Supreme Court New South Wales Medium Neutral Citation: In the Matter of New Bounty Pty Ltd; Winpar Holdings Ltd v Baron Corporation Pty Ltd [2015] NSWSC 1060 Hearing dates: 21, 22 May 2015; 17 June 2015 Decision date: 05 August 2015 Jurisdiction: Common Law Before: Sackville AJA Decision: 1. The proceedings be dismissed. 2. The Plaintiff pay the Defendants' costs of the proceedings. Catchwords: CORPORATIONS LAW – deed of company arrangement (DOCA) – related company forgives portion of debt in return for an issue of shares – effect is to dilute interests of minority shareholders – whether the administration and execution of the DOCA involved an abuse of Pt 5.3A of the Corporations Act 2001 (Cth) – whether relief should be granted under s 447A having regard to the financial position of the company after termination of the administration – whether injunctive relief should be granted under s 1324 Legislation Cited: Corporations Act 2001 (Cth), ss 9, 95A, 182, 260A, 260D, 435A, 436A, 437A, 437D, 439A, 439C, 444D, 445C, 445FA, 444G, 445G, 445H, 447A, 664C, 1317E, 1317F, 1324; Pt 5.3A; Pt 6A.2 Civil Liability Act 2002 (NSW), s 5D Evidence Act 1995 (NSW), s 140 Cases Cited: Aloridge Pty Ltd (prov liq apptd) v Christianos [1994] FCA 123; 13 ACSR 99 Al-Shennag v Statewide Roads Ltd [2008] NSWCA 300 Argyle Art Centre Pty Ltd v Argyle Bond and Free Stores Co Pty Ltd [1976] 1 NSWLR 377 Australasian Memory Pty Ltd v Brien [2000] HCA 30; 200 CLR 270 Australian Beverage Distributors Pty Ltd v The Redrock Co Pty Ltd [2007] NSWSC 966; 213 FLR 450 Australian Securities and Investments Commission v Mauer-Securities Ltd [2002] NSWSC 741; 42 ACSR 605 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; 226 CLR 256 Blacktown City Council v Macarthur Telecommunications Pty Ltd (admin apptd) [2003] NSWSC 883; 47 ACSR 391 Chappel v Hart [1998] HCA 55; 195 CLR 232 City of Swan v Lehman Brothers Australia Ltd [2009] FCAFC 130; 260 ALR 199 Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 Dowling v Colonial Mutual Life Assurance Society Ltd [1915] HCA 56; 20 CLR 509 Emanuele v Australian Securities Commission (1995) 63 FCR 54 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd [2009] NSWSC 231 Honest Remark Pty Ltd v Allstate Exploration NL [2006] NSWSC 735; 58 ASCR 234 Industrial Equity Ltd v Blackburn [1977] HCA 59; 137 CLR 567 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; 44 ACSR 21 Kyle House Pty Ltd v ACN 000 016 213 Pty Ltd [2007] NSWSC 224 Maylord Equity Management Pty Ltd v ReelTime Media Ltd [2008] NSWSC 1045 McIntosh v Williams [1979] 2 NSWLR 543 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; 205 CLR 1 Morley v Australian Securities and Investments Commission [2010] NSWCA 331; 274 ALR 205 Parkview Constructions Pty Ltd v Tayeh [2009] NSWSC 186; 71 ACSR 65 Re AFG Insurances Ltd [2002] NSWSC 735; 20 ACLC 1588 Re Capital General Corporation Ltd; Rodgers v Radly [2000] VSC 570; 37 ACSR 158 Re Pasminco Ltd; McCluskey v Pasminco Ltd (No 2) [2004] FCA 656; 49 ASCR 470 Rosenberg v Percival [2001] HCA 18; 205 CLR 434 Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; 53 NSWLR 213 Spacorp Australia Pty Ltd v Fitzgerald [2001] VSC 61; 19 ACLC 979 TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410 Walker v Commonwealth Trading Bank of Australia [1985] 3 NSWLR 496 Walker v Wimborne [1976] HCA 7; 137 CLR 1 Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; 162 CLR 285 Williams v Spautz [1992] HCA 34; 174 CLR 509 Texts Cited: Ford's Principles of Corporations Law (Looseleaf ed, LexisNexis) Category: Principal judgment Parties: Winpar Holdings Limited (Plaintiff) Baron Corporation Pty Limited (First Defendant) Peter Paul Krejci (As the Administrator of the Deed of Company Arrangement between New Bounty Pty Limited and Baron Corporation Pty Limited dated 12 May 2014) (Second Defendant) Brian Raymond Silvia (As the Administrator of the Deed of Company Arrangement between New Bounty Pty Limited and Baron Corporation Pty Limited dated 12 May 2014) (Third Defendant) New Bounty Pty Limited (Fourth Defendant) Representation: Counsel: T Brennan / Ms V O'Halloran (Plaintiff) M Condon SC / M Stevens (First and Fourth Defendants) Submitting appearance (Second and Third Defendants) Solicitors: SBA Lawyers (Plaintiff) Somerset Ryckmans (First and Fourth Defendants) File Number(s): 2014/226909 IN THE MATTER OF NEW BOUNTY PTY LTD INDEX PARAGRAPH Statutory Basis for Relief 11 The DOCA 26 Winpar's Pleaded Case Founded on Abuse of Part 5.3A 34 Factual Background 41 New Bounty: 1992-2007 42 The 2007 Deed of Consolidation until the 2011 Deed of Variation 51 2012 until October 2013 64 Events Leading to the Administration of New Bounty 83 New Bounty in Administration 92 The 439A Creditors Report 108 New Bounty's Financial Position at 31 March 2014 109 Explanation for Failure 113 New Bounty's Financial Position at 4 April 2014 115 Insolvency Trading Summary 116 Options 117 New Bounty's Financial Position on Termination of the DOCA 121 Submissions 127 Scope of the Case 127 Winpar's Submissions 135 The Defendants' Submissions 143 The Witnesses 150 Findings Concerning Mr Bart's Actions 156 Mr Bart's Motivation 156 Mr Bart's Conduct 174 The Principles 178 Australasian Memory Pty Ltd v Brien 179 Authorities on Abuse of Part 5.3A 189 Application of Principles 198 Abuse of Part 5.3A 198 Mr Bart's Purposes as the Controlling Purpose 207 Objective Purpose 214 Officer of a Corporation 215 Should Relief be Granted? 220 The Orders Sought 220 Difficulties with Proposed Orders 1-5 221 Discretionary Considerations: Proposed Orders 1-5 231 Proposed Orders 6-10 260 A Contravention of 260A? 262 Other Proposed Orders 266 Proposed Order 7 266 Proposed Orders 6 and 8-10 269 Principles 269 Procedural Issues 270 Exercise of Discretion 278 Orders 281 JUDGMENT 1. SACKVILLE AJA: The Plaintiff (Winpar) is a minority shareholder in the Fourth Defendant (New Bounty). At all material times, the First Defendant (Baron) has been the majority shareholder in New Bounty and since September 2012 it has held more than 90 per cent of the shares. The Second and Third Defendants (Administrators) were the administrators of New Bounty when it was placed in voluntary administration. The Administrators were appointed on 4 April 2014 and continued in that role until the administration of New Bounty came to an end on 4 July 2014. 2. Mr Bart controls Baron and a number of other companies involved in transactions that were the subject of evidence. Those companies include Newbart Holdings (Newbart), Australian Weaving Mills Pty Ltd (AWM) and Colerand Pty Ltd (Colerand). Mr Bart is not a party to the proceedings. 3. Mr Bart was a director of New Bounty until 31 March 2014, when he resigned. On 3 April 2014, three days later, Mr Bart caused Baron to make a written demand on New Bounty to pay Baron the sum of $4,552,710 in principal and interest under loans secured on New Bounty's assets (Demand). The Demand caused New Bounty to become insolvent, since it was no longer able to pay its debts as and when they became due. 4. The following day, 4 April 2014, the sole continuing director of New Bounty, Mr Parker, arranged for the appointment of the Administrators to New Bounty. The creditors of New Bounty subsequently approved the execution of a Deed of Company Arrangement on 12 May 2014 (DOCA). Pursuant to the DOCA, the Administrators issued 1,511,954,800 shares in New Bounty to Baron at $0.0025 per share. In return, Baron forgave New Bounty $3,779,887 in accrued but unpaid interest. The balance of the New Bounty Loan remained owing by New Bounty to Baron. 5. The effect of the issue of shares to Baron was to increase its shareholding in New Bounty from about 90.7 per cent of the issued capital to about 99.4 per cent. A corresponding effect was to reduce the interests of the minority shareholders in New Bounty from about 9.3 per cent to about 0.6 per cent, of which Winpar owns approximately two thirds. The minority shareholders derived no benefit from the DOCA. 6. On 15 November 2012, prior to New Bounty entering administration, Baron lodged with the Australian Securities and Investments Commission (ASIC) a compulsory acquisition notice pursuant to Pt 6A.2 of the Corporations Act 2001 (Cth) (Corporations Act). The notice specified a price of one cent per share for the shares held by minority shareholders. Some of those shareholders, including Winpar, lodged notices of objection to the compulsory acquisition. Baron then commenced proceedings in the Supreme Court of Tasmania on 16 January 2013 seeking an order approving the compulsory acquisition of the minority shares on the terms proposed. 7. In the current proceedings, Winpar pleads its case in a Second Further Amended Points of Claim (2FAPC), last amended on the third and final day of the hearing. Winpar alleges that by causing Baron to demand repayment of the moneys due by New Bounty and by causing New Bounty to be placed in administration and to enter the DOCA, Mr Bart used his position as an officer of New Bounty to gain an improper advantage for himself and Baron. Winpar also says that the "effect and purpose" of the DOCA and of the issue of shares to Baron was to dilute the minority shareholdings in New Bounty and to circumvent the compulsory acquisition process provided for in Pt 6A.2 of the Corporations Act. According to Winpar, Mr Bart's acts constituted an abuse of Pt 5.3A of the Corporations Act (dealing with the administration of a company), entitling Winpar to seek relief under ss 447A and 1324 of the Corporations Act. [1] 8. The relief sought by Winpar in its Amended Originating Process, omitting claims not pressed, is as follows: "1. An Order pursuant to s.447A of the Corporations Act (Act) that the operation of s.444G of the Act [2] be modified in relation to [New Bounty] so that none of the company, its directors or the Deed Administrator are or were authorised or required to issues shares in the company to [Baron] pursuant to clauses 6.2 or 9 of the DOCA entered into on 12 May 2014 … 3. An Order pursuant to s.447A … setting aside the decision of the [Administrators] made on or about 13 May 2014 to issue 1,511,954,800 shares in the company to [Baron]. 4. An Order pursuant to s.447A …: (a) cancelling all of the shares issued in [New Bounty] on or about 13 May 2014; and (b) directing New Bounty to rectify its share register by cancelling those shares by a date specified in the Order. 5. Further to [Order 1] and in the alternative to Orders 3 and 4 an Order pursuant to s.1324 that: (a) [Baron] surrender 1,511,954,800 shares in New Bounty by a date specified in the order; and (b) New Bounty rectify its share register by cancelling those shares by a date specified in the Order." 1. Winpar's claim is opposed by Baron and New Bounty. The Administrators have filed submitting appearances. Winpar does not allege any wrongdoing on their part. 2. Mr Brennan appeared with Ms O'Halloran for Winpar. Mr Condon SC appeared with Mr Stevens for Baron and New Bounty, the active defendants, to whom I refer as the Defendants. Between them the parties tendered in excess of 3000 pages of documentary exhibits. The parties' submissions were very helpful, but the difficult task of working through the extensive documentary exhibits would have been rendered more manageable had the documentation been presented to the Court in a more systematic and consistent manner. Statutory Basis for Relief 1. Numerous provisions of the Corporations Act were referred to in argument. The following are the provisions that bear most directly on Winpar's claim for relief. 2. Part 5.3A of the Corporations Act deals with "Administration of a company's affairs with a view to executing a deed of company arrangement". Section 435A specifies the object of Pt 5.3A: "The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence – results in a better return for the company's creditors and members that would result from an immediate winding up of the company." 1. The effect of placing a company in administration is dealt with by s 437A of the Corporations Act, which provides as follows: "(1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. (2) Nothing in subsection (1) limits the generality of anything else in it." 1. Section 439A(1) requires the administrator of a company to convene a creditors' meeting within specified time limits. The notice to creditors must be accompanied by a report from the administrator about the company's business, property, affairs and financial circumstances. [3] The report must state the administrator's opinion on certain matters. [4] If a deed of company arrangement is proposed, the details of the proposal must be included. [5] 2. Section 439C of the Corporations Act states that creditors may resolve at the meeting convened under s 439A: "(a) that the company execute a deed of company arrangement specified in the resolution (even if it differs from the proposed deed (if any) details of which accompanied the notice of meeting); or (b) that the administration should end; or (c) that the company be wound up." 1. Section 444D(1) of the Corporations Act provides that a deed of company arrangement binds all creditors of the company so far as concerns claims arising on or before the day specified in the deed. However, a secured creditor is not prevented from realising a security interest except insofar as the deed so provides and the secured creditor voted in favour of the resolution of creditors to execute the deed. [6] A creditor of the company may become a member of the company as a result of the deed requiring the creditor to accept an offer of shares in the company. [7] 2. Section 444G of the Corporations Act, referred to in Winpar's Proposed Order 1, states that a deed of company arrangement binds the company, its officers and members and the deed's administrators. 3. A deed of company arrangement terminates, relevantly, if the deed specifies the circumstances in which it is to terminate and those circumstances exist or if the administrator executes a notice of termination in accordance with s 445FA. [8] Where the administrator has applied the proceeds from the realisation of assets available to pay creditors, and creditors have been paid in accordance with the deed, s 445FA requires the administrator to certify, inter alia, that creditors have been paid and that all obligations under the deed have been fulfilled. A notice of termination of the deed must be given to ASIC. 4. Section 445H of the Corporations Act provides that the termination or avoidance, in whole or in part, of a deed of company arrangement does not affect the previous operation of the deed. 5. Section 447A of the Corporations Act is within Div 13 of Pt 5.3A. It is headed "General power to make orders", and provides as follows: "(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. (3) An order may be made subject to conditions. (4) An order may be made on the application of: … (f) any other interested person." 1. Section 1324(1) of the Corporations Act confers power on the Court to grant an injunction. It relevantly provides as follows: "(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute: (a) a contravention of this Act; or … (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or … the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing. (1A) For the purposes of subsection (1): (a) a contravention of this Act affects the interests of a creditor or member of a company if the insolvency of the company is an element of the contravention; and (b) a company's contravention of: … (ii) paragraph 260A(1)(a) (financial assistance for share acquisition not to prejudice company or shareholders or ability to pay creditors); affects the interests of a creditor or member of the company … This subsection does not limit subsection (1) in any way." 1. Winpar's case for relief under s 1324 of the Corporations Act rests upon establishing a contravention of either s 182 or s 260A. Those sections provide as follows: "182. (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. 260A (1) A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if: (a) giving the assistance does not materially prejudice: (i) the interests of the company or its shareholders; or (ii) the company's ability to pay its creditors; or ... (2) Without limiting subsection (1), financial assistance may: (a) be given before or after the acquisition of shares (or units of shares); and … (3) Subsection (1) extends to the acquisition of shares (or units of shares) by: (a) issue; or (b) transfer; or (c) any other means." 1. Section 1317E(1) of the Corporations Act provides that if the Court is satisfied that a person has contravened s 182 (among other provisions), it must make a declaration of contravention. The declaration must specify the provision that has been contravened, the person who contravened it, the conduct that constituted the contravention and the corporation to which the contravention related. [9] A declaration of contravention is conclusive evidence of the matters specified. [10] 2. Any person dishonestly involved in a company's contravention of s 260A of the Corporations Act commits an offence. [11] However, if a company provides financial assistance in contravention of s 260A, the contravention does not affect the validity of the financial assistance or of any contract or transaction connected with it. [12] 3. Part of Winpar's pleaded case is that Mr Bart, at all relevant times, was an officer of New Bounty within the meaning of s 9 of the Corporations Act. Section 9 defines "officer of a corporation" to include: "(b) a person: (i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of a business of the corporation; or (ii) who has the capacity to affect significantly the corporation's inancial standing; or (iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act …" The DOCA 1. The parties to the DOCA were New Bounty, the Administrators and Baron. 2. Clause 2.2 of the DOCA stated its purposes and objects as follows: "to provide for the business, property and affairs of the Company to be administered in a way that maximises the chances of the Company, or as much as possible of its business continuing in existence, or if this is not possible provides the best return for Creditors and a return that is better than would result from an immediate winding up of the Company." 1. Clause 6 of the DOCA was headed "Funds available to pay Creditors". It provided as follows: "6.1 Deed Fund (a) The Deed Administrators will establish a deed fund ("Deed Fund"). (b) The Deed Fund will comprise an amount to be paid by Baron which is sufficient to pay in full all of the following: (i) the Deed Administrators' remuneration, costs, fees and expenses of acting as voluntary administrator and deed administrator; (ii) the Admitted Claims of Priority Creditors; and (iii) all other Admitted Claims of Creditors. (c) The Deed Administrators shall hold the Deed Fund on trust for the benefit of the Deed Administrators and those Creditors whose Claims are admitted by the Deed Administrators for distribution purposes. 6.2 Time and Manner of Payment (a) The amount comprising the Deed Fund shall be determined by the Deed Administrators and must be paid by Baron within 28 days of written notification. (b) The payment to be made by Baron under clause 6.2(a) shall be made by way of subscription for shares in the capital of the Company. (c) The Deed Administrator shall cause the Company to issue to Baron fully paid ordinary shares in the capital of the Company at an issue price of $0.0025 per ordinary share." 1. Clause 7 dealt with the distribution of the Deed Fund: "(a) The Deed Fund shall be distributed in the following order of priority: (i) first, payment in full of the remuneration, disbursements and trading expenses and liabilities (if any), incurred by the Deed Administrators in acting as voluntary administrators … (ii) second, payment in full of the Admitted Claims of Priority Creditors … (iii) third, payment of the Admitted Claims of all remaining Creditors. … (c) Creditors shall accept their entitlements (if any) out of the Deed Fund in full settlement of their Claims. (d) For the avoidance of doubt a Secured Creditor (including Baron) … shall not be entitled to prove in the Deed Fund for any dividend entitlement." 1. Clause 9 dealt with the deferment of the "Baron Claim" and the allotment of shares to Baron. The expression "Baron Claim" was defined in cl 1.1 to mean: "the secured debt owed to Baron in the sum of $4,552,710 which comprises the principal sum of $772,823 and accrued but unpaid interest totalling $3,779,887." 1. Clause 9 provided as follows: "9.1 Subject to clause 9.2, Baron covenants with the Company and the Deed Administrators that it will not during the operation of this Deed make any demand or claim upon the Company in respect of the Baron Claim or share or seek to share in any distribution of the Deed Fund pursuant to the DOCA in respect of the Baron Claim. 9.2 Baron may at any time during the operation of this Deed give notice to the Company and the Deed Administrators to issue to Baron ordinary shares in the capital of the Company at a conversion price of $0.0025 per ordinary share in consideration of Baron agreeing to forgive all or part of the accrued interest owing in respect of the Baron Claim. 9.3 In the event that Baron serves a notice under clause 9.2, the Deed Administrators must, subject to any requirement of the Act, allot to Baron ordinary shares in the Company." 1. As has been noted, pursuant to cl 9.2 of the DOCA 1,511,954,800 shares were issued to Baron. In return Baron forgave New Bounty the accrued interest of $3,779,887. The principal sum of $772,823 remained owing. 