disputes or personal interests should be allowed to intrude such as to interfere with or risk the conduct of the case. For example, the question of your possible exposure as to costs is not a matter to now be discussed with the Bank."

14 On 31 May 2000 the first respondent convened a meeting of creditors at the request of the appellants. The creditors resolved to amend the deed in the terms of the resolution set out in the notice convening the meeting. The first respondent spoke against the resolution but did not vote on it. The resolution was in the following terms:

"5A Conduct of Action

5A.1 The directors shall have the conduct of the Action on behalf of the company.

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5A.2 Clause 5a[sic].1 is subject to:

5A.2.1 the directors causing the prosecution of the Action with due expedition and diligence.

5A.2.2 the directors shall not settle, compromise or discontinue the Action without the consent of the Administrator, which consent shall not be unreasonably withheld.

5A.2.3 the directors shall cause and so instruct the company's solicitors to, as reasonably possible provide, deliver or otherwise communicate, as the case may be, to the Administrator and the secured creditor:


5A.2.3.1 any offer to settle or compromise the Action

5A.2.3.2 any advice given in respect to the prosecution of the Action

5A2.3.3 copies of all accounts incurred in the prosecution of the Action or any agreement in respect to the fees or expenses of the Action.


5A.3 the directors shall provide or cause the company's solicitors to provide a report every month as to the progress of the Action to the Administrator and the Secured Creditor."

15 In the result, the learned Master declared that the variation to the deed adopted at the meeting of creditors on 31 May 2000 was void, but was not prepared to give any other relief save as to costs.

16 The grounds of appeal from that decision, as amended at the hearing, are as follows:

"1. The learned Master erred in law in holding that Pt 5.3A of the Corporations Law requires an administrator of a deed of company arrangement to consent to any variation of that deed made pursuant to section 445A of the Corporations Law as a condition that such variation be effective.

2. The learned Master erred in law in holding that a deed of company arrangement is a contract between the company subject to that deed and the administrator of that deed.

(Page 13)

2A. The First Respondent (Plaintiff) lacked standing to bring the application, to the extent that reliance was placed upon section 445B of the Corporations Law, in that the First Respondent (Plaintiff) was not a creditor of the Second Respondent (First Defendant).

3. The learned Master should have held, in the absence of any admissible evidence of prejudice to the First Respondent (Plaintiff) arising from the variations to the deed of company arrangement approved at the meeting of creditors of the Second Respondent (First Defendant) held on 31 May 2000, that those variations were effective in law, and dismissed the application."

17 At the hearing of the appeal, an application was made on the part of the first respondent to amend the application by the first respondent so that the relief claimed included, as a third alternative to the order declaring the amendments to the deed void, that:

"3A Alternatively, the amendments to the Deed passed on 31 May 2000 be declared void unless within 7 days the [appellants] provide to the [first respondent] an indemnity secured by Bank Guarantee for the [first respondent's] potential liability to the Town of Claremont in CIV 1978 of 1997."

The application was not opposed and the amendment duly made.

18 Section 444B in Pt 5.3A of the Law makes provision for the creditors to resolve that a company enter into a deed of company arrangement and for the appointment of an administrator of the deed. There is a distinction between "the administrator of the company" and "the administrator of the deed": see s 444A(2) which provides that:

"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."

19 Section 444A(3) requires the administrator of the deed to prepare an instrument setting out the terms of the deed. The "administrator" in this context is the person who is appointed the administrator of the deed, who may not necessarily be the administrator of the company. In this case, they were one and the same person, but the two capacities are different. Section 444B(2) requires the company to execute "the instrument" (ie the deed) within 21 days of the end of the meeting of creditors. The company

(Page 14)

may, by resolution, authorise the instrument to be executed by or on behalf of the company: s 444B(3). It is provided in s 444B(4) that subs (3) has effect despite s 437C, but does not limit the functions and powers of the administrator of the company. Section 437C(1) provides that:

"While a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise a function or power as an officer of the company, except with the administrator's written approval."

20 It should be noted that s 437C(1) only operates while a company is under administration. Section 435C provides when the administration of a company begins and ends as follows:

"The administration of a company:

(a) begins when an administrator of the company is appointed under section 436A, 436B or 436C; and

(b) ends on the happening of whichever event of a kind referred to in subsection (2) or (3) happens first after the administration begins."

21 Thus, the administration will end when a deed of company arrangement is executed by both the company and the deed's administrator. It follows from s 437A(1) that the administrator of the company has the power to execute the deed on behalf of the company. It also follows from s 444C(1) that the directors of the company may be authorised by a resolution of the company to execute the deed of company arrangement. The result is that the deed may be executed on behalf of the company either by the administrator of the company or by persons authorised by or as a consequence of the company adopting the necessary resolution.

