Supreme Court New South Wales Medium Neutral Citation: In the matter of SBL Solutions Pty Ltd (subject to a deed of company arrangement) [2021] NSWSC 1002 Hearing dates: 29 July 2021 Date of orders: 11 August 2021 Decision date: 11 August 2021 Jurisdiction: Equity - Corporations List Before: Black J Decision: Proceedings to set aside the Deed of Company Arrangement dismissed with costs. Catchwords: CORPORATIONS — Voluntary administration — Application to set aside deed of company arrangement — Where proposal voted upon by related creditors — Whether resolution to enter deed of company arrangement contrary to interests of creditors — Whether winding up would allow more favourable outcome or better return to creditors than deed of company arrangement. CORPORATIONS — Voluntary administration — Application to set aside deed of company arrangement — Whether the deed of company arrangement should be terminated for "some other reason" under s 445D(1)(g) of the Corporations Act 2001 (Cth) — Whether deed of company arrangement oppressive, unfairly prejudicial to, or unfairly discriminatory against one more creditors — Where insufficient evidence that relevant resolution deprived creditors of the benefit of investigations as to causes of action in respect of breach of directors' duties and insolvent transactions. Legislation Cited: - Corporations Act 2001 (Cth), ss 447A, 455D - Insolvency Practice Schedule (Corporations), s 75-41 Cases Cited: - Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) (2015) 110 ACSR 203; [2015] FCA 1360 - Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (2005) 226 ALR 510; [2005] NSWSC 1235 - Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd (2005) 228 ALR 598; [2005] WASC 261 - Guo v Song [2018] NSWSC 12 - Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (2020) 149 ACSR 1; [2020] FCA 1395 - Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to deed of company arrangement) (2007) 64 ACSR 91; [2007] SASC 296 - Re Antqip Hire Pty Limited (subject to deed of company arrangement) (in liq) [2020] NSWSC 487 - Re Citadel Financial Corp Pty Ltd (subject to deed of company arrangement) (2020) 146 ACSR 220; [2020] NSWSC 886 - Re Condor Blanco Mines Ltd (No 2) [2016] NSWSC 1304 - Re Octaviar Ltd (No 8) (2009) 73 ACSR 139; [2009] QSC 202 - Re Pilot Advisory Pty Ltd (2019) 376 ALR 662; (2019) 141 ACSR 458; [2019] FCA 2171; BC201912245 - Re Recycling Holdings Pty Ltd (2015) 107 ACSR 406; [2015] NSWSC 1016 - Re Windows on the World Steel Windows Pty Ltd (In Administration) [2020] VSC 880 Category: Principal judgment Parties: Wind Turbine Services Australia Pty Ltd and Cosmic Wind Services Pty Ltd (Plaintiffs) SBL Solutions Pty Ltd (subject to a deed of company arrangement) (First Defendant) Vincent Pirina (Second Defendant) Steve Naidenov (Third Defendant) SBL Solutions Services Pty Ltd (Fourth Defendant) Representation: Counsel: P Rodionoff (Plaintiffs) J Horowitz (First Defendant) J Hynes/F Tao (Second and Third Defendants) Solicitors: Ai Strategic Lawyers (Plaintiff) Contracts Specialist (First Defendant) Corrs Chambers Westgarth (Second and Third Defendants) File Number(s): 2021/50975 Judgment 1. By Amended Originating Process filed on 15 March 2021, the Plaintiffs, Wind Turbine Services Australia Pty Ltd ("WTS") and Cosmic Wind Services Pty Ltd ("Cosmic") apply for orders, under s 455D or 447A of the Corporations Act 2001 (Cth) that a Deed of Company Arrangement ("DOCA") made between SBL Solutions Pty Ltd ("SBL"), Messrs Pirina and Naidenov ("Deed Administrators") and SBL Solutions Services Pty Ltd ("SSL") be terminated. Alternatively, they seek an order under s 75-41 of the Insolvency Practice Schedule (Corporations) ("IPSC") setting aside a resolution of creditors of SBL passed at a meeting on 11 January 2021 ("11 January resolution") that SBL vary the DOCA and an order that SBL be wound up. The basis of the Plaintiffs' application is set out in Points of Claim filed on 15 March 2021, and there is a significant degree of common ground as to the facts which emerge from the Points of Claim and Points of Defence. Background and chronology 1. I will first set out some backgrounds facts and a chronology of events, which I do not understand to be contentious. SBL was incorporated on 19 September 2014 and was part of the "SBL Solutions Group", which also included SSS and the ultimate parent company, SBL Solutions Group Pty Ltd ("SSG"). Mr Brett Poole was the sole director of SBL. The principal business of the SBL Solutions Group was assembling, repairing and maintaining wind turbines and associated electrical work. 2. SBL was previously engaged by Sarens (Australia) Pty Ltd ("Sarens") to undertake works in respect of two projects located at the Sapphire Wind Farm and the Silverton Wind Farm, and commenced works on the Sapphire project in about September 2017 and was required to install 75 wind turbines by May 2018. It commenced works in respect of the Silverton project in about November 2017 and was required to install 58 wind turbines by June 2018. Significant delays occurred in those projects, which SBL contended resulted from Sarens' delays in moving cranes needed for the work and, from about June 2018, there were disputes between SBL and Sarens in respect of payments claimed by SBL for those projects. 3. On 30 June 2018, SSS was incorporated and, in the second half of 2018, it became the contracting party for all new projects for the SBL Group and SBL remained as an asset holding company and employing entity for management and administrative staff of the SBL Group, and also held one maintenance contract, as to which works were completed in May 2019. 4. By early December 2018, Sarens had advised SBL that it would not accept SBL's delay claims in relation to the Sapphire and Silverton projects and would claim liquidated damages for delay against SBL. SBL continued working on the Silverton project until at least March 2019. 5. On 3 June 2019, WTS obtained judgment against SBL in the amount of $183,204.24. WTS then served a creditor's statutory demand on SBL on 19 June 2019 and, on 8 July 2019, administrators were appointed to SBL by resolution of its director under s 436A of the Corporations Act. As at that date, WTS and Cosmic were creditors of SBL in the amounts of $216,984.24 and $1,583,351.15 respectively in respect of subcontractor work and they have received a dividend of 20.75 cents in the dollar during the course of the administration. 6. On 5 August 2019, the Deed Administrators issued a second report to creditors which referred to arrangements between SBL and SSS, a related entity of SBL, and referred to the restructuring of the SBL Group to which I referred above. That report noted a potential preference claim available against the Deputy Commissioner of Taxation ("DCT") and another creditor, which is now in liquidation. A second meeting of creditors held on 12 August 2019 was then adjourned for not more than 45 business days. 7. In a third report to creditors issued on 8 October 2019, the Deed Administrators referred to a demand made on Sarens for an amount exceeding $10 million alleged to be owing to SBL and noted that attempts were being made to achieve a commercial resolution of the claim against Sarens; identified potential voidable transaction and insolvent transaction claims; noted that the Mr Poole's assets and liabilities were such that he may not be able to meet any claim against him and identified advantages and disadvantages of accepting a proposed deed of company arrangement and placing SBL in liquidation; and recommended that creditors resolve that SBL execute a deed of company arrangement in a form proposed by SBL Solutions. 8. SBL's creditors resolved that SBL enter into that DOCA on 15 October 2019 and that DOCA was executed on 4 November 2019, and required SSS to pay 13 instalment payments totalling $500,000, comprising four instalments of $35,000 and nine instalments of $40,000 towards the deed fund, which were payable monthly; and that the deed fund would also include recoveries made from claims against Sarens. 9. SSS subsequently failed to pay amounts due under the DOCA in February and March 2020 and the Deed Administrators convened a further meeting of SBL's creditors for 30 April 2020. By their fourth report to creditors issued on 15 April 2020, the Deed Administrators advised that SBL's claim against Sarens had been finalised on the basis that Sarens pay SBL the amount of $2.2 million, the large part of which had been paid and addressed a proposed further variation to the DOCA. 10. At the meeting of SBL's creditors held on 30 April 2020, creditors were advised that $70,000 had been paid into the trust account of SSS's solicitors and would be remitted to the deed fund if a variation to the deed proposal was accepted and creditors resolved to vary the DOCA at that meeting. Creditors, including the Plaintiffs, resolved to vary the DOCA to allow a six month extension to SSS to make the DOCA contributions. A deed of variation of the DOCA giving effect to those variations was executed on 14 May 2020. The payment of $70,000 was then made into the deed fund but SSS subsequently failed to pay further DOCA contribution instalments due in November and December 2020. 11. The Deed Administrators then convened a further meeting of SBL's creditors for 11 January 2021 and issued a further report to creditors, which referred to a proposal put forward by Mr Poole for further variations to the DOCA, indicated the potential outcomes of a revised DOCA and liquidation, noted that the return to creditors under the DOCA was most likely less than a liquidation result and recommended that the DOCA be terminated and SBL be wound up. The Deed Administrators identified several reasons to prefer liquidation to continuing the DOCA, including a likely higher dividend to creditors available under the liquidation scenario; the apparent incapacity of SSS to make further payments under the DOCA; a liquidator's ability to bring voidable transactions claims which they assessed as having good prospects; a liquidator's ability of a liquidator to bring an insolvent trading claim against Mr Poole; a liquidator's ability to investigate and pursue claims against SSS and other related parties; and a liquidator's ability to more comprehensively investigate SBL's affairs. The case now put by the Plaintiffs has much in common with the view then put by the Deed Administrators, notwithstanding the several criticisms the Plaintiffs now advance of the Deed Administrators' conduct. 12. At the further meeting of creditors held on 11 January 2021, the 11 January resolution to vary the DOCA was approved by creditors on a poll, with eight creditors with admitted claims totalling $2,816,943.42 voting in favour and five creditors with admitted claims totalling $2,648,854.86 voting against the resolution. There is a dispute as to the terms of the further DOCA proposal put to the meeting of 11 January 2021, as to which the Plaintiffs contend that SSS was to be released from making any further DOCA contribution payments and SBL contends that the effect of the DOCA variation was that SSS would make one further DOCA contribution payment in the amount of $40,000 and no payments thereafter. 