FEDERAL COURT OF AUSTRALIA Smith; in the matter of Matrix Metals Limited (in liquidation) [2011] FCA 1399 Citation: Smith; in the matter of Matrix Metals Limited (in liquidation) [2011] FCA 1399 Parties: VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235; VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR SEPARATE CAPACITY AS JOINT AND SEVERAL DEED ADMINISTRATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235 File number: WAD 246 of 2010 Judge: MCKERRACHER J Date of judgment: 7 December 2011 Catchwords: CORPORATIONS – application by liquidators for order terminating winding up – liquidators had previously appointed themselves administrators pursuant to leave of court – deed of company arrangement (DOCA) entered into – recapitalisation of company – interests of existing and future creditors, liquidators, contributories and the public – relevant considerations – considerations of public interest and commercial morality – solvency of the company – the effect of granting an order terminating the winding up – effect of the deed of company arrangement – evidence of misconduct – s 439A report to creditors – Corporations Act 2001 (Cth) s 482 Legislation: Corporations Act 2001 (Cth) ss 436B(2), 437C(1), 482 Cases cited: Re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 All ER 1046 Re Data Homes Pty Ltd [1972] 2 NSWLR 22 Re El-Fahkri, in the matter of Elfah Pty Ltd (in liq) [2002] FCA 1469 Re King & I Pty Ltd [2007] FCA 2085 Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 157 FLR 107 Re Nardell Coal Corporation Pty Ltd (2004) 182 FLR 290 Rupert Co Ltd v Chameleon Mining NL (in liq) (2006) 24 ACLC 635 Re Skay Fashions Pty Ltd (in liq) (1986) 10 ACLR 743 Re Telescriptor Syndicate Ltd [1903] 2 Ch 174 Re Terraplanet Ltd (in liq) (No 2) [2008] FCA 582 Date of hearing: Determined on the papers Date of last submissions: 1 December 2011 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 45 Solicitor for the Plaintiff: P Mac of Blake Dawson IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 246 of 2010 IN THE MATTER OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACn 082 593 235 VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235 VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR SEPARATE CAPACITY AS JOINT AND SEVERAL DEED ADMINISTRATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235 Plaintiffs JUDGE: MCKERRACHER J DATE OF ORDER: 2 DECEMBER 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Vincent Anthony Smith and Justin Denis Walsh be joined to the proceeding as further named plaintiffs in their separate capacity as joint and several deed administrators of the Company. 2. The winding up of the Company be terminated with effect from the date of these orders. 3. The plaintiffs' costs of this application and the hearing on 2 December 2011 are the costs of the winding up. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 246 of 2010 IN THE MATTER OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACn 082 593 235 VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235 VINCENT ANTHONY SMITH AND JUSTIN DENIS WALSH IN THEIR SEPARATE CAPACITY AS JOINT AND SEVERAL DEED ADMINISTRATORS OF MATRIX METALS LIMITED (IN LIQUIDATION) (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 082 593 235 Plaintiffs JUDGE: MCKERRACHER J DATE: 7 DECEMBER 2011 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 The plaintiffs are both the joint and several deed administrators, and joint and several liquidators, of Matrix Metals Limited (In Liquidation) (Subject to Deed of Company Arrangement) (Company). By operation of s 437C(1) of the Corporations Act 2001 (Cth) (CA), the plaintiffs' functions or powers as liquidators are suspended during the currency of the administration. They wish to terminate the winding up of the Company. On 2 December 2011, in open court, I made orders doing so. These are my reasons for those orders. 2 This proceeding was commenced on 8 September 2010 by the plaintiffs as joint and several liquidators of the Company. Pursuant to orders made on 16 September 2010, the plaintiffs were, among other things, given leave to appoint themselves as joint and several administrators of the Company under s 436B(2) CA. 3 By the originating process filed on 8 September 2010, the plaintiffs also sought an order that the winding up of the Company be terminated upon the execution of a deed of company arrangement after the administration. At the request of the plaintiffs, consideration of this relief was deferred pending the outcome of the administration of the Company. 4 On 16 September 2010, the plaintiffs appointed themselves as joint and several administrators of the Company. On 1 November 2010, at a meeting of creditors convened by the plaintiffs pursuant to s 439A CA, the creditors of the Company resolved that the Company should enter into a deed of company arrangement to give effect to and implement a recapitalisation proposal. The deed of company arrangement was executed on 9 November 2010 (Company DOCA). Since 9 November 2010, the plaintiffs have been attending to the administration of the Company DOCA in their capacity as joint and several deed administrators, and in particular, the satisfaction of the relevant Conditions Precedent (as defined in the Company DOCA). 