Supreme Court New South Wales Medium Neutral Citation: In the matter of Eastmark Holdings Pty Limited (receivers and managers appointed) and 1 Denison Street Holdings Pty Ltd (receivers and managers appointed; In the matter of Eastmark Holdings Pty Limited (receivers and managers appointed) (subject to a deed of company arrangement) & ors [2015] NSWSC 1437 Hearing dates: 26 August 2015 Date of orders: 27 August 2015 Decision date: 27 August 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Deed of company arrangement declared void insofar as the definition of "released party" includes the administrators, deed administrators, receivers and senior creditors. Catchwords: CORPORATIONS – voluntary administration – deeds of company arrangement (DOCA) – whether DOCA void – validity of releases of third parties – (CTH) Corporations Act 2001, s 444D(1) – whether provisions release parties other than company subject to deed – whether deed had or purported to have effect of binding creditors to release third parties – whether DOCA conforms to terms of creditors' resolution – severance – whether third party releases severable – where DOCA expressly provides for severability – where severance clause in DOCA itself potentially invalid – whether third party releases crucial and central part of DOCA structure . Legislation Cited: (CTH) Corporations Act 2001, s 436C, s 439A, s 439C, s 444A(3), s 444B, s 445D, s 445D(1), s 445G, s 447A (CTH) Corporations Regulations 2001 Cases Cited: City of Swan v Lehman Brothers Australia Ltd [2009] FCAFC 130; (2009) 179 FCR 243; 74 ACSR 191 Lehman Brothers Holdings Inc v City of Swan & Ors [2010] HCA 11; (2010) 240 CLR 509 In the matter of Recycling Holdings Pty Ltd [2015] NSWSC 1016 Category: Principal judgment Parties: In proceedings 2015/22409: The Owners Corporation of Strata Plan 74602 (plaintiff) Eastmark Holdings Pty Limited (receivers and managers appointed) (ACN 003 921 953) (first defendant) 1 Denison Street Holdings Pty Limited (receivers and managers appointed) (ACN 156 399 727) (second defendant) In proceedings 2015/155286: The Owners – Strata Plan No 74602 (plaintiff) Eastmark Holdings Pty Limited (receivers and managers appointed) (subject to a deed of company arrangement) (ACN 003 921 953) (first defendant) 1 Denison Street Holdings Pty Limited (receivers and managers appointed) (subject to a deed of company arrangement) (ACN 156 399 727) (second defendant) Absolute Investment Opportunity II Limited (ACN 160 726 358) (third defendant) Secured Asia Pacific Limited (ACN 158 527 130) (fourth defendant) Philip Patrick Carter (fifth defendant) Marcus William Ayres (sixth defendant) Representation: Counsel: N Hutley SC w T O'Brien (plaintiff) J Sheahan QC w N Owens & E Bathurst (first, second, fifth and sixth defendants) R McHugh SC w M Izzo & J Burnett (third and fourth defendants) Solicitors: In proceedings 2015/22409: Jones Day (plaintiff) Gilbert + Tobin (first and second defendants) In proceedings 2015/155286: Jones Day (plaintiff) Gilbert + Tobin (first and second defendants) King & Wood Mallesons (third and fourth defendants) File Number(s): 2015/22409; 2015/155286 Judgment (ex tempore) 1. HIS HONOUR: The third and fourth defendants Secured Asia Pacific Ltd and Absolute Investment Opportunity II Ltd (whom I will call "the secured creditors"), who are secured creditors of the first and second defendant Eastmark Holdings Pty Ltd and 1 Denison Street Holdings Pty Ltd (whom I shall call "Eastmark" and "1 Denison"), appointed the fifth and sixth defendants pursuant to (CTH) Corporations Act 2001, s 436C, to be joint and several administrators of Eastmark and 1 Denison, on 19 February and 12 February 2015 respectively. As required by s 439A, the administrators prepared a report, including their recommendation as to the course that the creditors should adopt at the s 439A meeting. To their report was annexed a letter from King & Wood Mallesons, the solicitors for the secured creditors, dated 20 April 2015 addressed to the administrators, which was stated to convey "the following final binding proposal for deeds of company arrangement to be submitted by the senior creditors (as the secured creditors were called in the documentation). 2. It is convenient to incorporate, by way of a summary of the proposal, the overview contained in that letter: 2 Overview This proposal involves the contribution by the Senior Creditors of a cash fund of $600,000 for all creditors of the Administration Companies to share in. In addition, it proposes an amendment of the Beau Monde Strata Management Statement which we believe addresses the Owners Corporation's grievances, including adjustment of the shared facilities proportions. This SMS amendment is subject to the approval of the Owners Corporation. Should the Owners Corporation agree to amend the SMS, then, in addition to the $600,000 cash fund, the Senior Creditors have agreed to carry out $1,100,000 of works to shared facilities plus make a cash contribution of $400,00 (to be matched by the Owners Corporation) to address the current state of finances of the Building Management Committee, meaning it can move forward based only on normal levies for the future, with the past behind everyone. The Senior Creditors will also agree to fund the costs of administering and implementing the DOCAs in addition to the $600,000 cash deed fund. The costs funded by the Senior