22 Section 444B(5) provides that the administrator of the deed must execute the instrument before or as soon as practicable after the company executes it. Section 444B(6) provides that the company must execute the deed and that, when both the company and the deed's administrator have executed it, the instrument becomes a deed of company arrangement.

23 In MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636 the High Court held that Pt 5.3A of the Law as it stood at the

(Page 15)

material time in 1994 did not require a deed of company arrangement to be executed as a deed. It was also held that a deed of company arrangement may be executed by the company in any way in which any other instrument or agreement, not under seal, might be executed.

24 At the time of the relevant events in MYT Engineering s 182(1), (2) and (7) of the Law provided that:

"(1) So far as the formalities of making, varying or discharging a contract, a person acting under the express or implied authority of a company may make, vary or discharge a contract in the name of, or on behalf of, the company in the same manner as if that contract were made, varied or discharged by a natural person."

"(2) The making, variation or discharging of a contract in accordance with subsection (1) is effectual in law and binds the company and other parties to the contract …"

"(7) A document or proceeding requiring authentication by a company may be authenticated by the signature of an officer of the company and need not be authenticated under the common seal of the company."

25 The High Court held that Pt 5.3A of the Law did not require a deed of company arrangement to be executed as a deed. It could be executed by the company in any way in which any other instrument, not under seal, might be executed. It was also held that, if a deed of company arrangement were to be treated as a contract of a kind dealt with in s 182(1) of the Law (which was not decided), its execution by fixing the common seal and attestation by an officer of the company authorised to do so amounted to execution by the company, notwithstanding that the document was not sealed in accordance with its articles of association. If, however, a deed of company arrangement was not simply a contract, it was a document (and perhaps also a proceeding) to which s 182(7) applied: 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193.

26 Section 124(1) of the Law as it now stands provides that "a company has the legal capacity and powers of an individual both inside and outside this jurisdiction." It is also provided in the same subsection that a company also has all the powers of a body corporate, "including" those expressly enumerated in the subsection. Section 126 provides that:

(Page 16)

"(1) A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company. The power may be exercised without using a common seal.

(2) This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract."

27 Section 127 provides that:

"(1) A company may execute a document without using a common seal if the document is signed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary - that director.

(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary - that director.

(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

(4) This section does not limit the ways in which a company may execute a document (including a deed)."

28 Section 129(6) provides that

"A person may assume that a document has been duly executed by the company if:

(Page 17)

(a) the company's common seal appears to have been fixed to the document in accordance with subsection 127(2); and

(b) the fixing of the common seal appears to have been witnessed in accordance with that subsection.

For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices."

Grounds 1 and 2: Consent of the administrator: Whether deed of arrangement a contract

29 As to ground 1 of the grounds of appeal, the learned Master held that Pt 5.3A of the Law required an administrator of a deed of company arrangement to consent to any variation of the deed made pursuant to s 445A of the Law as a condition that such variation be effective. The learned Master's conclusion was based partly on a conclusion that such a deed was at least a contract between the company and the administrator of the deed. This raises the first two issues to which I have referred.

30 Section 445A provides that:

"A deed of company arrangement may be varied by a resolution passed at a meeting of the company's creditors convened under section 445F, but only if the variation is not materially different from a proposed variation set out in the notice of the meeting."

31 The resolution passed by the creditors on 31 May 2000 was adopted under s 445A notwithstanding the opposition of the administrator. No deed or other document of variation of the deed of arrangement had been executed by the first respondent as administrator of the deed, or the appellants. As to this the learned Master said:

"A deed of company administration [sic arrangement] is at the very least a contract between the administrator and the company. Section 444B(5) provides that the administrator of the deed must execute the instrument before or as soon as practicable after the company executes it. Section 444B(6) provides that the company must execute the deed and that when both the company and the deed's administrator have executed it, the instrument becomes a deed of company arrangement. The

(Page 18)

High Court in MYT Engineering Pty Ltd & Ors v Mulcon Pty Ltd (1999) 195 CLR 636 held that the deed of company arrangement need not be executed under seal. The deed of company arrangement is a special instrument in that it is binding on the creditors, although not signed by them. Section 444B(1) provides that it is binding on all creditors of the company. Section 444B(2) and (3) places secured creditors and owners and lessors of property in a special position."

There was no criticism or attack on this passage in the learned Master's reasons.

32 The appellants' contention before the Master was that the variation was good and effective without the necessity for any deed or agreement to be signed by anyone. As to this the learned Master said:

"Section 445A, unlike s 444B(5), does not provide that the administrator must execute the varied deed. The [appellants] argue that the legislation is clearly different in its execution requirements for a deed of company arrangement and for a variation of that deed. The [appellants] say that if the position of the deed administrator has been weakened or unduly burdened by the variation, he can resign, or he can apply under s 445G to the court for an order setting aside the variation, or if he is a creditor, can apply under s 445B to have a variation cancelled."