2. Clause 15 stated that if the Administrators had paid the creditors their full entitlements under the DOCA and its terms had otherwise been satisfied, the Administrators had to certify to that effect and lodge an appropriate notice with ASIC. Winpar's Pleaded Case Founded on Abuse of Part 5.3A 1. By the 2FAPC, Winpar alleges that the sole or predominant purpose of the Demand made by Baron on 3 April 2014 was: "to procure the administration of New Bounty and the DOCA." [13] 1. Winpar pleads that the making of the Demand by Baron was a breach of Mr Bart's duty as an officer of New Bounty. [14] No particulars are provided for this allegation (which was added by way of a late amendment). However, the 2FAPC includes the following: "Mr Bart in breach of his duty not to do so and in contravention of s.182 of the Corporations Act, improperly used his position as an officer of New Bounty to gain an advantage for himself and the first defendant. Particulars a. If [Baron] is entitled to compulsorily acquire the minority shareholding in New Bounty that is through the Tasmanian Proceedings and not otherwise. b. By causing or permitting New Bounty to be placed in administration and to enter into a DOCA, Mr Bart caused [Baron] to acquire an additional 9.3% of the equity in New Bounty to the detriment of the minority shareholders. c. The acquisition of the equity referred to in Particular b. was not for the purpose of raising capital that was required by New Bounty." [15] 1. The 2FAPC alleges that at all material times Mr Bart had the capacity to affect significantly New Bounty's financial standing. [16] The particulars to this pleading are as follows: "a. Mr Bart wholly owned and controlled [Baron] which was owed $4,522,710.00 by New Bounty. This amounted to 99.3% of the admitted debts of New Bounty other than the debt owed to New Bounty's wholly owned subsidiary Colerand. b. Mr Bart controlled [AWM] which owed the AWM loan to New Bounty and which constituted its most substantial asset." 1. The 2FAPC pleads that at all relevant times Mr Bart made or participated in making decisions that affected the whole or a substantial part of the business of New Bounty. [17] The particulars to this allegation are as follows: "(a) Mr Bart made or participated in making the decisions that [Baron] would make a demand which resulted in administrators being appointed to New Bounty, that the DOCA be entered into and the shares issue pursuant to the DOCA. (b) Mr Bart was, and acted as, a director of New Bounty at all relevant times except for the period that he stepped down from 31 March 2014 to 9 June 2014." By reason of the matters summarised above, the 2FAPC alleges that at all material times Mr Bart was an officer of New Bounty within the meaning of s 9 of the Corporations Act. 1. It is then alleged that: "the effect and purpose of the DOCA and in particular clauses 6.2 and 9 of the DOCA was to dilute the minority shareholdings in New Bounty from 9.3% to 0.6%." [18] 1. Under the heading "Relief", the following is pleaded: "In the premises, the Administration and the DOCA was an abuse of Part 5.3A of the Act and [Winpar] is entitled to relief under s. 447A of the Act. Particulars a. The administration could not achieve an outcome for any creditor that was not available without the administration. b. The effect of the DOCA was to convert part of [Baron's] debt to equity in circumstances where the only purpose or effect of the issue of equity to [Baron] was to dilute the minority shareholding. c. The Administration was procured for the purpose as alleged in paragraph 52B above." [19] (The point of the reference in 'Particular c' to par 52B of the 2FAPC is unclear, since par 52B merely alleges that the purpose of the Demand was to procure the administration of New Bounty and execution of the DOCA.) 1. The 2FAPC further alleges that real purpose of the allotment of shares to Baron was not a proper purpose as provided for in s 435A of the Corporations Act. [20] The particulars to this allegation claim that the "real purpose of the allotment of shares … was the dilution of the minority holding". Factual Background 1. There was no dispute as to many of the events leading to the decision to place New Bounty in administration, although the purpose of the Demand and of the administration was very much in dispute. The following account is very largely based on matters that were not in contest. New Bounty: 1992-2007 1. New Bounty was incorporated on 30 July 1992 under the name Silkwane Pty Ltd. It subsequently changed its name to National Textiles Ltd and, on 2 February 2004, to New Bounty. Mr Bart was a director of New Bounty from 30 June 1997 until his resignation on 31 March 2014. He was reappointed as a director on 9 June 2014. 2. AWM was incorporated in 1945. In the 1980s, it commenced business as a textile manufacturer from premises located in Devonport, Tasmania (Devonport Premises). At its height, AWM had over 500 employees. At one stage a Tasmanian Government instrumentality held a 49 per cent stake in AWM, but on 31 August 2004 New Bounty acquired that stake and AWM thereafter became a wholly owned subsidiary of New Bounty. 3. On 1 October 1999, Oldtex Pty Ltd (Oldtex), a company controlled by Mr Bart, advanced $3.7 million to New Bounty (then known as National Textiles Ltd) pursuant to a Deed of Loan (New Bounty Loan). New Bounty granted Oldtex a fixed charge over its assets to secure the New Bounty Loan. The Deed of Charge provided that interest would accrue on unpaid amounts due and payable by New Bounty. 4. Prior to January 2000, New Bounty operated a textile mill in New South Wales. At this stage it was listed on the Australian Stock Exchange (ASX). The minority shareholders seem to have acquired their shareholdings while New Bounty was listed on the ASX. 5. On 20 January 2000, New Bounty ceased trading as a textile manufacturer and was placed into voluntary administration. It remained under administration until October 2003. 6. On 14 June 2001, New Bounty (then known as National Textiles Ltd) and AWM executed a deed whereby New Bounty advanced $1.75 million to AWM, secured by a charge over all AWM's assets (AWM Loan). 7. New Bounty was delisted from the ASX on 16 July 2001. 8. Between 20 January 2000 and 23 July 2007, New Bounty did not carry on any active business. During this period it acted as the non-trading holding company of AWM and another subsidiary, and provided loan funds to AWM. In December 2004, it changed its status from a public company to a proprietary limited company. 9. Oldtex made further advances to New Bounty in 2000, 2004 and 2005. An Amended Deed of Loan in 2000 provided for an advance of $2.25 million for New Bounty to invest in AWM. Interest was payable on the basis provided in the original deed providing for the AWM Loan. A Further Deed of Loan in 2004 provided for an advance up to $2.375 million, which was to be free of interest. An Additional Further Deed of Loan in 2005 stated that the additional advance made at that time "at the option of [Oldtex] would be free of interest". However, Oldtex could charge interest on the additional advance outstanding from time to time "should it so desire". The 2007 Deed of Consolidation until the 2011 Deed of Variation 1. On 30 April 2007, Oldtex and New Bounty entered into a Deed of Variation and Consolidation (2007 Deed of Consolidation) which was said to confirm an oral agreement made between the parties on 30 June 2006. The 2007 Deed of Consolidation recited that the amount due by New Bounty to Oldtex pursuant to the 1999 Deed of Loan and the subsequent Deeds of Loan amounted to $5.241 million as at 30 June 2006. The 2007 Deed of Consolidation provided for the consolidation and variation of the previous loans. New Bounty was required to repay all moneys due on 30 days written notice, an event of default or 1 October 2009, whichever was the earliest. 2. Although Mr Condon suggested that the 2007 Deed of Consolidation provided for Oldtex to charge interest on the New Bounty Loan retrospectively from 1999, it is clear enough that, subject to certain exceptions, the 2007 Deed of Consolidation contemplated that interest would accrue only in respect of periods after execution of the Deed. The exceptions included the following: [21] * unless Oldtex determined otherwise, no interest was to accrue on the advance; * if Oldtex elected to exercise its rights in an "Event of Default", interest would be deemed to have accrued during the "Interest Period", defined to mean a period commencing on 1 July 2006. 1. On 23 July 2007, New Bounty purchased weaving looms and commenced weaving textile fabrics at the Devonport Premises. The business ceased after about 12 months. In July 2008, New Bounty leased the weaving looms to Bruck Textile Technologies Pty Ltd (Bruck), a company also controlled by Mr Bart. 2. On 7 April 2008, New Bounty purchased the Devonport Premises from AWM. The purchase price of $6.8 million was satisfied by offsetting the price against AWM's indebtedness to New Bounty, which had increased over time. On 24 September 2008, New Bounty leased the Devonport Premises back to AWM for a term of three years from 1 May 2008, at an annual rental of $180,000. 3. On 27 January 2009, Newbart offered to purchase the shares in New Bounty held by Winpar and Mr Elkington, a director of Winpar. The price offered was 3.75 cents per share. Since Winpar held 2,554,682 shares, the offer valued its shareholding at $95,800.58. The offer was not accepted. 4. On 26 October 2009, Newbart acquired about 1.25 million shares in New Bounty, but not from Winpar or Mr Elkington. At this point Baron and Newbart between them held more than 90 per cent of New Bounty's shares. 5. A Deed of Assignment of Charge dated 4 November 2010, recorded that Oldtex had assigned the New Bounty Loan and the Deed of Charge to Newbart on 12 March 2010. The Deed of Assignment recorded that the New Bounty Loan amounted to $5.6 million as at 4 November 2010. New Bounty subsequently repaid to Newbart some of the moneys owed under the New Bounty Loan. 6. On 14 February 2011, Mr Bart signed New Bounty's financial statements for the year ended 30 June 2010. New Bounty's balance sheet as at 30 June 2010 showed net assets of $7.772 million. The New Bounty Loan was recorded as a current liability of $5.665 million. The Notes to the financial statements indicated that the New Bounty Loan was secured over the assets of New Bounty and that interest had not been charged on the New Bounty Loan during the year. 7. Mr Parker was appointed a director of New Bounty on 21 June 2011. 8. In an email exchange in August 2011, Mr Bart informed an advisor that he was thinking of returning about $8 million in capital to New Bounty from AWM. Mr Bart thought that this would produce a capital gain of about $4 million which could be offset against New Bounty's accumulated capital losses. Mr Bart also indicated that he was looking at "privatisation of New Bounty at some stage". 9. On 4 November 2011, Mr Bart signed New Bounty's financial statements for the year ended 30 June 2011. The balance sheet at 30 June 2011 showed that New Bounty had net assets of $9.396 million. The Notes to the financial statements indicated that the amount owed to Newbart under the New Bounty Loan at that date was $2.9 million, down from $5.665 million in the previous year. The Notes also recorded that Newbart had not taken up the option to charge interest on the New Bounty Loan, but did have the right to charge interest on the outstanding balance from 1 July 2004. The contingent liability for interest payable was $3.329 million. 10. On 17 October 2011, shortly before the 2011 New Bounty financial statements were signed off, Newbart (as "Lender") and New Bounty (as "Borrower") entered into a Deed of Variation (2011 Deed of Variation). The 2011 Deed of Variation recited the history of the New Bounty Loan up to and including the Deed of Assignment of Charge of 4 November 2010. The recitals included the following rather curious statements: "I. In consideration of the Lender and Borrower agreeing to the assignment of the Loan Deeds, the Borrower agreed to pay interest (if called by the Lender) on the loan commencing from 1 October 1999 when the loan was first made available by Oldtex (prior to the assignment) up until the date of the Deed of Assignment and then interest is to accrue as provided for in clause 5 of the Loan Deeds. J. It is acknowledged by the parties that at the time the Deed of Assignment was entered into the parties omitted to incorporate the interest calculation into the agreement." (Emphasis added.) 1. The 2011 Deed of Variation varied the 2007 Deed of Consolidation by inserting a provision [22] requiring New Bounty to repay the Advance and all other moneys due by it within 10 days of a written demand by Newbart. The 2011 Deed of Variation also inserted a new clause as follows: "5.5 Interest Owing by [sic] Oldtex (a) Subject to (b), the Borrower acknowledges that the Lender and the Borrower agreed that the Lender may call for interest to be paid on the Advance from the date the Advance was made available by Oldex [sic] … to the Lender [sic] (the Origination Date) as if the Lender was the lender of the Advance from the Origination Date. (b) The Borrower acknowledges that Interest, if called pursuant to (a), will accrue from the Origination Date and be calculated as accruing from that date until the loan is repaid in full." The "Origination Date" was defined to mean 1 October 1999. 2012 until October 2013 1. On 23 April 2012, the then directors of AWM (Mr Bart and Mr Parker) resolved that AWM should return $8.653 million of its issued capital to the shareholder (New Bounty) "to increase the loan". 2. In mid 2012, the board of AWM determined that the business should be relocated from Devonport to Wangaratta in Victoria. The proposed move involved closing down the operations in Devonport. 3. On 21 June 2012, AWM and New Bounty entered into a written Agreement. The Agreement recited the 2001 deed by which New Bounty lent AWM $1.75 million and recorded that the amount owing under the deed as at 21 June 2012 was $1.839 million. The Agreement also recited that New Bounty had agreed to lend AWM a further $8.653 million (Additional Sum), subject to the security already in place. The total loan therefore amounted to $10.492 million. The loan was repayable at the expiration of twelve months, but the term of the loan could be extended. New Bounty could demand interest on the Additional Sum calculated at 4 per cent above the 90 day bank bill rate. 4. By an "Agreement for Sale of Shares" dated 27 August 2012, New Bounty sold its 100 per cent interest in AWM to another company controlled by Mr Bart, Mark Foys Pty Ltd (Mark Foys). The consideration for the sale was $1.00. According to Mr Bart, the sale price recognised that Mark Foys was to bear the cost of relocating AWM's business from Tasmania to Victoria and that, accordingly, it was appropriate that Mark Foys should acquire a controlling interest in AWM. 5. On 10 September 2012, Newbart sold its shareholding in New Bounty to Baron at a price of one cent per share. Following the sale, Baron held 90.68 per cent of New Bounty's shares. 6. On 15 November 2012 Baron lodged a Notice of Compulsory Acquisition with the ASIC pursuant to s 664C(1) of the Corporations Act. The notice stated that Baron proposed to acquire all shares it did not hold at a price of one cent per share. 7. Between 15 November and 18 December 2012, Winpar and eleven other shareholders, who collectively held 5.77 per cent of the shares in New Bounty, lodged with the ASIC Notices of Objection to the proposed compulsory acquisition of their shares. 8. Baron instructed RSM Bird Cameron Corporate Pty Ltd to prepare an independent expert's report in connection with Baron's intention to acquire all shares in New Bounty that it did not own. RSM Bird Cameron prepared a report dated 12 November 2012, in which it assessed the fair market value of New Bounty shares at $nil. The report assessed the fair value of the AWM Loan at between $1.358 million and $1.458 million. 9. As previously noted, on 16 January 2013, New Bounty and Baron commenced proceedings in the Supreme Court of Tasmania against the objectors seeking approval for the compulsory acquisition of their shares in New Bounty. New Bounty and Baron filed an amended originating application in those proceedings on 18 February 2013. 10. On 22 January 2013, Mr Bart signed the financial statements for New Bounty for the year ended 30 June 2012. The balance sheet recorded New Bounty's net assets on that date at $7.982 million. However, it had lost $1.414 million for the year. The Notes to the accounts recorded that the New Bounty Loan amounted to $2.3 million as at 30 June 2012. Interest had not been charged during the year, but Newbart had the right to charge interest at any time on the outstanding balance from 1 July 2004. The contingent liability for interest payable was $3.551 million. 11. AWM's balance sheet as at 30 June 2012 showed a net deficiency of $0.975 million. The financial report for the year ended 30 June 2012 noted that its weaving operations in Tasmania had been moved to a related company in Victoria. The report also noted that AWM owed New Bounty $10.492 million. New Bounty had not yet elected to charge interest on the loan but had the right at any time to charge interest on the outstanding balance from 7 April 2008 onwards. As at 30 June 2012, the contingent liability for interest payable was $0.95 million. 12. On 17 January 2013, an application was lodged on behalf of Newbart and New Bounty to rezone the Devonport Premises for future development for "Bulky Goods Sales". It appears that the application was adopted by the Devonport City Council and forwarded to the Tasmanian Planning Commission. However, in late 2013, before the Commission could deal with the matter, a new planning scheme was adopted. The result was that the re-zoning application effectively lapsed. 13. On 31 January 2013, Baron wrote to Newbart stating that Baron agreed to assume responsibility for the repayment of the New Bounty Loan (apparently meaning that Baron would take an assignment of the New Bounty Loan). Mr Bart signed the letter on behalf of both Baron and Newbart. 14. Between 15 January 2013 and 12 February 2013, Winpar (through Mr Elkington) and New Bounty (through Mr Bart) engaged in correspondence concerning Baron's Notice of Compulsory Acquisition. 15. By a Deed of Assignment dated 24 April 2013 between New Bounty, Baron and Newbart, Newbart agreed to assign to Baron the New Bounty Loan and the benefit of the charges held by Newbart over New Bounty's assets. The Deed of Assignment recorded that as at January 2013 the total of the New Bounty Loan was $2.3 million. Mr Bart signed the Deed of Assignment on behalf of all three parties. 16. Mr Bart signed New Bounty's financial statements for the year ended 30 June 2013 on 11 December 2013. The balance sheet as at 30 June 2013 recorded the New Bounty Loan as a current liability of $4.594 million, up from $2.3 million the previous year. Trade and other receivables were reduced from $9.517 million in the 2012 balance sheet to $2.636 million, reflecting a provision for impairment of amounts advanced to related entities, including AWM. The Profit and Loss Statement for the 2012-2013 year included impairment losses for New Bounty of $7.8 million. 17. The Notes to the 2013 financial statements recorded that interest was payable for the life of the New Bounty Loan. Although the New Bounty Loan had not been called at 30 June 2013, "due to the weaker position of the group a provision has been included for interest payable on this loan". Mr Bart gave evidence that he was responsible for including the provision for interest in the financial statements for 2012-2013. 18. On 23 October 2013, AWM informed the Tasmanian Environment Protection Authority (EPA) that textile bleaching, dyeing and printing operations at the Devonport Premises would cease at the end of 2013. The EPA informed AWM on 31 October 2013, that a Decommissioning and Rehabilitation Plan would be required for the site. On 5 November 2013, a Tasmanian consultant provided AWM with a two page report estimating the remediation cost for the site at $4.442 million. Ten days later, Baron's solicitors forwarded the estimate to the solicitors for the minority shareholders. The covering letter asserted that the cost of remediation had not been factored into previous valuations and that if "there was any doubt whatsoever about the certainty of failure of your clients [sic] case, that doubt should now be removed". 19. On or about 31 October 2013, as advised to the EPA, AWM ceased to trade from the Devonport Premises. Thereafter it paid no further rent to New Bounty. Events Leading to the Administration of New Bounty 1. On 5 and 19 March 2014 Mr Bart met with Mr Nicodemou of BRI Ferrier. Rather curiously Mr Nicodemou kept no notes of the meetings. However, Mr Bart prepared an undated document entitled "Notes for meeting" which, as he confirmed in evidence, set out his thoughts in advance of the meetings. Mr Nicodemou accepted that he received a copy of the notes at the first meeting and that they provided the basis for discussions between Mr Bart and himself. 2. The notes recorded that the process for the compulsory acquisition of the minority shareholdings had been opposed by a group of shareholders marshalled by Mr Elkington. According to the notes, Mr Elkington had extensive experience with the process and had adopted "a strategy of dragging the matter out ad infinitum" with a view to increasing costs. The notes suggested that the strategy was designed to cause the acquiring company to buckle to "greenmailing" and pay more for the shares than they were worth. However, Mr Bart was hopeful that Baron would not end up paying the costs of the litigation, although the costs already dwarfed the value of the shares. 