Creditors will be limited to the ordinary costs of implementation, and not the costs of defending any legal proceedings, including contesting the validity of the administration or the DOCAs. To the extent these costs arise before or after approval of the DOCAs, those costs will be taken from the cash deed fund and reduce the cash distributions to non-priority creditors. Importantly, if the DOCA is approved, it involves the Administration Companies being placed into liquidation at the end of the administration provided this can be accommodated in a manner which does not expose the Senior Creditors, the receivers or the administrator to claims from creditors, allowing unsecured creditors to pursue claims against the directors and shareholders via a liquidator should they wish to fund doing so. Accordingly, we value the contribution being offered to be made by the Senior Creditors as $2,100,000, none of which would be paid if the DOCA proposal is not accepted. In our opinion, this is an extremely generous proposal in favour of the creditors who rank behind the Senior Creditors and stand to recover nothing otherwise. 1. The letter then went on to contain an outline of the proposed deeds of company arrangement ("DOCAs"), including identifying the proposed deed administrators as the deed administrators, and making provision in respect of the constitution of the deed fund and its distribution, the making of a proposal to amend a strata management statement in order to resolve other proceedings in which the present plaintiff Owners Strata Plan No 74602 ("the Owners") is the plaintiff and for the companies to go into liquidation after distribution of the deed fund, in which the secured creditors would not participate (conditionally upon participating creditors giving releases of the administrators, the receivers appointed by the secured creditors, and the secured creditors themselves). The letter was expressed to be a formal binding offer to be further documented in formal deeds of company arrangement to reflect the offer and the intention stated in it, "such form as may be necessary to enable us to sign off to the senior creditors to that effect", whatever that might mean. 2. In their s 439A report, the administrators recommended that the creditors resolve to require the company to enter into a deed of company arrangement. The s 439A report, which as I have said annexed the proposal to which I have referred, analysed that proposal and compared it to other potential outcomes. It is plain that the recommendation, although it does not explicitly refer to a particular deed, was intended to be to the effect that the company execute a deed of company arrangement that reflected that DOCA proposal. 3. The second creditors' meeting was held on 1 May 2015. In the course of that meeting, the chairperson, who was one of the administrators, advised: It was not uncommon for parties contributing funds into a deed to require releases, and it was likely the releases would be fulsome as it would be uncommercial for a party to provide funds to a deed administrator without requiring some sort of release. 1. A representative of the Owners expressed concern as to how the releases would impact proceedings on foot. After a resolution proposed by the Owners for an adjournment was defeated, it was resolved, in respect of each of the subject companies, that "the company execute a deed of company arrangement". The resolution did not, at least expressly, specify any particular DOCA, but I think it is implicit from the material that was before the meeting - including the s 439A report, the DOCA proposal that was attached to that report, and the discussion at the meeting - that the only DOCA under consideration was one which conformed with the proposal attached to the s 439A report. 2. On 5 May 2015, a document entitled "Deed of Company Arrangement" was executed by each company and by the administrators. Relevantly, cl 13 ("Release and extinguishment of creditors' claims") provided as follows: 13 Release and Extinguishment of Creditors' Claims 13.1 Releases This clause 12 sets out all releases: (a) that are given effect to by or under the Deed; and (b) are required to be given under the Deed. 13.2 Deed and Distribution (a) With immediate effect upon satisfaction of the Conditions Precedent, the Claims of all of the Deed Creditors are limited to each Deed Creditor's right to receive a distribution of the Deed Fund under clause 17 and any rights under clause 22 ("Liquidation"). This clause 13.2(a) does not limit the effect of clause 14 ("Moratorium"). (b) Immediately following satisfaction of the Conditions Precedent the Companies, acting by the Deed Administrator must give a release in the form attached at Schedule 3. (c) Each Priority Creditor must accept its entitlements in respect of Priority Claims in full satisfaction and complete discharge of all Priority Claims which they have against either or both of the Companies and will, prior to receiving the relevant distribution under clause 17.1(c), execute and deliver a release in the form attached at Schedule 4. (d) Each Deed Creditor must accept its entitlements under the Deed in full satisfaction and complete discharge of all Claims which they have against either or both of the Companies and each of them will, prior to receiving the relevant distributions under clause 17.1(d) and clause 17.1(e) execute and deliver a release in the form attached at Schedule 5. This clause 13.2(d) is subject to clause 22.4 ("Participating Liquidation Creditors' claims preserved against Liquidation Recoveries and Surplus Proceeds"). 