33 The "administrator" referred to in this passage is clearly a reference to the administrator of the deed. While the administrator of the company is one of the persons who may execute the deed of company arrangement on behalf of the company, he ceases thereafter to have any role in the capacity of administrator of the company. That role ceases upon the execution of the deed because that event brings the administration of the company in that capacity to an end. That role passes to the administrator of the deed.

34 By s 444D(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 444(4)(i)". The effect of s 444E is that until a deed of company arrangement terminates, a person bound by the deed cannot make an application to wind up the company or proceed with an application to wind up made before the deed became binding, and such a person cannot begin or proceed with a proceeding against the company, or in relation to its property; or begin or proceed with any

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enforcement process in relation to property of the company; except with the leave of the Court; and in accordance with such terms (if any) as the Court thinks fit to impose.

35 Section 444G provides that a deed of company arrangement also binds the company; its officers and members; and the deed's administrator. It is important to keep in mind that the "administrator of the company" and the "administrator of the deed" are two different capacities. If, as in this case, the administrator of the company is appointed administrator of the deed, this has the effect that the administration of the company is brought to an end, so that the appointment of the first respondent as administrator of the company would be terminated upon the deed of arrangement having been executed by all parties.

36 It is against this background that the issues raised in the appeal fall to be decided. Counsel for the appellants submitted that there was no provision in Part 5.3A of the Law which expressly requires the administrator of a deed to consent to any variation. That submission overlooks the express reference to the consent of the administrator being required to a variation by the Court under s 444G(4). This in turn is consistent with the contractual nature of the deed. It was submitted, however, that s 445A vests the power to vary a deed in the general body of creditors alone, and the absence of a requirement for the administrator to consent to the variation is a strong indication that the legislation did not intend the administrator of a deed to have, in effect, a power to veto the wishes of the creditors. It was contended that this construction of the Law was supported by the express limitation in s 445B(1) of standing to apply for cancellation to "a creditor of the company". There is some force in these submissions, but they do not address the question whether a deed of company arrangement constitutes at the least a contract between the administrator of the deed, the company and the creditors.

37 As to the issues raised by grounds 1 and 2 of the appeal whether the consent of the administrator of the deed was required to the variation, the learned Master expressed his conclusions in the following passage:

"12 I consider the defendants have an argument that a variation is achieved by a resolution duly passed at a meeting of the company's creditors and does not require the execution or consent of the administrator because no express provision is made in s 445A or elsewhere for that execution or consent. However, I consider the argument

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is outweighed by three contrary arguments. I note that there is no decided case on this point. Firstly, s 445A is headed 'Variation of Deed by Creditors'. On first principles, to give words their natural and ordinary meaning, if a deed is to be varied there needs to be an instrument called a variation of deed to be executed by the relevant parties. (The relevant parties here are the same parties who signed the initial deed of company arrangement, ie the administrator, the company and the directors.) Or, the original deed could be amended in handwriting and those amendments initialled by the parties. Secondly, the resolution varying the deed under s 445A could affect adversely the powers and rights of the deed administrator. If his signature is required on a deed of variation, he can reject those amendments by refusing to sign. If his signature is not required he is stuck with them. It is not a satisfactory answer to that to say that he can resign. Yes he can resign as administrator, but that is for all purposes. In other words by resigning he loses his rights and obligations under the deed of company arrangement, in this case the deed signed on 4 November 1998. As in this case, he may be happy with that deed but opposed to the variation of that deed. I consider it only fair that an administrator should not have new burdens or liabilities thrust upon him by a creditor's meeting without his consent.

13 Thirdly, I consider there is a legislative hint which supports my interpretation that the consent of the deed's administrator is essential to an effective variation of the deed. I have quoted above the whole of s 445G - one of the two sections under which this application is brought. In summary it provides that, where there is doubt on a specific ground whether a deed of company arrangement was entered into in accordance with Pt 5.3A of the Corporations Law, the administrator or a creditor (among others) may apply to the court for an order under this section. The court may declare the deed void or valid, and by subs (4), where the court declares part only of the deed to be void, it may by order vary the deed. It may, as it were, delete the invalid or void provision in the deed but retain the rest. But by subs (4) it can only vary the

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deed in this way with the consent of the deed's administrator. Clearly, by subs (4), the court is not able to affect the position of the deed's administrator in any way, without his consent.

14 I consider the [first respondent's] argument on this point is correct. I consider the variation of the deed of company arrangement under s 445A requires the administrator's consent. Whether that consent is shown by execution of a deed of variation or whether it is simply expressed in writing, I leave open. But I consider his consent is required. I consider that this administrator is affected adversely by the variation passed at the meeting of 31 May 2000. He has some say in the action but has lost total control of it. He has an indemnity for his fees under cl 16 of the deed of company arrangement from the assets of the company. That indemnity is not altered by the variation. But the directors may wish to prosecute the action when he wishes to settle it. If the company loses the action and the costs exceed the funds advanced by the directors, he will have to foot the bill. I will declare that the variation to the deed of company arrangement passed at a meeting of the creditors on 31 May 2000 is void. I am not willing to give any other relief save as to costs. I will hear the parties on costs."