5 On 27 October 2011, the Receivers and Managers formally retired. Following that retirement, the plaintiffs progressed the recapitalisation proposal to its final stages and now seek to finalise the administration and liquidation of the Company. 6 The plaintiffs seek termination of the winding up of the Company to permit the finalisation of the Company DOCA and to enable the recapitalisation of the Company to proceed. The plaintiffs have relied on detailed submissions much of which I have adopted in these reasons. 7 The plaintiffs also seek ancillary orders to join themselves to the proceedings in their additional and separate capacity as deed administrators of the Company DOCA. It is appropriate for them to be joined in this separate capacity, given that the plaintiffs have, since 10 September 2010, been administering the Company in that capacity, rather than in their residual capacity as liquidators. STATUTORY FRAMEWORK 8 Section 482 CA provides that at any time during the winding up of a company, the Court may, on application, make an order terminating the winding up on a day specified in the order. 9 Under s 482(1A)(c) CA, the administrator of a deed of a company arrangement has standing to seek such an order. The liquidators also have standing to seek that order under s 482(1A)(a). 10 By s 482(2A) CA, in determining the application with respect to a company that is subject to a deed of company arrangement, the Court must have regard to all of the following matters: (a) any report that has been given to the Court by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; or (iii) Australian Securities and Investments Commission (ASIC), and that contains an allegation that an officer of the company has engaged in misconduct; (b) any report that has been lodged with ASIC by: (i) the administrator, or a former administrator, of the company; or (ii) the liquidator, or a former liquidator, of the company; and that contains an allegation that an officer of the company has engaged in misconduct; (c) the decision of the company's creditors to resolve that the company execute a deed of company arrangement; (d) the statement that was given under paragraph 439A(4)(b) when the company was under administration; (e) whether the deed of company arrangement is likely to result in the company becoming or remaining insolvent; and (f) any other relevant matters. 11 The Court should also have regard to the following considerations: (a) whether the termination would be in the interests of creditors, including future creditors, the liquidator, contributories and the public generally; (b) the terms and effect of any relevant deed of company arrangement and the extent to which termination of the winding up will better enable its objects, and those of Part 5.3A CA, to be achieved; and (c) any wider public interest considerations, including the question of whether the termination of the winding up would be detrimental to "commercial morality". Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 157 FLR 107 (at [47]-[51] per Austin J); Re Nardell Coal Corporation Pty Ltd (2004) 182 FLR 290 (at 304 per Austin J); Rupert Co Ltd v Chameleon Mining NL (in liq) (2006) 24 ACLC 635 (at [15] per Austin J); Re Terraplanet Ltd (in liq) (No 2) [2008] FCA 582 (at [24] per Lindgren J). 12 There are no fixed or absolute rules prescribing the circumstances which must exist before the Court can make an order terminating the winding up of a company. The matters identified above represent a range of discretionary considerations which the Court will usually need to address: Mercy & Sons (at [53]). Objects of Part 5.3A CA 13 One of the objects of Part 5.3A is (as set out in s 435A): … 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 … 14 It has been recognised that the objects of Part 5.3A may assume 'great' or 'considerable' importance where a termination order is sought after the execution of a deed of company arrangement: Mercy & Sons (at [53]); Re King & I Pty Ltd [2007] FCA 2085 (at [7]). 15 In this case, the objects of Part 5.3A CA will be met if an order terminating the winding up of the Company is granted in the present circumstances. Such an order will enable the Company DOCA to be fully effectuated, which in turn will enable the Company to: (a) continue in existence as a listed entity; and (b) provide a better return for the Company's creditors and members then would result from a winding up of the Company. RELEVANT CONSIDERATIONS IN TERMINATING THE WINDING UP An overview of the plaintiffs' contentions 16 The plaintiffs have submitted that it is appropriate for the Court to terminate the winding up of the Company for the following reasons as revealed in detailed affidavit evidence and written submissions (which have been adopted in these reasons). (a) The Company was initially placed into liquidation following the first voluntary administration, at which stage recapitalisation options were not considered viable, and liquidation was thought to be in the best interests of creditors. (b) Subsequent to the Company being placed into liquidation, the liquidators were presented with a viable recapitalisation