Supreme Court New South Wales Medium Neutral Citation: Shaoyong (David) Guo & Anor v Xinwei Song & Ors; In the matter of SG Capricorn Investments Pty Ltd (subject to deed of company arrangement); Dameng Developments Pty Ltd (subject to deed of company arrangement); and New Mangrove Pty Ltd (subject to a deed of company arrangement) [2018] NSWSC 12 Hearing dates: 28 and 29 November 2017; 14 December 2017 (submissions) Decision date: 24 January 2018 Jurisdiction: Equity - Corporations List Before: Black J Decision: The Court releases the First–Third Defendants from their undertaking as to certain funds in bank accounts; declines leave to the Plaintiffs to file the proposed Further Amended Statement of Claim in proceeding no 2015/92649; grants leave to the Plaintiffs to carry on the proceeding against the First–Third Defendants; and orders that the deed of company arrangement executed by the First–Third Defendants in proceeding no 2017/346899 be terminated, that those companies be wound up and that the deed administrators be appointed as liquidators. Catchwords: CIVIL PROCEDURE — Originating process — Amendment – where amendment late and would delay trial – where no adequate explanation of delay in making amendments – whether new claims proposed to be introduced reasonably arguable CORPORATIONS — Voluntary administration — Deed of company arrangement – Application to set aside resolutions authorising entry into deed of company arrangement – where resolutions were passed on the voices without poll – whether passage of resolutions depended on votes of related party creditors where no poll taken CORPORATIONS — Winding up – Application that deed of company arrangement be terminated and companies be wound up – where companies' payment of money and potential claim against payee require investigation – whether deed of company arrangement would provide better return to creditors than winding up – who should be appointed as liquidators CORPORATIONS — Winding up — Proceedings against company – Application for leave to proceed – where adjudication of Plaintiffs' claim as proof of debt would turn on disputed oral representations – where proceedings will determine whether companies have claims against other Defendants CIVIL PROCEDURE — Application by companies for release from undertaking not to dispose of assets – where companies placed in administration after undertaking given – where entitlement to assets disputed in litigation Legislation Cited: - Civil Procedure Act 2005 (NSW), ss 56–58, 64 - Corporations Act 2001 (Cth), Pt 5.3A, ss 9, 233, 435A, 436(1)(a), 438A, 439A, 440D, 445D, 447A, 471B, 500(2), 600A, 1321, 1606, Sch 2 s 75-41 - Evidence Act 1995 (NSW), s 136 - Income Tax Assessment Act 1936 (Cth), s 96 - Insolvency Law Reform Act 2016 (Cth), Sch 2 Pt 1 - Uniform Civil Procedure Rules 2005 (NSW), r 14.28 Cases Cited: - Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 - Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 - Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 - Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) (No 2) [2009] FCA 42 - Anglo Eastern Trust Ltd v Kermanshahchi [2002] EWHC 3152 - Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 - Ashton v Pratt [2015] NSWCA 12; (2015) 88 NSWLR 281 - Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) [2015] FCA 1360; (2015) 110 ACSR 203 - Australian Securities Ltd v Borina Pty Ltd [2017] NSWSC 1073 - Australian Turf Club Ltd v Wallace [2012] NSWSC 292 - Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 - Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510 - Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883; (2003) 47 ACSR 391 - Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2012] NSWCA 435 - Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 2) [2013] NSWSC 574 - Create Business Australia Pty Ltd v AURFS Pty Ltd [2017] NSWSC 680 - Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd [2001] NSWSC 89; (2001) 37 ACSR 394 - Deputy Commissioner of Taxation v Bollands [2012] FCA 1050 - Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; (2000) 156 FLR 453; 34 ACSR 391 - Deputy Commissioner of Taxation v TMPL Pty Ltd (subject to deed of company arrangement) (No 