38 It was submitted on behalf of the appellants that it was significant that in relation to a variation there was no provision in s 445A equivalent to that contained in s 444A(3), which requires the administrator of the deed to prepare an instrument setting out the terms of the deed. It was also submitted that the learned Master was wrong to take the view that a deed of company arrangement is simply a contract, with the result that the normal contractual rule would apply, so that all parties to the contract would be required to agree to the variation. Section 445A provides that a deed of company arrangement may be varied by resolution passed at a meeting of the company's creditors convened under s 445F, but only if the variation is not materially different from the proposed variation set out in the notice of the meeting. The latter qualification has no application in the present case. There is no express requirement in the law that the administrator assent.

39 Where creditors resolve that the company execute a deed of company arrangement under s 444A(1), s 444A(2) provides that the administrator is

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to be the administrator of the deed, unless the creditors appoint someone else to be the administrator of the deed.

40 The appellants' contention was that "absent proper objective reasons" an administrator owes a duty to the general body of creditors and should not act primarily to promote his own interests over those of the creditors. Further, it was said that the provisions of the Law provide adequate protection where a variation of a deed may offend proper principles and objects as enunciated in the Law: see s 445B and s 445G. Consequently, if a variation is considered "unfair" it can be dealt with by the Court, rather than by the administrator. It was submitted that the same can be said of a deed of company arrangement, where an administrator must prepare a deed by virtue of s 444A(3) and must also himself execute the deed by virtue of s 444B(5). This is so even if the administrator disagreed with the resolution. If the administrator wishes to pursue the matter, it would be necessary to invoke s 445D and s 445G.

41 Given that the administrator is a necessary party to the deed and, on the face of it, the deed constitutes a contract between the company and the administrator, it would seem, on general principles, to be necessarily implied that the administrator would have to agree to the variation, if not execute an instrument of variation. It seems, however, that the use of the word "deed" in this context is not a reference to a "deed" as that term is understood at common law. The nature of a deed of company arrangement was considered by the majority (Gleeson CJ, Gaudron, Gummow and Hayne JJ) in MYT Engineering at 643 - 645. Their Honours noted that s 444B(2) speaks of a company "execute[ing] the instrument" prepared by the administrator which was required to set out the terms of the deed (s 444A(3)) and must specify the matters identified in s 444A(4). Reference was made to what was said in a different context by King CJ (In the Estate of Williams (1984) 36 SASR 423 at 425), namely, "[t]o execute a document is to do what the law requires to be done to give validity to the document". Their Honours then said in MYT Engineering at 643:

"It follows that what is meant by a company 'executing' the instrument depends, in part, upon whether the instrument must be executed as a deed. If it must, it may then be … that the instrument must be executed under seal … or, if executed by an agent, that authority to execute the instrument must be given by instrument under seal (Harrison v Jackson (1797) 7 TR 207 [101 ER 935]; Berkeley v Hardy (1826) 5 B&C 355 [108 ER 132])."

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Their Honours also noted at 643 - 644 that the dictionary to the law refers to both "deed" and to "deed of company arrangement": s 9. At the time MYT Engineering was decided, s 9 of the law provided, as it does now, that, unless the contrary intention appears, the former "includes an instrument having the effect of a deed" and the latter means "a deed of company arrangement executed under Pt 5.3A or such a deed as varied and in force from time to time". It was further pointed out that although Pt 5.3A sometimes refers to the "instrument" (eg, s 444A(3), (4), (5); s 444B(1), (2), (3), (5), (6)) or the "deed" (eg, s 444A(2), (3)), the expression "deed of company arrangement" is used more frequently in the Part than are the other words mentioned - especially in Div 10 of Pt 5.3A, which deals with the execution and effect of a deed of company arrangement, and Div 11, which deals with variation, termination and avoidance of a deed of company arrangement.

42 Their Honours specifically pointed out at 644 that:

"Nowhere does the law state explicitly that the instrument must be executed and delivered as a deed or that it is, or is to take effect as a deed (as opposed to a 'deed of company arrangement')."