proposal that had to be given effect through the execution and implementation of the Company DOCA. The plaintiffs considered this proposal to present a better opportunity for creditors than if the liquidation were pursued to its completion. (c) In their second report to creditors in the second voluntary administration, the administrators expressed the opinion that it was in the best interests of creditors for the Company DOCA to be executed and implemented, as they expected creditors to receive a better return from the Company DOCA than if the Company were liquidated. (d) The creditors of the Company have accepted and supported this opinion, by resolving that it execute the Company DOCA. (e) The Company's shareholders have passed a number of resolutions which, broadly speaking, approve: (i) the full implementation of the Company DOCA (including termination of the winding up); and (ii) the subsequent recapitalisation of the Company and its relisting on the Australian Securities Exchange (ASX). (f) Once full effect has been given to the Company DOCA, the Company will be solvent. All prior debts of the Company will be extinguished in exchange for the creditors accepting a right to prove against the assets of a creditors' trust, and the Company will retain assets with a carrying value of about $224,000 and a single debt of about $24,000. (g) The liquidators' interests will be protected, as they continue to have a right of indemnity out of assets of the trust, as do the deed administrators, for the costs of the liquidation and administration. (h) The liquidators have not identified any evidence of misconduct by former company officers, or other matters which would enliven public interest concerns against the termination of the winding up and the Company being placed within the control of its new directors. (i) Consistent with the fundamental objectives of Part 5.3A CA, terminating the winding up will enable the obligations under the Company DOCA to be fully performed, which in turn will enable the Company to: (i) continue in existence as a listed entity; and (ii) provide a better return for the Company's creditors and members then would result from a winding up of the Company. Background to the winding up 17 The general background to the Company and the circumstances leading to it originally being placed into liquidation are set out in the s 439A report to creditors prepared during the first administration of the Company, dated 9 June 2009 (June Report) and the affidavit of Mr Vincent Anthony Smith sworn 8 September 2010 (First Smith Affidavit). 18 The following facts and matters emerge from the June Report and the First Smith Affidavit: (a) the Company was incorporated on 15 May 1998, and its principal activity was the exploration for and mining of copper; (b) the Company was placed into external administration on 11 November 2008 when the plaintiffs were first appointed as voluntary administrators of the Company; (c) the failure of the Company was attributed to: (i) its inability to make a payment due to its primary secured creditor, Glencore International AG, on 11 November 2008; (ii) the sharp decline, by mid-late 2008, in world copper prices; and (iii) the then weakening Australian dollar against the US dollar, (d) according to Mr Smith there was no viable opportunity to recapitalise the Company during the first administration due to the prevailing economic climate and the uncommercial nature of initial recapitalisation proposals received by the administrators at the time; (e) due to the fact that a recapitalisation was not commercially viable at the end of the first administration of the Company, the administrators expressed opinions in the June Report that: (i) it was not in the interests of creditors to execute a deed of company arrangement at that time; (ii) in the absence of an acceptable deed of company arrangement proposal, it was in the interests of all creditors for the Company to be placed into liquidation; and importantly (iii) should a recapitalisation opportunity emerge, it would be open to the liquidators to later appoint an administrator to put forward a deed of company arrangement and terminate the liquidation. (f) thus, following the June Report, the creditors of the Company resolved that the Company be wound up and the plaintiffs be appointed liquidators. Effect and terms of the deed of company arrangement 19 The terms and effect of a deed of company arrangement are central to consideration of the impact of terminating a winding up. 20 In this instance, the Company DOCA contains terms which provide for, among other things: (a) the Company DOCA to bind all persons having a Claim (a widely defined term covering a debt or claim against the Company arising before 11 November 2008, or out of events occurring before that date) (cl 4.1); and (b) the Company to be released from all Claims on Completion (defined to mean the completion of the transactions contemplated by cl 5.3), and all such Claims to be extinguished, in exchange for: (i) all persons having a Claim lodging a proof of debt with the Trustee under the Trust Deed (as those terms are defined); and (ii) all persons having a Claim accepting their right to prove under the Trust Deed in full satisfaction and discharge of all Claims as at 11 November 2008 (cl 4.3). 