3) [2011] FCA 1403; (2011) 289 ALR 69 - DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 86 NSWLR 293; 307 ALR 143; 99 ACSR 121 - Erol v Cavus [2012] QSC 371 - Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd [2005] WASC 261; (2005) 228 ALR 598 - General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 - Goumas v McIntosh [2002] NSWSC 713 - Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 - Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 - Hewlett Packard Australia Pty Ltd v Siltek Holdings Pty Ltd [2005] NSWSC 672 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 406 - Irving v Smith [2008] FCA 1391; (2008) 220 FCR 439; 68 ACSR 14 - Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 - Joseph Khoury & Sons v Zambena Pty Ltd [1999] NSWCA 402; (1999) 217 ALR 527 - Just Group Ltd v Peck [2016] VSC 614 - Kantfield Pty Ltd v Plastamatic (Aust) Pty Ltd (1994) 14 ACSR 687 - Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 - Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6 ; (2015) 225 CLR 62 - M & G Oyster Supplies Pty Ltd v Nonchalont Pty Ltd (admin apptd) (1995) 19 ACSR 27; 14 ACLC 415 - McGuirk v University of New South Wales [2009] NSWSC 1424 - Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to deed of company arrangement) [2007] SASC 296; (2007) 64 ACSR 91 - National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185 - Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 - Ogilvie–Grant v East (1983) 1 ACLC 742 - Oliveri v PM Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311 - Promnitz v Indochine Mining Ltd (subject to deed of company arrangement) [2015] FCA 857; (2015) 108 ACSR 134 - Public Trustee (Qld) v Octaviar Ltd (subject to deed of company arrangement) (recs and mgrs apptd) [2009] QSC 202; (2009) 73 ACSR 139 - QBI Corporation Pty Ltd v Plantation Rise Pty Ltd [2010] QSC 102; (2010) 77 ACSR 573 - Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 1590 - Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 611 - Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669; 1 ACLC 742 - Re Hayes Steel Framing Systems Pty Ltd (admins apptd) [2017] NSWSC 385 - Re Opes Prime Stockbroking Ltd (admins apptd) (recs and mgrs apptd) [2008] FCA 1425; (2008) 171 FCR 473; 68 ACSR 88 - Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 - Re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426 - Re Primespace Property Investment Ltd (in liq) [2016] NSWSC 1821 - Re Recycling Holdings Pty Ltd [2015] NSWSC 1016; (2015) 107 ACSR 406 - Ren v Jiang [2014] NSWCA 388; (2014) 104 ACSR 149 - Selim v McGrath [2003] NSWSC 927; (2003) 47 ACSR 537 - Shaw v New South Wales [2012] NSWCA 102 - Shelton v National Roads & Motorists Association Ltd [2004] FCA 1393; (2004) 51 ACSR 278 - Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 - Swaby v Lift Capital Partners Pty Ltd [2009] FCA 749 - Treadtel International Pty Ltd v Cocco [2016] NSWCA 360 - Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 - Vero Insurance Ltd v Kassem [2010] NSWSC 1481 - Weriton Finance Pty Ltd v PNR Pty Ltd (in admin) [2012] NSWSC 1402; (2012) 92 ACSR 88 - Workers Compensation Nominal Insurer v Perfume Empire Pty Ltd [2011] NSWSC 379 Texts Cited: - Austin & Black's Annotations to the Corporations Act (looseleaf, LexisNexis Butterworths) - J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, (7th ed, 2006, LexisNexis Butterworths) Category: Principal judgment Parties: Proceedings 2015/92649 Shaoyong (David) Guo (First Plaintiff) Dalavin Holdings Pty Ltd (Second Plaintiff) Xinwei Song (First Defendant) Jiaqi Song (Second Defendant) SG Capricorn Investments Pty Ltd (Third Defendant) Dameng Developments Pty Ltd (Fourth Defendant) New Mangrove Pty Ltd (Fifth Defendant) Hui Zhang (Sixth Defendant) Proceedings 2017/346899 Shaoyong (David) Guo (First Plaintiff) Dalavin Holdings Pty Ltd (Second Plaintiff) SG Capricorn Investments Pty Ltd (subject to deed of company arrangement) (First Defendant) Dameng Developments Pty Ltd (subject to deed of company arrangement) (Second Defendant) New Mangrove Pty Ltd (subject to deed of company arrangement) (Third Defendant) Stephen Ernest Vaughan (Fourth Defendant) Guy Edwards (Fifth Defendant) Xinwei Song (Sixth Defendant) Representation: Counsel: Proceedings 2015/92649 P Durack SC/E L Beechey (Plaintiffs) T E O'Brien (First, Second and Sixth Defendants) J A C Potts SC/P Reynolds (Third to Fifth Defendants) Proceedings 2017/346899 P Durack SC/E L Beechey (Plaintiffs) J A C Potts SC/P Reynolds (First to Fifth Defendants) T E O'Brien (Sixth Defendant) Solicitors: Proceedings 2015/92649 W & H Lawyers (Plaintiffs) Arnold Bloch Leibler (First, Second and Sixth Defendants) Clayton Utz (Third to Fifth Defendants) Proceedings 2017/346899 W & H Lawyers (Plaintiffs) Clayton Utz (First to Fifth Defendants) HWL Ebsworth (Sixth Defendant) File Number(s): 2015/92649; 2017/346899 Judgment The nature of these applications 1. This judgment deals with two interlocutory applications and an Originating Process seeking an order to set aside a deed of company arrangement. By their motion filed on 29 August 2017, SG Capricorn Investments Pty Ltd (subject to a deed of company arrangement) ("SGC"), Dameng Developments Pty Ltd (subject to deed of company arrangement) ("Dameng") and New Mangrove Pty Ltd (subject to deed of company arrangement) ("New Mangrove") (together, "Companies") seek to be released from an undertaking to the Court given on 30 April 2015, as varied on 1 July and 29 October 2015. By their motion filed on 4 September 2017, Mr Shaoyong Guo and Dalavin Holdings Pty Ltd ("Dalavin") (together "Guo parties") seek leave under s 440D of the Corporations Act 2001 (Cth) to carry on proceedings 2015/92649 ("Main Proceedings"), leave to file a Further Amended Statement of Claim ("FASOC") (MFI 1) in those proceedings and orders as to the costs of that application, including orders that the costs of Messrs Vaughan and Edwards as the voluntary administrators of the Companies not be costs in the administrations of the Companies. I will generally refer to Messrs Vaughan and Edwards in this judgment as the "Administrators", reflecting the position they previously occupied, while recognising that they are now the deed administrators of the Companies. 2. By Originating Process filed in Court on 16 November 2017, and heard with the interlocutory applications, the Guo parties seek orders under s 75-41 of the Insolvency Practice Schedule (Corporations) setting aside resolutions passed at an adjourned second meeting of creditors of the Companies, or orders under s 445D of the Corporations Act terminating a deed of company arrangement dated 18 October 2017 between Mr Xinwei Song, the Administrators and each of the Companies ("DOCA"), or orders under s 447A of the Corporations Act varying the DOCA and also seek personal costs orders against the Administrators and Mr Song. 3. The two interlocutory applications and the Originating Process were heard together, with the evidence in one proceeding to be evidence in the others. The matters were initially listed for hearing on 28 and 29 November 2017. On those days, Mr Durack, who appears with Ms Beechey for the Guo parties, cross-examined one of the Administrators, Mr Vaughan, at substantial length. A third day was then allocated for submissions on 14 December 2017. 4. In dealing with these applications, I will determine no more than needs to be determined for the purposes of determining them, and I do not reach final views as to contested factual matters where it is not necessary to do so. That course is appropriate both because many of the matters raised may ultimately have to be determined by the trial judge in the Main Proceedings, and because significant parties to the dispute, including Mr Guo and members of the Song family, did not give affidavit evidence in these applications and were not cross-examined. Factual background and chronology of events 1. By way of background, the Guo parties commenced the Main Proceedings against several defendants in 2015. Those proceedings involve a dispute concerning a "joint venture" between Mr Guo, who is resident in Australia, and Mr Song, who is resident in China, concerning a venture to acquire and obtain development approval for three properties. I refer here to a "joint venture" in its commercial sense, rather than in a way that identifies the legal incidents of the arrangement. 