13. There is also a dispute as to whether two employees of SBL should have been permitted to vote at the meeting on 11 January 2021, although nothing turns on these disputes for present purposes. However, it is not necessary to determine that dispute, or the application of any time limit to any challenge to the employees' entitlement to vote, because it is common ground that Mr Brett Poole, Ms Sarah Poole and SBL were each related creditors of SBL and voted in favour of the 11 January resolution; if their votes were disregarded, that resolution to vary the DOCA would have had to be determined on a casting vote; and that is sufficient to establish the Court's jurisdiction under s 75-41 of the IPSC on which the Plaintiffs rely. 14. A further variation of the DOCA was executed on 27 January 2021 and the Plaintiffs commenced these proceedings on 22 February 2021. Affidavit and other evidence 1. I now turn to the parties' affidavit and other evidence. The Plaintiffs rely on the affidavit dated 19 February 2021 of their solicitor, Mr Niles, which exhibits a number of relevant documents, and was admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as submission only and not as proof of the fact. By a further affidavit dated 22 March 2021, Mr Niles corrected the documents which were exhibited to his first affidavit and the Plaintiffs now rely on the exhibit to his second affidavit. 2. The Plaintiffs also rely on the affidavit dated 26 February 2021 of Ms Melanie Lenk, who is the sole director of WTS, and she refers to her dissatisfaction as to the way in which the Deed Administrators have handled the administration and identifies a number of aspects of that dissatisfaction. The Plaintiffs also rely on the affidavit dated 5 March 2021 of Mr Ivor Hatton, the sole director of Cosmic, who indicates that Cosmic does not want the Deed Administrators appointed as liquidators, that he does "not like the way the Administrators have handled their duties" and that he has lost confidence in them for several reasons. 3. The Plaintiffs also rely, in reply, on the affidavits of Mr Bjarne Jensen dated 19 May 2021, Ms Lenk dated 26 May 2021, Mr Bower dated 4 June 2021 and Mr Crossan dated 4 June 2021. 4. SBL relies on the affidavit dated 4 May 2021 of Mr Poole, who is the sole director of SBL and SSS. Mr Poole there refers to circumstances in respect of the Sapphire and Silverton projects, which appear to have contributed to the insolvency of SBL; to dealings with Recoup Debt Recovery Pty Ltd ("Recoup"), a company that SBL engaged to assist with recovery of its claims against Sarens; to the entry into the DOCA and subsequent meetings with creditors; and to his personal asset position and intention to defend any insolvent trading claim against him. Mr Poole's affidavit exhibited a statement of his personal assets and liabilities, which indicated that his only asset of substance was a house owned jointly with his wife with a value of $1,125,000. SBL also led expert valuation evidence to establish the value of that property, by a valuation report dated 22 April 2021 (Ex SBL-2) and the Plaintiffs did not contest that valuation. That house is subject to a mortgage of over $700,000, leaving Mr Poole with net assets of $263,098 as at 20 April 2021. 5. The prospects of any recovery against Mr Poole's assets are reduced by a contingent liability to Hermes Capital Australia Pty Ltd ("Hermes"), secured by a second mortgage over that house and a registered security interest over all of Mr Poole's present and after-acquired property, which then secured an amount of nearly $1.6 million, referable to an invoice financing facility provided by Hermes. Mr Horowitz (who appears for SBL) took me, at length, through the documentation of that invoice financing facility and it is plain that the appointment of a liquidator to SBL, as sought by the Plaintiffs, would give rise to an event of default under that facility, allowing Hermes to exercise its rights under the second mortgage and the registered security interest over Mr Poole's other assets, although I recognise that it would be only be entitled to do so, broadly, to the extent of any shortfall in its recovery of the amounts of the financed invoices. The extent of that shortfall on a termination of the DOCA and the appointment of a liquidator to SBL is uncertain, but it is plainly possible that that shortfall would exceed the amount of Mr Poole's net assets, depriving any proceedings against him of utility. 6. By a further unsworn affidavit dated 29 July 2021, which Mr Poole adopted in his oral evidence (Ex SBL-6), Mr Poole sought to respond to a submission made by Mr Rodionoff (who appears for the Plaintiffs) as to an unpleaded allegation that SBL had incurred costs of financing vehicles used by SSS and provided support staff for SSS's operations but did not charge for the provision of those services. Mr Rodionoff, perhaps perversely, objected to Mr Poole having the opportunity to respond to that allegation on the basis of the lateness of his evidence, and I rejected that evidence on the basis that the Plaintiffs would then not be permitted to pursue a claim which they had not pleaded and to which the Defendants had not had an opportunity to respond. I proceed on that basis. Mr Poole also led evidence, by leave, to address difficulties of form in several paragraphs of his earlier affidavit, dealing with matters which had adversely impacted SSS's performance and, he contends, affected its ability to comply with the terms of the DOCA. It is not necessary to reach findings as to that evidence in order to determine this application. 7. Mr Poole was briefly cross-examined. He acknowledged that, as the first half of the year 2018 progressed, the money owed by Sarens to SBL gradually increased and, as he had indicated in his affidavit, SBL and Sarens were in dispute about the money owed to SBL for the Sapphire and Silverton Projects, and that Sarens not paying SBL had the result that SBL was unable to pay the contractors that it had engaged or the money that it owed them (T24). He acknowledged that SBL was not paying tax due to the DCT at that time; his evidence was that workers compensation was being paid; but he did not recall whether payroll tax was being paid; and he acknowledged that SBL would not have the money to pay its creditors unless it obtained the money that it was claiming from Sarens (T24-25). This evidence would assist liquidators appointed to SBL in any claim for insolvent trading brought against Mr Poole, but it does not address the difficulty with Mr Poole's limited assets to which I have referred above. Mr Poole was also cross-examined as to Sarens' conduct which had contributed, in his view, to delay in the Sapphire and Silverton Projects (T25-26). It is plain enough that Mr Poole considered that Sarens' conduct had contributed to the delays in that project, but his evidence in cross-examination falls well short of the evidence that would be necessary to establish a viable claim against Sarens in that regard. 8. SBL also relied on an expert report dated 2 May 2021 of Mr John Melluish, who is an experienced insolvency practitioner, and an updated report dated 28 July 2021, to which I refer below. Mr Melluish's first report is based on several assumptions, all of which were reasonable, and none of which were controverted by evidence led by the Plaintiffs. These included assumptions that the administrators had identified any potential recoveries which may be made in a liquidation of SBL, and the only additional recovery identified by Mr Rodionoff in submissions was wholly speculative in character; that Mr Poole had insufficient assets to warrant an insolvent trading claim being brought against him, which is established by the evidence to which I referred above; and that any preference claim against the ATO could be settled for between 40% and 70% of the claim, which is speculative but not addressed by any evidence led by the Plaintiffs suggesting any better prospect of recovery. Mr Melluish identified a possible error in the Deed Administrators earlier calculation of the return on a liquidation, which would reduce that return, arising from the need to adjust for recoveries already obtained by creditors under the DOCA. Ultimately, little turns on that, because, as will emerge below, the claim to costs made by the Plaintiffs in respect of these proceedings and the Deed Administrators' right of indemnity for costs in respect of these proceedings would extinguish any advantage of a liquidation in any event. 9. Mr Melluish there concludes (at [90]-[91]) that, having regard to Mr Poole's statement of assets and liabilities, it appears that "any claim made against the Director for insolvent trading is unlikely to result in a commercial realisation by the Liquidator" and that: "In my opinion, it would be uncommercial to pursue either the Director or SBG for insolvent trading unless it could be shown that the defendants held sufficient assets to meet at least a multiple (2-3 times) of the estimated costs of bringing a claim (including legal fees, Liquidator remuneration and other costs). I estimate these costs to be at least in the order of $200,000, which is consistent with the estimate made by the Administrators for legal fees." 1. Mr Melluish there expressed the view that the DOCA represented a better financial outcome for creditors than the liquidation of SBL, on the basis that the dividend estimated to be paid under the DOCA was equivalent to the outcome that may be achieved in a liquidation, but there were considerable risks and uncertainties in achieving the estimated liquidation outcomes. Mr Melluish noted that a liquidation relied on a preference recovery from the ATO to deliver a substantial part of the return, and recognised the possibility that no recovery would be made against the ATO, which is plausible where the ATO may rely on affirmative defences. Other risks identified by Mr Melluish to recoveries in a liquidation included the risk that the liquidator's remuneration may be higher than estimated, which might be thought to be a matter of common experience; that the liquidator would expend further funds bringing an insolvent trading claim against SBL's holding company or Mr Poole which was unsuccessful or resulted in no commercial recovery, which appears to be a substantial risk at least if any proceedings were brought against Mr Poole; that the costs of these proceedings would erode the funds available in a liquidation, as may in fact occur as I will note below; and that the secured creditor, Hermes, would claim available funds (excluding voidable recoveries), potentially including the amount of the deed fund, adopting the approach that allowed a secured creditor to do so in Re Antqip Hire Pty Ltd (subject to deed of company arrangement) (in liq) [2020] NSWSC 487. Mr Melluish also noted that a dividend under the DOCA would be able to be declared upon resolution of a remaining dispute with Sarens (which has now occurred), which would be considerably sooner than any collection of the result of recoveries of any preference against the ATO. 2. Mr Melluish summarised his conclusion, as at the date of his first report, as follows (at [151]): "Notwithstanding the fact that the estimated DOCA return is marginally less than the estimate high Liquidation return (by 1.51 cents in the dollar), it is my opinion that once the substantial risks associated with achieving a dividend return in the Liquidation are taken into account, the comparatively risk free dividend payable under the DOCA represents a better financial outcome for unsecured creditors." Mr Melluish's logic is persuasive on its face and Mr Rodionoff did not seek to cross-examine Mr Melluish so as to challenge any aspect of that reasoning. 