3. The notes continued as follows: "[Baron] may lose interest in protracted litigation, and simply call its loan from [New Bounty], necessitating the appointment of an administrator. As a potential liquidation of [New Bounty's] illiquid assets would cause shareholders to see nothing (as foreshadowed in the Independent Expert report), and even [Baron], as sole secured creditor to see part of its debt evaporate, [Baron] would propose a DOCA, whereby it would agree to stand still, and NOT press for its money, and would offer to pay all existing creditors (but not contingent creditors) 100cts on the dollar, and pay the shareholders a token value (perhaps slightly more than the compulsorily acquisition price), moving [Baron] to 100% ownership. The creditors win (there are only a handful of them), because they get all of their money, rather than nil; the shareholders win, because they get something (more than the offer, and far more than the expert valued the shares at), and the company wins, because it sidesteps the vexatious litigation, and continues in business. The vexatious litigant, who, because there has not been a decision, or a costs order, may end up bearing the costs himself, or [Baron], as the acquirer, may have to pay the costs 'to date'." (In his evidence Mr Bart said that when preparing the notes he had not appreciated that Pt 6A.2 of the Corporations Act does not permit a party lodging a compulsory acquisition notice to alter the terms of the offer under the notice while the compulsory acquisition process is under way. [23] ) 1. Mr Bart asked Mr Nicodemou whether he had missed anything and sought Mr Nicodemou's advice on a number of matters: "A. Baron is considering appointing an administrator to protect its interest. B. A DOCA may see him [Mr Elkington] getting nothing for his shares (because they clearly have no value). C. The compulsory acquisition would be halted, and it is likely that no cost order would be made, leaving him with his whole legal bill. Baron would prefer not to go down that path, but will, if sensible arrangement is not made." 1. According to Mr Nicodemou, whose evidence was not challenged, Mr Bart informed him at the first meeting that Baron intended to make the Demand and that New Bounty would then be insolvent. Mr Nicodemou asked Mr Bart why Baron had decided to call up the loan facility and Mr Bart had replied as follows: "Baron holds approximately 91% of the shares in New Bounty. In 2012 Baron sought to compulsorily acquire the remaining shares in New Bounty. There are proceedings on foot in Tasmania which have been going for more than a year. Baron was interested in supporting New Bounty to develop a property in Devonport. However, Baron is unwilling to advance further moneys to New Bounty unless it owns 100% of New Bounty. Given that the proceedings in Tasmania are unlikely to settle any time soon Baron has now run out of patience and no longer wishes to support New Bounty. New Bounty is only able to operate with the continued support of related companies providing loan funds to New Bounty. More than 90% of the company's liabilities are owed to related parties. As Baron does not wish to continue supporting New Bounty I expect the company will have to go into voluntary administration." 1. Mr Bart resigned as a director of AWM on 28 March 2014. As has been noted, he resigned as a director of New Bounty on 31 March 2014. In his evidence, Mr Bart said that he resigned as a director of New Bounty because he believed that he would have a conflict of interest if he continued to act as a director in circumstances where he had formed the view "as a director of Baron" to call in the New Bounty Loan. 2. Shortly before Mr Bart resigned as a director of New Bounty he had a conversation with Mr Parker, to the following effect: "Geoff, I have decided it may be best if I resign as a director of New Bounty. As you know Baron is a creditor of New Bounty. Given the problems with the closure of the Devonport mill, the inability for New Bounty to redevelop the site and New Bounty's current financial difficulties I have formed the view that Baron is not prepared to extend further financial support to New Bounty and I plan to have Baron call in the loan. I'm also annoyed that the Tasmanian proceedings haven't been resolved and this is costing Baron a lot of money. I can't see why Baron should continue supporting New Bounty. Given that I plan to have Baron call in the loan I think it may be best if I resign so you can decide what should happen to New Bounty. If you decide to put the company into voluntary administration I think Baron may be prepared to support an arrangement which involves Baron converting part of its debt into equity. Baron is willing to support a deed of company arrangement to allow New Bounty to continue to pursue the possible redevelopment of the Devonport site as this is the only prospect for Baron to be repaid the whole of its debt." 1. On 3 April 2014, Mr Bart wrote to Mr Parker, by then the sole remaining director of New Bounty, as follows: "As I have advised you, I have resigned as the director of New Bounty Pty Ltd (New Bounty). I have done this, so as not to create a conflict of interest, as this letter is, in fact, a Notice of Demand for New Bounty to repay its total debt plus interest, to Baron Corporation Pty Ltd (Baron). Baron has simply lost patience with the shenanigans being played in the compulsory acquisition process, and needs its debts repaid promptly. I note the amount is $4,552,710. I recognise that the company does not have the liquid resource to repay this debt on demand. Perhaps a sensible solution would be to consult an insolvency practitioner regarding a voluntary administration. I await your urgent response." 1. After receiving this letter, Mr Parker formed the view that since Baron had withdrawn its support, New Bounty was insolvent. He then contacted BRI Ferrier (it is not entirely clear whether he spoke to Mr Nicodemou). On 3 April 2014 the Administrators (both principals of BRI Ferrier) signed a Consent to Act as Administrators. New Bounty in Administration 1. On 4 April 2014, Mr Parker as the sole director of New Bounty resolved pursuant to s 436A of the Corporations Act to appoint the Administrators as Joint and Several Voluntary Administrators of New Bounty. 2. The Administrators prepared their First Report to Creditors (First Creditors Report) on 8 April 2014. The First Creditors Report noted that New Bounty was a non-trading entity. It recorded that Baron had two fixed and floating charges over New Bounty's assets. 3. An annexure to the First Creditors Report stated that the "appointment was referred to us by Philip Bart, a former director of the Company". The annexure informed creditors that prior to the Administrators' appointment, Mr Bart had held two meetings with Mr Nicodemou, a member of BRI Ferrier's staff. 4. The first Meeting of Creditors, held pursuant to s 436E of the Corporations Act, took place on 16 April 2014 in Sydney. The meeting was chaired by Mr Nicodemou. Mr Bart attended as an observer. 5. On 24 April 2014, Mr Ryckmans, a solicitor, confirmed in an email to Mr Nicodemou that he had been asked by Mr Bart to prepare a draft deed of company arrangement. On 29 April 2014, Mr Ryckmans sent the draft DOCA "proposed by the director of New Bounty" to Mr Garofano of BRI Ferrier, with copies to Mr Nicodemou and Mr Bart (but not to Mr Parker). The following day, Mr Garofano raised queries with Mr Ryckmans concerning the effect of the draft DOCA on related party claims. The queries were answered by Mr Bart in an email sent directly to Mr Garofano. 6. On 2 May 2014 the Administrators presented a Report to Creditors (439A Creditors Report) as required by s 439A of the Corporations Act. I refer to the Report to Creditors in more detail later. [24] However, it is convenient to note that the Report to Creditors attributed a value of $4.553 million to Baron's claim against New Bounty in respect of the New Bounty Loan. The Administrators reported that Baron had exercised its right to receive an interim distribution from assets subject to its security interests. Accordingly, it had received an interim distribution of $250,000, thereby reducing its claim to $4.302 million. The Administrators expressed their opinion that it was in the interests of creditors to execute the DOCA annexed to the 439A Creditors Report. 7. On the same day as the Administrators presented the 439A Creditors Report, AWM was placed in voluntary administration. 8. The second Meeting of Creditors of New Bounty took place on 9 May 2014. The Meeting resolved to execute the DOCA in the form annexed to the 439A Creditors Report. 9. On 12 May 2014, the DOCA was executed. Its terms have been set out earlier. [25] 10. Following execution of the DOCA, New Bounty paid $119,278 into the Deed Fund. The unsecured creditors of New Bounty were paid in full out of the Deed Fund. 11. On 13 May 2014, New Bounty issued 1,511,954,800 shares to Baron, thereby increasing Baron's shareholding in New Bounty from about 90.7 per cent of the issued capital to about 99.4 per cent. 12. The administrators of AWM (the same Administrators) provided their report to creditors under s 439A of the Corporations Act on 29 May 2014. The administrators' valuation as at 2 May 2014 revealed that AWM had a deficiency of liabilities over assets of $8.429 million. New Bounty was recorded as a secured creditor in the sum of $12.119 million. AWM's largest asset was $5.242 million in pre-administration debtors, of which $3.708 million represented the administrators' valuation of AWM's impaired loan to Australian Weaving Pty Ltd. The administrators stated that if AWM was placed into liquidation, there would be no return to unsecured creditors, largely because of New Bounty's secured advance of $12.119 million. 13. As previously noted, Mr Bart was reappointed as a director of New Bounty on 9 June 2014. He was reappointed as a director of AWM on the same day. 14. On 2 July 2014, New Bounty's solicitors sent a letter to the solicitors representing the minority shareholders in the proceedings in the Supreme Court of Tasmania. The letter referred to the terms of the DOCA which called on Baron to forego its "capital and accrued interest" of $3.7 million in exchange for an issue of new shares. It continued as follows: "Given the minimal value of the remaining shares that your clients now hold, there is little purpose in proceeding with the compulsory acquisition for such a diminutive share parcel. … The simple fact is that your clients [sic] shares are virtually worthless." The letter proposed that the proceedings be discontinued with no order as to costs. 1. The administration of New Bounty ceased on 4 July 2014. The Administrators duly certified to ASIC that the DOCA had been wholly effectuated by its terms and thus had terminated by virtue of s 445C of the Corporations Act. 2. Winpar commenced the current proceedings in the Equity Division on 1 August 2014. The 439A Creditors Report 1. The 439A Creditors Report prepared by the Administrators recorded a number of significant matters. New Bounty's Financial Position at 31 March 2014 1. The 439A Creditors Report set out New Bounty's financial position at 31 March 2014. The company's Current Assets were $369,704, apparently entirely consisting of cash. Current Liabilities were recorded as $4.583 million of which $4.553 million (or an amount very close to that figure) comprised the New Bounty Loan due to Baron, inclusive of interest. The Administrators stated that the Company Secretary had advised that New Bounty: "had not accounted for interest on the Baron loan until 30 June 2013 due to the Company's Directors believing it more likely than not that it would only be a matter of time that Baron would call on the interest due by the Company. This was due to the deterioration of AWM's financial position which was leading to the impairment of the Company's loan to AWM." 1. New Bounty's Current Ratio (Current Assets compared to Current Liabilities) was therefore 0.08. The Administrators stated that a Current Ratio below one suggests that Current Assets are insufficient to meet Current Liabilities as they fall due. The Administrators noted that the Current Ratio was 0.05 on 30 June 2011, 0.06 on 30 June 2012 and 0.05 on 30 June 2013. Thus New Bounty's Current Assets had been insufficient to meet its Current Liabilities from at least 30 June 2011. Clearly this assessment took account of the New Bounty Loan, inclusive of interest, even though Baron had made no demand for payment until 3 April 2014. 2. The 439A Creditors Report also stated that it was arguable that Baron's debt should be excluded from New Bounty's working capital position: "The reason being that the debt due to Baron was not due and payable until called upon. Baron issued a demand to the Company on 3 April 2014 and at that date Baron's debt became due and payable. The fact that the debt due to Baron has an originating date of 1 October 1999 also suggests this debt was not immediately due and payable by the Company prior to Baron's demand being served." In any event, New Bounty had sufficient working capital to meet its debts due to unrelated creditors as those debts fell due. 1. Non-Current Assets as at 31 March 2014 amounted to $3.107 million while Non-Current Liabilities were $1.103 million. When Current Assets and Current Liabilities were taken into account, New Bounty's liabilities exceeded assets by $2.21 million. Explanation for Failure 1. The administrators concurred with the explanation by the director (presumably Mr Parker) that the failure of New Bounty was due to the illiquidity of its assets which left it unable to meet the Demand. Baron had called in its debt "due to difficulties Baron had experienced in the compulsory acquisition process". The administrators noted that as at the commencement of the administration, Baron had been trying to complete a compulsory acquisition of the minority shareholdings. 2. The administrators considered that their appointment was due to: "● Difficulties encountered by the Company's majority shareholder (Baron) in completing a compulsory acquisition of the Company's minority shares. This ultimately led to Baron issuing a Notice of Demand to the Company in the amount of $4,552,710; and ● As of 31 October 2013, AWM ceased trading from the Devonport Property and as such no further rental was paid to the Company after this time. The premises have remained untenanted since then except for a small group of AWM employees who provided services to entities related to the Company. Although the rental income payable to the Company would have still been insufficient to satisfy the Company's debt to Baron, this decrease in rental income still has the effect of reducing the level of working capital available to the Company." New Bounty's Financial Position at 4 April 2014 1. The 439A Creditors Report listed New Bounty's assets at the date of administration (4 April 2014), based on a statement provided by Mr Parker. The statement did not take into account the Administrators' fees. The deficiency reported in the statement varied only slightly from New Bounty's financial position as at 31 March 2014. However, the Administrators noted a number of matters, including the following: * the Devonport Premises had been valued at $1.35 million, but the property was subject to Baron's registered security interests; * the Devonport Premises were believed to be heavily contaminated with asbestos and other contaminants and an independent report had estimated the cost of remediation at $4.442 million; * the realisable value of the Devonport Premises could be as low as nil; * New Bounty was the ultimate holding company of Colerand, the only asset of which was a debt due to it from New Bounty of $1.094 million; * if New Bounty repaid its debt to Colerand the repayment would be distributed to New Bounty as a dividend; * the Administrators attributed a nil value to New Bounty's shareholding in Colerand because New Bounty did not have the capacity to repay the debt; * the statement listed the AWM Loan as having a book value of $12.041 million, but a realisable value of only $1.733 million; * the Administrators' preliminary view was that the AWM Loan was impaired but not to the extent reported in New Bounty's records, and they attributed a value of $3.808 million to the AWM Loan; * the Administrators were satisfied that it was appropriate to attribute a value of $4.553 million to Baron's claim and to accept the veracity of Baron's security interests against New Bounty. Insolvency Trading Summary 1. In a section headed "Insolvent Trading Summary", the Administrators made the following observations based on their preliminary investigations: "● As at 31 March 2014 [New Bounty] had sufficient working capital to meet its debts as they fell due. As discussed earlier in this report, it was only when [New Bounty] deemed its debt to Baron as a current liability that [New Bounty] reported a weak working capital position for each year since 2011. ● The fact that [New Bounty] has been able to obtain finance from related parties such as Baron and Colerand indicate that [New Bounty] has a history of being able to obtain finance from related parties to help meet its liabilities as they fell due. However, given the registered security interests against it held by Baron, it is unlikely that [New Bounty] would be able to obtain additional finance as at the commencement date of the Administration. ● The majority of [New Bounty's] debts (99% of the known creditor claims to date) are due to related parties which, until 3 April 2014 (in the case of Baron's debt), were not immediately due and payable debts. … ● Although [New Bounty] reported net losses during the 2012 and 2013 financial years and for the year ended 31 March 2014, these losses were funded by [New Bounty] loans from Related Entities." Options 1. The Administrators informed creditors that they could do one of four things at the forthcoming creditors' meeting: resolve to enter a DOCA; resolve to end the administration; resolve to place New Bounty in liquidation; or adjourn the meeting. The Administrators expressed the opinion that it was in the interests of New Bounty's creditors to execute the proposed DOCA put forward by the secured creditor, Baron. 2. The Administrators summarised the terms of the proposed DOCA. They pointed out that if requested by Baron the Deed Administrators were required to issue shares to it at $0.0025 per share, in consideration of Baron agreeing to forgive all or part of the accrued interest owing to it in respect of the secured debt. The Administrators advised creditors that the effect of the proposed DOCA would be to dilute New Bounty's shares, should Baron request the Deed Administrators to issue shares to it. 3. The Administrators did not consider ending the administration to be an option, as New Bounty was insolvent. Liquidation would not provide sufficient funds to allow for any return to unsecured creditors. This was because Baron was owed $4.553 million (not taking into account $250,000 paid to it as a distribution during the administration) and was a secured creditor. The estimated realisable value of New Bounty's assets was $4.249 million, excluding the value of the Devonport Premises. Having regard to the costs of realisation, any distribution to unsecured creditors was likely to be less than 100 cents in the dollar, depending on the value realised for the Devonport Premises. 4. The Administrators' opinion was that it was in the interests of creditors to execute the DOCA, for the following reasons: "● The DOCA meets the objectives of a Voluntary Administration as set out in Section 435A of the Act in that the Deed provides for a return to unsecured creditors that is greater than the estimated return in the Liquidation scenario; ● Under the DOCA, Unrelated Unsecured Creditors will receive a return of 100 cents in the dollar whilst in a Liquidation, any distribution to unsecured creditors would be less than 100 cents in the dollar and contingent on the value realised for the Devonport [Premises]; ● The amount comprising the Deed Fund shall be determined by the Deed Administration and must be paid by Baron within 28 days of written notification; and ● The objectives of Section 435A of the Act are also met in that it allows [New Bounty] to continue in existence." New Bounty's Financial Position on Termination of the DOCA 1. The best evidence of New Bounty's financial position on termination of the DOCA on 4 July 2014 is a draft Statement of Financial Position as at 30 June 2014, apparently prepared within the company in 2015. The draft Statement was prepared on the basis that Baron had forgiven New Bounty the accrued but unpaid interest on the New Bounty Loan, pursuant to cl 9.2 of the DOCA. The draft Statement reflected the distribution by the Administrators of $250,000 to Baron, in reduction of the principal sum due under the New Bounty Loan. 2. The draft Statement of Financial Position showed Current Assets (cash and trade receivables) as at 30 June 2014 of $168,000. Current Liabilities were $559,000 including $510,000 short term borrowings, being the amount due to Baron as at 31 June 2014. [26] As at that date, therefore, Current Liabilities exceeded Current Assets by approximately $400,000. 3. Non-Current Assets amounted to $1.754 million. The Non-Current Assets comprised two items. Trade and other receivables were recorded at $392,000, being the impaired value attributed to the AWM Loan. Property, plant and equipment were valued at $1.362 million and included freehold land in Tasmania at valuation ($590,000), the written down value of buildings ($765,000) and the heavily written down value of plant and equipment ($67,000). Non-Current Liabilities were $1.094 million, being a "Non trade amount owing to controlled entities". This is a reference to the amount owing by New Bounty to Colerand. 