THE HELLENIC ATHLETIC and SOCCER CLUB of SA INC. No. SCGRG-99-736 Judgment No. S393

[1999] SASC 393

RE: THE HELLENIC ATHLETIC AND SOCCER CLUB OF S.A. INC

APPLICATION BY BRUCE NEIL MULVANEY
[1999] SASC 393
1 MARTIN J. (Ex tempore) The plaintiff is a chartered accountant and an official liquidator of this Court. He is the Deed Administrator for the purposes of Part 5.3A of the Corporations Law of the Hellenic Athletic and Soccer Club of South Australia Incorporated (subject to a Deed of Incorporated Association Arrangement) ("the club").
2 This matter first came before the Court by application dated 25 June 1999 in which the Administrator sought directions pursuant to s 447D of the Corporations Law as to the conduct of a meeting of creditors convened under s 445F of that law to consider proposals to vary a Deed of Incorporated Association Arrangement dated 28 May 1999 ("the Deed") made between the Administrator, the Adelaide United Soccer Club Pty Ltd and Mr Toutsikos. After numerous appearances in this Court in which the circumstances pertaining to the Deed changed quite regularly, an order was made on 23 July 1999 that the Administrator convene a meeting of creditors to consider a resolution to vary the Deed, or to resolve that the Deed be terminated and the club wound up. The meeting was held and a variation to the Deed approved. A Deed of Variation was signed on 17 August 1999.
3 Clause 5.4 of the proposal which forms part of the Deed as varied is a condition precedent to the covenantors’ obligations to make payments specified in the Deed.   This clause concerned a variation to the constitution of the club by removing the voting rights of one member.  That condition precedent has not been met.  As a consequence, the first of advance due by the covenantors has not been paid within the time specified.   Clause 40A.5 provides in that if the particular payment is not received within 21 days of the Deed of Variation, the Deed shall terminate.  That 21 day period expired at midnight on 7 September 1999.  According to the terms of the Deed, therefore, the Deed has now terminated. 
4 The Administrator made an oral application on 8 September 1999.  On 9 September 1999 he filed an application to stand in the place of the oral application.   The Administrator sought an order that the Deed dated 28 May 1999, as varied by the Deed of Variation dated 17 August 1999, be further varied by varying par 40A.5 to increase the time for the payment from 21 days to 28 days.  A further application filed by the Administrator dated 14 September 1999 seeks variations to the identity of the covenantors and an extension of time to 17 September 1999 to make a payment pursuant to clause 1.1 of the proposal annexed to the Deed of Variation.  The Administrator also seeks a variation to clause 5.4 of the proposal annexed to the Deed of Variation.
5 The first difficulty faced by the applicant is the effect of the termination of the Deed by virtue of its terms.  A question arises as to whether, after the Deed has terminated, the Court can retrospectively extend a time limit prescribed in the Deed with the practical effect that the termination is reversed and the Deed is revived. 
6 Reliance is placed on the wide power found in s 447A(1) of the Corporations Law. That provision enables the Court to make such orders as it thinks appropriate about the operation of Part 5.3A of the Corporations Law in relation to a particular company. That section has been interpreted as enabling the Court to make retrospective orders where time limits prescribed by the law have expired. It was submitted that, in essence, the Court is being asked to do the same in this matter, but in respect of the Deed.
7 If the Deed stood alone and independently of provisions of the Corporations Law, I would not have acceded to the application. However, a Deed of Company Arrangement is a creature of the Corporations Law. As the majority of the High Court indicated in MYT Engineering Pty Ltd and Others v Mulcon Pty Ltd (1999) 162 ALR 441 at pp 449 and 450 a Deed of Company Arrangement is not simply a contract and is more than a set of promises between those who are parties to it. The Court said:
"First it is a document that, on execution, effects a change in the status of the company - from a company under administration to a company subject to a deed of company arrangement.  Secondly, it is a document that contains terms that bind all creditors of the company "so far as concerns claims arising on or before the day specified if the deed under paragraph 444A(4)(i)". (s 444D(1))  Those obligations stem from the combined operation of the deed of company arrangement and the Law not from any contractual bargain between the persons bound, and imposed on all creditors - not just those who voted in favour of any composition of moratorium reflected in the deed of company arrangement."
8 Although the question before the High Court was different, I note that in the context of the failure to validly execute a Deed within the time period which automatically terminated the voluntary administration, Kirby J expressed the view that that s 447A provided the power to retrospectively validate the otherwise invalid execution of the Deed (p 461).  His Honour observed that unless such retrospective leave could be given, the beneficial purpose of s 445G would be entirely robbed of its effectiveness in matters such as that before the Court.
9 There is no doubt that s 447A is designed to provide a wide power to avoid undesirable consequences of the strict operation of the law in circumstances where remedial action can and should be taken in the interests of creditors. Bearing in mind the relationship between the Deed and the Corporations Law, in my view the power of s 447A enables the Court to vary the Deed as requested with retrospective operation such that the Deed remains in full force and effect.
10 I order that the Deed of Variation dated 17 August 1999 be varied to the extent that clause 40A.5 is amended and varied by deleting the words "within 21 days of the deed of variation" and by substituting therefor the words "on or before 12 noon on Wednesday, 22 September 1999".