1. By a further report dated 28 July 2021, Mr Melluish updated his comparison of the outcome of the DOCA and the outcome of a liquidation, by reference to further information as to the cash held by the Deed Administrators in connection with the deed administration of SBL as at 27 July 2021; their unpaid remuneration and expenses as at 27 July 2021; and the estimated further remuneration and expenses likely to be incurred by the Deed Administrators between 28 July 2021 and the conclusion of the hearing. Mr Melluish's updated Table 5, comparing the result of the DOCA with a liquidation without having regard to the costs incurred in respect of these proceedings, showed a further return to the creditors of 5.06 cents in the dollar under the DOCA, in addition to the distribution previously made; a potential return to creditors of less than that amount, of 4.89 cents in the dollar, in the "low case" on a liquidation; and a marginally higher return of 7.53 cents in the dollar in the "high case" in a liquidation. 2. However, once Mr Melluish adjusted that table for the fact that the Plaintiffs seek to have their costs of these proceedings paid out of SBL's assets, as priority costs in respect of the winding up, and on the reasonable assumption that the Plaintiffs' recoverable costs would be at least $100,000, then the return in the "low case" in a liquidation reduces to 3.27 cents in the dollar, and the return in the "high case" reduces to 5.97 cents in the dollar, again only marginally above the return in the DOCA of 5.06 cents in the dollar. It seems to me that that result would not support the termination of the DOCA, where the evidence led by the Plaintiffs does not provide any reason to think that the "high case" rather than the "low case" result would be achieved in a liquidation, and that marginally better return in a "high case" would only be achieved after a significant delay and should be discounted for the risk attached to achieving it. 3. Mr Melluish also notes that, once both the Plaintiffs' claim to the costs of the proceedings and the Deed Administrators' right of indemnity in respect of their costs incurred in the proceedings (assumed to be a recoverable amount of $150,000) are taken into account, then the return on a DOCA to creditors is reduced to 3.86 cents in the dollar, the return on the "low case" in the liquidation is reduced to nil, and the return on the "high case" in the liquidation is reduced to 2.71 cents in the dollar, less than the return on the DOCA. Mr Melluish's analysis reflects the fact that the right of indemnity has a differing financial impact in the DOCA and a liquidation, although it would be available in both, because the Deed Administrators costs should be recoverable against the Plaintiffs if the application to terminate the DOCA fails. Mr Rodionoff seeks to displace this analysis by contending that the Deed Administrators would not be allowed their costs or would only be allowed part of their costs in respect of these proceedings. It seems to me that that result is unlikely, where the Deed Administrators were left with little realistic option other than participating in the hearing, where the Plaintiffs were not prepared to narrow the case by excluding the allegations advanced against them. 4. The result set out in the previous paragraph is, in my view, the likely outcome of the orders which the Plaintiffs seek and it has the result that both the "low case" and the "high case" on a liquidation is worse than the result of the DOCA, even without regard to the uncertainty and delay involved in a liquidation. I should add that this unhappy result will not arise in all cases where a plaintiff seeks to set aside a DOCA; but it will foreseeably arise in a case such as this case, where the return in a liquidation was only marginally better than the return on a DOCA, prior to the commencement of these proceedings; a plaintiff seeks to recover its costs of the proceedings in preference to the claims of other creditors in the liquidation; and a plaintiff raises allegations as to the conduct of the administrators, which it does not make good, and they are entitled to a right of indemnity as to their costs of responding to those allegations. 5. The Deed Administrators rely on the affidavit dated 30 April 2021 of Mr Pirina, who is one of the joint and several Deed Administrators of SBL under the DOCA, and describes himself as the lead appointee in relation to the external administration of SBL since the administrators were appointed. Mr Pirina indicates the intent of that affidavit is to address relevant factual matters, and that he does not oppose the relief sought by the Plaintiffs, except to the extent that they allege there has been any misconduct or breach of duty by the Deed Administrators warranting investigation or giving rise to grounds to terminate the further varied DOCA. Mr Pirina addresses several allegations made by the Plaintiffs in the Points of Claim and Ms Lenk's affidavit, including issues as to the appropriateness of the settlement between SBL and Sarens; the position in respect of GST payable on the settlement; the position as to fees and legal costs in litigation by Recoup against Mr Poole and action taken by SBL against Recoup; whether the Deed Administrators' fees and disbursements were excessive; and whether their solicitors' costs were fair and reasonable or whether they should be assessed. 6. Mr Pirina's evidence, in his first affidavit, is that the Deed Administrators, then as administrators of SBL, identified that the claim against Sarens, in respect of works associated with the Sapphire Project and the Silverton Project, was its most significant asset, and his evidence is that the Administrators took legal advice from their solicitors as to the merits of SBL's claims against Sarens and whether those claims may be pursued through the security of payment adjudication process, and the estimated costs of pursuing the claims (Pirina 30.4.21 [23]). He elaborates on these matters in his second confidential affidavit. 7. Mr Pirina also addresses the work that he and his staff undertook in relation to claims concerning Recoup, which assisted SBL, prior to its administration, with its claims against Sarens, in respect of an adjudication initiated by SBL under the security of payments legislation. His evidence (Pirina 30.4.21 [34]-[35]) is that Recoup submitted proofs of debt to the Deed Administrators claiming a "success fee" in respect of amounts recovered by SBL from Sarens and further amounts sought under an invoice issued by Recoup to SBL; that he obtained legal advice that SBL had claims available against Recoup and that SBL intended to pursue those claims; and, about the same time, the Deed Administrators became aware that Recoup had commenced proceedings against Mr Poole in the Local Court seeking to recover amounts also claimed under proofs of debt lodged by Recoup in the administration. His evidence is that the Deed Administrators, with legal advice, considered it necessary to investigate matters concerning Recoup's proofs of debt, and whether SBL or the Deed Administrators should pursue any claims against Recoup. He sets out, at some length, the steps taken to investigate these matters, and notes that the Deed Administrators rejected the proofs of debt submitted by Recoup after that investigation (Pirina 30.4.21 [32]-[51]). 8. In his first affidavit, Mr Pirina also responds to a question raised by the Plaintiffs (and I use that language advisedly) as to the amount of the Deed Administrators' remuneration and expenses. Mr Pirina there gives evidence (Pirina 30.4.21 [52]-[81], in a manner that would ordinarily be seen in a remuneration claim, of the manner in which the Deed Administrators and their staff record the time spent and work performed in relation to their appointments, the use of leveraging and Mr Pirina's review of time entries to ensure all time and work charged are fair and reasonable. He also points out that creditors have approved the Deed Administrators' remuneration in earlier resolutions at creditors' meetings. 9. Mr Pirina also relies on an affidavit dated 30 April 2021, parts of which were subject to a claim for confidentiality. Mr Pirina there addressed the advice which he had received from his solicitors in relation to the merits of the claims of SBL against Sarens and the estimated costs associated with pursuing those claims. Mr Pirina there exhibits a memorandum of advice dated 3 September 2019 from the administrators' solicitors which advised as to the strengths and weaknesses of the claims against Sarens, the limited avenues available to pursue those claims and the substantial cost of arbitral proceedings in respect of the claims and the desirability of settlement negotiations (Ex DA4, CB 1911-1924). I have regard to that advice but do not set out in more detail where it is subject to orders under the Courts Suppression and Non-publication Act 2010 (NSW). Mr Pirina also explains why, having regard to the advice they had received, the Deed Administrators decided to settle the claim against Sarens on the specified terms (Confidential Pirina Affidavit [14]). 