4. Net Assets of New Bounty at 30 June 2014 were therefore valued at $269,000, calculated as follows: $ $ Current Assets 168,000 Non-Current Assets 1,754,000 TOTAL ASSETS 1,922,000 Current Liabilities 559,000 Non-Current Liabilities 1,094,000 TOTAL LIABILITIES 1,653,000 NET ASSETS 269,000 1. Although the Statement of Financial Position showed that New Bounty had net assets of $269,000, its Current Liabilities exceeded Current Assets by a large margin. Assuming no significant change between 30 June 2014 and 4 July 2014 (when the administration of New Bounty ended), the Statement of Financial Position suggests that New Bounty's solvency depended on the willingness of Baron not to call upon the New Bounty Loan (a Current Liability). If such a call was made, it would seem that New Bounty would be unable to pay its debts as and when they fell due. The amount of New Bounty's indebtedness to Baron when the administration ended was considerably less than its indebtedness at the commencement (by reason of Baron having forgiven the interest due to it). But New Bounty's solvency when the administration ended depended on Baron's forbearance, just as it had immediately before Baron made the Demand of 3 April 2014. 2. Since the Statement of Financial Position recorded New Bounty as having Net Assets of $269,000 on 30 June 2014, it suggests that the value of the minority shareholdings, assuming the minority retained 9.3 per cent of issued shares, was in the order of $25,000. However, as Mr Brennan pointed out, there was uncertainty as to the proper value to be attributed to the AWM Loan. The draft Statement of Financial Position attributed an impaired value of $392,000 to the AWM Loan, whereas the Deed Administrators in the 439A Report had assessed the impaired value of the AWM Loan at $1.733 million. Depending on the true realisable value of the AWM Loan and the Devonport Premises, the minority interests might have been worth more than suggested by the Statement of Financial Position. The minority interests also might have been worth less, perhaps nothing. Submissions Scope of the Case 1. There was a good deal of debate during the hearing about the precise parameters of the case that Winpar is attempting to establish. In part, the uncertainty was due to Winpar pleading a large number of transactions that preceded the Demand by Baron. On one reading, the 2FAPC might have been intended to impugn the validity or genuineness of some of the transactions preceding the Demand, although no such allegation was made expressly. 2. Mr Condon drew attention to the absence of any express pleading challenging the propriety of any of the antecedent transactions. On this basis, he objected to Mr Bart being asked questions suggesting that some of those transactions may have been colourable, such as the conversion in April 2012 of New Bounty's equity in AWM into debt (which greatly increased the AWM Loan). 3. When pressed, Mr Brennan accepted that Winpar is not alleging that any of the earlier transactions were shams, unlawful or improper. He acknowledged that Winpar's case proceeds on the basis that all transactions preceding the Demand were "perfectly valid". Mr Brennan also acknowledged that Winpar's case is confined to claiming that the purpose of the Demand and of placing New Bounty in administration, executing the DOCA and issuing shares to Baron was to dilute the interests of minority shareholders. On Winpar's case, it is that purpose which rendered the administration of New Bounty and the actions under the DOCA an abuse of Pt 5.3A of the Corporations Act and enlivened the Court's power to make orders under s 447A. 4. Winpar's written submissions in reply confirmed that it does not challenge the propriety or efficacy of the transactions which occurred prior to March 2014. The submissions also confirmed that there is no challenge to the quantification of the New Bounty Loan when the Demand was made on 3 April 2014. However, Winpar contends that the execution of the 2011 Deed of Variation, in circumstances where Mr Bart had already decided to acquire the minority shareholdings in New Bounty, is relevant to assessing the purpose of making the Demand, and of placing New Bounty into administration. Mr Brennan says that if Mr Bart's purpose in executing the 2011 Deed of Variation was to permit New Bounty to be rendered insolvent at any time (by Baron demanding immediate payment of the principal and backdated interest on the New Bounty Loan), his purpose in causing Baron to make the Demand could only have been to render New Bounty insolvent and to place it in voluntary administration. 5. In final oral submissions, Mr Brennan was asked whether the test for ascertaining the purpose of the administration was subjective or objective. His response was that the ultimate question is always whether the provisions of Pt 5.3A of the Corporations Act have been abused, since it is the abuse that enlivens the power in s 447A(1) of the Corporations Act. Mr Brennan then submitted that an abuse of the provisions of Pt 5.3A can be shown (relevantly) in two ways. 6. The first is to show that the subjective purpose of the person procuring the administration was outside the scope of Pt 5.3A. Mr Bart was the relevant decision-maker and his purpose in making the Demand and procuring the administration of New Bounty was to dilute the interests of the minority shareholders. That purpose was outside Pt 5.3A and was sufficient to enliven the Court's powers conferred by s 447A(1) of the Corporations Act. 7. The second approach is to rely on "all the facts and commercial realities surrounding the administration" to establish that the objective purpose of placing a company into voluntary administration is outside the objects of Pt 5.3A of the Corporations Act. In this case, so Mr Brennan contended, the objective facts and circumstances point to the Demand and the administration of New Bounty having only one purpose, namely dilution of the interests of the minority shareholders. 8. Mr Brennan put Winpar's case on both bases. He submitted that Mr Bart's purpose was to dilute the interests of the minority shareholders and this purpose was outside the object of Pt 5.3A of the Corporations Act. Alternatively, the purpose of placing New Bounty into administration and of executing the DOCA, objectively assessed, was foreign to the object of Pt 5.3A. Mr Condon did not suggest that either of these ways of putting the case is outside the pleadings. Winpar's Submissions 1. Mr Brennan invited me to make the following findings of fact: * the sole or predominant purpose of the administration of New Bounty was to dilute the minority's interests by issuing shares to Baron; * Mr Bart's sole purpose in making the Demand and procuring the DOCA was to dilute the minority's interests; and * at all material times, Mr Bart was an officer of New Bounty within s 9 of the Corporations Act. 1. Mr Brennan submitted that the 2011 Deed of Variation was designed to impose onerous obligations on New Bounty (by exposing it to a very substantial liability to interest, payable at Newbart's discretion) in order to make New Bounty vulnerable to insolvency. Mr Brennan recognised that Mr Bart denied that this was his objective, but submitted that if Mr Bart's denial was truthful his actions "disclosed a cavalier disregard for his duties as a director of New Bounty". This disregard for his duties, so Mr Brennan argued, should inform the assessment of Mr Bart's subjective purpose in making the Demand and causing New Bounty to be placed into administration. 2. The Demand involved an election by Baron to require New Bounty to pay interest on the New Bounty Loan calculated from 1 July 2004 and to pay the full amount of principal and interest immediately. Prior to the Demand, no interest had been payable. New Bounty's financial accounts from 2010-2011 recorded a contingent liability for interest payable to Newbart or Baron, but it was not until the financial accounts for the year ended 30 June 2013 that the interest was recorded as a liability. 3. According to Mr Brennan, Mr Bart's own evidence demonstrated that his only purpose in electing to impose interest and demanding payment from New Bounty was to procure the company's insolvency. This conclusion was supported by the fact that the only outcome achieved by the administration and the DOCA was the dilution of the interest of the minority shareholders. Baron received $250,000 from the administration in reduction of the New Bounty Loan, but it could have realised that sum without New Bounty being placed in voluntary administration. Baron gave up its entitlement to interest, but retained the benefit of a secured debt which was sufficient to leave New Bounty wholly vulnerable to being rendered insolvent if Baron renewed its demand for immediate payment of the balance of the New Bounty Loan. 4. Mr Brennan submitted that the evidence demonstrated that Mr Bart procured both the voluntary administration of New Bounty and the execution of the DOCA notwithstanding his resignation as a director of New Bounty on 31 March 2014. Mr Bart had met with Mr Nicodemou with a view to placing New Bounty into administration and ensuring that Baron moved to virtually complete ownership of the company. But for the Demand, New Bounty would have not been in any financial difficulty. After the administration ended, New Bounty was effectively in the same position, so far as solvency was concerned, as it had been prior to the company being placed into administration. Independently of the New Bounty Loan, it could meet its debts as and when they fell due, but if Baron called for immediate repayment of the New Bounty Loan, New Bounty would be rendered insolvent. His purpose, therefore, could not have been (as Mr Bart maintained) to return New Bounty to solvency. 5. Mr Brennan acknowledged that it was Mr Parker, as the sole remaining director of New Bounty, who resolved to place New Bounty in administration. However, Mr Bart had recommended to Mr Parker that he consult BRI Ferrier and Mr Bart's actions had created a situation where Mr Parker had no choice but to place the company in administration. In substance, as the notes prepared by Mr Bart before his meetings with Mr Nicodemou indicated, the DOCA was Mr Bart's idea. Moreover, the draft DOCA was prepared by a solicitor who acted on behalf of Baron and Mr Bart (although he nominally acted on behalf of the director of New Bounty). Mr Bart also executed the DOCA on behalf of Baron. These acts justified a finding that Mr Bart procured the administration of New Bounty and the execution of the DOCA. In acting in this way, Mr Bart satisfied the definition of an "officer" of New Bounty in s 9 of the Corporations Act, even after his resignation as a director of New Bounty. 6. Mr Brennan relied on the broad construction accorded to s 447A of the Corporations Act by the High Court in Australasian Memory Pty Ltd v Brien. [27] He submitted that the termination of the administration did not prevent the Court granting relief for an abuse of Pt 5.3A of the Corporations Act. While there may be cases where relief is precluded because the interests of third parties have intervened, this was not such a case. If the issue of shares to Baron was set aside and Baron's forgiveness of the interest portion of the New Bounty Debt was also set aside, no third party interests would be prejudiced. The shareholdings as they existed prior to the administration and the interest component of New Bounty Loan would both be reinstated. The Demand would no longer be extant and New Bounty would remain solvent. 7. Mr Brennan submitted that an injunction should be granted against Baron because Mr Bart's conduct as an officer of New Bounty contravened s 182 of the Corporations Act and Baron was knowingly concerned in that contravention. Thus Baron is a person who engaged in conduct within s 1324(1)(e) of the Corporations Act and can therefore be the subject of an injunction. Winpar is entitled to claim such relief so Mr Brennan argues, because the insolvency of New Bounty was an element in Baron's contravention and thus Winpar's interests are deemed to be affected by the contravention. [28] The Defendants' Submissions 1. Mr Condon's starting point was that Winpar had not challenged the validity of any of the transactions preceding the Demand or the quantum of the New Bounty Loan. His submissions distinguished between a party exercising a right out of self-interest and invoking a process for the purposes foreign to the process. The Demand was made at a time when New Bounty was hopelessly insolvent. Baron owed no duty to New Bounty in exercising its rights under the New Bounty Loan. The placing of New Bounty into administration was simply a natural consequence of Baron's lawful demand for payment of the debt due to it. 2. Mr Condon submitted that Baron's immediate purpose – recovery of the debt – was permissible. Even if Baron's ultimate purpose was to achieve a collateral commercial benefit, such as dilution of the minority shareholdings, that was not to the point. According to Mr Condon, the authorities accept that a creditor may derive commercial benefits from placing the debtor into administration or liquidation, provided the procedure was lawfully invoked. 3. Mr Condon submitted that Baron's reasons for calling on the New Bounty Loan were proper and well-founded. Because AWM needed to move its weaving operations to Wangaratta in Victoria, this led to a number of adverse events including the triggering of the requirement by the Tasmanian EPA to remediate the Devonport Premises. These developments impaired the AWM Loan even further. New Bounty had been hopelessly insolvent at all times from 30 June 2012, but for Baron's continued support. The developments in Tasmania lent credence to Mr Bart's explanation for withdrawing Baron's support from New Bounty. 4. In the alternative, Mr Condon contended that there is nothing impermissible in the administration of a company being used as a vehicle to dilute the minority's shareholding. One of the objects of Pt 5.3A of the Corporations Act is to maximise a distressed company's chances of survival. The members of the company are not given rights by Pt 5.3A and their interests come to the fore only if the company cannot be saved. 5. Mr Condon submitted that in any event the relevant rights and entitlements in this case were exercised by persons other than Baron. Mr Parker made his own decision to place New Bounty in administration and his good faith was not impugned. Once New Bounty was placed in administration, it was up to the creditors and the Administrators to consider what was in the best interests of New Bounty. 6. While recognising that s 447A of the Corporations Act has been given a broad construction, Mr Condon submitted that Winpar could not invoke it in the present case, for three reasons: * Winpar had not identified any provision in Pt 5.3A which is to be modified by the orders it seeks, instead seeking orders setting aside the issue of shares to Baron; * the grant of relief would defeat rather than advance the objects of Pt 5.3A, in that restoring the status quo ante would restore an insolvent company to a position where it could trade; and * Winpar had delayed in bringing proceedings and had chosen to take no action to prevent the DOCA being passed or effectuated until the administration was complete and substantial fees incurred. 1. Mr Condon submitted that a further reason for refusing relief to Winpar is that it has not suffered any prejudice. On the evidence, New Bounty would be insolvent if the orders sought by Winpar were made. The value of the Devonport Premises is diminished by the costs of remediation, while New Bounty's only other asset of significance, the AWM Loan, was owed by a company whose debts exceeded its assets by $8.429 million at 30 June 2014. The Witnesses 1. Mr Brennan read affidavits by Mr Blanks, Winpar's solicitor, and Mr Elkington, a director of Winpar. Mr Blanks was not required for cross-examination. Mr Elkington was cross-examined, but his credit was not impugned. No submission was made that I should not accept Mr Elkington's evidence. 2. Mr Condon read two affidavits by Mr Bart. He also read affidavits by Mr Parker and Mr Nicodemou. Mr Parker was cross-examined but there has been no suggestion that his evidence was anything other than truthful. Mr Nicodemou had the day to day carriage of the external administration of New Bounty and gave advice to Mr Bart and Mr Parker prior to New Bounty being placed in voluntary administration. Mr Nicodemou was briefly cross-examined, but again no attack was made on his credit. 3. Mr Bart was cross-examined at considerable length and his evidence was challenged on a number of issues. Mr Bart presented as a confident and articulate witness who, not surprisingly, demonstrated a very good understanding of the affairs of New Bounty and the other companies he controlled. Mr Bart is quite clearly a person of commercial acuity and, equally clearly, astute to act in the interests of his companies as he perceives those interests. For the most part his evidence was precise and to the point. Where the questioning was ambiguous, or lacked precision or appeared to make a doubtful assumption, Mr Bart was quick to point out the difficulty and to seek clarification or a reformulation of the question. 4. I formed the view that, for the most part, Mr Bart was reasonably forthright in his evidence. He was obviously alert to the major issues in the case. Even so, he gave what seemed to me frank evidence as to his motives for taking the immediate steps that led to New Bounty being placed in administration. For example, he accepted that the sole purpose of Baron issuing a demand on New Bounty to repay the moneys due to Baron (including accrued interest) was "to bring about a situation of insolvency with New Bounty". He also acknowledged that he was not prepared to restructure New Bounty, which had accumulated tax losses that could be potentially offset against future earnings, "whilst having minority interests in the business". Mr Bart is astute enough to have appreciated that these admissions were potentially harmful to the Defendants' case. 5. Mr Brennan appears to have formed much the same view of Mr Bart's evidence since he did not submit that Mr Bart's evidence generally lacked credibility. He did point out, however, that on some matters Mr Bart's evidence was mistaken or inaccurate. For example, Mr Bart initially said in his oral evidence that Baron could not have taken advantage (as the parent company) of New Bounty's accumulated tax losses because of the minority interests in New Bounty. Mr Bart later acknowledged that there was nothing about the presence of the minority on the share register that affected whether New Bounty could derive a future benefit from the tax losses. Similarly, Mr Bart's recollection as to the effect of the documentation governing the loans between Baron and New Bounty was flawed in a number of respects. Mr Brennan also submitted that there were some matters, particularly relating to Mr Bart's motives, on which I should not accept his evidence. 6. My assessment of Mr Bart's evidence is that it was generally reliable, but is not to be uncritically accepted on all issues. In particular, Mr Bart's claim that his primary purpose in causing Baron to make the Demand was not to rid himself of the irritation created by the minority, must be viewed with some scepticism. Similarly, Mr Bart's evidence as to his motivation in placing New Bounty in a position where administration was virtually inevitable and bringing about the execution of the DOCA has to be assessed in the light of the objective evidence. As Mr Condon very fairly acknowledged, Mr Bart's explanation of his purpose or motives was made well after the event and was likely to be coloured by perceptions as to the issues at state in the proceedings. In this respect, Mr Bart's evidence has similarities to evidence by a plaintiff seeking damages for personal injuries as to what he or she would have done to avoid the risk of injury had the defendant given a warning. The courts have repeatedly warned that evidence of this kind has to be treated with caution. [29] Thus even though it was not suggested that Mr Bart deliberately gave untruthful evidence, I do not necessarily accept his evidence as to his motivation or purpose for particular actions. Findings Concerning Mr Bart's Actions Mr Bart's Motivation 1. Mr Brennan placed considerable emphasis on the 2011 Deed of Variation as a transaction shedding light on Mr Bart's purpose in making the Demand and causing (on Winpar's case) New Bounty to enter into administration. Mr Bart's explanation for executing the 2011 Deed of Variation was that the document was simply designed to tidy up existing arrangements by consolidating the various loan deeds. In fact, the Deed of Variation went considerably further than the earlier deeds relating to the New Bounty Loan, since it permitted Newbart (which at that stage was the lender to New Bounty) to back date interest to 1999. 2. In my view, the 2011 Deed of Variation is of more limited significance to the issues in dispute than Winpar's submissions suggest. This is so for three reasons. First, as I have pointed out, Winpar does not challenge the genuineness of efficacy of the Deed. Secondly, Mr Brennan, while submitting that Mr Bart's execution of the Deed showed "cavalier disregard" for his obligations as a director of New Bounty, did not invite me to reject Mr Bart's evidence that he did not think that the Deed fundamentally changed the pre-existing arrangements governing interest payable in respect of the New Bounty Loan. Thirdly, the 2011 Deed of Variation was executed over a year prior to Baron giving the Notice of Compulsory Acquisition to minority shareholders and over two years prior to Baron issuing the Demand. 