13.3 Pre-Liquidation Releases (a) Immediately prior to, and as a condition precedent to, the Companies going into liquidation in accordance with clause 22 ("s 445F Liquidation"), the Companies, acting by the Deed Administrator must, in accordance with clause 22.4(a), give a release in the form attached at Schedule 6; and (b) As a condition precedent to any Deed Creditor participating in the liquidation in accordance with clause 22 ("s 445F Liquidation"), the Deed Creditor must, in accordance with clause 22.2(a)(ii), give a release in the form attached at Schedule 7. 13.4 Termination Release (a) Upon termination of the Deed, Eastmark may plead the Deed in bar to any action, proceeding or suit brought by the Deed Creditor which is an Eastmark Creditor (other than an Excluded Creditor) in respect of that creditor's Claim. (b) Upon termination of the Deed, 1 Denison may plead the Deed in bar to any action, proceeding or suit brought by the Deed Creditor which is a 1 Denison Creditor (other than an Excluded Creditor) in respect of that creditor's Claim. 1. It may be observed that cl 13.2 deals with "deed and distribution releases", and in particular, clauses 13.2(c) and (d) make provision for the releases contained in Sch 4 and Sch 5 to be given in connection with (using for present purposes, a neutral term) the distributions to be paid, to priority creditors and ordinary creditors respectively, from the fund. For convenience, I will call them "the distribution releases". Clause 13.3, on the other hand, makes provision in respect of "pre-liquidation releases", to be given in connection with participation in the post-DOCA liquidation. The proceedings before the Court 1. By originating process filed on 25 May 2015, the Owners applied to the Court for an order pursuant to Corporations Act, s 445D, terminating the DOCA on various of the grounds referred to in that section; alternatively, an order pursuant to s 445G declaring the DOCA void; and alternatively orders said to be under s 447A setting aside the DOCA and making further provision. Other relief also was sought that need not be mentioned for present purposes. 2. The proceedings were set down for final hearing to commence yesterday, 26 August 2015. For reasons which it is not necessary, at least for present purposes, to elaborate, the full hearing was not able to proceed that day. However, in order to make some use of the time that had been set aside, the parties sensibly proposed that the claim for a declaration that the DOCA be declared void under s 445G could be tried as a preliminary question. 3. If that question be resolved in the affirmative, in favour of the plaintiff, it would practically render the other issues otiose, and result in the termination of the proceedings in favour of the plaintiffs. If it not be determined wholly in the plaintiff's favour, nonetheless it will still resolve one of the issues which would otherwise have to be addressed on the resumed hearing, and save time at that stage. Accordingly, it seems to me proper and convenient that that question be dealt with as a separate question. The separate question 1. Ultimately, the question was formulated by the parties in the following terms: Whether the plaintiff is entitled to an order pursuant to s 445G of the Corporations Act, that the DOCA be declared void on the ground that the provisions contained in it, concerning releases of parties other than companies, are invalid by virtue of s 444D(1). 1. The question arises because the releases provided for in Sch 4 and Sch 5, referred to in clauses 13.2(c) and (d) respectively, are expressed to be in favour not only of the companies subject to the DOCAs, but also to the administrators (in their capacities as voluntary administrators and deed administrators of each of the companies), the receivers (that is to say, the receivers who have been appointed by the secured creditors), and "the senior creditors" (that is to say, the senior creditors). 2. For present purposes, it suffices to refer to the release contained in Sch 5, which is that given or required to be given by ordinary – as distinct from priority – creditors, which is in the following terms: 3 Release Subject to cl 4 ("Preservation"), the deed creditor unconditionally, absolutely and irrevocably releases, and indemnifies, each of the Released Parties from all claims, rights and entitlements of, and amounts owing to, the Deed Creditor in respect of its Claim. 1. As will be apparent from what I have already said, the released parties are not limited to the relevant company, but extend to the administrators, the receivers and the senior creditors, all of them being third parties. The contention that that has the effect that the deed is void arises because in Lehman Brothers Holdings Inc v City of Swan & Ors [2010] HCA 11; (2010) 240 CLR 509, the High Court held that in the context of a DOCA, creditors were not bound by provisions in such a deed that involve releases of claims against entities other than the company the subject of the deed. I will return to that in due course. Effect of the subject releases 1. First, it is necessary to consider whether in fact the subject releases have the effect of releasing parties other than the company the subject of the deed. In that respect, it is necessary to consider principally the terms of Sch 4 and Sch 5, being the releases provided for by the two clauses in question; again, it suffices to refer to Sch 5. 