10. The Deed Administrators also rely on Mr Pirina's third affidavit dated 26 July 2021, which responds to evidence led by the Plaintiffs. Mr Pirina there acknowledges that the administrators became aware that, in April 2019, prior to the Company's entry into administration, Sarens had made an offer to settle that claim for approximately $5 million (Pirina 26.7.21 [15]-[16]). His evidence is that SBL had then made a counteroffer to Sarens, prior to the administrators' appointment, and Sarens had withdrawn its earlier offer. Mr Pirina reiterates the view that he held, at the time of the settlement with Sarens, that a settlement in the amount of $2 million plus GST was in creditors' interests having regard to the legal advice he had obtained. He expresses the view, based on his experience, that SBL's ability to obtain a settlement with Sarens would have been adversely impacted by several matters after it entered voluntary administration, including two adjudication determinations adverse to SBL after the earlier Sarens offer and its withdrawal, which had improved Sarens' position, and the financial difficulties which led to SBL being placed in administration which would have indicated to Sarens that it likely had insufficient financial means to prosecute claims through arbitration. Mr Pirina also refers to the fact that, if litigation funding had been obtained by SBL, about 30-40% of any recoveries would have been payable to the funder and to his experience that litigation funders are ordinarily reluctant to fund complex construction disputes. He also refers to the offsetting claims that Sarens had asserted as against SBL, some of which were accepted by SBL, which would have made it more difficult to obtain litigation funding and would have impacted on any funding fee payable. It seems to me that these matters will have considerable force in supporting Mr Pirina's decision to accept Sarens' offer to settle the claims against it for the settlement amount that was ultimately achieved. 11. The Deed Administrators also rely on the affidavit dated 30 April 2021 of their solicitor, Mr Chopra, who refers to correspondence with the solicitors for the Plaintiffs. The exhibit to Mr Chopra's affidavit records attempts made by the Deed Administrators to narrow the issues in dispute in this application by excluding allegations as to their conduct, so that they would not need to appear and incur costs in doing so. The Plaintiffs chose to maintain those allegations and I have referred above to Mr Melluish's evidence as to the impact of the Deed Administrators' costs of the proceedings on the likely result of a DOCA or liquidation. 12. I bear in mind that agreement was reached between Counsel for the Plaintiffs and Counsel for SBL respectively that they were not required to put a witness' version of events to another witness who put a competing version of those events, dispensing with the requirement in Browne v Dunn (1893) 6 R 67 (HL). That was a plainly sensible approach in the circumstances, which will have reduced the length of the hearing and the costs incurred by all parties in the hearing. 13. I also bear in mind that Mr Barnden, as liquidator of ARC Renewables Pty Ltd (in liq) ("ARC"), appeared at the commencement of the hearing to indicate his support for the Plaintiffs' application and was then given leave to withdraw. The DCT, which is a substantial creditor of SBL in an amount in excess of $2 million and also the potential target of a preference claim indicated its position by letter dated 27 July 2021 (Ex DA-5). The DCT indicated that, based on the information available to it, it did not have concerns in relation to the way the Deed Administrators have managed the DOCA and would not object to their being appointed as liquidators if the Court ordered that SBL be wound up. The DCT there recognised concerns raised by the Plaintiffs about the administration of the DOCA, including the amount of the settlement of SBL's claims against Sarens, the amount of the Deed Administrator's fees and the amount of the fees and expenses of the Deed Administrators' legal representatives, and indicated that the DCT did not share those concerns, although it also recognised that an investigation of those issues might give rise to a potential conflict of interest if the Deed Administrators were to be appointed as liquidators. The Plaintiffs respond that the DCT faces a preference claim if a liquidator is appointed, apparently implying that the DCT has taken that position to avoid such a claim. I treat the DCT's letter as a genuine expression of its views. I recognise that, on the one hand, Mr Barnden supports the relief sought and, on the other, the DCT, which has a substantial claim, does not share the concerns to which the Plaintiffs have referred and does not join in seeking the relief sought. The Plaintiffs' application under s 444E of the Corporations Act 1. The Plaintiffs seek leave of the Court to bring an application to wind up SBL, to the extent they would be prohibited from doing so by s 444E(2) of the Corporations Act, and point to their ability under s 445D of the Act to seek an order terminating a deed of company arrangement, with the result that SBL is taken to have passed a resolution that it be wound up voluntarily. The parties did not make substantive submissions about this application, and it is ultimately not necessary to deal with it, since I conclude below that the basis for an order terminating the DOCA is not established in any event. The Plaintiffs' claim for termination of the DOCA under s 75-41 of the IPSC 1. It will be convenient first to address the Plaintiffs' claim for an order terminating the DOCA under s 75-41 of the IPSC. In their opening submissions in support of that and other orders, the Plaintiffs outline the facts leading up to the voluntary administration at some length and I have had regard to the evidence as to those matters and the Plaintiffs' submissions about them. Mr Rodionoff also outlines, at some length, the chronology of events in respect of the administration and the Deed Administration, and I have had regard to the evidence as to those matters and Mr Rodionoff's outline of those events. I recognise that the Plaintiffs may well be justifiably aggrieved by their dealings with SBL and the financial losses which they have suffered, although that will be the understandable position of many creditors in many insolvencies. However, the question for the Court in this application is not whether the Plaintiffs are justifiably dissatisfied with SBL, but whether they have established the basis of the relief that they seek and, in particular, whether the result of the liquidation which they now seek will be preferable, for creditors as a whole, to a DOCA. 2. That section deals with the position where the outcome of voting at a creditors' meeting is determined by a related entity and applies if, on the application of, relevantly, a creditor, the Court is satisfied that a proposal was voted on by creditors at a meeting of creditors; if the vote(s) of a related creditor(s) had been disregarded, a proposal that was not passed would have been passed, or the question would have had to be decided on a casting vote; and the failure to pass that resolution: "(i) Is contrary to the interests of the creditors as a group or of that class of creditors as a group, as the case may be; or (ii) Has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposal, or for it, as the case may be, to an extent that is unreasonable having regard to the matters in subsection (ii)." Section 75-41(2) specifies matters that are to be taken into account in determining whether there is unreasonable prejudice to the interests of creditors and s 75-41(3) specifies the orders which the Court may make under that section. 1. Mr Rodionoff submits, and it is common ground, that s 75-41 involves a twostep process, namely to determine whether the threshold set out in s 75-41(1) has been satisfied and, second, if that threshold has been satisfied, to exercise a discretion as to whether orders are to be made under that section. Mr Rodionoff submits, and it is common ground, that the threshold for the application of s 75-41 is satisfied, because each of SSS, Mr Poole and Mrs Poole were related creditors of SBL and voted in favour of the 11 January resolution and, if their votes were disregarded, the question of variation of the DOCA would have had to be decided on a casting vote for the purposes of s 75-41(1)(b) of the IPSC. The Court therefore has jurisdiction to make the orders sought by the Plaintiffs and the parties rightly recognised that the real question is whether those orders should be made for the purposes of s 75-41(1)(c) of the IPSC. 2. In paragraphs 51 and 52 of their Points of Claim, the Plaintiffs plead that the 11 January resolution was contrary to the interests of SBL's creditors as a whole and that that resolution prejudiced or is likely to prejudice the interests of those creditors, including the Plaintiffs, who voted against that resolution to an extent that is unreasonable. Those claims are particularised by reference to several matters, which are also addressed by Mr Rodionoff in submissions. First, the Plaintiffs submit that the DOCA was contrary to the interests of SBL's creditors as a whole or has prejudiced the interests of those creditors, because SSS's claim is not discharged by the operation of cl 10.4 of the original DOCA. Mr Rodionoff refers to information provided to SBL's creditors in the Deed Administrators' third report to creditors and to authority that a deed of company arrangement may be set aside if it is unreasonable having regard to the benefits provided to related creditors. Mr Rodionoff submits that the unfairness of the approach adopted by the DOCA is that, if a recovery of more than $4 million had been achieved in respect of the Sarens debt, SSS would have been entitled to participate in the DOCA as well as have its debt preserved after the DOCA was completed. He submits that the 11 January resolution preserved the unreasonably prejudicial provision of the DOCA provided that SSS's debts would not be extinguished on a final distribution. 3. Mr Horowitz responds that SSS gave up its entitlement to receive any dividend under the DOCA, where other unsecured creditors have already received a dividend of 20.75 cents in the dollar and will receive a further final dividend if the DOCA remains in place; SSS had contributed $180,000 to the deed fund, although I recognise it had defaulted in making further contributions; and that it is unknown whether SBL will be in a position to pay SSS's claim in the future. Mr Horowitz submits that, for these reasons, the fact that SSS's claim is not discharged by the operation of the DOCA is not contrary to the interests of the creditors as a whole or prejudicial to any creditors. 4. I am not persuaded that this matter, alone or together with the several other matters on which the Plaintiffs rely, establishes either that the 11 January resolution was contrary to the interests of SBL's creditors or that it prejudiced their interests to an unreasonable extent. The Plaintiffs' evidence does not raise any real possibility that SBL could achieve a recovery of more than $4 million in respect of the Sarens debt, so that SSS would recover both a return under the DOCA and preserve its debt, and it appears that it would in fact be left to the uncertain prospect that it might in future recover an amount against SBL. The Plaintiffs also lead no evidence to suggest that that prospect was a real possibility. 