43 This was contrasted with the relevant provisions of s 213(2) in Pt X of the Bankruptcy Act 1966 (Cth). There is no provision that an instrument not under seal, which if it had been under seal would have been a deed of arrangement, is void. A "deed of arrangement" is defined in the Bankruptcy Act, s 187(1) as "a deed … providing for the arrangement of the affairs of the debtor". A "deed of assignment" is defined as a "deed by which a debtor assigns all his or her divisible property". The Law, however, defines a deed of company arrangement as "a deed of company arrangement executed under Pt 5.3A" rather than as a "deed" having certain characteristics or effects. Their Honours also pointed out at 644 that the use of the term "deed of company arrangement" was an allusion to the earlier forms of arrangement made on the insolvency of individuals. While called "deeds of arrangement" they were not always made by deed: cf Deeds of Arrangement Act 1887 (UK). Section 4(2) of that Act, which provided for registration of deeds of arrangement, covered instruments that effected any of several kinds of arrangement with creditors, whether or not they were under seal. This usage was adopted in the first Commonwealth bankruptcy legislation, the Bankruptcy Act 1924 (Cth), s 190(2) as well as in earlier colonial bankruptcy legislation, such as the Insolvency Act 1915 (Vict), s 252(2).
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44 The majority in the High Court in MYT Engineering concluded at 644 - 645:

"In the light of this history, we do not consider that any inference can be drawn from the use of the word 'deed' in the expression 'deed of company arrangement'. When Pt 5.3A is read as a whole, its provisions do not require that a deed of company arrangement should be executed as a deed."

45 It follows that, to the extent that the learned Master regarded the deed of company arrangement as subject to variation in the same way as a "deed" properly so-called, this was incorrect. A deed of variation was not required. As the original deed could be executed by or on behalf of the company or the administrator in the same way as a simple contract, it follows that a variation required no greater formality.

46 While there is no express provision for the administrator to become a party to or consent to the variation of a deed of company arrangement, it was contended on behalf of the respondent such a requirement is necessarily to be implied.

47 In MYT Engineering at 645 the majority said:

"When an administrator is appointed to a company (usually following the board of the company resolving that the company is, or is likely to become, insolvent and that an administrator should be appointed [s 436A(1)] the administrator takes control of the company's business, property and affairs (s 437A(1)) and the powers of the officers of the company are suspended (s 437C(1)). …

As we have already noted, once the creditors of a company under administration resolve that the company execute a deed of company arrangement, the company must do that within the time limited under s 444B(2). But who is to effect that execution? Must execution be done by the administrator acting for the company, or (with the administrator's written approval) by officers of the company exercising some function or power ordinarily confided to them, or by someone appointed under s 444D(3)?

Section 444B(4) provides that subs (3) (the provision permitting the 'board of the company … by resolution [to] authorise the instrument to be executed by or on behalf of the company') 'has

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effect despite s 437C, but does not limit the functions and powers of the administrator of the company'. Does this express reference to s 437C mean that the only permissible means of execution of the instrument by the company are the three we have identified: by the administrator, or by officers of the company acting with the written authority of the administrator, or by the means contemplated in s 444B(3), that is pursuant to authority conferred by resolution of the board?

A company can make a deed of company arrangement only while it is in administration. By requiring that 'the company' execute the instrument, which upon execution by both the company and the administrator becomes a deed of company arrangement, Pt 5.3A requires a visible expression of the company's assent to the terms that are recorded in the instrument. Further, by providing that the instrument becomes a deed of company arrangement when executed by both the company and the administrator, the legislation reveals an intention that the company's transition from being subject to administration to being subject to a deed of company arrangement should not depend exclusively on the wish of the creditors and the assent of the administrator. And indeed the provision in s 446A(1)(b) for what is to happen if the company contravenes s 444B(2) and does not execute the instrument within time (coupled with the explicit reference to the consequence in s 444B(7)) can only reinforce that conclusion. Of course, s 444B(4) and its express reference to s 437C can be said to suggest the contrary view, but the other considerations we have mentioned are, in our opinion, of greater weight. That is not to say that the company's assent to the instrument could not be expressed in any of the three ways we identified earlier; it could. But we do not accept that those are the only ways in which the company can execute the instrument prepared by the administrator. To hold that they are would reduce the company's execution of the instrument to a mere matter of form."

48 Section 446A(1)(b) provides that:

"(1) This section applies if:

…

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(b) a company under administration contravenes subsection 444B(2) at a particular time …"

49 In that event, s 446A(2) provides that the company is taken:

(a) to have passed at the time of the contravention a special resolution under s 491 that the company be wound up voluntarily; and

(b) to have done so without a declaration having been made and lodged under s 494.

50 Section 444B(2) provides for the company to execute the deed of company arrangement proposed under s 444A within 21 days after the end of the meeting of creditors, or such further period as the Court allows on an application made within those 21 days. Section 444B(7) provides that:

"Division 12 provides for consequences of the company contravening subsection (2)."

51 It is in this context that s 444B(3) provides that:

"The board of the company may, by resolution, authorise the instrument to be executed by or on behalf of the company."

52 Section 444B(4) provides that:

"Subsection (3) has effect despite section 437C, but does not limit the functions and powers of the administrator of the company."

53 It follows that the company may execute the deed by a person authorised by resolution of the company signing it or by the administrator of the company signing it in that capacity.