2. The schedule is entitled "Deed creditor distribution release" and refers back to cl 3.2(d), which imposes the requirement – if it be that – to give the release in question. The parties to the release referred to include not only the deed creditor and the companies, but also the administrators, the receivers and the senior creditors. The recitals include, in recital E, that the deed is entered into pursuant to and as required by cl 13.2(d) of the DOCA. The definition of released party includes the administrators, the receivers and the senior creditors. Clause 3, set out above, refers to a release of each of the released parties, thus including the administrators, the receivers and the senior creditors. 3. The release is only "from all claims, rights and entitlements of, and amounts owing to, the deed creditor in respect of its Claim". "Claim" is defined in the DOCA in the following terms: A debt payable by, and all claims against, either Eastmark or 1 Denison (as applicable) (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred on or before the relevant date that would be admissible to proof against the relevant company in accordance with div 6 of pt 5.6 of the Corporations Act, if that company had been wound up and the winding up is taken to have commenced on the relevant date. 1. Perhaps imprecisely, but much more succinctly, "Claim" thus means a claim that would have been provable by the creditor in a winding up of the relevant company. 2. That said, the release is not merely of a "Claim", which would have been limited, by the definition, to a claim against the relevant deed company. Rather, it is of "all claims, rights and entitlements of, and amounts owing in respect of" such a Claim. That, it seems to me, means that the release is of something wider than a Claim against a deed company. For example, a claim against a guarantor of a debt owed by a deed company might well be described as a claim "in respect of" a Claim. Moreover, the release is not only of each relevant deed company, but expressed in terms which also releases the third parties to which I have referred. The purport of cl 3 is not just to release each deed company from a Claim, but also to release those third parties from claims, rights and entitlements that may be described as being in respect of a Claim. 3. As I have said, a guarantee of a Claim, or some coordinate liability on some other basis in respect of a Claim, might fall within such a description. In any event, I am unable to accept that, properly construed, cl 3 of Sch 5 releases only claims against the deed companies. It was perhaps suggested that, in the haste in which the documentation was prepared, the inclusion of the third parties may have been unintentional; but no evidence was given to that effect, and there was no application for rectification of the DOCA on that or any other basis. 4. Accordingly, in my view, the releases referred to in cl 13.2(c) and (d), when read with Sch 4 and Sch 5, respectively were releases not only of claims against the deed companies, but also of claims against the third parties identified as "released parties". Whether the deed binds creditors 1. It is next necessary to consider, however, whether the deed purported to have the effect of binding creditors to give such releases, or whether it merely afforded them an opportunity to do so as a condition of participating in the deed fund. There are, I think, two tenable possibilities in the construction of cl 13.2(c) and (d) in that respect. One, advanced by Mr McHugh of senior counsel for the third and fourth defendants, was to the effect that the provision for a release was merely a condition which deed creditors could at their option satisfy, but had to do so if they wished to participate in a distribution from the deed fund. The alternative, advanced by Mr Hutley of senior counsel for the plaintiff, was that there was a binding obligation to give such a release, but one that was expressed in terms that made the obligation of the administrators to distribute the deed fund to each creditor dependent upon the creditor having first performed its obligation to give such a release. 2. The chief, if not exclusive, aid to resolving that question is to be found in the terms of the DOCA itself. 3. Mr Hutley invoked, first, cl 13.1, set out above, as indicating that the releases set out in that clause were both "given effect to" by or under the deed, and also "required to be given". But I accept that subclause (a) and (b) of cl 13.1 are disjunctive, and that cl 13 sets out the releases that are given effect to, by or under the deed as well as those releases that are required to be given under the deed. That conclusion is, I think, dictated by cl 13.3(b), because the pre-liquidation release referred to in cl 13.3(b) is, when one has regard to other provisions of the deed, plainly one that is optional and not mandatory for a deed creditor to give. Accordingly this matter does not support a mandatory as opposed to discretionary construction. 