5. Second, the Plaintiffs contend that the passage of the 11 January resolution relieved SSS of having to pay the sum of $320,000 it was required to contribute to the deed fund under the previous versions of the DOCA and SBL's creditors "got nothing in return". Mr Horowitz responds that the 11 January resolution gave SBL's creditors a choice between varying the DOCA in the manner proposed by SSS or placing SBL into liquidation and neither of those resolutions would have required SSS to pay a further $320,000 into the deed fund. He notes that the Plaintiffs did not propose a resolution calling for the Deed Administrators to enforce the terms of the DOCA as it then stood and bring proceedings against SSS for outstanding monies. That approach would, of course, have raised questions as to the cost of the proceedings and the capacity of SSS to meet a judgment against it. Mr Horowitz submits that it cannot be said to have been contrary to the interests of SBL's creditors as a whole, or prejudicial to any creditors, to have passed a resolution which relieved SSS of the requirement to pay a further $320,000 when the alternative motion for which the Plaintiffs contended would have had the same consequence. 6. I am not persuaded this matter, again alone or in combination with other matters, has the result for which the Plaintiffs contend, where creditors then faced the choice of varying the DOCA or placing SBL in liquidation, and there were significant risks attached to replacing the likelihood of a prompt return under the DOCA with the more uncertain and less timely return under a liquidation. Even if this matter had been established, the present position would not support the making of the order sought, where (as I will note below) the outcome of a liquidation would now be worse than the outcome of a DOCA having regard to the costs incurred in these proceedings. 7. The Plaintiffs third and fourth submissions are of a similar character. The Plaintiffs contend that the passage of the 11 January resolution relieved SSS of the prospect of a liquidator investigating if it engaged in potential uncommercial transactions with SBL and making a claim for repayment of any benefit received by SSS from such transactions or seeking other relief under s 588FF of the Act. The Plaintiffs refer to the recognition of potential uncommercial transactions in the Deed Administrators' reports to creditors. 8. Mr Horowitz responds that the Deed Administrators stated, in their report to creditors dated 5 August 2019 [CB 153]: "As detailed previously, SSS is lending funds to the Company so that the Company may meet its liabilities to its employees and in respect of the assets owned by it. In return, the Company is allowing SSS to have the use of these employees and its motor vehicles without charge. Our investigations have not identified any benefit to the Company from this arrangement. Our investigations into this arrangement are ongoing. If it is uncommercial, a liquidator, should one be appointed, may apply to the Court for an order that the Company be relieved of its liability to SSS." 1. Mr Horowitz submits that the Plaintiffs have not adduced evidence which would allow the Court to determine the prospects that a liquidator might have in any Court proceedings in relation to potential uncommercial transactions between SSS and SBL and there would be no utility in an order that SBL be relieved of its liability to SSS, where SSS is not participating in the DOCA. 2. I accept that the passage of the 11 January resolution, which continued the DOCA, relieved SSS of the prospect of such investigations, but it seems to me that would only be contrary to the interests of creditors or relevantly prejudicial to the interests of creditors if the outcome of such investigations would be preferable to the continuance of the DOCA. The evidence led by the Plaintiffs falls well short of establishing even a significant prospect of that matter. 3. Fourth, the Plaintiffs contend that, by the passage of the 11 January resolution, Mr Poole has avoided the prospect of investigation of his conduct as a director of SBL and the prospect of being pursued by a liquidator for insolvent trading or breach of directors' duties. The Plaintiffs here refer to references in the Deed Administrators' reports to creditors of potential insolvent trading claims and potential breaches of directors' duties by Mr Poole. They recognise the evidence now led by Mr Poole as to his asset position, but refer to an earlier occasion when he declined to respond at a creditors' meeting to a question as to whether he had transferred assets to his spouse and whether his spouse would provide security at a creditors' meeting. The Plaintiffs suggest that a liquidator could conduct an examination of Mr Poole to determine if he had transferred assets to his wife, although there is no evidence that that has occurred, and no reason to think that Mr Poole would give different evidence in a liquidator's examination to the evidence he has given in these proceedings. 4. In oral submissions, Mr Rodionoff submitted, by way of background, that SBL was insolvent from June or July 2018, 12 months prior to the administrators' appointment, and that a liquidator would not have difficulty in proving insolvency from that point (T27). I will assume, without deciding, the correctness of that proposition but it does not assist the Plaintiffs in either establishing the recoverability of any insolvent trading debt against Mr Poole or assessing the prospects of the defences that may be raised by the DCT in any preference claim against it, or the costs of such a claim if the DCT cross-claims against Mr Poole for indemnity in respect of the amount of any preference that it may be required to repay, and Mr Poole in turn raises defences to the insolvent trading claims. Mr Rodionoff submits that Mr Poole had provided little evidence as to his financial position and that warranted a further investigation by the liquidator and referred to his having declined to answer a creditor's question as to whether he had transferred assets to his wife in the course of a creditors' meeting (T30); however, I have referred above to Mr Poole's statement of assets and liabilities, as addressed by his affidavit evidence, and to the mortgage held by a bank and the second mortgage held by Hermes over the property he and his wife own, and the further security taken by Hermes over his other assets. Mr Rodionoff refers to Mr Poole's evidence that he also had motor vehicles and submits that "there can be motor vehicles of great value" (T30); while that proposition is true, the Plaintiffs lead no evidence to raise any question that Mr Poole owns any motor vehicles of that character. 5. Mr Horowitz responds that the Deed Administrators identified a possible claim against Mr Poole, for insolvent trading and did not identify any claims against Mr Poole for other breaches of directors' duties. He refers to Mr Poole's evidence that: "It is my intention to defend any insolvent trading claim that may be brought against me. Up until the time that I placed SBL into voluntary administration, I believed that SBL would be able to pay all of its creditors in full from the monies owing to it by Sarens. Up until December 2018, I believed those monies would be paid voluntarily by Sarens. From December 2018, after retaining Recoup, I believed that SBL would recover those monies from Sarens under SOPA." 1. Mr Horowitz also refers to Mr Poole's evidence of his assets and liabilities and to Hermes' rights under its securities, to which I have referred above, and to Mr Melluish's assessment that an insolvent trading claim is uncommercial, which I have noted above. He also responds to the suggestion that Mr Poole may have transferred assets to his wife, because he declined to answer a questions at a creditors' meeting as to that matter, by pointing to his evidence that "[o]ther than motor vehicles, the only asset of substance that I have ever owned is my house – which I purchased jointly with my wife in 2015" (Poole [120]). Mr Poole was not cross-examined to suggest that evidence was untrue. I have not neglected Mr Rodionoff's further observation in oral submissions that motor vehicles may be valuable, but the Plaintiffs led no evidence to suggest that any motor vehicles now owned by Mr Poole had substantial value. 2. Mr Horowitz submits, and I accept, that any potential insolvent trading claim against Mr Poole is of little, if any, value where Mr Poole has limited assets; the legal costs of bringing a defended insolvent trading claim will be roughly equivalent to the value of Mr Poole's assets; and Hermes holds a registered second mortgage over Mr Poole's home, which it is entitled to enforce, inter alia, if Mr Poole fails to pay a judgment debt within 14 days. Mr Horowitz also submits, and I also accept, that the Plaintiffs have therefore not established that the effect of the 11 January resolution in giving up the insolvent trading claim in return for a more immediate and certain dividend payable under a DOCA was contrary to the interests of the creditors as a whole or prejudicial to any creditors. 3. Fifth, the Plaintiffs contended, in their Points of Claim, that the passage of the 11 January resolution had the result that SBL's unsecured creditors were unable to participate in any recovery from Sarens of the amount of $200,048, being the balance of the settlement sum agreed to between the Deed Administrators and Sarens. It appears that amount was referable to GST on the Settlement Deed, and the dispute whether Sarens was required to pay it reflected a dispute as to whether GST was payable on the Settlement Deed. In the event, this amount was not recovered from Sarens, but the Deed Administrators received a refund of GST in substantially the same amount (although there is a difference of about $18,000 between the two figures) from the DCT which was paid into the deed fund. Mr Rodionoff rightly accepts that "this issue substantially falls away" in these circumstances. It does not support the relief sought by the Plaintiffs, alone or together with other matters. 4. Sixth and seventh, the Plaintiffs contend that, by reason of the passage of the 11 January resolution, SBL's unsecured creditors are likely to be no better off than, or worse off than, if SBL had been placed into liquidation. I will deal with these propositions together. The Plaintiffs refer to the Deed Administrators' report to creditors dated 15 December 2020 which set out the advantages and disadvantages of liquidation and the advantages and disadvantages of accepting the DOCA amendment proposal. They also address Mr Melluish's first report which had expressed the view that the dividend under the DOCA was equivalent to the outcome that may be achieved in a liquidation, but recognise his observation that a DOCA was preferable because of risks and uncertainties in achieving the liquidation outcome. They submit that that report suffers from several deficiencies and point to the possibility of insolvent trading claims or uncommercial transaction claims, which I have addressed above. They submit that the Deed Administrators may be personally liable for their costs in these proceedings if the Plaintiffs are successful, but that seems unlikely where the Deed Administrators have adopted a neutral position in this application other than to respond to the allegations which the Plaintiffs have made against them personally. 