54 It follows from the reasoning of the High Court in MYT Engineering that the requirements at common law relating to the variation of a "deed" properly so-called do not necessarily apply to a deed of company arrangement. Consequently, the learned Master was in error in applying the common law principle that "if a deed is to be varied there needs to be an instrument called a variation of deed to be executed by the relevant parties". These were the administrator, the company and the directors.

55 In my opinion, however, once the company is under administration, the administrator takes control of the company's business, property and affairs by virtue of s 437A(1) and the powers of the officers of the company are suspended. As has been seen, s 437C(1) provides that no

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person other than the administrator can perform or exercise or purport to perform or exercise a function or power "as an officer of the company", except with the administrator's written approval: s 437C(1). However, as has already been seen, the effect of the execution of the deed of company arrangement by the company and the administrator of the deed is that it brings the administration of the company by the administrator of the company to an end. One consequence of this is that s 437C(1) ceases to apply because it only applies "while a company is under administration …".

56 At the same time, however, it would seem that whatever else it may be, a deed of company arrangement is a contract between the company and the administrator of the deed. The creditors may appoint someone else to be the administrator of the deed, but otherwise, as has also been seen, s 444A(2) provides that the administrator of the company is to be the administrator of the deed. The contractual basis of the relationship between the company and the administrator of the deed is entirely consistent with the statement by the majority in MYT Engineering at 645 that the intention of the legislation in Pt 5.3A is that the transition from administration to being subject to a deed of company arrangement "should not depend exclusively on the wish of the creditors and the assent of the administrator".

57 If, for example, the variation purported to alter the terms and conditions upon which the administrator of the deed had been appointed, it would seem necessarily to be implied that the administrator would need to be a party to the variation of the deed. In other words, his agreement would be required. In the present case, the variation has the effect of purporting to vest in the directors the powers of the administrator of the deed in relation to the prosecution of the action, although the directors may not settle, compromise or discontinue the action, without the consent of the administrator, whose consent is not to be "unreasonably withheld". The right of action is virtually the only asset of the company.

58 In the present case, the administrator opposed the amendments at the meeting of creditors and it was contended on his behalf that the variations were not valid without his consent.

59 It was submitted on behalf of the appellants that the variation was entirely in the hands of the creditors. It was also submitted, however, that there is no requirement that the variation be recorded in any instrument other than the record of the creditors' assent to their resolution. Finally, it was contended that there was no requirement either that the variation be

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recorded in an instrument, or that the administrator of the deed consent to the variation. Consequently, s 444A and s 444B only apply where, at a meeting convened under s 439A [as distinct from s 445A] it was resolved that the company execute a deed. The power to vary is conferred by s 445F, not s 439A. It was contended that, if the variation was to be recorded by deed of variation or the consent of the administrator was required, a provision would have been included to that effect. It is noted, however, that in s 445G(4), where the court declares a provision of a deed of company arrangement to be void, the court may by order vary the deed, but only with the consent of the deed's administrator.

60 In my opinion, on the face of it, given that the administrator of the deed is a party to the deed in his own right and, following the original execution of the deed, is the person in whom is vested all of the powers of the company, it would appear to be for this reason that the learned Master considered that a deed of company arrangement was at the very least a contract between the administrator and the company. As the majority said in MYT Engineering at par 25 at p 649:

"It may be, however, that the deed of company arrangement is not simply a contract. 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. (The only essential parties to a deed of company arrangement are the company and the deed administrator (s 444B(6).)"

61 In my view, this passage clearly recognises that a deed of company arrangement is at least a contract between the administrator and the company, as the learned Master concluded. It is true that their Honours went on to say in par 26 at 649 that:

"If, then, a deed of company arrangement is not a contract of a kind dealt with in s 182(1) (and we need not decide that question) the provisions of s 182(7) apply. That sub-section deals with a document or proceeding requiring authentication by a company 'and finds its origin in provisions that deal with the authentication' of registers or summonses and other legal process. Section 182(7) of the Law (as it was in force at the time of these events) also applied to such documents, but it was not limited to such documents."

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62 Their Honours went on to hold at 651 that the signature of a director duly authorised for that purpose:

"… authenticated the document on behalf of MYT. The signature of the third appellant gave legal effect to the document (or to the 'proceeding' if that is the better description of the company executing a deed of company arrangement). It expressed in visible terms the company's assent to the arrangement. That is the company executed the deed and did so within the time limited by law."

63 In my opinion, although their Honours in the High Court did not find it necessary to decide whether a deed of company arrangement was not a contract of the kind dealt with by the former s 182(1) of the Law, it does not follow that they decided that it was not a contract at all. On the contrary, the issue in the case was whether, given that a deed of company arrangement was at the least a contract between the administrator and the company, it had been properly executed on behalf of the company.

