FEDERAL COURT OF AUSTRALIA Irving v Smith [2008] FCA 1391 CORPORATIONS – deed of company arrangement executed pursuant to resolution of creditors – appeal from decision of chair of creditors' meeting to accept proofs of debt where assignments of debts took place after meeting was convened – where result of assignment was a larger number of creditors entitled to vote at the meeting and resolution on deed of company arrangement was passed with the support of those creditors – whether debts were split as a result of assignments – whether there is a cut off time for lodgment of proofs of debt at the point where the notices convening the meeting were sent – whether assignments bona fide – whether deed of company arrangement should be terminated. Held: Debts not split – nothing in Corporations Act 2001 (Cth) Pt 5.3A that supports the proposition that there is a cut off time for determining who is a creditor at the point where notices convening the meeting are sent – assignments bona fide – application for termination of deed of company arrangement refused. CORPORATIONS – whether the deed of company arrangement was oppressive or unfairly prejudicial towards or unfairly discriminatory against one or more creditors – where administrators advised that deed did not "clearly" provide a better return for all classes of creditors – whether effect of deed was unfair or inequitable in the impact it had upon one or more of the creditors – where creditors by a majority of number and value chose to pursue a deed of company arrangement rather than liquidation. Held: Administrators' report presented a clear choice to creditors, indicating assumptions made and variable factors including the advantages and disadvantages of liquidation – assumptions and factors required creditors to make a choice – the choice did not result in a deed that was oppressive, unfairly prejudicial or unfairly discriminatory towards the general body of creditors including the plaintiff – contention that effect could not be given to the deed without injustice rejected. Corporations Act 2001 (Cth): ss 436C(1), 436E, 439A, 445D(1), Pt 5.3A Corporations Regulations: reg 5.6.23 Brash Holdings Limited (Administrator appointed) v Katile Pty Ltd [1996] 1 VR 24, followed Selim v McGrath (2003) 177 FLR 85, cited Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (subject to Deed of Company Arrangement) (2001) 37 ACSR 394, cited Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to Deed of Company Arrangement) [2007] SASC 296, considered IN THE MATTER OF LONGREACH CAPITAL PTY LTD (ADMINISTRATORS APPOINTED) (ACN 100 042 000) MARY GAYWIN IRVING v MURRAY SMITH VID 567 of 2008 GOLDBERG J 12 SEPTEMBER 2008 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 567 of 2008 IN THE MATTER OF LONGREACH CAPITAL PTY LTD (ADMINISTRATORs APPOINTED) (ACN 100 042 000) BETWEEN: MARY GAYWIN IRVING Plaintiff AND: MURRAY SMITH Defendant JUDGE: GOLDBERG J DATE OF ORDER: 12 SEPTEMBER 2008 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The Originating Process, as amended, be dismissed. 2. The plaintiff pay the defendant's costs of and incidental to the Originating Process. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 567 of 2008 IN THE MATTER OF LONGREACH CAPITAL PTY LTD (ADMINISTRATORs APPOINTED) (ACN 100 042 000) BETWEEN: MARY GAYWIN IRVING Plaintiff AND: MURRAY SMITH Defendant JUDGE: GOLDBERG J DATE: 12 SEPTEMBER 2008 PLACE: MELBOURNE REASONS FOR JUDGMENT INTRODUCTION AND BACKGROUND 1 The proceeding before the Court arises out of a resolution of creditors of Longreach Capital Pty Ltd (Administrators Appointed) ("the Company") passed at a meeting of creditors held on 14 August 2008 pursuant to s 439A of the Corporations Act 2001 (Cth) ("the Act") that the Company execute a deed of company arrangement pursuant to the provisions of Pt 5.3A of the Act and the execution of a Deed of Company Arrangement by the Company on 21 August 2008. The plaintiff: · appeals from the decision of the chair of the meeting to accept certain proofs of debt, for the purposes of voting at the meeting, by assignees of debts due by the Company; · seeks anorderterminatingtheDeed of Company Arrangement executed on 21 August 2008. 2 On 13 May 2008 Westpac Banking Corporation ("Westpac"), the holder of a fixed and floating charge over the whole of the Company's property, appointed Murray Campbell Smith and Colin McIntosh Nicol as Administrators of the Company pursuant to the provisions of s 436C(1) of the Act. On that date Mary Gaywin Irving, the plaintiff, was the sole director of the Company. 3 On 23 May 2008 the first meeting of creditors of the Company required to be held pursuant to s 436E of the Act was held. The meeting was chaired by Mr Smith. At the meeting Mr Smith noted that the Company's main assets were the former Kenmore Hospital site and adjacent land located at Goulburn in New South Wales. 4 On 11 June 2008 the Administrators, pursuant to s 439A of the Act, sent a report to the creditors of the Company and notified them of the second meeting of creditors to be held on 18 June 2008. In the report to creditors the Administrators noted that the Company was insolvent and said that their opinion was that in the absence of a deed of company arrangement proposal providing a better outcome for creditors than liquidation, it was in the creditors' best interests that the Company be wound up. 5 Prior to sending the report to the creditors, the Administrators had been told that the Company was proposing that it enter into a deed of company arrangement but they had not received any documents. On 10 June 2008 the Administrators received a deed of company arrangement proposal to acquire the assets of the Company from Mr Jim Byrnes on behalf of an entity yet to be identified. The Administrators did not have time to consider the proposal fully. 