5. Apparently in the alternative, the Plaintiffs advance the wider submission that the passage of the 11 January resolution left the unsecured creditors "likely to be worse off" than if SBL had been placed in liquidation. They refer to some of the same evidence in support of that submission and again point to the possibility of insolvent trading claims or claims for uncommercial transactions or an investigation into the Deed Administrators' actions. I have addressed each of these matters above and the Plaintiffs have not established that, at the time of the 11 January resolution, the unsecured creditors were likely to be worse off by its passage than if SBL had been placed in liquidation, and the position is now to the contrary. 6. The Plaintiffs raised several issues as to the Deed Administrators' conduct of the deed administration in respect of this claim. First, Mr Rodionoff also points to a "potential outcome" of an investigation into whether the Sarens claim was appropriately settled and, if not, a "potential claim" against the Administrators or their legal representatives". The Deed Administrators respond to this aspect of the claim, so far as it calls their conduct into question. Mr Hynes draws attention to Mr Pirina's evidence of the steps taken by the Deed Administrators, with the assistance of their legal advisors, to realise SBL's claims against Sarens and I have referred to that evidence above. Mr Hynes submits, and I accept, that that evidence indicates that the Deed Administrators had a reasonable basis to settle the claims against Sarens on the terms of that settlement. The Plaintiffs have not shown that any claim against them or their legal advisers has reasonable prospects so as to warrant, alone or with other matters, the further costs and delay involved in the termination of the DOCA and a winding up of SBL. 7. In oral submissions, Mr Rodionoff first raised the further possibility of a claim by SBL under s 18 of the Australian Consumer Law against Sarens in respect of precontractual representations made to Mr Poole as to the time that it would take to relocate the cranes in respect of the projects. I will assume, without deciding, that such a claim would be arguable, but its prospects would depend upon a review of the communications between Mr Poole and Sarens generally, whether SBL relied on any such representation and whether it was reasonable to do so, and this claim has the difficulty that it would presumably have been apparent to SBL, at an early stage in the projects, that the relocation of cranes was taking longer than Sarens had indicated and it apparently chose to continue with the projects after that emerged. It seems to me that this claim, or any consequential claim against the Deed Administrators or their legal representatives for not pursuing it, cannot be given any real weight as a matter supporting a termination of the DOCA or the appointment of a liquidator to SBL. 8. A second matter relied on for this claim is the prospect of an investigation of whether it was appropriate, and the extent to which it was appropriate, for the Deed Administrators to charge fees and incur legal costs in reviewing documents in litigation brought by Recoup against Mr Poole and by SBL against Recoup. The Deed Administrators also respond to this aspect of the claim, so far as it also calls their conduct into question, and I have referred to Mr Pirina's evidence as to these matters above. Mr Hynes points out that the Plaintiffs do not explain why it should be necessary to investigate the work performed and associated remuneration claimed by the Deed Administrators in respect of matters relating to Recoup, and do not identify any reason that the work performed was inappropriate or unreasonably undertaken. He submits that there can be no serious suggestion that the Deed Administrators' work in connection with the Recoup claims was not appropriately undertaken or that the matter requires some kind of investigation. I do not consider it necessary to reach the latter finding, and it is sufficient to find that, in the absence of an identified basis for an investigation or reason to think that recoveries are likely to follow from it, it also does not warrant, alone or with other matters, the delay or costs that would be incurred in the termination of the DOCA and a winding up of SBL. 9. A third matter relied on for this claim is the prospect of an investigation of the amount of the Deed Administrators' remuneration and expenses. The Plaintiffs point to the amount of that remuneration and expenses, which is substantial, and Cosmic's director, Mr Hatton, gives evidence that he would "like an independent liquidator to investigate if those fees were properly incurred, whether they were excessive and if there is any prospect of having the fees reduced" (Hatton 5.3.21 [8(d)]. I have referred to Mr Pirina's evidence as to this matter above. Mr Pirina also responds to concerns raised by the Plaintiffs as to the manner in which the Deed Administrators dealt with them, although some of the Plaintiffs' evidence in that regard was not admissible and was not admitted. The evidence led by the Plaintiffs in these respects does not sufficiently show any prospect of recovery to warrant, alone or with other matters, the delay or costs that would be incurred in the termination of the DOCA and a winding up of SBL. 10. Mr Horowitz also addresses this claim, by reference to Mr Melluish's evidence that the dividend payable under the DOCA, from funds now held by the Deed Administrators, represents a better financial outcome for SBL's creditors than placing the company into liquidation. He also submits that the position is reinforced if the Deed Administrators are entitled to be indemnified out of the deed fund for the costs of these proceedings, which is the prima facie position; or the Plaintiffs' costs of these proceedings are paid out of the deed fund, as the Plaintiffs seek, and I have addressed Mr Melluish's evidence on that basis above. In oral submissions, Mr Rodionoff responds that the Deed Administrators should have put on a submitting appearance in these proceedings and that that affects any entitlement on their part to costs (T34-35). I do not accept that submission, where the Plaintiffs chose to advance allegations as to the Deed Administrators' conduct, and did not withdraw them when they were invited to do so in order to allow the Deed Administrators to withdraw from the proceedings. 11. Mr Horowitz also refers to Mr Melluish's evidence as to the other substantial risks associated with a liquidation, including the risk that the preference recovery claim against the ATO does not result in the estimated recoveries forecast under the high liquidation or low liquidation scenarios, and that no recovery will be made; that a new liquidator's remuneration will be higher than estimated by Mr Melluish; and that Hermes as secured creditor may claim any available funds (excluding voidable recoveries) pursuant to the guarantee provided by SBL on 20 April 2020 in relation to SSS's invoice finance facility. I have also referred to these matters in dealing with Mr Melluish's evidence above. Mr Horowitz also submits, and I accept, that there is no evidentiary basis of substance for the suggested causes of action against the Deed Administrators and their legal representatives, so far as they are relied on to support a contention that creditors would be better off if SBL were placed into liquidation. 12. In oral submissions, Mr Horowitz emphasised that the Plaintiffs indicated a number of matters that they wished to have investigated by a liquidator, but did not seek to establish that those investigations would lead to actionable claims with a prospect of recovery, and disclaimed any allegations of wrongdoing in several respects (T37). Mr Horowitz also emphasised that the Plaintiffs did not say they would fund the investigation or pursuit of those claims (although the Plaintiffs sought to address that matter after judgment was reserved) and emphasised the significance of that matter where lack of funding was one reason that the Deed Administrators had settled the claim against Sarens as noted above (T38). Mr Horowitz emphasised the analysis undertaken by Mr Melluish, to which I have referred above, and that Mr Melluish was not required for cross-examination. Mr Horowitz also pointed to the impact of the Plaintiffs' costs and the Deed Administrators' costs of these proceedings on a distribution, by reference to Mr Melluish's updating report dated 28 July 2021, to which I have also referred above. As I noted above, I raised a concern in submissions as to whether that approach depended upon the question of costs, which would not be known until it was known whether the Plaintiffs had succeeded or failed (T41). However, I am satisfied that it is legitimate to take account of the Plaintiffs' claim to costs of the proceedings, since that is the outcome for which they contend; and of the Deed Administrators' right to indemnity for costs, where there is little likelihood that that indemnity would not be permitted, as events have developed. Mr Horowitz also addressed, in oral submissions, the operation of Hermes' security over Mr Poole's assets (T52ff), which I have also addressed above. 13. Mr Hynes in turn notes that the Plaintiffs and SBL have joined issue on whether a liquidation scenario would likely provide a better return to creditors and that the Deed Administrators make no submission as to that matter, on the basis that he should properly take a position of neutrality directed at assisting the Court and volunteering the relevant facts: Re Condor Blanco Mines Ltd (No 2) [2016] NSWSC 1304 at [8]-[15]; Re Windows on the World Steel Windows Pty Ltd (In Administration) [2020] VSC 880 at [39]. In oral submissions, Mr Hynes responded that the Deed Administrators were compelled to have a wider engagement in the application, because matters were raised in respect of the conduct of the administration, both by the evidence led by the Plaintiffs and by submissions, and the Plaintiffs had contended that there was a "degree of delinquency" on the part of the Deed Administrators and their legal advisers, so as to support the appointment of an independent liquidator, including that the Deed Administrators had "sacrificed valuable claims" of SBL or that their remuneration was excessive (T62). Mr Hynes submitted, and I accept, that the Deed Administrators were entitled to respond to those allegations, notwithstanding that Mr Rodionoff now says that he does not ask the Court to make adverse findings in relation to the Deed Administrators' conduct, but leave that question for investigation by a liquidator (T62). Mr Hynes submits that the Deed Administrators consider it is important that they demonstrate that "they have done nothing wrong" and that they also draw relevant evidence to the Court's attention (T62). 