64 It follows, in my opinion, that it would be an extraordinary anomaly if a person who was appointed administrator of the deed of company arrangement, on particular terms and conditions, which could only be varied by the Court with his consent under s 445G(4), could be varied by resolution of the creditors pursuant to s 445A without his consent. It seems to me that by necessary implication, s 445A must be read as subject to s 444B(5) so that the consent of the administrator of the deed is required before such a variation could take effect.

65 It is true that, in par 25 p 649 of MYT Engineering, the majority also said that a deed of company arrangement:

"… is a document that contains terms that bind all the creditors of a company 'so far as concerns claims arising on or before the day specified in the deed under par 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 proposition or moratorium reflected in the deed of company arrangement."

66 This explains what the majority had in mind in the passage at 649 referred to above. A deed of company arrangement is more than a contract containing a set of promises between those who are parties to it

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because it has statutory effect, binding creditors who voted against the resolution as well as those who did not vote at all. In these circumstances, it must be necessarily implied that the arrangement having been originally required to be expressed in the form of a contractual document, any variation of it adopted by the creditors would require to be similarly authenticated. While it may well follow that s 444A and s 444B require authentication by the company, it does not necessarily follow that the administrator could be bound without his consent.

Ground 2A: Lack of standing of administrator under s 445B

67 It was submitted that the first respondent did not have standing to bring the application under s 445B of the Law because he was not a creditor of the company at the time when the creditors resolved that the company should enter into a deed of company arrangement. The first respondent maintained that he had standing as a creditor of the company to make the application under s 445B for an order cancelling the variation. The first respondent relied upon the fact that he was a creditor of the company in relation to his fees as administrator of the company and as administrator of the deed. The appellants contended that the first respondent was not a creditor on or before the relevant date. In Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor (1994) 13 ACSR 504, it was held that the reference to "all creditors" in s 444D(1) of the Law must be read and understood in the context of all other references to "creditors" in Pt 5.3A of the Law. In the absence of good reason otherwise the word "creditors" should be read as used in the same sense throughout Pt 5.3A. It was also held that the "creditors" of the company for the purposes of s 444D(1) are those who were creditors for the purposes of winding up. In the present case the deed of company arrangement provided in cl 1.1 that:

" 'Creditor' means a person who has a debt payable by or claim against the Company whether present or future, certain or contingent, ascertained or founding only in damages, the circumstances giving rise to which occurred on or before the Relevant Date.

…

'Relevant Date' means 20 July 1998."

68 It was on 20 July 1998 that the first respondent was appointed administrator of the company. It was on 14 October 1998 that it was

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resolved by the creditors pursuant to s 439C of the Law that the company execute a deed of company arrangement. Thus he did not have standing at the relevant times as a creditor of the company. It was conceded, however, that for the purposes of invoking the general powers of the Court under s 447A to make such order as it thinks appropriate, the first respondent had standing to apply by virtue of the fact that he was the administrator of the deed. Section 447D(1) provides that the administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator's functions and powers. Section 447D(2) provides that the administrator of such a deed may apply to the Court for directions about a matter arising in connection with the operation, or giving effect to, the deed.

69 In my opinion, both s 445G(1) and s 447D(1) and (2) give the administrator of a deed of company arrangement standing to bring an application of the kind sought to be made by the first respondent in this case.

70 In my opinion it was not necessary for the first respondent to rely on s 445B. The first respondent was entitled to make the application under s 445G(1).

Ground 3: Absence of admissible evidence of prejudice

71 As a result of the conclusion I have reached in respect of the other grounds, this ground falls away.

Conclusion

72 I have already set out the provisions of s 445G(1) which provides, among other things, that the administrator may apply to the Court for an order under that section where there is doubt whether a deed of company arrangement was entered into in accordance with Pt 5.3A of the Law. On such an application the Court may make an order declaring a provision of the deed to be void: s 445G(2). The first respondent, as administrator, has made such an application. For the reasons I have mentioned I consider that the purported variation of the deed the subject of the relevant resolution at the meeting on 31 May 2000 was void as being made without the consent of the first respondent as administrator. The first respondent is entitled to an order to that effect.

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73 In the result, therefore, I consider that the appeal should be dismissed and an order made on the first respondent's application as I have indicated. If that is the order of the Court, it will follow that the injunction granted by Miller J on 31 August 2000 will cease to have effect.

74 KENNEDY J: The relevant facts in this matter are set out in the reasons for judgment of the Chief Justice and there is no necessity for my repeating them.

75 Chapter 5 of the Corporations Law ("the Law") deals with the external administration of corporations. Part 5.3A of that chapter is headed "Administration of a Company's Affairs with a View to Executing a Deed of Company Arrangement". By s 13(1) of the Acts Interpretation Act 1901 (Cth), the headings of Parts, Divisions and Subdivisions into which any Act is divided shall be deemed to be part of the Act.

76 The object of Pt 5.3A is set out in s 435A of the Law, which states that it 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 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.