6 The second meeting of creditors was held on 18 June 2008 and was chaired by. Mr Smith. He informed the meeting that the Administrators had received two proposals for a deed of company arrangement to be entered into by the Company, one from Mrs Irving and one from Mr Byrnes. There was general discussion about the two proposals. The meeting was adjourned until 3 July 2008 to enable further investigation and negotiations in relation to the two proposals. 7 The adjourned meeting was held on 3 July 2008 and, again, it was chaired by Mr Smith. Mr Smith circulated to the creditors present a further report from the Administrators entitled "Alternative Courses of Action". In that report the Administrators noted that they had received two deed of company arrangement proposals, one from Mrs Irving and the other from Mr Byrnes. In the report they analysed and assessed each of the proposals. In the light of the issues they raised and discussed they said that they could not then recommend Mrs Irving's proposal to creditors. They noted that Mr Byrnes' proposal was well articulated and considered but their analysis indicated that it did not clearly provide a better return to all classes of creditors and on that basis, they could not recommend it. In the report they stated that their analysis indicated that liquidation was likely to provide the best return to each class of creditors and on that basis they recommended that the Company be wound up. 8 There was discussion about the matters raised in the Administrators' report. The meeting was adjourned for some time to enable the Administrators to hold further discussions with the proposers of the two deeds. When the meeting resumed the Administrators advised creditors that amendments had been made to Mr Byrnes' proposal and there was further discussion about both proposals. 9 At the request of Mr Byrnes, Mr Smith put a resolution to the meeting that the Company execute a deed of company arrangement as proposed by Mr Byrnes and as amended at the meeting. Mr Smith informed the creditors that he would exercise proxies held by him in favour of the resolution. The resolution was passed. According to Mr Smith, eleven creditors voted for the resolution and ten creditors voted against the resolution. Mr Smith declared the resolution carried on the voices. No creditor requested a poll to be called and no poll was conducted. 10 On 17 July 2008, in the course of finalising the minutes of the meeting and reviewing the names of the creditors, Mr Smith realised that there was a risk that at the meeting eleven creditors had voted against the resolution as he realised he may have omitted to recognise the vote of one of the creditors. 11 Consequently, on 21 July 2008 Mr Smith procured an originating process to be filed in the Supreme Court of New South Wales seeking a declaration that the administration of the Company had not terminated and an order that the meeting of creditors held on 3 July 2008 had not been terminated but was to be treated as having been adjourned to a time and place to be notified by the Administrators to the creditors. 12 On 23 July 2008 Justice Austin declared that the administration of the Company had not terminated and ordered that the meeting of creditors of the Company under s 439A of the Act had not terminated but was to be treated as having been adjourned to a time and place to be notified by the Administrators to the creditors. 13 On 24 July 2008 the Administrators sent a notice to creditors reconvening the second meeting of creditors on 5 August 2008. Mr Smith sought an adjournment of the meeting until 14 August 2008. Shortly before the meeting he had received a number of new and revised proofs of debt, proxies and debt assignments and he needed time to consider and adjudicate upon them. The meeting was adjourned by the creditors until 14 August 2008. 14 At the meeting on 14 August 2008 Mr Smith again circulated an "Alternative Courses of Action" report from the Administrators. In the report the Administrators analysed and considered the Deeds proposed by Mrs Irving and Mr Byrnes. The Administrators through Mr Smith expressed the following opinion in their report in relation to the Deed proposed by Mrs Irving: "I have not received sufficient evidence from the Proposer to indicate the likely timing of a DOCA and related sale, nor have we received sufficient evidence to suggest that there is a genuine purchaser and that the DOCA and sale are likely to complete. In light of these uncertainties, I cannot presently recommend this proposal to creditors." 