3. I have little doubt that in 2011 Mr Bart appreciated that the ability of Newbart to claim back-dated interest at any time would be very useful if it became desirable to restructure New Bounty in the future. Mr Bart was aware that New Bounty had previously been placed in voluntary administration in 2000 and was also well aware that New Bounty had minority shareholders whose presence was by no means congenial to him. Indeed, in January 2009 Mr Bart, through Newbart, had offered to purchase the shares held by Winpar and Mr Elkington. However, I do not think that Mr Bart's predominant motive or objective in executing the 2011 Deed of Variation was to facilitate the insolvency of New Bounty or to pave the way for the dilution of the interests of minority shareholder. 4. Nor am I prepared to find that Mr Bart's actions in April 2012 in converting New Bounty's equity in AWM into a loan, were done predominantly for the purpose of diluting the interests of the minority shareholders in New Bounty. While the conversion was closer in time to Baron issuing the Notice of Compulsory Acquisition, it took place well before it became apparent to Mr Bart that the compulsory acquisition process would encounter major obstacles. There were also other issues affecting AWM's operations at the time of the conversion that may have played a part in the decision to substitute debt for equity. 5. There is, however, a good deal of other evidence as to Mr Bart's purpose in making the Demand, including his own evidence. Mr Bart initially rejected as "totally wrong" the suggestion put to him in cross-examination that the reason he made the Demand on Baron's behalf, rather than take action to enforce Baron's security over New Bounty's assets, was to procure the insolvency of New Bounty. Mr Bart, however, subsequently retreated from that position: "HIS HONOUR Q. I think the question, unless I misunderstood it, was, when you caused the demand to be made by Baron, was it your purpose in doing that, to bring about a situation of insolvency for New Bounty? A. It certainly was the most likely outcome, yes. But by simply calling on the security and taking the cash, was effectively doing the same thing. So yeah, okay, yeah, well, yes, on that-- Q. I just wanted to be clear, that you accept that the purpose of issuing the demand was to bring about a situation of insolvency with New Bounty? A. Yes." 1. Later in Mr Bart's cross-examination, the following exchange took place: "BRENNAN Q. In March 2014, you understood that New Bounty could continue to trade, even if you required the payment of $250,000, didn't you? A. I hadn't really turned my mind to that. I knew that absent of the Baron repayment of the debt, New Bounty didn't have any particular problems. But New Bounty was owed four point something million dollars, and it wanted its money back. Q. But you knew it couldn't get its money back, other than the money which New Bounty had, didn't you? A. To the extent of the cash? Q. Yes. A. Correct. Q. You can't have had any purpose in making the demand, other than to procure the insolvency, can you? HIS HONOUR: You mean making the demand on behalf of Baron? BRENNAN Q. Of making the demand on the behalf of Baron, for repayment of its loan. That was your only purpose, wasn't it? A. Well, I guess effectively, but, well, the answer is yes." 1. That Mr Bart's purpose was to bring about New Bounty's insolvency does not establish that his purpose in making the Demand was to set in train the administration of New Bounty which would result in the dilution of the minority interests through execution of the DOCA. Mr Bart was, however asked why he wanted to bring New Bounty to insolvency. His reply was as follows: "A. I wanted to bring to a head a whole series of matters that had been pending for a significant period of time. I wanted to be able to utilise the tax losses, that was really the only other thing of value in New Bounty." 1. This explanation for bringing about New Bounty's insolvency was taken up in the following passage: "BRENNAN Q. There is nothing about the presence of the minority on the share register of New Bounty which affected whether the tax losses would be available to New Bounty in the future, was there? A. An extreme irritation, but other than that, no. Q. The irritation was that there was some shareholders who may share in the economic benefits of the company in the event it succeeded in the future? A. If I can put it in slightly different terms. There was some external shareholders in the company that would benefit from my injecting new business and new capital into New Bounty; yes, that's correct." 1. Earlier in his cross-examination, Mr Bart was asked about what he understood could be achieved by placing New Bounty in administration: "Q. You understood, therefore, in March 2014 that there was no prospect of AWM paying, making a repayment on the AWM loan to New Bounty, didn't you? A. Certainly not in the short term. Q. You understood the only prospect Baron had for recovery of any of its loan from New Bounty in the short term was the payment from its cash at bank, didn't you? A. Yes. Q. You understood that Baron, as a secured creditor, was entitled to simply take possession of that cash at bank, didn't you? A. Yes. Q. You understood there was nothing that Baron could obtain from an administration, additional to the cash at bank, didn't you? A. No, that's not true. Q. The only thing additional to obtaining the cash at bank that Baron could obtain was the dilution of the minority shareholders, wasn't it? A. It was the issuance of further equity and I guess that means dilution of the minorities, yes. Q. There was no practical effect for Baron or any other party by the issue of further equity other than the dilution of the minority, was there? A. It was the return of solvency to New Bounty. That was the practical effect." 1. Mr Brennan later put to Mr Bart that he made the Demand in order to remove the minority interests in New Bounty: "Q. Given that it was your irritation at the minority being available, I take it that the reason you elected to make a demand for Baron to make a demand for repayment of its loan, rather than taking other courses open to it in March 2014, was to rid yourself of the irritation of the minority? A. That was certainly a consequence, it wasn't the primary reason, but it was certainly a consequence. … Q. Your thought process commenced, as you describe it in this affidavit at paragraph 25, there was a cessation of trading by AWM on 31 October 2013 from Devonport; see that? A. Yes. Q. You identified in this affidavit that at the same time Baron was continuing to experience difficulties in connection with its acquisition of minority shares? A. Yes. Q. Was therefore unwilling to extend any further financial accommodation to New Bounty? A. Yes. Q. That was your position in March 2014, wasn't it? A. Yes. Q. That the reason why Baron would not extend further financial accommodation to New Bounty was because of its difficulties in acquiring the minority shares; that was the reason, wasn't it? A. With respect, I don't think that's what my testimony says; I think it was one of the reasons. Q. You accept it was one of the reasons? A. Yes. Q. Why Baron was not willing to extend financial assistance. A. Yes. Q. What were the others? A. The likely insolvency, the difficulty in trade of AWM, the difficulty in trade of the company underneath it, the loss of the rezoning opportunity. Just everything culminating in – to that particular time." 1. In this passage, as in his affidavits, Mr Bart invoked a number of considerations that played a part in his decision to cause Baron to issue the Demand. I am satisfied that none of the considerations, other than Mr Bart's desire to remove or greatly dilute the interests of the minority shareholders, played a significant part in his decision to cause Baron to make the Demand and, subsequently, to shape the terms of the DOCA. 2. First, Mr Bart's own evidence strongly suggests that New Bounty's ability to take advantage of its accumulated tax losses was not affected by whether or not the company was placed in administration. The administration, from Mr Bart's point of view, was the available mechanism to prevent the minority shareholders from sharing in whatever economic benefit might accrue to New Bounty from utilising its tax losses, for example by the group directing revenue to New Bounty rather than to another company within the group. This objective was in substance achieved by the DOCA diluting the minority interests to a negligible proportion of the issued share capital of New Bounty. 3. Secondly, in his later affidavit, Mr Bart said that New Bounty needed to borrow funds in order to meet its commitments. In his oral evidence he explained this answer by suggesting that AWM would be likely to call on New Bounty for the funding it needed for its operations. But Mr Bart accepted that by the end of March 2014 the rezoning proposal for the Devonport Premises was dead and that, accordingly, he did not expect AWM to spend any further moneys on the rezoning proposal. He also accepted that by March 2014, apart from outgoings on the Devonport Premises (which were not affected by the DOCA), New Bounty would not incur any additional liabilities in the short term. 4. Thirdly, Mr Bart suggested that one purpose of the Demand and of the administration which followed was to ensure that Baron could recover the moneys due to it. But as Mr Bart acknowledged, if Baron wished to recover moneys due to it, Baron could have simply enforced its security against New Bounty's assets. There was no need for New Bounty to be placed into administration for Baron to claim and receive the moneys paid to it by the Administrators in reduction of the New Bounty Loan. Those moneys were simply paid out of New Bounty's bank account. 5. Fourthly, Mr Bart said that one significant reason for Baron making the Demand and for New Bounty to be placed into administration was to restore New Bounty to solvency. But this is not what happened. Baron forgave only a portion of the New Bounty Loan. According to the draft Statement of Financial Position as at 30 June 2014 (four days before termination of the DOCA), New Bounty's Current Liabilities exceeded Current Assets by nearly $400,000. The Current Liabilities comprised the amount due under the New Bounty Loan which Baron could call up at any time. As I have pointed out, [30] just as the solvency of New Bounty prior to the administration depended on Baron's forbearance, so its solvency after the administration was terminated depended on Baron's forbearance. If at any time after the administration terminated Baron had called up the balance of the New Bounty Loan, New Bounty would have been unable to pay its debts as and when they fell due, thus rendering it insolvent. 6. Fifthly, Mr Bart's notes prepared in advance of the meetings with Mr Nicodemou make it clear that Mr Bart's analysis of the virtues of appointing administrators was based on what he perceived as conduct by Mr Elkington designed to frustrate the compulsory acquisition process set in train by Baron. Mr Bart identified moving to 100 per cent ownership of New Bounty as an objective of the DOCA that he envisaged would be executed in the course of the administration of New Bounty. It is true that the notes identified the existing unsecured creditors as likely beneficiaries if the DOCA was entered into, since they would be paid in full. But as Mr Bart recognised in his evidence, if the Demand had not been made, New Bounty had ample funds to pay its unsecured creditors. Indeed, as Mr Brennan pointed out, the Deed Fund, which was wholly financed by New Bounty, was sufficient to pay out all unsecured creditors as well as meeting the Administrators' fees. 7. Sixthly, Baron's letter of 3 April 2014 gave only one reason for making the Demand, namely that Baron had "lost patience with the shenanigans being played in the compulsory acquisition process". This strongly suggests that Mr Bart had at the forefront of his mind that the administration of New Bounty would eliminate the "shenanigans" by eliminating the minority interests. (It will be recalled that at this stage Mr Bart believed that placing New Bounty into administration would allow Baron to acquire 100 per cent of New Bounty's shares.) 8. In my view, the objective evidence establishes that Mr Bart's motivation for making the Demand was to procure the insolvency of New Bounty as a means of eliminating or diluting the interests of the minority shareholders. Mr Bart wished to procure the insolvency of New Bounty so that the company would be placed into administration and the DOCA executed, thereby bringing about dilution (if not extinguishment) of the interests of the minority shareholders. To the extent that Mr Bart was responsible for procuring the administration of New Bounty, his predominant motivation and intention was to dilute the interests of the minority shareholders. Similarly, to the extent that he was responsible for procuring the execution of the DOCA, his motive and intention was to dilute the interests of the minority. Mr Bart's Conduct 1. Mr Bart resigned as a director of New Bounty on 31 March 2014. He issued the Demand on 3 April 2014 on behalf of Baron, of which he remained a director. As I have found, in making the Demand Mr Bart's predominant motive and intention was to cause New Bounty to become insolvent as a mechanism for diluting the minority interests in New Bounty. At the time of making the Demand, Mr Bart appreciated and intended that New Bounty would be placed into administration and that a deed of company arrangement in substantially the terms he envisaged would be executed. Mr Bart also appreciated that although he purported to act in the interests of Baron, the administration of New Bounty and the execution of the DOCA would not yield any benefit to Baron, other than any benefit that might accrue indirectly from the dilution of the interests of New Bounty's minority shareholders and the corresponding increase in Baron's proportionate shareholding. 2. The decision to place New Bounty into administration was made by Mr Parker, the sole remaining director of New Bounty. Mr Parker made that decision because the Demand, as he knew, rendered New Bounty insolvent and because Mr Bart had suggested in the letter making the Demand that "a sensible solution would be to consult an insolvency practitioner regarding a voluntary administration". The suggestion was consistent with what Mr Bart conveyed to Mr Parker in the conversation which took place shortly before Mr Bart resigned as a director of New Bounty. [31] In that conversation, Mr Bart told Mr Parker that if New Bounty was placed in voluntary administration, Baron might be prepared to convert part of its debt into equity through a deed of company arrangement. 3. Once Baron made the Demand, Mr Parker appreciated that the only options were to liquidate New Bounty or place it into administration. He also appreciated (as did Mr Bart) that liquidation was not feasible because, apart from the consequences for unsecured creditors, putting New Bounty into liquidation would have adverse consequences for AWM and Australian Weaving (of which Mr Parker was the CEO). Accordingly, by reason of the Demand, Mr Parker had no practicable alternative but to place New Bounty in voluntary administration. His choice of BRI Ferrier to conduct the administration was based on Mr Bart's recommendation. 4. Mr Bart, notwithstanding that he had resigned as a director of New Bounty, was heavily involved in devising the terms of the DOCA and its preparation. Mr Bart instructed Mr Ryckmans, who apparently acted as the solicitor for both New Bounty and Baron, to draft the DOCA. Mr Ryckmans duly prepared a draft, which was sent to BRI Ferrier and copied to Mr Bart (but not to Mr Parker). Queries from BRI Ferrier as to the terms of the DOCA were answered directly by Mr Bart. Further instructions given by Mr Ryckmans to BRI Ferrier were copied to Mr Bart (but again not to Mr Parker). The terms of the DOCA as executed were broadly consistent with the ideas put by Mr Bart to Mr Nicodemou in the discussion that preceded the Demand. The Principles 1. In asserting Winpar's claim for relief under s 447A(1) of the Corporations Act it is necessary to consider the authorities addressing the scope of the provision and how it applies to a company that has been in voluntary administration. Australasian Memory Pty Ltd v Brien 1. The starting point for an analysis of the scope of s 447A of the Corporations Act is the judgment of the High Court in Australasian Memory Pty Ltd v Brien. [32] In that case, the joint administrators of a company convened a second meeting of creditors otherwise than in accordance with the time limits laid down by s 439A(2) of the Corporations Act. The meeting was held on 3 March 1997, but was adjourned until 24 March 1997. At the adjourned meeting, which was also held outside the relevant time limits, the creditors resolved to wind up the company. Statutory demands made by the liquidators were set aside on the ground that the meeting of 3 March 1997 was not validly convened. An application was then made to the Supreme Court of New South Wales seeking orders, inter alia, under s 447A(1) modifying the statutory time limits in relation to the company. The orders were made by the trial Judge and affirmed by the New South Wales Court of Appeal. 2. The High Court dismissed an appeal against the orders. The judgment of the Court made it clear that there is no basis for reading down the general words of s 447A(1). [33] It follows that the powers conferred by the section are wide, although they are not "entirely without limit". [34] 3. The High Court identified the particular question arising on the appeal as whether an order could be made under s 447A(1) of the Corporations Act altering the way in which s 439A(2) applied to the company. [35] In answering this question in the affirmative, the judgment stated the following propositions: * Since s 447A(1) authorises orders as to how Pt 5.3A is to operate "in relation to a particular company", the power is not confined to curing defects or departures from the scheme in Pt 5.3A. [36] * The language of s 447A(1) is broad enough to confer power to make orders which will have effect in the future, but which are occasioned by something done or not done in the past. [37] * The reference in s 447A(1) to orders as to how "this Part" is to operate does not refer only to Pt 5.3A as a whole. It refers to each of the provisions in Pt 5.3A. [38] * The examples given in s 447A(2) do not exhaust the scope of s 447A(1), but they show that orders under s 447A(1) may alter the operation of other provisions in Pt 5.3A. The orders contemplated are orders that alter how Pt 5.3A is to operate, not how it does operate in relation to a particular company. [39] * Section 447A(1) is to be understood as an integral part of the legislative scheme created by Pt 5.3A. It therefore allows for orders which alter how particular provisions, such as those imposing time limits, are to operate in the future. [40] * The words of s 447A(1) contemplate that it may be applied even after the administration has come to an end. The temporal requirement ("how this Part is to operate") is satisfied if orders made under s 447A(1) apply only from the time of their making. [41] 1. The Court also considered whether s 447A(1) should be construed so as not to authorise an order reinstating an administration if (as was argued) such an order would interfere with accrued or vested rights. Their Honours distinguished between two kinds of case. The first is where members or officers of the company or third parties have taken steps predicated upon the termination of the administration (other than by entering a deed of company arrangement or going in liquidation). [42] An example is where the directors of a company resume management and deal with the assets of the company on the assumption that the administration has come to an end. In a case of that kind, reinstating the administration might be inconsistent with rights created in the intervening period. The Court considered it unnecessary to decide whether in such a case relief under s 447A(1) would be refused because the section does not confer power to reinstate the administration or because there is an "insuperable discretionary obstacle" to making an order for reinstatement. [43] 2. The second kind of case identified by the High Court is where steps are taken that are predicated upon the company having validly entered into a deed of company arrangement or been placed into liquidation. In this kind of case: [44] "there would be no inconsistency between the varied operation of Part 5.3A and the rights that have accrued in the intervening period if the order gave legal validity to the premise for the parties' conduct." 1. The Court considered that the case before it was of the second type, since the steps taken by third parties, such as those who purchased the assets of the company, were predicated upon the company's creditors having validly resolved that the company should be placed in liquidation. The orders made by the Supreme Court of New South Wales remedied the irregularities and no rights which accrued in the intervening period were adversely affected by the orders. [45] Thus the orders had been properly made. 2. Mr Brennan submitted that the present case falls within the second category identified in Australasian Memory v Brien and, further, that the Proposed Orders would not prejudice any third parties, such as the unsecured creditors. Nor would Baron be prejudiced, since it would be restored to the position it occupied before New Bounty entered into administration. 3. It is clearly correct that Australasian Memory v Brien establishes that the termination of the administration of New Bounty is not of itself necessarily a barrier to this Court making orders of the kind sought by Winpar. But the circumstances of the present case are different from those in Australasian Memory v Brien. 