21 Under the terms of the Company DOCA, Completion is subject to the satisfaction of a number of matters occurring prior to, or at, Completion (as set out in cl 3), including: (a) the fulfilment or waiver of the 'Conditions Precedent' described and defined as: (i) the Claims Condition (that is, the Deed being terminated under cl 10.1 and extinguishing all Claims at Completion); (ii) the Shareholder Condition (the passing of certain resolutions by the Shareholders of the Company at a Shareholders Meeting); (iii) the ASX Condition (the Promoters receiving written assurances from the ASX confirming that, subject to the successful completion of the Company DOCA, the Company's shares will be relisted for quotation on the ASX); (iv) the Employment Contract Condition (the termination or repudiation of any employment contracts by which the Company may be bound as at 11 November 2008, so that all employees claims are dealt with by the Company DOCA) (v) the Court Orders Condition (the Court ordering the termination of the winding up of the Company, or staying the winding up indefinitely); (vi) the Receivers and Managers Condition (the retirement of the Receivers and Managers, and Glencore International AG releasing the charge it was granted by the Company); (vii) the BOQ Charge Condition (BOQ Equipment Finance Ltd releasing its fixed charge granted by the Company); (viii) the Meeting Documents Condition (the preparation of the Meeting Documents) by the Promoters in accordance with the provisions of the Recapitalisation Deed in a form acceptable to the Administrators (acting reasonably) (as those terms are defined); (ix) the Trust Deed Condition (the execution of the Trust Deed by the relevant parties); and (x) the QMC Share Sale Condition (the sale of all shares in Queensland Mining Corporation Ltd (QMC) held by the Company). (b) the Trust Deed taking effect and the receipt of the Settlement Sum (as defined) by the Trustee (cl 3.1(b)). 22 Upon Completion, the Company DOCA provides for the following to occur, among other things: (a) the Promoters (as defined) to pay the Cash Advance ($800,000), less the Deposit ($100,000), to the Company or to the Trustee (cl 5.3(b)); and (b) the Remaining Tenements to be owned by the Company (cl 5.3(d)) 23 The Company DOCA will terminate in the following situations (among others): (a) by cl 10.1, immediately after Completion, when control of the Company is to return to its Directors (as defined); or (b) by cl 10.2, if the plaintiffs (as Administrators) and the Promoters agree that the terms of the Company DOCA cannot be fulfilled, or the Conditions Precedent are not satisfied by the Due Date (effectively, a date to be agreed between the plaintiffs and the Promoters). 24 As the second affidavit of Mr Vincent Anthony Smith, sworn 29 November 2011, (Second Smith Affidavit) discloses, at this stage, the following Conditions Precedent to the Company DOCA have been satisfied: (a) QMC Share Sale Condition; (b) BOQ Charge Condition; (c) Employment Contract Condition; (d) Receivers and Managers Condition; (e) ASX Condition; and (f) Shareholder Condition. 25 Of the remaining Conditions Precedent: (a) the Court Orders Condition is the subject matter of this application; and (b) Mr Smith expects that the remaining Conditions Precedent (the Claims Condition and the Trust Deed Condition) will be satisfied immediately before or upon Completion, or will be waived to enable Completion to occur, and will follow on from any orders made by the Court to terminate the winding up of the Company. Section 439A(4)(b) report 26 The plaintiffs submit that the administrators' report under s 439A(4)(b) is relevant to the Court's discretion in a number of ways as: (a) it provides useful background to the Court on the company's business, property, affairs and financial circumstances. (b) it discloses the administrator's opinion about why it was in the interests of creditors for the company to execute that deed of company arrangement. 27 In this case, two reports have been prepared under s 439A(4)(b) CA: (a) a report to creditors for the first period of voluntary administration (June Report); and (b) a report to creditors for the second period of voluntary administration, dated 11 October 2010 (October Report). 28 In the October Report: (a) At section 6, the plaintiffs: (i) reported that on 20 August 2010, the Company entered into a Recapitalisation Deed (as defined); (ii) summarised the key terms of the Recapitalisation Deed; (iii) explained that the process required to facilitate the recapitalisation process agreed between the Company and the Proponents would involve: (A) first, entering into a deed of company arrangement containing the essential terms set out in section 7.1 of the October Report; (B) secondly, the shareholders of the Company voting in favour of the recapitalisation of the Company, on the terms set out in the Recapitalisation Deed; and (C) finally, establishing a creditors' trust and providing for the creditors of the company to become beneficiaries of the trust. (b) Further, the plaintiffs in the October Report advised that they had found no information