15 The Administrators expressed the following opinion in their report in relation to the Deed proposed by Mr Byrnes: "The obvious disadvantage of the DOCA proposed by Mr Byrnes is the sale value at $4.4m against an independent valuation of $5.93m (although the benefits of withdrawing claims totalling approximately $888,000 and the caveats must be considered). This results in lower estimated funds available after the secured creditor's claim when compared to the liquidation mid and high scenarios. However, there is a risk that if the sale of the assets under a liquidation is delayed for an extended period or fails to achieve sufficient proceeds then creditors may receive less under a liquidation scenario. In addition, I have significant concerns that the property can be sold at or near to valuation. Those concerns include the history of the property (contamination, heritage issues, costs of remediation) and also the history of past sales efforts. The benefit of the Byrnes DOCA proposal is the early sale and settlement, and certainty around the minimum amount of funds available for creditors. The proposal by Mr Jim Byrnes is well documented and advanced to final draft stage (including asset sale contracts); however my analysis indicates that it does not clearly provide a better return for all classes of creditors and on that basis I cannot recommend it." 16 The reference to an independent valuation of $5.93 million was a reference to a valuation received by the Administrators earlier. 17 In the report the Administrators estimated that: · under the Deed proposed by Mr Byrnes the total distribution to unsecured creditors would be between 1.44 cents to 4.01 cents in the dollar; · liquidation would result in a dividend to unsecured creditors of between 76.24 cents under a high scenario, 35.24 cents under a medium scenario and no dividend under a low scenario depending on the price received for the sale of the land. Their analysis indicated to them that liquidation was likely to provide the best return to each class of creditors and on that basis, they recommended that the Company be wound up. 18 It should be noted that the Administrators' estimates depended upon a number of assumptions which the Administrators set out in their report: "The key assumptions are that: + The high scenario estimated outcome assumes one marketing campaign and 14 weeks to realise the Longreach Properties, whereas the low estimate assumes that the Longreach Properties are put to the market but require an extended marketing period that takes 30 weeks until settlement (and also additional creditor claims); + The low scenario sales price has been discounted to reflect our understanding of the results of previous sales campaigns; and + An increase in both legal and administration fees associated with managing and realising the Longreach Properties will be required compared to the DOCA proposals. I have also been provided with a valuation dated 14 April 2008 by Langshaw Valuations as instructed by Mr John Benjamin. The valuation is at $10.7m for Lot 5 only but notes a number of critical assumptions which impact on value, including around the DA and Masterplan, improvements and the application of the property as an expanded retirement village. It is not clear what action or cost is required to achieve that valuation. As such, I consider my valuation which is more appropriate as it is on an 'as is' basis." 19 The Administrators set out in the report the benefits of liquidation: "+ The potential increase in return to creditors (under the medium to high range); + The opportunity to further investigate whether there are any other recoveries or voidable transactions for the benefit of creditors (these have not been included in our analysis and there are significant doubts about the costs/benefit of further investigation); and + It provides both parties who proposed DOCAs with the opportunity to purchase the Longreach properties on the open market." They also set out in their report the disadvantages of liquidation: "+ The timing of the sale of the former Kenmore Hospital site, which may potentially be delayed by a number of months due to legal or other action from a number of separate parties if the company proceeds to liquidation; " + The costs and likelihood of removing the caveats currently on the property; + The ultimate sale price achieved if the property is sold on the open market by a liquidator. This is a highly specialised asset with a limited market as such despite conducting a thorough marketing campaign, there is a very real risk that the property may not sell for the full appraised value; and + The ongoing holding costs (in particular, the first ranking secured creditor's interest costs) and professional fees associated with managing the property and conducting a sales campaign." 20 The report contained the following evaluation by the Administrators in relation to the execution of a deed of company arrangement compared to liquidation: "Execution of a DOCA At the creditors meeting on 3 July 2008, Mr Benjamin stated that Ms Mary Irving was to provide a DOCA proposal that was unconditional and superior to the proposal provided by Mr Byrnes. I have not received anything further since the 3 July meeting. As detailed previously, Ms Irving's DOCA proposal is silent on a number of keys [sic] points. In particular, how the caveats over the property will be removed. If the caveats cannot be removed, the DOCA cannot be completed. Accordingly, due to the lack of detail provided and the highly uncertain nature of what has been provided, it is not possible to offer a meaningful comparison. I therefore cannot recommend the Irving DOCA proposal. I have compared the estimated return to each creditor group from the DOCA proposed by Mr Byrnes to that estimated to be available under a liquidation. While there are a number of factors which make the comparison difficult and subjective, the return to creditors under the Byrnes DOCA is not clearly superior to that under a liquidation. Accordingly, I cannot recommend the