4. Winpar seeks orders, inter alia, deleting the provisions of the DOCA relating to the issue of shares to Baron and the forgiveness by Baron of portion of the New Bounty Loan. [46] It also seeks an order modifying the operation of s 437A(1) of the Corporations Act [47] to deprive the Administrators of power to issue shares to Baron pursuant to the DOCA. In effect, the orders seek to restore New Bounty and Baron to the status quo ante, while leaving undisturbed the creation of the Deed Fund and the payments made from it to unsecured creditors and the Administrators. By contrast, the orders in Australasian Memory v Brien remedied irregularities which, had the orders not been made, rendered invalid steps purportedly taken in the course of the administration. Australasian Memory v Brien was a case in which steps had been taken predicated upon the company concerned having validly entered into a deed of company arrangement. 5. In my opinion, the present case does not fit neatly into the second type of case identified by the High Court in Australasian Memory v Brien. Winpar does not seek to remedy irregularities in order to ensure the validity of steps taken in the course of New Bounty's administration. On the contrary, it seeks to set aside provisions of the DOCA and thus annul transactions entered into pursuant to the DOCA. This does not necessarily mean that the Court lacks power under s 447A(1) to make the orders sought by Winpar. It does mean that the case cannot be decided simply by reference to the binary classification adopted by the High Court in Australasian Memory v Brien. It may also mean that the binary classification is not to be understood as necessarily covering the universe of cases in which orders might be sought under s 447A(1) after an administration has come to an end. Authorities on Abuse of Part 5.3A 1. It is not uncommon for proceedings to be brought challenging the appointment of an administrator or the execution of a deed of company arrangement on the ground that the appointment of an administrator or the execution of the deed was an abuse of Pt 5.3A, although ordinarily such cases seem to be brought while the administration is continuing. In dealing with challenges of this kind, courts have tended to apply principles derived from other areas of the law. For example, orders have been made under s 447A(1) terminating an administration where the party appointing an administrator seeks to thwart pending proceedings disputing the existence of the debt which provided the foundation for the appointment of the administrator. [48] These decisions have reasoned by analogy from authorities holding that a party who elects to pursue a remedy curially ought not be permitted to attempt to enforce it by more direct means. [49] 2. In cases where an administrator is said to have been appointed for an improper purpose, the courts have relied on the principles governing the stay or dismissal of proceedings as an abuse of process. In Blacktown City Council v Macarthur Telecommunications Pty Ltd (admin apptd), [50] Barrett J observed that the concept of "abuse" in s 447(2)(b) of the Corporations Act is: [51] "akin, as to its content and purpose, to the court's inherent jurisdiction to stay proceedings permanently for abuse of process". His Honour cited the High Court decision in Williams v Spautz [52] as confirming that the use of a process "for a purpose essentially foreign to the purpose it is designed to serve is the principal determinant of abuse". On this approach, resort to the process to effectuate some collateral purpose makes use of the process improper. 1. Blacktown Council v Macarthur was a relatively straightforward case. Barrett J found that the administration of a company and a proposed deed of company arrangement were engineered by the controller of the company in a "clear and deliberate, but not subtle" attempt to stave off pending District Court proceedings for professional negligence against the company and to forestall an otherwise inevitable insolvent winding up. His Honour had no difficulty in concluding that these actions amounted to an abuse of Pt 5.3A. The administration and the proposed deed of company arrangement paid mere "lip service" to the objects of Pt 5.3A stated in s 435A, but had no "real purpose of rehabilitating the company as a commercial concern". Accordingly his Honour made orders terminating the administration and appointing a liquidator. 2. Other cases are closer to the line. In Re Capital General Corporation Ltd; Rodgers v Radly, [53] a decision of the Supreme Court of Victoria cited by Barrett J in Blacktown Council v Macarthur, a company was placed into voluntary administration by the directors one month after oppression proceedings were commenced. Warren J thought it "curious" that not only had the company been dormant for two years but its debts had been allowed to lie for that period. It was only when the oppression proceedings were instituted that the company suddenly became "insolvent". Her Honour considered that, in these circumstances, it was arguable that Part 5.3A had been abused and that termination of the administration was warranted. [54] However, her Honour declined to make termination of the administration because the company was clearly insolvent and there were matters warranting investigation and reporting upon by the administrators. 3. In Australian Beverage Distributors Pty Ltd v The Redrock Co Pty Ltd, [55] a decision relied on by Mr Condon, the plaintiff obtained an assignment of a debt owed by the defendant (Redrock) and initiated winding up proceedings against Redrock. White J found that one of the plaintiff's purposes was to prevent Redrock contesting proceedings against another company associated with the plaintiff. White J accepted that this is not an outcome Pt 5.3A is intended to secure. Nonetheless, his Honour held that the plaintiff's purpose did not constitute an abuse of Pt 5.3A. 4. White J cited Williams v Spautz and Dowling v Colonial Mutual Life Assurance Society Ltd [56] for two propositions: [57] "it is an abuse of process to institute proceedings for the predominant purpose of obtaining a collateral advantage outside the proper purpose for which the proceedings are designed. However, it is not an abuse of process to bring proceedings for the purpose of pursuing them to a conclusion to obtain whatever entitlement or benefit the law provides if the proceedings terminate in the plaintiff's favour." 1. The practical effect of making a winding-up order was to stultify Redrock's pursuit of an arguable claim, but that was not its purpose. The plaintiff intended to pursue the petition for a winding up order to a conclusion. The tactical advantage that it would derive in other proceedings may have been the product of "sharp practice", but that did not make the winding up proceedings an abuse of process. [58] 2. Williams v Spautz, to which frequent reference is made in proceedings brought under s 447A(1) of the Corporations Act, was concerned with abuse of the court's process, [59] not with abuse of the process available under Pt 5.3A of the Corporations Act. The issue before the High Court was whether proceedings commenced by a former lecturer at a University, alleging criminal offences against officers of the University, should be stayed as an abuse of process. The lecturer's predominant purpose was to use the criminal proceedings as a means of exerting pressure on the University to reinstate him or to settle his wrongful dismissal proceedings on favourable terms. The High Court, by majority, held that the criminal proceedings should be stayed as an abuse of process. 3. The key passage in the majority judgment is as follows: [60] "To say that a purpose of a litigant in bringing proceedings which is not within the scope of the proceedings constitutes, without more, an abuse of process might unduly expand the concept. The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event. Thus, to take an example mentioned in argument, an alderman prosecutes another alderman who is a political opponent for failure to disclose a relevant pecuniary interest when voting to approve a contract, intending to secure the opponent's conviction so that he or she will then be disqualified from office as an alderman by reason of that conviction, pursuant to local government legislation regulating the holding of such offices. The ultimate purpose of bringing about disqualification is not within the scope of the criminal process instituted by the prosecutor. But the immediate purpose of the prosecutor is within that scope. And the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event at the proceedings terminate in the prosecutor's favour. It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers. So, in Dowling, Isaacs J pointed out that 'if, for instance, it had been shown that the society had simply threatened Dowling that unless he did what they had no right to demand from him, namely give up certain names, they would proceed to sequestration, and they had proceeded accordingly, there would have been in law an abuse of the process'. However, because the Society wished to use the process for the very purpose for which it was designed, there was no abuse of process." (Citations omitted.) The important point that emerges from this passage is that a person who intends to use a process for the purpose for which it is designed, does not abuse that process by having an "ultimate purpose" that is outside the scope of the proceedings. Application of Principles Abuse of Part 5.3A 1. In my view some care must be taken in applying the principles governing the process of a court to the different question of whether a party has improperly invoked the process available under Pt 5.3A of the Corporations Act. The issues may be similar in each situation, but they are not necessarily identical. It may be difficult, for example, to apply concepts such as procedural fairness to actions taken by a company or its officers. When the question of abuse of process arises in a statutory context, attention has to be directed primarily to the terms of the legislation. 2. Winpar puts its case primarily on the basis that Mr Bart was responsible for placing New Bounty into administration and for the subsequent execution of the DOCA and allotment of shares to Baron. I have found that Mr Bart's sole or predominant purpose in acting as he did was to dilute the interests of the minority shareholders. The question then arising is posed by s 447A(2)(b) of the Corporations Act, namely whether Mr Bart's actions, given his purpose, constituted abuse of the provisions of Pt 5.3A. Section 447A(2) contemplates that the consequence of such an abuse is that the Court may order the administration to end. However, this is merely an example of an "appropriate" order that the Court may make pursuant to s 447A(1). On Winpar's case, if Mr Bart's actions constituted abuse of the provision of Pt 5.3A, the Court's powers are wider than merely ordering the administration to end. 3. The object of Pt 5.3A of the Corporations Act is stated in s 435A. The object is to provide for the business, property and affairs of an insolvent company to be administered in such a way that: "(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence-results in a better return for the company's creditors and members than would result from an immediate winding up of the company." 1. I accept, as Mr Condon submitted, that it is not necessarily an abuse of Pt 5.3A for the person placing a company into administration to do so intending to dilute the interests of minority shareholders. This proposition is illustrated by Kirwan v Cresvale Far East Ltd (in liq), [61] a case involving a deed of company arrangement. In his judgment, Meagher JA explained the decision as follows: [62] "Securities was carrying on business as a stockbroker; everyone agreed it should continue to do so; it was desperately short of capital, and was dancing on the brink of insolvency; it could not continue in business, unless there was some injection of capital; capital could have put it in liquidation, but did not do so; nobody was prepared to supply it with any capital, except Mr Kirwan; Mr Kirwan did so, in return for the issue of shares. In these circumstances, the correct principle is that set out by his Honour: 'Likewise, if a company has need of capital and there is only one avenue of obtaining that capital, then even though the person who is subscribing the extra capital and has a dominant purpose in obtaining control and even though that person is a director of the company, there would be no improper purpose in making the allotment.'" 1. In Kirwan v Cresvale, Young CJ in Eq referred [63] to the decision of the High Court in Whitehouse v Carlton Hotel Pty Ltd. [64] There the Court held that the directors of a company cannot ordinarily exercise a fiduciary power to allot shares for the purpose of defeating the voting power of existing shareholders by creating a new majority. The reason given by the Court for this principle is that it is no part of the function of the directors as such to favour one shareholder, by exercising a fiduciary power to allot shares for the purpose of diluting the voting power of other shareholders. Young CJ in Eq pointed out [65] that Whitehouse v Carlton Hotel recognised that there may be special circumstances in which the directors of a company can legitimately issue shares in order to dilute the voting power of some shareholders. The obvious example is where a company is in need of capital and the only way of obtaining the necessary funds is to allot shares to an investor prepared to inject the funds. 2. The present case is very different from Kirwan v Cresvale. New Bounty was not in need of funds when placed in administration. New Bounty's insolvency was created by Mr Bart for the sole or predominant purpose of diluting the interests of the minority. New Bounty did not receive an injection of capital. Baron agreed to forego part of its debt, but its actions did not change New Bounty's position from that prevailing immediately before the Demand. At both times its continuing solvency depended wholly on whether Baron would demand immediate payment of the balance of the New Bounty Loan. If Baron chose to support New Bounty, as it did until 3 April 2014, the company would be able to meet its debts as and when they fell due. If Baron withdrew its support, New Bounty was unable to pay its debts as and when they fell due. 3. If it is accepted that Mr Bart was in effect the controlling mind of New Bounty and if his sole or predominant purpose of causing New Bounty to be placed in administration was to dilute the interests of minority shareholders, in my opinion the administration involved an abuse of the provisions of Pt 5.3A of the Corporations Act. I reach this conclusion because placing New Bounty into administration did not achieve and was not intended to achieve the object stated in s 435A of the Corporations Act. The purpose of the administration in these circumstances was not to maximise the chances of New Bounty continuing in existence. Had the Demand not been made and New Bounty not placed in administration, New Bounty would have continued in existence. It would have done so subject to Baron's forbearance in not pressing for payment of the New Bounty Loan. But when the administration ended, New Bounty's continued existence also depended on Baron's forbearance in not pressing for payment of the New Bounty Loan. 4. Similarly, placing New Bounty in administration had nothing to do with achieving a better result for the unsecured creditors. They would have been paid in full had the Demand not been made and had New Bounty not been placed in administration. New Bounty had ample cash reserves to ensure that the few unsecured creditors were paid in full without any need for the DOCA and the Deed Fund established under its provisions. 5. In substance, the only result achieved by placing New Bounty into administration and giving effect to the DOCA was to dilute the interests of the minority shareholders. That result was as Mr Bart intended from before he made the Demand on behalf of Baron. This is not a case in which Mr Bart intended to utilise Pt 5.3A of the Corporations Act to achieve a result contemplated by the legislation, while also having an ulterior purpose outside the scope of the legislation. His intention and purpose was to utilise Pt 5.3A to achieve an object not contemplated by the legislation and thus outside its scope. Mr Bart's Purposes as the Controlling Purpose 1. The next question is whether Mr Bart's subjective purpose is to be regarded as the purpose of placing New Bounty into administration and of taking the steps leading to the allotment of shares to Baron. In his submissions, Mr Condon correctly pointed out that Australian law accepts the fundamental principle that each company is a separate and independent legal entity, even if within a group controlled by the same person. [66] He emphasised that the Demand was made by Baron when Mr Bart had resigned as a director of New Bounty. He submitted that the Demand was no more than Baron exercising its legal rights, as it was entitled to do. 2. I do not think that the doctrine of separate legal personality prevents Mr Bart's purpose being regarded as the purpose of placing New Bounty into administration and the execution of the DOCA. Mr Bart was the moving force behind the administration and the DOCA, even though others necessarily participated in the process. His resignation as a director of New Bounty shortly before the Demand was made cannot divorce him from the process that he had set in motion prior to his resignation and in which the continued to play an active role. 3. When Mr Bart made the Demand on behalf of Baron he intended to cause New Bounty to become insolvent. He also intended that the insolvency so created would cause New Bounty to be placed in administration and that the administration would be conducted so as to give effect to his intention of diluting the interests of the minority shareholders. Mr Bart understood that the only benefit that Baron could obtain from the administration was the dilution of the minority's assets. This is shown by the passage in his evidence which I have already quoted. [67] 4. Mr Bart added that another effect was to return New Bounty to solvency but, as I have found, that is not what happened. 5. The Demand was not simply made in the exercise of Baron's legal entitlement as a creditor of New Bounty. Nor was it made simply in Baron's interests. The Demand was made as a necessary step in achieving Mr Bart's objective of diluting the minority shareholding interests in New Bounty. It is true that Mr Bart was no longer a director of New Bounty when the Demand was made. But his was the mind that determined the events leading to the allotment of shares in New Bounty to Baron and the dilution of the minority interests in New Bounty. 6. As I have found, Mr Parker had no choice but to appoint administrators of New Bounty. Mr Parker, although he acted in good faith, acted in his capacity as a director of New Bounty in accordance with Mr Bart's wishes. The terms of the DOCA were settled in conformity with Mr Bart's instructions and with virtually no involvement by Mr Parker. Mr Bart's instructions were based on ideas that he had formed while still director of New Bounty and that he had discussed with Mr Nicodemou. The DOCA was designed, as Mr Bart knew, to bring about the dilution of the interests of the minority shareholders in New Bounty. The DOCA was the instrument by which the dilution of the minority interests was effected. 7. In these circumstances, I think Mr Bart's purpose should be regarded as the purpose of procuring the administration and of the DOCA. For the reasons I have given, that purpose involved an abuse of the provisions of Pt 5.3A. Objective Purpose 1. As I have noted, Winpar relied not only on Mr Bart's subjective purpose, but on the purpose of the administration and the DOCA, assessed objectively. In view of the findings I have made, it is not necessary to address the objective purpose of the administration. Had that been necessary, I would have found that the objective purpose of the administration and of the DOCA involved an abuse of the provisions of Pt 5.3A of the Corporations Act. Officer of a Corporation 1. I have reached the conclusion that the administration involved an abuse of Pt 5.3A of the Corporations Act independently of the definition of "officer of a corporation" in s 9. That expression is used in Pt 5.3A, [68] but it does not appear in s 447A. Nonetheless, Mr Brennan submitted that a finding should be made that at all material times after Mr Bart's resignation as a director of New Bounty and prior to his reappointment, he satisfied the definition of "officer of a corporation" in s 9 of the Corporations Act. He sought the finding primarily because Winpar's claim for relief under s 1324 of the Corporations Act rests on Mr Bart's alleged contravention of s 182 of the Corporations Act in his capacity as an officer of New Bounty. However, Mr Brennan seemed to suggest that the finding might assist Winpar's case under s 447A. 2. Whether a person satisfies the definition of "officer of a corporation" is a question of substance and is not determined by the description accorded (or not accorded) to that person's role by the company. [69] A person can satisfy the definition by making or participating in making decisions affecting the business of the corporation without necessarily being in ultimate control of the corporation or actively implementing all aspects of the decisions. [70] 3. In my view, Mr Bart was a person who made or participated in making decisions affecting the whole or a substantial part of the business of the corporation within par (b)(i) of the definition. [71] Mr Bart made the decision to issue the Demand on 3 April 2014 intending that it should affect New Bounty's overall financial position by rendering it insolvent. He participated in the decision to appoint administrators by suggesting the idea to Mr Parker, knowing that Mr Parker would have no effective choice. Mr Bart also recommended to Mr Parker that BRI Ferrier should be asked to provide the Administrators, a recommendation followed by Mr Parker. Mr Bart participated in procuring the approval of the creditors to the execution of the DOCA by giving instructions as to the contents of the DOCA to the effective exclusion of Mr Parker. The DOCA affected a substantial part of New Bounty's business by relieving the company of most of its largest liability. The absence of any suggestion that the Administrators failed to perform their statutory duties does not detract from the conclusion that during the administration, Mr Bart participated in making decisions that affected the whole or a substantial part of New Bounty's business. 