14. For the reasons set out above, I am not persuaded that the Plaintiffs have established that the claims that they seek to have a liquidator bring against Mr Poole or SSS have significant prospects of a recovery, or that the "potential" claims against the Deed Administrators or their legal representatives are more than speculation. In any event, as I have noted above in dealing with Mr Melluish's further evidence, the comparison between a liquidation and a DOCA was marginal at the time of the 11 January resolution, and the result of a liquidation would now be worse than the result of a DOCA, having regard to the Plaintiffs' claim for costs in these proceedings and the Administrators' right of indemnity in respect of the costs of the proceedings. Even if this claim were established, the Court would not exercise its jurisdiction to set aside the 11 January resolution, where it has not been established that would bring a better result for creditors than the continuance of the DOCA. I will address a further matters raised by the Plaintiffs after judgment was reserved below. 15. Eighth, the Plaintiffs contended that the passage of the 11 January resolution and execution of the further variation to the DOCA deprived SBL's creditors "of the benefit of a detailed investigation" into several matters. The Plaintiffs identified several matters for investigation in their Points of Claim and I have addressed a number of those claims above. Those matters included an unfair preference claim against the DCT and I have addressed Mr Melluish's assessment of the value of that claim above. In oral submissions, Mr Rodionoff also submits that, so far as any preference claim against the DCT is concerned, the DCT would have had reason to suspect that SBL was insolvent (T30); but that submission also does not reflect any factual investigation of that matter. There are also other gaps in the Plaintiffs' analysis of this potential claim, to which I drew Mr Rodionoff's attention in submissions (T31), including how any recovery action brought against the DCT would be funded; whether the Plaintiffs offered to fund it (a matter which the Plaintiffs only sought to address after judgment was reserved); whether liquidation funding would be available for such a claim and, if so, the impact of a funding charge of 30-40% on the benefit of any proceedings to creditors; and how those recoveries would be affected by the liquidator's remuneration over the time that any proceedings would take. Mr Rodionoff responds that there were funds in the administration that would be able to be utilised (T31), but such funds would largely be dissipated by the Plaintiffs' claim to costs of the proceedings as a priority claim (a matter which the Plaintiffs also sought to address only after judgment was reserved) and the costs incurred by the Deed Administrators, in responding to the allegations made against them, as to which they would be likely entitled to indemnity from the deed fund; and potentially further eroded by any claim by Hermes to the deed fund as a secured creditor. The matters identified for investigation by the Plaintiffs also included a claim in respect of an alleged unfair preference to ARC, which is likely to be of minimal value where that company is now in liquidation. The remaining matters raised questions about the Deed Administrators' conduct in the course of the administration and I have addressed those matters above. 16. Mr Rodionoff submits that the Plaintiffs do not seek to have the Court make "final findings" in relation to the Deed Administrators' actions, and he submits that "there is utility in an independent liquidator investigating the matters set out and if the independent liquidator finds that there is a basis for a claim it will be up to that liquidator to institute any claims". Mr Rodionoff again refers to the settlement of the claim against Sarens and to the evidence concerning that settlement in this respect, and refers to the Plaintiffs' wish to have an investigation as to whether the Deed Administrators' charges were reasonable. Mr Rodionoff submits that: "As the passing of the [11 January resolution] means that those investigations could not take place, the passing of the proposal is contrary to the interests of the creditors as a group and has also prejudiced or is likely to prejudice the interests of those creditors who voted against it to an extent that is unreasonable." 1. Mr Horowitz responds that the Plaintiffs lead evidence of their concerns as to the Deed Administrators but ultimately do not seek to establish a seriously arguable case that the Deed Administrators have done anything wrong, as distinct from contending that "the creditors of SBL have been deprived of the benefit of a detailed investigation" of their concerns. Mr Horowitz points to the likely cost of that investigation and submits, by reference to Re Pilot Advisory Pty Ltd (2019) 376 LR 662; (2019) 141 ACSR 458; [2019] FCA 2171 at [84], that: "The Plaintiffs' desire to have various questions answered about the conduct of the administration is not something that should be funded by the creditors of SBL unless there is cogent evidence that there is a "real prospect" or a "serious case" that such investigations will lead to a greater recovery for creditors than what they would receive under the DOCA". 1. I am also not persuaded that the eighth ground warrants the relief sought, alone or together with other matters. As Mr Horowitz points out, the conduct of any investigation will only be in creditors' interests if the likely outcome of that investigation, any subsequent proceedings and any subsequent recoveries of them are to creditors' advantage, having regard to the costs and delay which would be incurred by undertaking them. Where the Plaintiffs make no serious attempt to establish a real prospect that those investigations will lead to recoveries for creditors, there is no reason to think that the costs and delay involved in undertaking them are to the advantage of creditors, or that not undertaking them is contrary to their interests or prejudicial to them. 2. In oral submissions, Mr Rodionoff also relies on the fact that, as I noted above, Mr Barnden supports the termination of the DOCA in his capacity as liquidator of ARC. I recognise Mr Barnden's position, although the weight that can be given to it is limited by the absence of evidence as to any investigations he has undertaken before forming that view, or any analysis of the likely outcome that underpins that view. Matters raised by the Plaintiffs after judgment was reserved 1. In the course of closing submissions, I had drawn Mr Rodionoff's attention to the fact that I would likely have regard to that part of Mr Melluish's analysis which took into account the costs claimed by the Plaintiffs in these proceedings, rather than an analysis that did not have regard to those costs. Mr Rodionoff had responded (T72) that, "if that was to be an issue" he would seek the Plaintiffs' instructions to limit their costs to a figure below $100,000, although he did not obtain such instructions or advance such an offer before submissions were completed and judgment was reserved. I left open the possibility that, if the Plaintiffs wished to make such an offer, they could make it to the parties and communicate it to my Associate and I would then give the parties an opportunity to be heard as to that position. 2. After judgment had been reserved, the Plaintiffs' solicitors sent the other parties' solicitors two letters, with a copy to my Associate; the first offered, for the first time, that the Plaintiffs would not claim more than $100,000 in costs and would defer the claim for costs until a liquidator's recovery exceeded $450,000 and the second offered, also for the first time, to fund their proposed appointee as liquidator for initial costs of $100,000 and to "consider" additional funding for a liquidator. SBL's solicitors responded, not surprisingly, that they opposed the Plaintiffs being granted leave to tender further evidence, being the letters attached to their emails. 3. I heard the Plaintiffs' application for leave to reopen on 9 August 2021, and dismissed it for the reasons set out in a separate judgment, including that the proposed evidence would significantly alter the position they had adopted at the hearing, after the hearing was completed and judgment was reserved; the Plaintiffs did not offer to compensate SBL for the costs it had incurred in leading evidence as to the effect of the position that the Plaintiffs had previously adopted, which would be wasted by their shifting to a different position; and an offer to pay the liquidator's costs would in any event be given little weight where not supported by evidence of the Plaintiffs' financial capacity to do so. The position here differed significantly from that in Citadel Corporation Pty Ltd (subject to deed of company arrangement) (2020) 146 ACSR 220; [2020] NSWSC 886 ("Citadel Financial"), where I had granted leave to lead further evidence where the question was whether a third party, the DCT, rather than the plaintiff in that case would provide an indemnity for a liquidator's costs. By contrast with these proceedings, that case was not conducted up to the end of closing submissions on the basis that such funding would not be provided and the DCT's financial capacity to provide such funding if it offered to do so was clear in that case. In any event, the further evidence the Plaintiffs sought to lead as to these matters would not have addressed the adverse effect on other creditors of a delay in a distribution under the DOCA or the other risks in a liquidation which I have addressed above. The Plaintiffs' claims under s 445D(1)(d)(f) and (g) of the Corporations Act 1. The Plaintiffs also rely on ss 445D(d), (f) and (g) of the Corporations Act. Section 445D(1) relevantly provides that: "(1) The Court may make an order terminating a deed of company arrangement if satisfied that: … (d) there has been a material contravention of the deed by a person bound by the deed; 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." An order under that section may be made on the application of, relevantly, a creditor of the company. 