Byrnes DOCA to creditors. Longreach to be wound up As set out in the Dividend Analysis at Annexure 'C', liquidation provides for a realisation of the company's assets at their market value and the following estimated returns to creditors: Low Medium High Secured (Westpac) 100c 100c 100c Priority Nil 100c 100c Unsecured Nil 35c 75c There are real risks that the valuation amounts may not be achieved in a sale process, the sale process may take significant time (with a resulting erosion of value due to default interest and costs), and there may be litigation involving various parties (including the caveat holders). However, on balance, I recommend that it is in the best interest of creditors that Longreach is wound up." 21 At the meeting Mr Smith produced a list of persons and companies claiming to be creditors. That list included Margaret Sweet, Catherine Gina Byrnes, Andrew Simmons, Trevor Quilky and Consolidated Byrnes Investment Company Pty Limited all of whom were shown on the list as assignees. 22 Shortly prior to the meeting on 5 August 2008, Mr Smith had received a number of documents constituting assignments of debts owed to certain creditors of the Company. At the same time Mr Smith received proofs of debt lodged by the assignees of the debts. Mr Smith was satisfied that each of the debts assigned was a discrete debt owed to the creditor of the Company and was not one debt that had been split amongst a number of assignees. 23 Each Deed of Assignment was dated 4 August 2008 and notice of each assignment was given to the Company pursuant to s 12 of the Conveyancing Act 1919 (NSW). 24 The assignments comprised: (a) an assignment by Kenmore Campus Pty Ltd to Andrew Simmons of a debt arising out of a claim against the Company for damages of $50 million for a consideration of $1.00; (b) an assignment by Kenmore Developments Pty Ltd to Catherine Gina Byrnes of a debt arising out of a claim against the Company for damages of $50 million for a consideration of $1.00; (c) an assignment by Kenmore Campus Pty Ltd to Margaret Sally Sweet of a debt arising out of a court order for a judgment for costs of $19,661.00 for a consideration of $1.00. This was a costs order made in favour of Kenmore Campus Pty Ltd and Kenmore Developments Pty Ltd in the Supreme Court of New South Wales. The Administrator admitted this debt in the sum of $7,000.00 on the basis that it was approximately 70% of the amount claimed to take into account the discount he believed was commonly made concerning assessments of Supreme Court orders for costs; (d) an assignment by Kenmore Campus Pty Ltd to Trevor Quilky of a debt arising out of a judgment for costs of which Kenmore Campus Pty Ltd had a claim for one half for a consideration of $1.00. Mr Smith admitted Mr Quilky to vote for $1,290.60 which was approximately 1/6 of the costs claimed by the solicitor in the proceeding; (e) an assignment by Kenmore Developments (NSW) Pty Ltd to Consolidated Byrnes Investments Corporation of an order for costs in respect of which Kenmore Developments (NSW) Pty Ltd claimed one half. (No point was taken that the name of the assignor in the Deed of Assignment was different from the name of the assignor shown in the Notice of Assignment). 25 The debts claimed by Kenmore Campus Pty Limited and Kenmore Developments Pty Limited arose in the following circumstances. Prior to the appointment of the Administrators the Company had sold part of the Goulburn land to those companies. A deposit of $500,000.00 was paid by the companies but a dispute arose between them and the Company as to whether they were required to settle the contract. The Company asserted that they were obliged to do so but they contended that they were not so obliged. The dispute was resolved by the parties entering into an agreement whereby the Company agreed to pay Kenmore Campus Pty Limited and Kenmore Developments Pty Limited $600,000.00. Prior to the date for settlement of the payment of the $600,000.00 the Administrators were appointed to the Company and the payment was not made. Those two companies gave a proxy to Mr Byrnes for the purposes of voting at the meeting of creditors. 26 At the meeting on 14 August 2008 Mr Smith advised the meeting of the details of each of the proofs of debts, the Deeds of Assignment and proxies received for the meeting and the amounts he had admitted for voting purposes. Mr Smith then took the creditors through the report and summarised the key points from it. Mr Smith highlighted his recommendation to creditors that, on balance, the Company should be wound up and he referred to the considerations relevant to his arriving at that recommendation. There was general discussion regarding the Deed proposed by Mr Byrnes. At the conclusion of this discussion Mr Smith put a resolution to the meeting that the Company execute the Deed of Company Arrangement proposed by Mr Byrnes in accordance with the statements setting out details of the proposed Deed included in the report dated 14 August 2008. Mr Smith called for a poll on the resolution. The creditors admitted to vote resolved by a majority of 22 to 19 in number and $4,348,789.00 to $436,637.00 in value in favour of the resolution 27 Votes cast in favour of the resolution included the votes of Margaret Sweet, Catherine Gina Byrnes, Andrew Simmons, Trevor Quilky and Consolidated Byrnes Investment Company Pty Ltd, as well as Kenmore Campus Pty Ltd and Kenmore Developments Pty Ltd. 28 On 21 August 2008 the Company, the Administrators, Australian Corporate Restructuring Services Pty Limited, Kenmore Property Holdings Pty Limited, Kenmore Developments (NSW) Pty Limited, Kenmore Campus Pty Limited and Consolidated Byrnes Investments Company Pty Limited and Paul Menere executed a Deed of Company Arrangement. On the same day the Company and others executed agreements for the sale of the land for a total sum of $4.395 million. SHOULD THE PROOFS OF DEBT LODGED BY THE ASSIGNEES OF DEBTS DUE BY THE COMPANY BE DISALLOWED? 