4. I also think that Mr Bart during the same period had the capacity to affect significantly New Bounty's financial standing within par (b)(ii) of the definition of "officer of a corporation". He demonstrated that capacity by issuing the Demand knowing that it would bring about New Bounty's insolvency. Mr Bart also demonstrated it by proposing to Mr Parker that the company should be placed into administration knowing that Mr Parker had no real choice but to implement the proposal. Mr Bart's participation in the drafting and adoption of the DOCA, the terms of which significantly altered New Bounty's financial position, further demonstrated his capacity to affect New Bounty's financial standing. 5. Thus, to the extent it is relevant to the issues in the proceedings, I find that Mr Bart was an officer of New Bounty during the period from 31 March 2014 until he resumed his position as a director on 9 June 2014. However, the finding does not add to the analysis of whether the administration of New Bounty involved an abuse of Pt 5.3A of the Corporations Act. Should Relief be Granted? The Orders Sought 1. Winpar's final written submissions set out proposed short minutes of order specifying the relief which it says should be granted. The Proposed Orders (Proposed Orders) are as follows: "1. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) ('Act'), Part 5.3A of the Act is to operate in relation to … Baron … and … New Bounty in such a way as to empower the Court to vary the [DOCA] so that clauses 6.2(b) and 6.2(c) of the DOCA be deleted. 2. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to … Baron and … New Bounty in such a way as to empower the Court to vary the DOCA so that clause 9.2 of the DOCA is deleted. 3. Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate so that s 437A(1)(d) of the Act is to be modified in relation to … New Bounty, so that the [A]dministrators were not empowered to issue shares in New Bounty to … Baron on or about 13 May 2014 pursuant to clauses 6.2(b), 6.2(c) or 9.2 of the DOCA. 4. Pursuant to s 447A(1) of the Act, part 5.3A of the Act is to operate in relation to … Baron, to order it to surrender by a date specified in the order 1,511,954,800 shares in … New Bounty issued to it on or about 13 May 2014. 5. Pursuant to s 447A(1) of the Act, Part 5.3A of the Act is to operate in relation to … New Bounty to order it to rectify its share register by a date specified in the order, by cancelling the 1,511,954,800 shares that were issued to … Baron on or about 13 May 2014. 6. Pursuant to s 1324 of the Act [Baron] be permanently restrained from making any claim or demand based on or otherwise relying upon clause 6.2(c) or 9.2 of the DOCA. 7. Pursuant to s 1324 of the Act, [Baron] be permanently restrained from making a demand for payment of any part of the Baron Claim within the meaning of the DOCA if such a demand is made for the purpose of procuring the issue of equity in [New Bounty]. 8. Pursuant to s 1324 of the Act, [Baron] surrender by a date specified in the order 1,511,954,800 shares issued to it in New Bounty on or about 13 May 2014. 9. Pursuant to s 1324 of the Act, [New Bounty] rectify its share register by a date specified in the order, by cancelling the 1,511,954,800 shares that were issued to … Baron on or about 13 May 2014. 10. In the alternative to order 9, pursuant to s 1324 of the Act [Baron] is to cause [New Bounty] to rectify its share register by a date specified in the order, by cancelling the 1,511,954,800 shares that were issued to [Baron] on or about 13 May 2014." Difficulties with Proposed Orders 1-5 1. Australasian Memory v Brien establishes that orders can be made under s 447A(1) after the administration of a company has terminated. The decision also establishes that orders can operate with respect to past matters or events, provided the orders have effect only from the time they are made. 2. One potential difficulty in Winpar's path is that it does not seek orders setting aside the DOCA as a whole, but only orders varying its terms. In Kyle House Pty Ltd v ACN 000 016 213 Pty Ltd, [72] Barrett J held that, where a deed of company arrangement had terminated by a certification that the deed had been wholly executed, the Court has no power under s 445G to order the variation of the deed. [73] His Honour held that in these circumstances there is no longer a deed capable of variation. He left open the possibility that, despite s 445H expressly preserving the previous operation of the deed following termination or avoidance, the "comprehensive jurisdiction created by s 447A" might support an order changing the previous operation of the deed. [74] 3. It has been held that s 447A(1) of the Corporations Act authorises the Court to make an order prior to termination of a deed of company arrangement varying the terms of the deed. [75] However, these decisions do not determine whether s 447A(1) authorises such an order after the deed has terminated, as Winpar seeks in the present case. 4. The issue was not argued in any detail before me. Having regard to the expansive interpretation given to s 447A(1) in Australasian Memory v Brien, I am inclined to the view that there might be circumstances in which s 447A(1) supports an order varying or setting aside particular provisions of a deed of company arrangement, not for the purpose of validating actions taken in reliance on the deed (as in Australasian Memory v Brien), but in order to vary rights and obligations or to invalidate otherwise valid actions. Those circumstances are likely to be rare. Moreover, consistently with the reasoning of the High Court, any such power can be exercised only to make an order prescribing how Pt 5.3A, or a provision within Pt 5.3A, is to operate in relation to the relevant company. Further, the power can only be exercised so as to prescribe how Pt 5.3A, or a provision thereof, is to operate as from the date the orders are made. 5. If this is correct, there are difficulties in bringing Winpar's Proposed Orders within the scope of s 447A(1). Proposed Orders 1 and 2 provide that Pt 5.3A is to operate "in such a way as to empower the Court to vary the [DOCA]" so as to delete cll 6.2(b), 6.2(c) and 9.2. Section 447(1) cannot be construed so as to permit the court to make an order that effectively amends Pt 5.3A to confer a power on the court that it does not already have under Pt 5.3A. The power conferred by s 447A(1) is to make an order about how Pt 5.3A is to operate in relation to a particular company. It is not a power to redraft Pt 5.3A to confer a power not otherwise available to the court. It is for this reason that the authorities state that before an order can properly be made under s 447A(1), it is necessary to identify a provision in Pt 5.3A the operation of which is to be modified in relation to a particular company. [76] 6. A further difficulty arises because of the constraint flowing from the requirement that the section only authorises an order which operates from the date it is made. Section 445H of the Corporations Act provides that the termination or avoidance of a deed of company arrangement does not affect the previous operation of the deed. Winpar's Proposed Orders do not seek to modify the operation of s 445H and it is by no means clear that orders under s 447A(1) could have that effect. In any event, although Proposed Orders 1 and 2 are not entirely clear, they are presumably intended, conformably with Australasian Memory v Brian, to operate from the date they are made. If this is the intention, it is difficult to see how an order deleting the specified clauses from the DOCA after the DOCA has terminated can affect the issue of shares to Baron while the DOCA was in force. At that time the New Bounty shares were issued to Baron pursuant to cl 9.2, the provisions of the DOCA were valid and effective. 7. If Proposed Orders 1 and 2 are intended to have the effect of deleting the specified clauses from the DOCA from a date prior to the issue of shares to Baron, they would seem to be inconsistent with the interpretation of s 447A(1) adopted in Australasian Memory v Brien. Orders having a retrospective effect in this sense would not be orders which state how Pt 5.3A, or a provision within Pt 5.3A, is to operate. [77] 8. Proposed Order 3 purports to modify s 437A(1)(d) (which provides that the administrator may exercise any power the company had if it were not under administration) so that the administrators were not empowered to issue shares to Baron. As I have explained, the issue of shares to Baron was valid when it occurred. Section 447A(1) authorises only an order as to how s 437A(1) is to operate from the date the order is made. It does not authorise the making of an order, after termination of a deed of company arrangement, declaring that the administrators lacked power to act in accordance with the deed while it was in force. 9. Proposed Order 4 purports to direct that Pt 5.3A is to operate so as to require Baron to surrender the shares issued to it by the administrators. No provision in Pt 5.3A is identified which would allow an order to be made requiring the shares to be surrendered. Order 4 seems to be an indirect way of attempting to circumvent the requirement that an order under s 447A state how Pt 5.3A is to operate as from the date of the order. Whatever the breadth of s 447A(1), it cannot empower the Court to order a party to surrender shares lawfully acquired, save as a consequence of some other order impugning the transaction. Proposed Order 5 falls into the same category. 10. For these reasons, I do not think that s 447A(1) of the Corporations Act authorises the Court to make the Proposed Orders sought by Winpar. Discretionary Considerations: Proposed Orders 1-5 1. If, contrary to my view, the Court does have the power to make the Proposed Orders, I would not exercise my discretion in favour of making Proposed Orders 1-5. 2. On the findings I have made, Winpar has satisfied a necessary factual precondition for the granting of relief, namely that the administration of New Bounty involved an abuse of Pt 5.3A of the Corporations Act. This finding enlivens the discretion of the Court to determine whether orders should be made as to how Pt 5.3A is to operate and, if so, what orders should be made. The discretion is a broad one, subject to any limitations imposed by the subject matter, scope and purpose of the Corporations Act. [78] 3. Assuming there is power to grant relief to Winpar, there is a basis for the Court to exercise its discretion to make orders of the kind sought by Winpar. This is so for two reasons. First, the orders would presumably prevent Mr Bart, whether through New Bounty or Baron, obtaining a benefit from his and New Bounty's abuse of Pt 5.3A of the Corporations Act. Secondly, the orders would ensure that, so far as practicable, Winpar is not disadvantaged by the abuse of Pt 5.3A. But there are three other significant considerations to take into account which weigh against the grant of relief. 4. The first is Winpar's delay in instituting proceedings seeking relief under s 447A(1) of the Corporations Act. Mr Brennan pointed out that the first formal notification of the DOCA was not given to Winpar and other minority shareholders until the letter of 2 July 2014 from Baron's solicitors. That letter asserted that the interests of the minority had been rendered worthless by the issue of shares to Baron pursuant to the DOCA. [79] Mr Brennan submitted that since the proceedings had been instituted within one month of the letter being received, Winpar had not been guilty of any delay and certainly no significant delay. 5. This, however, is not the whole story. Mr Elkington acknowledged that he became aware by the end of April 2014 that New Bounty had been placed into voluntary administration. He and his fellow directors of Winpar were concerned before the second creditors meeting held on 9 May 2014, that placing the company into administration might have been part of a strategy designed to cancel the shareholdings of the minority. By reason of the directors' concern, Winpar sought advice at around this time from its solicitor concerning the developments that had taken place. While Mr Elkington said that he personally did not see the DOCA, he agreed that he was aware of its contents "in general terms". He appreciated that the DOCA included an arrangement whereby some of Baron's loan to New Bounty would be converted into equity. 6. Mr Elkington met with the solicitor from time to time, but the Chief Executive Officer of Winpar, Mr Pritchard, was primarily responsible for liaising with the solicitor. Mr Pritchard remains on the board of Winpar but did not give evidence. Mr Elkington ultimately received a copy of the DOCA from the solicitor, but this did not happen until shortly before the present proceedings were instituted. 7. In this state of the evidence I infer that Winpar's solicitor received a copy of the DOCA either shortly before the creditors meeting of 9 May 2014 or shortly thereafter. It is not to be supposed that the solicitors would have given advice to Winpar concerning the administration of New Bounty without ascertaining that the DOCA had been approved by creditors. Nor is it to be supposed that he would have given advice without procuring a copy of the DOCA. The solicitor and, through him, the directors of Winpar were aware shortly after the creditors meeting that the effect of the DOCA would be to dilute the interests of minority shareholders. 8. Winpar did not commence proceedings until 1 August 2014. It therefore delayed for the best part of three months before taking action, to challenge the key provisions of the DOCA. During this period, the Administrators implemented the DOCA by establishing the Deed Fund, paying unsecured creditors, issuing the shares to Baron and obtaining Baron's forgiveness of part of the New Bounty Loan. Prior to the proceedings being commenced, the administration of New Bounty terminated and the Administrators' fees were paid out to the Deed Fund. 9. Mr Elkington did not proffer an explanation for the delay. Nor was any explanation advanced by Mr Brennan, other than to suggest that the compulsory acquisition proceedings in Tasmania may have had something to do with the delay. 10. There is no hard and fast rule as to the period of delay that suffices to disqualify a party from claiming relief under s 447A(1). A short delay may be sufficient if it results in irremediable prejudice to another party; a longer delay may be disregarded if no party is prejudiced by the delay. [80] A court may also take into account the public interest in having matters dealt with swiftly and, in certain cases, to ensure that standards of commercial morality are maintained. [81] 11. If the Defendants could point to third parties sustaining significant prejudice by reason of Winpar's delay in instituting proceedings, that prejudice would be sufficient to justify withholding relief from Winpar. The only prejudice Mr Condon identified as flowing from the delay was the cost incurred by New Bounty in funding the Administrators' fees and expenses out of its own resources. Baron might be prejudiced if the Proposed Orders were made, but any such prejudice would flow from Baron's involvement in the abuse of Pt 5.3A, not from Winpar's delay in instituting proceedings. 12. In the absence of substantial prejudice to third parties or the Defendants, Winpar's delay, even though unexplained, is not sufficient of itself to justify withholding relief that otherwise would be granted under s 447A(1) of the Corporations Act. Nonetheless, there is a public interest in requiring a third party wishing to challenge a deed of company arrangement, or action taken under such a deed, to do so at the earliest practicable opportunity. Delay always creates the risk that persons dealing with the company will act under a misapprehension as to the status of the company. In this case, had Winpar instituted proceedings before the administration terminated on 4 July 2014, steps might have been taken to prevent the Administrators certifying to ASIC that the DOCA had been wholly effectuated and the administration terminated. That certification was a matter of public record. 13. For these reasons, while I do not regard Winpar's delay as fatal to its case, it is a factor to be weighed in the balance in determining whether relief should be granted. 14. The second significant matter that has to be taken into account is the practical effect of making the Proposed Orders. It is common ground that this is a matter relevant to the exercise of the Court's discretion. It is also common ground that the effect of the Proposed Orders would be to cancel the issue of shares to Baron and restore the New Bounty Loan in full as a debt due by New Bounty to Baron. The 439A Creditors Report, to which detailed reference has been made, [82] showed that immediately before New Bounty was placed in administration, its Current Liabilities exceeded Current Assets by $4.213 million, once account was taken of the New Bounty Loan. The 439A Creditors Report estimated that, at that time, New Bounty's total liabilities exceeded its total assets by $2.21 million. 15. The Statement of Financial Position as at 30 June 2014 showed that Current Liabilities exceeded Current Assets by about $400,000, allowing for Baron's forgiveness of interest on the New Bounty Loan. New Bounty's net assets amounted to $209,000 after providing for the debt due to Colerand as a Non-Current Liability. 16. Section 95A(1) of the Corporations Act provides that a person is solvent if, and only if, the person is able to pay all the person's debts, as they become due and payable. Section 95A(2) states that a person who is not solvent is insolvent. New Bounty's financial position at the time it entered administration and after the administration terminated suggests that the Proposed Orders, if made, would not restore New Bounty to solvency or otherwise achieve the object stated in s 435A of the Corporations Act. 17. Mr Brennan recognised that an indication of solvency or insolvency can often be obtained by comparing current assets with current liabilities. [83] He submitted, however, that solvency is a question of fact and is to be determined by reference to the "commercial realities" of the company, including the stance taken by creditors. In this case, so he argued: "The bare existence of the liability to Baron in an amount which cannot be met from current assets cannot be determinative of solvency in circumstances where the loan documents provide that principal and interest are only payable when called, where there has been no call, and where the lender is wholly owned and controlled by a director who is the ultimate owner of more than 90% of the equity in the company and where that director has given clear evidence that he believes it would be contrary to his interests for the company to be liquidated." 1. The principles governing the assessment of a company's solvency were helpfully summarised by Palmer J in Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation. [84] The propositions stated by his Honour include the following: "(i) whether or not a company is insolvent for the purposes of [s 95A], is a question of fact to be ascertained from a consideration of the company's financial position taken as a whole; (ii) in considering the company's financial position as a whole, the Court must have regard to commercial realities. Commercial realities will be relevant in considering what resources are available to the company to meet its liabilities as they fall due, whether resources other than case are realisable by sale or borrowing upon security, and when such realisations are achievable; … (v) in assessing solvency, the Court acts upon the basis that a contract debt is payable at the time stipulated for payment in the contract unless there is evidence, proving to the Court's satisfaction, that: ● there has been an express or implied agreement between the company and the creditor for an extension of the time stipulated for payment; or ● there is a course of conduct between the company and the creditor sufficient to give rise to an estoppel preventing the creditor from relying upon the stipulated time for payment; or ● there has been a well-established and recognised course of conduct in the industry in which the company operates, or as between the company and its creditors as a body, whereby debts are payable at a time other than that stipulated in the creditors' terms of trade or are payable only on demand; (vi) it is for the party asserting that a company's contract debts are not payable at the times contractually stipulated to make good that assertion by satisfactory evidence." (Citations omitted.) 