which altered their prior opinion that there was no evidence of offences, recoverable actions or insolvent trading which would provide a basis for a liquidator to bring recovery proceedings for the benefit of creditors (section 11). (c) The plaintiffs also stated their opinion that it would: (i) not be in the interests of any class of creditors for the administration of the Company to end (section 12.1); (ii) not be in the interests of any class of creditors for the Company to be placed back into liquidation (section 12.3); and (iii) be in the interests of the Company's creditors to enter into the proposed deed of company arrangement to allow the recapitalisation of the Company in accordance with the current recapitalisation proposal, on the basis that the creditors would then receive a better return than if the administration of the Company were to end and the Company be placed into liquidation (or continue in liquidation) (section 13). 29 The matters set out above, read with the terms of the Company DOCA, were favourable considerations supporting any order that the winding up be terminated. In particular, refusal to make such an order would have meant that: (a) the proposed recapitalisation of the Company could not proceed; and (b) the liquidation of the Company would be revived, ultimately resulting in a lesser return to creditors than if the Company DOCA were fully implemented. The interests of creditors 30 As is clear from Mercy & Sons (at [47]) and Re Terraplanet Ltd (at [25]-[27]) the Court will consider: (a) the attitude of the Company's creditors to the application; and (b) the position of potential future creditors and whether they may be prejudiced. 31 I am satisfied on the evidence that it is in the interests of current creditors of the Company for the winding up to be terminated, and for the Company DOCA to proceed. No prejudice to future creditors is apparent. Specifically, the plaintiffs submit and the Second Smith Affidavit indicates that: (a) the current creditors of the Company are expected to receive a better return from the Company DOCA than if the company were wound up, as outlined in the October Report. The creditors have voted in favour of the Company DOCA. (b) the Company DOCA envisages that the winding up will be terminated to enable the Company DOCA to be fully implemented. Therefore, in approving the Company DOCA, the existing creditors approved the current application and are taken to have considered that they will be better off when the winding up is terminated. (c) the Company DOCA, if fully implemented, will extinguish all Claims against the Company and creditors will instead have a right to prove for their debts under the Trust Deed. No existing debt will be preserved under the Company DOCA, and once the recapitalisation proposal is carried out the Company is expected to have: (i) approximately $1,076,000 of cash funds after recapitalisation costs; (ii) retained its 100% interest in the Wee MacGregor tenements in Queensland, being "Reserved Tenements" as that term is defined under the Company DOCA, with a carrying value of about $284,000; and (iii) a single debt of $27,000 (provisions), following the extinguishment of all other claims against the Company pursuant to the Company DOCA, 32 The fact that existing debt will be extinguished by the Company DOCA is particularly important in determining the position of future creditors and whether they would be prejudiced by the termination of the winding up: see Rupert Co Ltd (at [17] per Austin J); Re King & I Pty Ltd (at [6]). In this case, because of the effect of the Company DOCA, there is no appreciable risk to future creditors if the winding up is terminated. The interests of the liquidators 33 As indicated in Rupert Co Ltd (at [19]); Re Calgary and Edmonton Land Co Ltd (in liq) [1975] 1 All ER 1046, the Court will also consider what impact a termination of the winding up may have on the position of the liquidators. Particularly relevant matters are: (a) whether the liquidator supports the order; and (b) in any case, whether the liquidator's remuneration, costs and expenses are provided for. 34 In this case, a termination order will not prejudice the interests of the liquidators. The liquidators are plaintiffs to the application and they support the termination of the winding up. Also, the liquidators' position is protected by the Company DOCA, as its terms give them an indemnity against the assets of the Creditors Trust for any costs and expenses incurred during the liquidation. The interests of contributories 35 In considering the position of contributories, the Court will usually wish to know whether each member of the company either consents to the termination of the winding up, or is otherwise bound not to object to it, or his or her rights are properly secured: Re Calgary and Edmonton Land Co Ltd; Re El-Fahkri, in the matter of Elfah Pty Ltd (in liq) [2002] FCA 1469 (at [7] per Finkelstein J). 