29 The plaintiff's initial submission in relation to her appeal against the decision of Mr Smith to admit the proofs of debt for the purposes of voting by the five assignees referred to in par [24] above was that each assignment arose out of the splitting of a debt due to Kenmore Campus Pty Limited and Kenmore Developments (NSW) Pty Limited. The plaintiff submitted that a specific debt could not be split or divided up so as to allow more than one vote or claim to be allowed or made in respect of a specific debt. It was submitted that the scheme found in ss 439A, 439B and 439C of the Act did not allow or admit the splitting of a debt in this fashion. In the course of oral argument, counsel for the plaintiff accepted that discrete debts could be assigned with the result that the assignee would be entitled to claim the debt resulting from the assignment and obtain an entitlement to vote in respect of that assigned debt, but submitted that what was not effective was to divide a specific debt into individual debts and then assign those individual debts. 30 That submission did not advance the plaintiff's case having regard to the form and content of the Deeds of Assignment which were submitted to the Administrators and upon which Mr Smith relied in determining who was entitled to vote at the meeting. The Deeds of Assignment produced by Mr Smith and upon which he relied are assignments of specific debts incurred in favour of each of the assignees. Each of the assignments is an assignment of the whole of a debt and not part of a debt. 31 The Administrators accepted that it was not proper or appropriate for a creditor of a company to divide up a debt by way of assigning part of the debt to one person and part of the debt to another so as to create more votes available to be cast at a meeting of creditors. That is not the situation which applies in relation to the five Deeds of Assignment in issue in this proceeding. None of them is a partial assignment of debt or an assignment of part of a debt. In each case there is an assignment of the totality of a particular debt in existence. 32 As the argument developed, counsel for the plaintiff embraced the proposition that determination of who were the relevant creditors entitled to vote at the second creditors' meeting convened pursuant to s 439A of the Act was to be made at the time that notices of the meeting were sent to creditors. It followed from this submission that an assignment of a debt due to a creditor after the notices were sent to creditors pursuant to s 439A of the Act was ineffective to carry with it an entitlement of the assignee of the debt to lodge a proof of debt and vote at the meeting. Counsel for the plaintiff qualified this proposition by submitting that an assignment of a debt after the date upon which notices were sent out convening the meeting pursuant to s 439A of the Act would be effective to carry with it a right in the assignee to lodge a proof of debt and vote at the meeting so long as the assignment was bona fide and not effected for the purpose of manipulating the voting at the meeting. Counsel for the plaintiff submitted that the assignments in issue in this proceeding were not bona fide. 33 I can find nothing in the scheme of Pt 5.3A of the Act or, in particular, in s 439A of the Act which supports the plaintiff's submission that there is a cut off time at the point where notices convening the meeting pursuant to s 439A are sent to creditors and published in newspapers which limits the entitlement of a creditor of a company to assign a debt due by the Company to the creditor and which carries with it a right to lodge a proof of debt and vote at the meeting. 34 It was not clear what counsel for the plaintiff meant when he submitted that the assignments were not bona fide. When I questioned what he meant by "not bona fide" he responded that the assignments were a sham and were executed for the purpose of obtaining voting power to enable the resolution that the Company enter into the Deed of Company Arrangement proposed by Mr Byrnes to be passed. I questioned counsel as to what he meant by this submission as I had earlier understood him to say that the plaintiff was not challenging the validity of the Deeds of Assignment. Counsel said that he was not challenging the validity of the Deeds of Assignment at all and that they were perfectly valid Deeds. Nevertheless, counsel continued to submit that the assignments were not bona fide, apparently on the basis that the assignors assigned either a number of different debts, or parts of debts, to more than one person and that the assignments were made for the purpose of manipulating the voting at the meeting. 