4. However, in cl 13.2(c) and (d), the word "will" connotes an obligation to give a release, not an option to do so. Notably, different words – and a different concept, of a "condition precedent" – are used in cl 13.3(b), where the terminology of "as a condition precedent to participating in the liquidation" is used. The differing structures of cl 13.2(c) and (d) on the one hand and cl 13.3(b) on the other suggest that different results were intended. In cl 13.2(c) and (d), the words "prior to" indicate that what was contemplated was a temporal relationship, rather than a conditional relationship such as that imported by the reference to a condition precedent in cl 13.3(b). 5. Moreover, in cl 13.2(a), reference is made to each deed creditor's right to receive the distribution of the deed fund under cl 17 on the one hand, as distinct from "any rights under cl 22" on the other, suggesting that it was contemplated that all deed creditors had rights to receive a distribution under cl 17, whereas a different regime of conditional rights applied under cl 22 - the condition being the pre-liquidation release. 6. Clause 14.4 provides as follows: 14.4 Execution of all necessary documents Deed Creditors must, if required by the Companies or the Deed Administrator, as a condition of receiving any distribution from the Deed Fund execute any documents the Companies or the Deed Administrators may require from time to time to give effect to the releases in clause 13 ("Release and Extinguishment of Creditors' Claims"). 1. Notably, while the terminology of "condition" is used in that clause, its scope is limited to a distribution from the deed fund. It can therefore refer only to the cl 13.2 distribution releases, and not the cl 13.3 pre-liquidation releases. It apparently confers on the deed administrators and companies a right to insist upon execution of a distribution release. There is no equivalent provision in respect of the pre-liquidation releases. 2. Clause 17.1 provides that, subject to cl 17.2, the deed administrators must apply each company's portion of the deed fund in a standard order of priority, the fifth priority being the balance of the deed fund after payment of preceding amounts to all participating creditors remaining unpaid. Clause 17.2, to which that obligation is subject, provides that the deed administrators must not make a distribution to any deed creditor under clause 17.1 unless or until that creditor has provided the relevant distribution release. Notably, cl 17.2 is entitled "Timing for distributions", and that title is incorporated in the text of the first part of cl 17.1. All this fortifies the view that this is a mandatory obligation to give a distribution release, and that the condition is concerned with timing, not with the obligation to give the release. 3. In distinction, in respect of the pre-liquidation release, cl 22.2 relevantly provides as follows: 22.2 Call for releases from Deed Creditors (a) The Deed Administrators must issue a notice ("Preliminary Notice") to all creditors of the Companies who are creditors at the time of issue of the notice that both: (i) states that the Deed Administrators intend to convene a meeting in accordance with section 445F(1) of the Corporations Act; and (ii) calls for any Deed Creditors who wish to be eligible to participate in a liquidation of the Companies to execute and deliver to the Deed Administrators a release in the form of Schedule 7 ("Pre-Liquidation Release") by no later than 30 days after the date of the Preliminary Notice ("Preliminary Notice Expiry Date"), at the following times: (iii) upon a date being not later than 30 days after the later of: (A) The Deed Administrators having distributed the final distribution in accordance with clause 17 ("Distributions"); and (B) The Property Completion Date having occurred; and (iv) at any time it is requested to convene a meeting under section 445F(1)(b) of the Corporations Act; or (v) in the circumstances referred to in clause 20.4 ("Deed Administrators to call meeting"). 1. Notably, in that context, the deed administrators are required to call for those deed creditors who wish to be eligible to participate in the post-DOCA liquidation to execute the optional pre-liquidation release. There is no corresponding provision in respect of the distribution releases, again fortifying the view that such a release is not an optional one. Nor is there any equivalent in the context of a distribution release of cl 22.3, which provides that, in the context of a liquidation, all claims of creditors who had not given a pre-liquidation release would be extinguished, discharged and released. One consequence of that is that so much of the deed fund as is attributable to priority and deed creditors who have proved their claim and been admitted to proof but have not given a release, is frozen and remains in the deed fund, and is not re-allocated amongst other deed creditors. That is further support for the view that the intent of the deed, so far as the distribution release is concerned, is to make the obligation to pay dependent upon the giving of the release which the creditor must give, rather than to give the creditor an option whether or not to give such a release. Such an obligation or requirement would have been quite unremarkable had it been limited to a release of claims against the company. Indeed, the standard provisions for DOCAs provided for in Sch HA of the (CTH) Corporations Regulations 2001 contemplate that a creditor may be required to execute a release. 