36 In this case, upon receiving detailed explanatory information, the shareholders of the Company voted in favour of a number of resolutions which, broadly speaking, approve: (a) the full implementation of the Company DOCA; and (b) the subsequent recapitalisation of the Company and its relisting on the ASX 37 The winding up of the company must be terminated before the Company DOCA can be fully implemented and before the Company can be recapitalised. In that sense, the shareholders of the Company can be taken to support an order to terminate the winding up of the Company. Evidence of misconduct 38 The existence of misconduct by officers of a company in liquidation is a further relevant consideration. The relevant questions include whether a termination of the winding up would: (a) return the company to the control of persons who had improperly managed it in the past: Re Skay Fashions Pty Ltd (in liq) (1986) 10 ACLR 743; or (b) detract from the potential benefit to be gained from the company remaining or being placed into the control of a liquidator, who can conduct investigations into the management of the Company and its officers and potentially pursue recovery actions for the ultimate benefit of its creditors and contributories: Re Telescriptor Syndicate Ltd [1903] 2 Ch 174. 39 As deposed to in the Second Smith Affidavit: (a) Mr Smith has not identified any evidence of offences, recoverable actions or insolvent trading which would provide a basis for a liquidator to bring recovery proceedings for the benefit of creditors; and (b) Mr Smith has not prepared, at any stage during his tenure as external administrator of the Company in any capacity, any report to ASIC or to the Court about any potential misconduct by officers of the Company. 40 As appears from the ASIC records in evidence, the three current directors of the Company were appointed on 22 December 2010, and none of the Company's directors who held office when the Company first went into liquidation, or the second period of voluntary administration, remain as directors of the Company. Solvency and public interest 41 The Court must generally be satisfied that, if the winding up is terminated, there is an objectively sustainable basis for belief as to the solvency of the company: Re King & I Pty Ltd (at [8]); Re Terraplanet Ltd (at [27]-[28] per (Lindgren J). 42 The solvency consideration is part of the wider concern of the Court to ensure that the termination of the winding up would be supported by considerations of commercial morality and the public interest. It reflects the public interest in ensuring that insolvent companies should not be permitted to trade, to the potential detriment of those with whom they deal, and instead should generally be wound up: Re Data Homes Pty Ltd [1972] 2 NSWLR 22; Mercy & Sons (at [51]); El-Fahkri (at [8] per Finkelstein J). CONCLUSION 43 I am satisfied on the basis of the considerations above that terminating the winding up of the Company now is appropriate, for the following reasons. (a) The Company DOCA is very close to being fully implemented. It is expected it will be fully implemented within 2 weeks. (b) The remaining steps under the Company DOCA are not complicated or time-consuming. They are: (i) executing the Trust Deed (which has already been prepared); (ii) arranging a formal time for the parties to meet and attend to the Completion Events set out in cl 5.3 of the Company DOCA; and (iii) the Deed Administrators terminating the Company DOCA in accordance with its provisions on the Company DOCA being wholly effectuated. They will then retire as the joint and several administrators of the Company. While important, these steps are mostly straight forward. These are not matters that are highly contingent or wrought with uncertainty. (c) Upon Completion and consequential termination of the Company DOCA, the Company will be solvent. All prior debt will be extinguished and the Company will be left with assets with a carrying value of some $224,000 and a single debt of some $24,000. (d) The Company remains in external administration, and in the control of the plaintiffs, until the time when the Company DOCA is terminated after Completion. The Company is not returned to the control of the new directors until after the Company has attained solvency. (e) If, for any reason, the Company DOCA does not proceed to Completion, the Company will be placed back into liquidation and remain in the control of the plaintiffs. It will, therefore, continue in a form of external administration, unless and until the Company DOCA is fully implemented. (f) The Company will, once it is returned to its directors, seek to relist on the ASX and embark upon a capital raising designed to raise some $1,076,000 of cash funds after recapitalisation costs, to enable it to resume trading. 44 I do not consider there is any realistic prospect that the public would be endangered if the winding up of the Company is terminated in the present case. 45 Accordingly, the following orders were made: 1. Vincent Anthony Smith and Justin Denis Walsh be joined to the proceeding as further named plaintiffs in their separate capacity as joint and several deed administrators of the Company. 2. The winding up of the Company be terminated with effect from the date of these orders. 3. The plaintiffs' costs of this application and the hearing on 2 December 2011 are the costs of the winding up. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 7 December 2011