35 Counsel for the plaintiff also submitted that there was no logical reason for the assignees to take assignments of the debts because if they voted in favour of the resolution that the Company enter into the proposed deed of company arrangement they would not, as unsecured creditors, obtain any return under the Deed. However, if the liquidation of the Company proceeded they were likely to obtain a greater return than they would under the Deed. 36 The expression "creditors" is not defined in the Act. In particular, it is not given a limited temporal aspect. It is therefore necessary to consider the content of that expression by reference to the context in which it appears in the Act — in particular in Pt 5.3A of the Act and, more particularly, in ss 439A and 439C. I do not consider that there is any warrant for limiting the expression "creditors" in s 439A and s 439C to those persons to whom the Company was indebted as at, or on, the date notice was given by the Administrators to creditors in accordance with s 439A(3)(a) of the Act or the publication of the notice of the meeting required by s 439A(3)(b) of the Act. I cannot find in any provision or context in the Act or, in particular, any provision in Pt 5.3A of the Act any warrant for such a limitation. Nor is any such limitation to be found in reg 5.6.23 of the Corporations Regulations which provides for the manner in which a creditor is entitled to vote at a meeting of creditors of the Company. There is nothing in that regulation which identifies a creditor as being a person who is identified in the books of account of the Company as being a creditor at any particular point of time prior to the meeting at which the right of that creditor to vote is called in question. 37 The submission that the expression "creditors" should be limited to persons to whom the Company was indebted as at the date the notices were sent out or published under s 439A(3) is also inconsistent with the reasoning of the Appeal Division of the Supreme Court of Victoria in Brash Holdings Limited (Administrator appointed) v Katile Pty Ltd [1996] 1 VR 24. In that case the Court had before it for consideration the provisions of Pt 5.3A of the Corporations Law, the predecessor of the present Pt 5.3A of the Act which, for all relevant purposes, was in the same form as the current Pt 5.3A. The administrators of a group of companies had sought declarations as to which creditors of a company were bound by the deed of company arrangement. The relevant enquiry focused on s 444D of the Corporations Law. The Court said at 31‑32: "In our opinion, the reference to 'all creditors' in s.444D(1) must be read and understood in the context of all other references to "creditors" in Pt.5.3A. What has so far been described is sufficient to show that the general scheme of the Part is to involve the company's creditors, without further limitation or description. The word "creditors" should, in the absence of any good reason otherwise, be read as used in the same sense throughout Pt.5.3A, and it is difficult to suppose that sections, drawn so widely as, for instance, s.435A (describing the object of the Part) had in mind anything less than all of the creditors for the time being of the company." The Court said further at 33: "Once it is decided, for the reasons we have given, that the expression 'all creditors' in s.444D(1) should not be confined to those having claims for money sums due and payable on or before the day specified in the deed, we see no alternative but to treat the creditors of the company for the purposes of Pt.5.3A as those who would have been creditors had the company gone into liquidation and the relevant date for the purposes of s.553 been the day specified in the deed." 38 The reasoning in Brash Holdings Limited (Administrator appointed) v Katile Pty Ltd (supra) was adopted and followed in Selim v McGrath (2003) 177 FLR 85. Barrett J considered that for the purposes of s 439A creditors in a voluntary administration under Pt 5.3A of the Act were all persons who had debts or claims against a company provable in its winding up and said, at 105: "The boundaries are therefore those set by s 553(1) which refers to 'all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages) …". 39 It follows that I reject the plaintiff's submission that the determination of who was entitled to lodge a proof of debt for the purpose of voting at the second creditors' meeting was to be made as at the time notices of the meeting were sent out or published in accordance with s 439A(3) of the Act. 40 I also reject the plaintiff's submission that the Deeds of Assignment were not bona fide, or were a sham or should not otherwise have been accepted by the Administrators as supporting the proofs of debt lodged with them. The plaintiff's submission in this respect was confused. The plaintiff's acceptance that the Deeds were valid and the statement by counsel that the plaintiff was not challenging the validity of the Deeds was inconsistent with the submission that the Deeds were a sham. Further, there was no evidentiary basis for the assertion that they were executed for the purposes, presumably improper, of obtaining voting power to enable the resolution that the Company enter into the deed of company arrangement to be passed. No party to any of the Deeds of Assignment was called to give evidence. The fact that the assignees voted in favour of the resolution is not, of itself, proof of any such improper purpose, notwithstanding that they might, if the Company went into liquidation, obtain a better return. 41 In short, the plaintiff's case impugning the efficacy of the Deeds of Assignment for the purpose of supporting the assignees' proofs of debt was based on conjecture and suspicion and was not grounded in any admissible evidence. SHOULD THE DEED OF COMPANY ARRANGEMENT BE TERMINATED? 