2. It follows, in my view, that when one has regard to the context and structure of the DOCA as a whole, clauses 13.2(c) and (d) impose on creditors an obligation to give the releases referred to in Schs 4 and 5 respectively, and that the obligation of the administrators to distribute the deed fund to those creditors is dependent upon such a release first being given. It also follows that the deed purports to bind creditors, including dissenting creditors, to give releases to third parties in respect of claims other than claims against the company, which is precisely what the High Court in Lehman Brothers said a DOCA could not do. As was pointed out in the joint judgment of French CJ and Gummow, Hayne and Kiefel JJ (at [50]), there is no textual footing for reading the word "claims" in the "so far as concerns" clause in s 444D(1) as including claims against persons other than the subject company. And as their Honours pointed out (at [53]), because creditors are bound under s 444D(1) only to the limited extent identified in that provision, the agreement of some creditors, albeit a majority, to giving up claims against another does not bind other creditors to do so. In short, a dissenting creditor cannot be bound by a DOCA to give up claims other than claims against the company the subject of the deed. On that basis – in the absence of any argument, at least in the High Court, that the provisions in question, which did not bind creditors, were severable – their Honours concluded that the deed as a whole failed. 3. I will return to the question of severability shortly. But before doing so, it should be observed that there is another basis in this case for concluding that the provisions in question are not valid. As I have said, the resolution of creditors at the 439A meeting did not expressly identify the deed in question, but implicitly referred to a deed that conformed to the DOCA proposal attached to the administrators' s 439A report. This case presents yet another illustration of the dangers that can arise from not having a draft deed available for approval by the creditors, or at least a detailed prescription of what the deed is to contain, and a reference to it in the resolution. 4. The DOCA proposal attached to the s 439A report, while it contemplated the pre-liquidation releases contained in the DOCA, made no reference whatsoever to the distribution releases. Because it referred to the "prescribed provisions", it implicitly incorporated a reference to a release of claims against the company; but it did not incorporate any reference, expressly or implicitly, to releases of claims at the distribution stage against third parties. True it is that the administrator, in the course of the meeting, referred to the prospect that there would be wide releases, but there was no resolution to vary the terms of the DOCA proposal, or to prescribe or specify that the Deed should differ in any material respect from the DOCA proposal. 5. As was pointed out in In the matter of Recycling Holdings Pty Ltd [2015] NSWSC 1016 (at [85] and [88] and following), s 439C provides that at a s 439A meeting the creditors may resolve, inter alia: 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 company the notice of meeting. 1. Section 444A(3) then provides that where the creditors so resolve, the administrator of the company must prepare an instrument setting out the terms of the deed. The deed referred to in s 444A(3) must mean the deed specified in the resolution that was mentioned in s 439C, and a deed that did not conform with the resolution would not be "the deed". Whilst s 444B then provides that where an instrument is prepared under s 444A, the company and the administrator must execute it, so that when executed it becomes a DOCA, the instrument will not be an instrument setting out the terms of "the deed" unless it conforms with the deed specified in the s 439C resolution. A deed that does not accord with the terms of the creditors' resolution at the s 439A meeting is not, at least to the extent of any disconformity, entered into in accordance with or in compliance with Pt 5.3A. 2. The third party distribution releases to which I have referred did not form part of the DOCA proposal, were not specified implicitly or explicitly in the s 439C meeting, and therefore have no proper place in the DOCA. On that ground also, those provisions at least would be void. 3. It follows that, in my view, the Deed was not entered into in accordance with Pt 5.3A, because it is not the deed referred to in the s 439C resolution to that extent. It also did not comply with Pt 5.3A because substantive provisions of the deed, being the third party distribution releases, cannot be effective. Severance 1. I turn then to the question of severability which, though not argued in the High Court in Lehman Brothers, was the subject of argument and consideration in the decision of the Full Federal Court from which the appeal to the High Court came [City of Swan v Lehman Brothers Australia Ltd [2009] FCAFC 130; (2009) 179 FCR 243; 74 ACSR 191]. At [41] of that judgment, Stone J agreed with Perram J's reasons for holding that the provisions in question were not severable from the deed, which must therefore be declared void and whole. Rares J also expressed agreement with what Perram J said in that respect. At [154], Perram J said: I do not think that it is really open to doubt that the establishment of the litigation fund, on the one hand, and the moratorium and releases, on the other, are inextricably interconnected. Since the latter are invalid it must follow that the former is too. With those provisions excised from the deed it no longer operates, if it operates at all, in a manner resembling its former self. Neither the creditors nor the company could have understood themselves to be putting in place such a stunted instrument. It follows that the deed is invalid. Putting the matter more formally, crucial provisions in the deed are invalid and they are inseverable from its balance. 