1. Mr Brennan is correct to submit that unless and until Baron again calls upon the New Bounty Loan, New Bounty, as a commercial reality, will remain solvent. It is also correct that Mr Bart was motivated to call up the New Bounty Loan because he wished to bring about the dilution of the minority's interests. When Mr Bart did so, the only commercially feasible action at the time was to place New Bounty in administration. 2. But the fact that if the New Bounty Loan is restored in full, the company's liabilities will greatly exceed its assets. If the New Bounty Loan is regarded as a Current Liability (as it was in the accounts for 2012-2013 and 2013-2014 years), Current Liabilities will exceed Current Assets by over $4 million. 3. The evidence does not enable a finding to be made as to whether Baron will make a further demand for payment of the New Bounty Loan, should the Proposed Orders be made. Mr Bart repeatedly asserted that Baron was no longer prepared to act as New Bounty's financier. Whether he would maintain that position if the Proposed Orders were to be made was not explored in the evidence. No doubt his future actions should the Proposed Orders be made, will be determined to a considerable extent by his response to the continued existence of the minority shareholders. 4. I am prepared to infer from Mr Bart's evidence, and from the way New Bounty's affairs have been conducted, that the directors would ensure, so far as practicable, that the interests of New Bounty's few unsecured creditors would not be prejudiced. However, that would be true whether or not the Proposed Orders were made. 5. It is a matter of speculation whether, if the Proposed Orders are made, Baron will make a further demand and, if so, whether New Bounty will remain in existence. Given that its ability to remain solvent is entirely dependent on Baron's forbearance, I cannot conclude that the making of the Proposed Orders would restore New Bounty to solvency as a matter of commercial reality. Nor can I conclude, despite the unattractiveness of liquidation as an option in the circumstances prevailing on 3 April 2014, that New Bounty will not be placed into liquidation in the different circumstances prevailing if the Proposed Orders were to be made. 6. The uncertainty as to New Bounty's solvency and continued existence should the Proposed Orders be made is a factor militating against the exercise of the statutory discretion in favour of making the Proposed Orders. 7. The third consideration is related to the second. The utility of making the Proposed Orders (or granting other relief) is not apparent. Winpar did not attempt to lead evidence of the true market value of its shares. The 439A Creditors Report and the Statement of Financial Position suggest that the shares are valueless and were valueless at the time New Bounty was placed in administration. (This was the conclusion reached in the expert report prepared on Baron's behalf in the Tasmanian proceedings in November 2012.) 8. Mr Brennan pointed to uncertainty as to the realisable value of the Devonport Premises and the possibility that New Bounty might utilise its accumulated tax losses. But even on a favourable view, it is difficult to see how these considerations alone could produce value for the minority shareholders. 9. It is undoubtedly true that Mr Bart would not have attempted to dilute the interests of the minority shareholders unless he thought that there was an advantage to him in doing so. But if the minority shareholders remain on the register, I cannot conclude that Mr Bart will take action to restore New Bounty to a position where its net assets exceed its liabilities. I therefore cannot find that the dilution of Winpar's minority interest has had any significant effect on the value of its shares. 10. Mr Brennan suggested that the prejudice suffered by Winpar was that it had been denied the opportunity to negotiate a fair price for its shares. The evidence suggests that the price it was offered in the compulsory acquisition proceedings was at least arguably fair. In any event, in the absence of evidence that the shares were worth more than the price offered, I do not think that the lost opportunity carries substantial weight in relation to the exercise of discretion. 11. For these reasons, if the Court has power to make the Proposed Orders, in the exercise of my discretion I would decline to do so. Proposed Orders 6-10 1. Winpar relies on what it describes as the general "catch all" terms of s 1324 of the Corporations Act to support Proposed Orders 6-10. Mr Brennan contends that Proposed Orders 6-8 and 10, which are directed against Baron are within the power conferred by s 1324 because Mr Bart's conduct constituted a contravention of s 182 of the Corporations Act and Baron was a person knowingly concerned in Mr Bart's contravention. [85] Mr Brennan further contends that Winpar is entitled to seek an order under s 1324 because Winpar is a person whose interests have been affected by the conduct. [86] That is so because an element in Mr Bart's contravention of s 182 was the insolvency of New Bounty. [87] 2. Winpar supports Proposed Order 9 on the ground that New Bounty contravened s 260A of the Corporations Act by financially assisting Baron to acquire shares in New Bounty. A Contravention of s 260A? 1. Winpar's case that New Bounty contravened s 260A of the Corporations Act changed in the course of the proceedings. The original contention seemed to be that the Deed Fund was used to finance at least part of the allotment of shares to Baron. When it became apparent that no portion of the Deed Fund was used directly for this purpose, the argument changed. As finally formulated, it was that since New Bounty provided the moneys for the Deed Fund and since the Deed Fund paid the Administrators' costs, New Bounty had financially assisted Baron to acquire shares in itself. I think it fair to say that the argument was not strongly pressed. 2. While New Bounty paid moneys into the Deed Fund, none of those moneys were used to provide financial assistance to Baron to acquire the shares. While the predominant purpose of the administration, as I have found, was to dilute the interests of minority shareholders, the consideration for the issue of the shares to Baron was the forgiveness of a genuine debt due to Baron by New Bounty. The Administrators were validly appointed and they exercised their statutory function in good faith. The payment of their fees out of the Deed Fund cannot in my view be characterised as providing financial assistance to Baron to acquire shares in New Bounty. 3. In any event, a contravention of s 260A does not invalidate the acquisition of shares for which the financial assistance was provided. Section 260D(1) of the Corporations Act states that if a company provides financial assistance in contravention of s 260A, the contravention does not affect the validity of the financial assistance or any transaction connected with it. In view of s 260D(1), it is difficult to see how Winpar's claim for injunctive relief under s 1324, insofar as it is founded on a contravention of s 260A, could succeed. 4. Insofar as Winpar's claim for injunctive relief rests on a contravention of s 260A of the Corporations Act, it must be rejected. Other Proposed Orders Proposed Order 7 1. Among the principles which govern the grant of injunctive relief pursuant to s 1324 of the Corporations Act is that the order must not be expressed in terms which leave unclear the form of conduct that will expose a party to the consequences of breaching a court order. [88] A party bound by a final injunction must know what is expected as a matter of fact. [89] Thus an injunction must be in clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the injunction. 2. Proposed Order 7 does not meet these criteria. It would leave Baron (and Mr Bart) in doubt as to whether a demand for payment of the New Bounty Loan, or any part of it, is made "for the purpose of procuring the issue of equity in [New Bounty]". I did not understand Mr Brennan to argue to the contrary. 3. Proposed Order 7 should not be made. Proposed Orders 6 and 8-10 Principles 1. In Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd, [90] Palmer J summarised the principles governing the exercise of the jurisdiction conferred by s 1324 of the Corporations Act to grant injunctive relief to a person whose interests have been affected by conduct constituted as a contravention of the Act. Among the propositions stated by Palmer J are the following: [91] "● the jurisdiction which the court exercises under CA s 1324 is a statutory jurisdiction, not the court's traditional equity jurisdiction; ● Parliament has made it increasingly clear by successive statutory enactments that the court, in exercising its statutory jurisdiction under s 1324, is not to be confined by the considerations which would be applicable if it were exercising its traditional equity jurisdiction; ● among the considerations which the court must take into account in an application for an injunction under CA s 1324 are the wider issues referred to by [other authorities]; they may be gathered under the broad question whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act; ● these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s 1324(1) or for an interim injunction under s 1324(4); ● where an application under s 1324(4) is made by ASIC rather than a private litigant the court is more likely to give greater weight to the broad question whether the injunction would serve a purpose within the contemplation of the Corporations Act." Procedural Issues 1. Proposed Orders 6, 8 and 10 seek orders against Baron. Proposed Order 9 seeks an order requiring New Bounty to rectify its share register, presumably on the ground that such an order is consequential on the relief granted against Baron. 2. The 2FAPC pleads that Mr Bart, in contravention of s 182 of the Corporations Act, improperly used his position as an officer of New Bounty to gain an advantage for himself and New Bounty. The advantage is said to be enabling Baron to dilute the interests of minority shareholders and to increase its proportionate shareholding in New Bounty. 3. There is no allegation in the 2FAPC that Baron was knowingly involved in Mr Bart's alleged contravention of s 182 of the Corporations Act. Winpar's opening written submissions advanced no such contention. The opening written submissions appear to have been framed on the assumption that a contravention by Mr Bart of s 182 of the Corporations Act would support orders under s 1324(1) against the Defendants. 4. If that was the assumption underlying the submissions, it is wrong. Section 1324(1) applies (relevantly) where a person has engaged in conduct that constituted a contravention of the Corporations Act. If such a contravention is established, the Court may grant an injunction restraining that person from engaging in the conduct or requiring that person to do something. A contravention of s 182 by Mr Bart, of itself, would not support Winpar's claim for injunctive relief against Baron or New Bounty. 5. The first reference to Baron being knowingly involved in Mr Bart's contravention is Winpar's closing submissions. It is there asserted, without elaboration, that as Baron was knowingly involved in the contravention, it is open to the Court to make the orders sought by Winpar under s 1324 of the Corporations Act. Presumably because the issue was raised late in the proceedings, neither party gave close consideration to whether Baron could be said to have been knowingly involved in Mr Bart's contravention when in Winpar's case Mr Bart was acting as an "officer" of New Bounty when he contravened s 182. 6. A further procedural issue, although not one identified by the parties, is whether Mr Bart should have been joined by Winpar as a defendant. The linchpin of Winpar's claim for relief under s 1324(1) of the Corporations Act is that Mr Bart contravened s 182 by improperly using his position as an officer of New Bounty to gain an advantage for himself or to cause detriment to the minority shareholders in New Bounty. 7. Winpar does not seek relief against Mr Bart personally. Ordinarily, this would eliminate the need to join him as a defendant since he would not be a person whose rights or liabilities would be directed affected by the Proposed Orders. [92] However, there may be circumstances in which a third party whose interests are adversely affected by the orders sought in the proceedings ought to be joined as a party. [93] 8. As neither party has raised the issue I do not think it appropriate to say more than that it is arguable that Mr Bart should have been joined as a defendant. It is an essential element of Winpar's case for injunctive relief (once s 260A of the Corporations Act is put to one side) that Mr Bart contravened s 182. Section 1317E(1) of the Corporations Act requires the Court, if satisfied that a person has contravened s 182, to make a declaration to that effect. I appreciate that the application of s 1317E, where the person concerned is not a party to the proceedings, may present issues not explored in the present proceedings. I also appreciate that any finding made in these proceedings, given that Mr Bart is not a party, would not bind him and that, as a practical matter, he has had an opportunity to resist the claims advanced by Winpar. Nonetheless, Winpar's case does seem to me to give rise to a real question as to whether Mr Bart should have been joined. Exercise of Discretion 1. I have found that Mr Bart was an "officer" of New Bounty from 31 March 2014 until he resumed his position as a director on 9 June 2014. Because I propose to refuse relief under s 1324(1) of the Corporations Act on discretionary grounds and because I have concerns about the procedural matter to which I have referred, I do not think it appropriate to make a finding that Mr Bart contravened s 182 of the Corporations Act, as alleged by Winpar. [94] I am prepared to assume that he contravened s 182 by exercising his de facto authority as an officer of New Bounty to procure the dilution of the interests of minority shareholders. 2. Winpar's claim to injunctive relief rests on essentially the same factual foundation as its claim for an order under s 447A or the Corporations Act. Having refused relief under s 447A on discretionary grounds, it is inappropriate to exercise the discretion conferred by s 1324 to make orders having the same practical effect. Specifically, the reasons I have given for declining relief under s 447A apply equally to Winpar's claim for injunctive relief under s 1324. 3. I therefore decline to make Proposed Orders 6 and 8-10 as sought by Winpar. Orders 1. The proceedings must be dismissed. Winpar must pay the Defendants' costs. ********** Endnotes 1. Sections 447A and 1324 are reproduced at [20]-[21] below. 2. See [17] below. 3. Corporations Act, s 439A(4)(a). 4. Corporations Act, s 439A(4)(b). 5. Corporations Act, s 439A(4)(c). 6. Corporations Act, s 444D(2). 7. Corporations Act, s 444D(4). 8. Corporations Act, s 445C(1)(c), (d). 9. Corporations Act, s 1317E(2). 10. Corporations Act, s 1317F. 11. Corporations Act, s 260D(3). 12. Corporations Act, s 260D(1). 13. 2FAPC, par 52B. 14. 2FAPC, par 52C. 15. 2FAPC, par 78. 16. 2FAPC, par 58. 17. 2FAPC, par 76. 18. 2FAPC, par 70. 19. 2FAPC, par 71. 20. 2FAPC, par 74. 21. 2007 Deed of Consolidation, cll 5.1, 5.4. 22. Clause 4.1. 23. See Corporations Act, s 664D(1). 24. See at [108]-[120] below. 25. See at [27]-[33] above. 26. The draft Profit and Loss Statement for the years ended 30 June 2014 shows a borrowing expense of $69,000. The notes to the accounts suggest that this figure was not included in the Current Liabilities in the draft Statement of Financial Position. This may be because Baron had not called on New Bounty to pay this amount. 27. [2000] HCA 30; 200 CLR 270. 28. Corporations Act, s 1324(1A)(a). 29. See, for example, Chappel v Hart [1998] HCA 55; 195 CLR 232 at [32] fn 64 (McHugh J); Rosenberg v Percival [2001] HCA 18; 205 CLR 434 at [15]-[16] (Gleeson CJ); [26]-[27] (McHugh J); [87] (Gummow J); [221] (Callinan J); cf Civil Liability Act 2002 (NSW), s 5D(3)(b) (rendering inadmissible evidence by the plaintiff as to what he or she would have done had there been no negligence). 30. At [125] above. 31. See at [89] above. 32. [2000] HCA 30; 200 CLR 270. 33. Australasian Memory v Brien at [17]. 34. Australasian Memory v Brien at [20]. 35. Australasian Memory v Brien at [16]. 36. Australasian Memory v Brien at [17]. 37. Ibid. 38. Australasian Memory v Brien at [18]. 39. Ibid. 40. Australasian Memory v Brien at [24]. 41. Australasian Memory v Brien at [26]. 42. Australasian Memory v Brien at [30]. 43. Australasian Memory v Brien at [32]. 44. Australasian Memory v Brien at [31]. 45. Australasian Memory v Brien at [32]. 46. The Proposed Orders seek the deletion of cll 6.2(b), 6.2(c) and 9.2 of the DOCA. See [27]-[33] above for the terms of the DOCA. 47. Reproduced at [13] above. 48. Aloridge Pty Ltd (prov liq apptd) v Christianos (1994) 13 ACSR 99 at 101 (Burchett J); Spacorp Australia Pty Ltd v Fitzgerald [2001] VSC 61; 19 ACLC 979 at [28] (Beach J). 49. In Aloridge v Christianos, for example, Burchett J followed Argyle Art Centre Pty Ltd v Argyle Bond and Free Stores Co Pty Ltd [1976] 1 NSWLR 377 at 386, a landlord and tenant case. 50. [2003] NSWSC 883; 47 ACSR 391. 51. Blacktown Council v Macarthur Telecommunications at [17]. 52. [1992] HCA 34; 174 CLR 509. 53. [2000] VSC 570; 37 ACSR 158. The case was decided a few months after Australasian Memory v Brien, but the High Court decision was not referred to. 54. Re Capital General Corporation at [30]. 55. [2007] NSWSC 966; 213 FLR 450. 56. [1915] HCA 56; 20 CLR 509. 57. Australian Beverage v Redrock at [37]. 58. Australian Beverage v Redrock was followed by Barrett J in TS Recoveries Pty Ltd v Sea-Slip Marinas (Aust) Pty Ltd [2007] NSWSC 1410. The latter was a case in which a winding up petition was filed with the intention of displacing the controller of the debtor company, in the expectation that the liquidator would not pursue proceedings against a company related to the petitioning creditor. 59. Another is Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; 226 CLR 256, holding it to be an abuse of process to institute or continue proceedings where a fair trial was not possible. 60. Williams v Spautz at 526-527 (Mason CJ, Dawson, Toohey and McHugh JJ). 61. [2002] NSWCA 395; 44 ACSR 21. 62. Kirwan v Cresvale at [2]. 63. Kirwan v Cresvale at [294]. 64. [1987] HCA 11; 162 CLR 285 at 289-290 (Mason, Deane and Dawson JJ). 65. Kirwan v Cresvale at [300]-[302]. 66. Walker v Wimborne [1976] HCA 7; 137 CLR 1 at 6-7 (Mason J, Barwick CJ agreeing); Industrial Equity Ltd v Blackburn [1977] HCA 59; 137 CLR 567 at 577-578 (Mason J, Stephen, Murphy and Aikin JJ agreeing); Al-Shennag v Statewide Roads Ltd [2008] NSWCA 300 at [40]-[44] (Tobias JA, Beazley and Bell JJA agreeing). 67. See at [164] above. 68. For example in s 437D(5), which makes it an offence for an officer or a corporation to enter into a transaction on behalf of a company under administration without the approval of the administrator or the court. The term also appears in s 444G: see [17 ] above. 69. Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 at [68] per curiam (speaking of the definition of "director" in s 9 of the Corporations Act). 70. Grimaldi v Chameleon Mining at [73], citing Morley v Australian Securities and Investments Commission [2010] NSWCA 331; 274 ALR 205 at [893] (Spigelman CJ, Beazley and Giles JJA). 71. See at [25 ] above. 72. [2007] NSWSC 224. 73. Section 445G(2) provides that where there is doubt as to whether a deed of company arrangement complies with Pt 5.3A, the Court may declare the deed or a provision of it to be void. However, where the Court declares a provision to be void, the Court may vary the deed but only with the consent of the administrator: s 445G(4). 74. Kyle House at [17]. See also Parkview Constructions Pty Ltd v Tayeh [2009] NSWSC 186; 71 ACSR 65 at [58] (Barrett J). 75. Re Pasminco Ltd; McCluskey v Pasminco Ltd (No 2) [2004] FCA 656; 49 ASCR 470 at [35] and cases cited there (Finkelstein J). 76. Re AFG Insurances Ltd [2002] NSWSC 735; 20 ACLC 1588 at [23] (Barrett J); Honest Remark Pty Ltd v Allstate Exploration NL [2006] NSWSC 735; 58 ASCR 234 at [66] (Brereton J). 77. Australasian Memory v Brien at [26]. 78. City of Swan v Lehman Brothers Australia Ltd [2009] FCAFC 130; 260 ALR 199 at [159] (Perram J, Stone J agreeing). 79. See at [105] above. 80. Maylord Equity Management Pty Ltd v ReelTime Media Ltd [2008] NSWSC 1045 at [85] (PalmerJ). 81. Emanuele v Australian Securities Commission (1995) 63 FCR 54 at 69-70 per curiam. 82. See at [108]-[120] above. 83. Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd [2009] NSWSC 231 at [15] (Barrett J). 84. [2001] NSWSC 621; 53 NSWLR 213 at [54]. 85. Section 182(1)(a), (b), reproduced at [22] above. 86. Corporations Act, s 1324(1). 87. Corporations Act, s 1324(1A). 88. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; 205 CLR 1 at [60] (Gleeson CJ, Gummow, Hayne and Callinan JJ). 89. Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 at 575 per curiam. 90. [2002] NSWSC 741; 42 ACSR 605. 91. ASIC v Mauer-Swisse Securities at [36]. See also Ford's Principles of Corporations Law (Loosleaf ed, LexisNexis) at [10.310.21]. 92. See John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 at [131]-[132] per curiam. 93. McIntosh v Williams [1979] 2 NSWLR 543 at 561 (Hutley JA, Moffitt P and Samuels JA agreeing); cf Walker v Commonwealth Trading Bank of Australia [1985] 3 NSWLR 496 (Needham J). 94. In determining whether to find that Mr Bart contravened s 182 of the Corporations Act, it would be necessary to have regard to s 140 of the Evidence Act 1995 (NSW). Section 140(2)(c) requires the Court, in deciding whether a matter is established on the balance of probabilities, to take into account the gravity of the matters alleged. 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: 05 August 2015