42 In support of her submission that the Court should order the termination of the Deed of Company Arrangement entered into on 21 August 2008, the plaintiff relied upon subpars (e), (f) and (g) of s 445D(1) of the Act. Section 445D(1) relevantly provides: "The Court may make an order terminating a deed of company arrangement if satisfied that: (a) … … (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors of the company as a whole; or (g) the deed should be terminated for some other reason." If an order is made under s 445D terminating a deed of company arrangement, the company is taken to have passed a special resolution under s 491 that the company be wound up voluntarily: s 446B(1) and Corporations Regulation 5.3A.07. 43 The plaintiff submitted that effect could not be given to the Deed without injustice and that the Deed was oppressive or unfairly prejudicial to creditors or contrary to the interests of the creditors of the Company as a whole. The plaintiff relied upon the fact that, under the Deed, the unsecured creditors will achieve little or no return whereas under a liquidation, depending upon whether there was a high, medium or low scenario, there is a prospect of the unsecured creditors obtaining a return: see par [17]above. The plaintiff relied in particular upon the fact that the Deed proposes a sale price of $4.4 million for the land whereas there is available to the Administrators an independent valuation of $5.93 million. Put shortly, the plaintiff submitted that there is no benefit for the unsecured creditors at all in the Deed which has been executed. 44 The plaintiff also submitted that the Deed should be terminated pursuant to subpar (g) of s 445D(1) of the Act because the Administrators counted the votes cast by the five assignees of the debts due by the Company. Counsel for the plaintiff invited the Court to infer that the debts were assigned for the purpose of supporting the interests of Mr Byrnes who was proposing the deed of company arrangement. Counsel for the plaintiff acknowledged that there was no direct evidence to this effect and that he had not examined or cross‑examined the assignees on that issue. 45 In support of the submission that the Deed of Company Arrangement was unjust or unfairly prejudicial or unfairly discriminatory of one or more of the creditors or contrary to their interests, the plaintiff relied upon the Administrators' statement that the Deed did not clearly provide a better return for all classes of creditors, that Mr Smith could not recommend it and that his estimates indicated that liquidation would result in dividends to unsecured creditors of between 76.24 cents, 35.24 cents and no dividend and on that basis, he recommended liquidation. 46 The submission that the Deed should be terminated because the chair of the meeting counted the votes of the assignees of the debts due to the Company is rejected having regard to my conclusion that the chair was entitled to count those votes because the Deeds of Assignment were effective. 47 It does not follow simply because the Administrators said: · they could not recommend Mr Byrnes's proposed Deed to creditors, · that they considered that the return to creditors under that proposed Deed was not clearly superior to that under a liquidation, and · that they recommended that it was in the best interests of creditors that the Company was wound up, that effect cannot be given to the Deed without injustice or that the Deed will be oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more of the Company's creditors. 48 The context in which those statements were made by the Administrators and the assumptions and analysis made by the Administrators in reaching their conclusions must be considered and evaluated. The creditors were presented by the Administrators with a number of factors which, according to the Administrators, made "the comparison [between a return under the Deed proposed by Mr Byrnes and the return under a liquidation] difficult and subjective". 49 The creditors were presented with a clear choice based on a reasoned report and analysis by the Administrators. That report and analysis demonstrated that there were a number of assumptions and variable factors which bore upon the extent to which a liquidation would bring a better return for unsecured creditors than entry by the Company into the Deed proposed by Mr Byrnes. The report made it clear that it was not inevitable that liquidation would bring a better return for unsecured creditors than if the Company entered into the Deed proposed by Mr Byrnes. For example, the return to unsecured creditors on a liquidation was critically dependent on the sale price of the land in respect of which there were a number of factors which could impact on the ability of the liquidator to achieve a price sufficiently high to result in a return to unsecured creditors. 