1. In respect of their claim under s 445D(1)(d) of the Act, the Plaintiffs contend that there had been a material contravention of the DOCA prior to the meeting of creditors on 11 January 2021, because SSS had failed to make contribution payments of $40,000 each due on 3 November 2020 and 3 December 2020. Mr Horowitz responds that, while there were breaches of previous versions of the DOCA, there has been no breach of the DOCA as amended by the Second Deed of Variation on 27 January 2021, following the 11 January resolution, and that relief under this section is not available: Commonwealth Bank of Australia v C2C Developments Pty Ltd (2013) 94 ACSR 555; [2013] NSWSC 724 at [21]. I accept that submission. 2. Turning now to the Plaintiffs' claim under ss 445D(1)(f)-(g) of the Act, Mr Hynes rightly points out that whether a deed of company arrangement is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more of the company's creditors or is contrary to the interests of the creditors of the company as a whole, and whether that is the case will be determined by reference to the general principles underlying Pt 5.3A, including by reference to a creditor's right to be paid or wind up a company or have the company administered by the administrator in a way which will see the creditor paid from the company's property: Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd (2005) 228 ALR 598; [2005] WASC 261 at [59]–[60]; Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to deed of company arrangement) (2007) 64 ACSR 91; [2007] SASC 296 at [114]; Re Recycling Holdings Pty Ltd (2015) 107 ACSR 406; [2015] NSWSC 1016 at [60]–[61]; Guo v Song [2018] NSWSC 12 at [148]; Citadel Financial at [22]. 3. Mr Hynes also rightly draws attention to Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) (2015) 110 ACSR 203; [2015] FCA 1360 ("Midland Hwy") at [68]-[74], where Beach J summarised the applicable principles in respect of the termination of a deed of company arrangement "for some other reason" under s 445D(1)(g) of the Act as follows: "The public interest includes considerations of commercial morality and the interests of the public at large (Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (2005) 226 ALR 510 at [287] per Campbell J). Where there has been misconduct in the affairs of a company requiring appropriate investigation by a liquidator and appropriate recovery proceedings being considered and undertaken, it is detrimental to commercial morality to prevent or hinder such steps through the device of a DOCA propounded by entities and individuals who ought be the subject of investigation and the target of such proceedings. A winding up will be beneficial from a public interest perspective where investigations and recovery proceedings are likely to be funded and the investigations and appropriate recovery proceedings could realistically lead to the relevant persons who have engaged in the suspect transactions being brought to account: Public Trustee (Qld) v Octaviar Ltd (subject to a deed of company arrangement) (2009) 73 ACSR 139 at [182] per McMurdo J. More specifically and of direct relevance to the present context, the Court has power under s 447A to set aside a resolution to enter into a DOCA and to order the winding up of the company. In exercising such a power, the Court can apply by analogy any one or more of the principles applicable to s 445D. In other words, if a DOCA if entered into pursuant to the relevant resolution could be terminated under s 445D, then by analogy in the scenario where a DOCA has not yet been executed pursuant to that resolution, s 447A can be used to prevent the DOCA from being entered into. But none of this is to deny or limit the broader ambit of s 447A. Section 447A can be used to make the orders sought by ASIC, whether or not any element of s 445D could be hypothetically or contingently invoked, although I accept that s 445D(1)(g) is broad and on one view unconstrained, save by its context and s 435A generally, such that this proposition may only be of theoretical interest. But it is correct to say that even if none of the elements of s 445D could be satisfied, the orders sought could still be made under s 447A. But let me address s 445D for a moment. The Court may set aside a DOCA pursuant to s 445D even where creditors may be better off under the DOCA than with a liquidation: Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd at [286] to [291] per Campbell J. It may do so in the public interest. Where the relevant company is not trading and there is no likelihood of its resuming its former business, the public interest in placing the company in the hands of a liquidator may prevail over the interests of creditors (see Australian Securities and Investments Commission v Storm Financial Ltd (recs and mgrs apptd) (admin apptd) (2009) 71 ACSR 81 at [69] and [71] per Logan J). In QBI Corporation Pty Ltd v Plantation Rise Pty Ltd (admins apptd) (recs and mgrs apptd) (2010) 77 ACSR 573 a DOCA was set aside where there was no continuing business preserved and the structure designed and enshrined in the DOCA was to allow and facilitate the director of the company and third parties who were susceptible to voidable transactions to be protected from relevant action. Generally, the breadth of s 445D(1)(g) is such that in a particular case the public interest can justify the termination of a DOCA even where it is not established that this would necessarily be in the creditors' interests. Finally, in any event, the preclusion of an effective investigation by a liquidator into relevant transactions and the opportunity for greater returns may render a DOCA contrary to the creditors' interests overall (see Canadian Solar v ACN 138 535 832 Pty Ltd [2014] FCA 783 at [37] (per Perry J)." 1. As Mr Hynes points out, these observations were followed in Citadel Financial above at [20] and in Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (2020) 149 ACSR 1; [2020] FCA 1395 at [409] where Beach J also observed (at [410]) that: "But generally speaking, one should not terminate a DOCA and order a company to be wound up if the DOCA will restore the company to financial health and the DOCA does not have the purpose or effect of unjustifiably quarantining third parties from investigation. If the company is trading and it is likely that its business will continue, then unless there are real public interest concerns, termination of a DOCA and causing a company to be wound up are inappropriate outcomes. The interests of creditors should be the primary consideration, but they may be outweighed if the DOCA has a fraudulent or wrongful purpose." His Honour also observed (at [412]) that, even if any of the criteria in s 445D are satisfied, the Court retain a discretion whether to terminate a DOCA, having regard to the creditors' interests and the public interest. 1. The Plaintiffs here repeat the allegation that the variation of the DOCA by the 11 January resolution has deprived creditors the benefit of investigations and claims in respect of breach of duty and insolvent trading and other matters and contend that that amendment was contrary to the interests of creditors as a whole and contrary to the public interest, and that the 11 January resolution prejudiced or was likely to prejudice the interests of creditors who voted against the resolution to an unreasonable extent. The Plaintiffs also seek to rely on an additional claim that the Deed Administrators' legal representatives may have given inadequate advice as to the implications of the adjudications for a claim against Sarens, but this proposition is also raised without being sufficiently developed to establish that there is any serious prospect of success in a claim of that character. The Plaintiffs also rely on an unpleaded claim that SBL had incurred costs in respect of vehicles and staff used in SSS's operations, for which it had not charged SSS. I have referred above to the fact that the Plaintiffs objected to Mr Poole's evidence led in response to that allegation, and it seems to me the Plaintiffs cannot be permitted to pursue an unpleaded claim where they have deprived SBL of an opportunity to lead evidence in response to it. 2. Mr Rodionoff also submits that SSS's conduct in paying overdue DOCA instalment payments into its solicitors' trust account to be released to SBL only if creditors resolved to vary the DOCA in accordance with its proposal offends against commercial morality. Mr Horowitz responds with reference to the reasons put by SSS and in Mr Poole's evidence for its suggested inability to pay the DOCA instalment payments when due at that time, but I do not find it necessary to determine the adequacy of those reasons. Whether or not it was reasonable for SSS to await the outcome of the vote at the creditors' meeting before making any further payments to the deed fund, it seems to me that course is not sufficiently offensive to commercial morality to warrant a termination of the DOCA where that course will be adverse to creditors for the reasons noted above. 3. I am otherwise not persuaded that the matters relied on in respect of the orders sought under s 445D of the Act support the relief sought, for the same reasons that the matters relied on under s 75-41 of the IPSC do not support that relief. The Plaintiffs' claim under s 447A of the Corporations Act 1. Turning now to Plaintiffs' alternative claim under s 447A of the Act, that section provides that the Court may make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company, and gives an example that, if the Court is satisfied that the administration of a company should end because provisions of that Part are being abused or for some other reason, the Court may order that the administration is to end. Such an order can also be made on the application of, relevantly, a creditor of the company. Mr Hynes rightly refers to Midland Hwy above as authority that the considerations applicable to s 445D apply by analogy to an application brought under s 447A, and that section raises considerations as to the public interest having regard to the statutory objectives of Pt 5.3A of the Act and matters as to commercial morality: Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (2005) 226 ALR 510; [2005] NSWSC 1235 at [286]-[291]; Re Octaviar Ltd (No 8) (2009) 73 ACSR 139; [2009] QSC 202 at [182]; Guo v Song above at [125]. 2. Mr Rodionoff fairly recognises that no additional facts are pleaded for that claim beyond those supporting the claims under s 445D and s 75-41 of the IPSC. Mr Horowitz submits, and I accept that, where I would not grant relief under the other statutory provisions on which the Plaintiffs rely, there is no reason to do so under s 447A of the Corporations Act, where the Plaintiffs have not shown that creditors are likely to be better off in liquidation than under the DOCA. Orders 1. For these reasons, the proceedings are dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 August 2021