1. In the present case, the position is not so straightforward. First, the deed itself contains, in cl 30, a provision for severability: 30 Severance Notwithstanding anything contained in any provision of the Deed, if any such provision is held or found to be void, invalid, inapplicable or otherwise unenforceable, such provision shall be deemed to be severed from the Deed to the extent only that it is void, invalid, inapplicable or unenforceable, but the remainder of any such provision and the Deed shall remain in full force and effect. 1. However, that provision has its own problems of validity. I can see no reference to any such provision or anything like it in the DOCA proposal, and I do not think it at all clear that it was part of "the deed" that the creditors resolved that the company should execute. Accordingly, I prefer not to rely on cl 30 in deciding the question of severance, but to address it unaided by the perhaps wider test of severability that cl 30 would permit. 2. Next, at first sight the very fact that the obligation of the administrators to distribute the deed fund to creditors was made dependent on the giving of the distribution releases suggests that the obligation to give those releases could not be severed effectively from the deed, because it would then leave an obligation to distribute the deed fund standing shorn of a condition to which it had been intended to be subject. The obligation to distribute the deed fund being plainly a crucial and central part of the structure, on that analysis the whole deed would have to fail. 3. However, the alternative basis for concluding that the provisions in question (at least) are void leads to a different conclusion. The true position here, it seems to me, is that the third party distribution releases were never intended to be part of the deed in the first place. As I have said, they were not in the deed proposal, and they were not discussed at the creditors' meeting, except perhaps in the vaguest way; they were certainly not expressly mentioned. It may be that the administrators had such releases in the backs of their minds, and it may well be that the secured creditors were already contemplating such releases, but the question is not what they had in the back of their minds, but what objectively the creditors intended the company to execute when they passed the s 439C resolution. On no objective view, when one has regard to the s 439A report and the minutes of the meeting of creditors, was there any intention to include the third party distribution releases in the deed. 4. On that approach, severance of the third party distribution releases would simply reinstate the deed as it was intended by the creditors' meeting to be, rather than giving rise to a deed which included a condition that it was never intended to include. 5. Accordingly, the third party creditor releases are void, but severable. 6. I will hear the parties on the precise relief that ought to be given in that respect, although it seems to me that the result is achieved by declaring void the references in the definition of "released party" in Schs 4 and 5 to parties other than the companies. Counsel addressed 1. The Court declares, pursuant to Corporations Act, s 445G, that the DOCA dated 5 May 2015 is void insofar as in Sch 4 and Sch 5 the definition of "released party" contains: 1. "(b) the administrators in their capacities of voluntary administrators and deed administrators of each of the companies; 2. (c) the receivers; and 3. (d) the senior creditors." Costs 1. Although the plaintiff's success has only been partial, it has, nonetheless, attained a measure of success. In addition the necessity to embark on this course over the last day or so has been occasioned by fault on the part of the administrators. Until the determination of the separate question, the position was that even if the plaintiffs otherwise failed in the proceedings, any attempt to access their pro rata share of the deed fund would have been met by a requirement to give a third party distribution release. Now, the position is that they can access the deed fund without giving a third party distribution release, which in the past they have said they were not prepared to give. That represents a material improvement in the plaintiff's overall position, which has been achieved as a result of the determination of the separate question, if only partly, in the plaintiff's favour. But that success is in my judgment sufficient to carry with it success on the separate question, and a costs order. 2. The Court orders that the first, second, third and fourth defendants pay the plaintiff's costs of the separate question. ********** 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: 29 September 2015