50 Mr Smith's estimate of the potential dividend to unsecured creditors under what he called his high and medium scenario depended upon the amount received on the sale of the land. The Administrators' high scenario was based on a valuation of the land obtained net of required remedial works. The estimate of a medium scenario was based on a value of the land which was 10% less than the valuation which the Administrators had received. The low scenario was based upon the highest unconditional offer for the land which was $4.5 million and 10% less than the market value of the adjacent properties. The difference between the value of the land in the high scenario and the low scenario was $800,000.00. As noted above (par [15]) the Administrators acknowledged that there was a risk that if the sale of the assets under liquidation was delayed for an extended period or failed to achieve sufficient proceeds then creditors might receive less under a liquidation scenario. It is important to note that the Administrators had significant concerns that the land could be sold for the valuation. The Administrators' concerns included the history of the land which involved issues of contamination, heritage issues and costs of remediation and also the history of past sale efforts. 51 Further, as noted above, the Administrators had identified in their report significant disadvantages of liquidation. 52 All these factors were matters which the creditors were entitled to take into account in determining whether to vote for the Deed proposed by Mr Byrnes or have the Company go into liquidation. A resolution in favour of the Deed rather than liquidation, of itself, does not demonstrate consequential injustice to any creditor or oppression, unfair prejudice or unfair discrimination or a situation contrary to the interests of creditors when regard is had to the range of outcomes or scenarios which might occur under liquidation. 53 The expression "injustice" in s 445D(1)(e) is of wide import. As Austin J pointed out in Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (subject to Deed of Company Arrangement) (2001) 37 ACSR 394 at 430: "The case law does not provide any significant assistance as to the meaning of this provision [subpar (e) of s 445D(1)]." What is important to recognise is that it is the "effect" of the deed rather than the purpose of the deed which is to be considered and taken into account: Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (supra) at 430; Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to Deed of Company Arrangement) [2007] SASC 296 at [112]. In the context of s 445D(1)(e) I consider that I should ask whether the effect of the Deed is unfair or inequitable in the impact it has upon one or more of the creditors bound by it. 54 Similar considerations apply when considering the application of s 445D(1)(f). In Mondello Farms Pty Ltd v Annatom Pty Ltd (supra), Layton J said at [114]: "In determining whether a deed is oppressive or unfairly prejudicial or unfairly discriminatory, the background of the general principles underlying Pt 5.3A of the Act must be considered. A creditor has the basic right to payment, to the winding up of a company, or to the administration of the company in a manner that keeps the business of the company going which ultimately resulting [sic] in the creditor receiving payment out of the property of the company. The court will look at the whole of the effect of the deed and assess 'its unfairness, if any, to the plaintiff creditor bearing in mind the scheme of Pt 5.3A, the interests of the other creditors, the company and the public generally'. It is necessary to consider the total circumstances of the case so as to determine whether there is overall unfairness." [footnotes omitted]. In the circumstances of the present case, the last sentence of this quotation is critical. 55 The plaintiff's case, in essence, was that effect could not be given to the Deed without injustice and that the Deed was oppressive, prejudicial to and discriminatory against creditors because of the amount for which the land is to be sold pursuant to the Deed of Company Arrangement. Although the Administrators had received an independent valuation of the land which provided a valuation of $5.93 million net of rectification costs, the Administrators had set out in their report factors which made it problematic whether such a value could be received on the sale of the land. Having regard to the circumstances and factors set out in the Administrators' report, I do not consider that effect cannot be given to the Deed without injustice. It is the plaintiff who is complaining about the injustice but I do not consider that there is any injustice to the plaintiff in circumstances where in a context and with the background to which I referred, the creditors, by a majority of number and value, have decided to go the route of deed of company arrangement rather than liquidation. 56 The assumptions and factors identified by the Administrators required the creditors to make a choice. The choice they made did not result in a Deed which was oppressive to, or prejudicial to, or discriminatory against the general body of creditors, and the plaintiff in particular, having regard to the factors which had to be taken into account in determining whether what the Administrators called either a high scenario, a medium scenario or a low scenario in terms of return to creditors might be achieved. 57 For all these reasons I am not satisfied that any ground has been made out which warrants the Court making an order terminating the deed of company arrangement executed by the Company on 21 August 2008. 58 The Originating Process will be dismissed with costs. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate: Dated: 12 September 2008 Counsel for the Plaintiff: R Cook Solicitor for the Plaintiff: James D Mapleston Counsel for the Defendant: M D Wyles Solicitor for the Defendant: Clayton Utz Date of Hearing: 3 September 2008 Date of Judgment: 12 September 2008