77 Section 436A(1) provides that a company may, by writing, appoint an administrator of the company if the Board has resolved to the effect that (a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and (b) an administrator of the company should be appointed. While a company is under administration, the administrator has control of the company's business, property and affairs and is given extensive powers : s 437A. While a company is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company, except with the administrator's written approval; but an officer of a company is not thereby removed from his or her office : s 437C.

78 Division 5 of Pt 5.3A of the Law is headed "Meeting of creditors decides company's future". Within this Division, s 439A requires the administrator of a company under administration to convene a meeting of the company's creditors within the period specified in the section. At a meeting convened under the section, the administrator is to preside :

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s 439B. At that meeting, the creditors may resolve that the company execute a deed of company arrangement or that the administration should end or that the company be wound up.

79 Division 10 of Pt 5.3A goes on to deal with the execution and effect of a deed of company arrangement. If a company's creditors resolve, as they did in this case, that the company execute a deed of company arrangement, the administrator of the company is required to be the administrator of the deed, unless the creditors, by resolution passed at the meeting, appoint someone else to be the administrator of the deed : s 444A(2). The first respondent had been appointed as the administrator of the company and there was no appointment of someone else to be the administrator of the deed. The administrator of the deed "must" prepare an instrument setting out the terms of the deed : s 444A(3). The company is required to execute the instrument within 21 days after the end of the meeting of creditors, subject to any extension of time granted by the Court : s 444B(2). The board of the company "may", by resolution, authorise the instrument to be executed by or on behalf of the company : s 444B(3). And the administrator of the deed "must" execute the instrument before, or as soon as practicable after, the company executes it : s 444B(5). When executed by both the company and the deed's administrator, the instrument becomes a deed of company arrangement : s 444B(6).

80 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 : s 444D(1). A deed of company arrangement also binds the company, its officers and members and the deed's administrator : s 444G. The Law does not depend upon the contractual obligations of the administrator.

81 In contrast to the formalities laid down in Div 10 for the execution of a deed of company arrangement, under Div 11, which deals with the variation, termination and avoidance of deeds of company arrangement, all that the Act expressly requires to vary a deed of company arrangement is a resolution passed at a meeting of the company's creditors convened under s 445F. Any variation, however, may not be materially different from the proposed variation set out in the notice of meeting : s 445A. There is no requirement for the execution of any deed of variation.

82 Accepting that the deed of company arrangement constitutes a contract between the administrator and the company, it nevertheless appears to me that it is a contract which is capable of being varied by the creditors in accordance with s 445A, which is itself headed "Variation of deed by creditors". If the respondents' argument is correct, and the administrator of the deed must agree to any variation of it, it would follow

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that the administrator would effectively have a power of veto, subject, however, to the court exercising its powers under s 447A to order a variation.

83 It is noted that the wording of s 445C(b), enabling the company's creditors to terminate a deed of company arrangement, is in very similar terms to s 445A. It is also noted that, by s 445G(4), where the court declares a provision of a deed of company arrangement to be void, the court may by order vary the deed, but only with the consent of the deed's administrator. Had it been intended to require the administrator's consent to a variation of the deed, it might have been expected that this requirement would have been incorporated in s 445A.

84 In my opinion, s 445A should be given effect in its terms. In the circumstances, I would therefore have allowed this appeal and set aside the orders of the learned Master.

85 On the rather meagre information before this Court, I am not persuaded that, as a result of the variation, the first respondent would be at risk as to the costs of the action against the Town of Claremont, should it fail. I am not, therefore, persuaded that the first respondent is entitled to an indemnity. However, having regard to the majority view, this issue does not now arise. Furthermore, the argument before this Court concentrated upon the contention that the variation of the deed of arrangement depended upon the consent of the first respondent. The merits of the variation to the deed were not examined and do not now fall for consideration.

86 PIDGEON J: I agree with the reasons of the Chief Justice.

87 If s 444A and s 444B of the Corporations Law(Cth) were read literally, they could be interpreted to mean that if the company's creditors resolved that the company execute a deed of company arrangement with the administrator of the company being the administrator of the deed, then the administrator would be required to execute the deed pursuant to s 444B(5) and to act under it. I would see it unlikely for the legislature to have intended compulsion of this type. There are other sections to indicate that this was not the intention of the legislature. The fact that the administrator is required to execute the deed is such an indication. I would read s 444B(5) as meaning that if the administrator intends to execute the instrument, then he must do so within the time specified in that section. It is the section making provision as to time, rather than being a command to execute the deed. Section 445G(4), requiring the

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consent of the administrator to a court order varying the deed, is a further indication. I agree with the reasons of the Chief Justice that the deed is a contract. The essence of a contract is consensus which would be a further indication that the consent of the administrator is necessary to make a proposed variation effective.

88 I would dismiss the appeal.