2. The defendants in the Main Proceedings include Mr Song, his wife, Ms Hui Zhang and his daughter Ms Jiaqi Song ("Song parties"), SGC, Dameng and New Mangrove. The shares in SGC are held as to 80% by Song Capricorn Pty Ltd, a company associated with Mr Song, and as to 20% by Dalavin, a company associated with Mr Guo; Mr Guo was a director of SGC from 15 April 2010 until 17 November 2011; and Mr Song and Ms Jiaqi Song have been directors of SGC since 15 April 2010 and 17 November 2011 respectively. Mr Song holds all of the shares in New Mangrove; Mr Guo was the sole director of New Mangrove from 9 November 2009 until 18 November 2011; and Ms Jiaqi Song has been the sole director of New Mangrove since 18 November 2011. Ms Zhang holds all of the shares in Dameng; Ms Zhang was a director of Dameng since 12 July 2011; and Ms Jiali Song, the sister of Ms Jiaqi Song, who is not party to any of the proceedings, was also a director of Dameng from 12 July 2011 until 26 July 2011 and from 16 November 2011 to 25 September 2013. There is a dispute in the Main Proceedings as to whether, inter alia, the shares in the Companies are held on trust reflecting the terms of the joint venture between the parties. 3. Broadly, the Guo parties plead in the Main Proceedings that Mr Guo and Mr Song made an oral agreement to acquire property in Sydney and Melbourne in April 2010, on the basis that 80% of the profits were to be distributed to Mr Song and 20% to Mr Guo, and Mr Song would fund the venture and Mr Guo would identify and develop the relevant properties (Amended Statement of Claim [9]–[12]). New Mangrove, then owned by Mr Guo, and Mr Song entered into a written agreement to acquire a property at Warwick Farm in Sydney in May 2010 and New Mangrove subsequently acquired that property. SGC subsequently entered a call option to acquire a property at Kings Way in Melbourne and an agreement to buy an adjacent property in Kavanagh Street, Melbourne, and Dameng subsequently acquired a call option in respect of the Kings Way property in November 2001. The Guo parties contend that SGC and Dameng held the relevant rights for Mr Song and Mr Guo on the terms of the "joint venture". 4. The properties were sold by the end of December 2014 and it is common ground that a substantial part of the sale proceeds, totalling some $33.7 million, which the Song parties contend included interest payable on monies lent by Mr Song to the Companies, were then paid to Mr Song. Mr Guo complains that that occurred without his prior knowledge or consent. An amount of about $2.38 million remained in bank accounts of the Companies in Australia after that payment. The Companies failed to pay withholding tax on the amounts of any interest paid to Mr Song and also failed to pay income tax on any profit made by the Companies from the venture. 5. The Guo parties plead that profits were made on New Mangrove's sale of the Warwick Farm property, on the sale of the Kings Way property by Dameng after exercise of the call option, and on the sale of the Kavanagh Street property by SGC and that Mr Guo is entitled to be paid a 20% share of those profits. Whether the Guo parties can sustain that allegation will depend, at least in part, on whether Mr Song was entitled to be reimbursed, by the Companies, for the interest that he claims to have paid on monies borrowed to fund the venture, extinguishing any profit on the venture. Mr Guo accepts in submissions that Mr Song had contributed funding of at least $23.5 million to the venture by the time of the payments to Mr Song, and the dispute appears to relate to the amount transferred to Mr Song in purported reimbursement of interest he claims to have paid to borrow that money in China, above the amount of the reimbursement of the funds he had advanced to the Companies. 6. The Guo parties initially contended that, on the sale of the properties, there should have been an accounting of the financial outcome of the "joint venture" and that an 80% share of profits of the venture should have been distributed to Mr Song and 20% of the profits to Mr Guo. As I will note below, that contention has since developed to a contention that the assets of the Companies, the remaining proceeds of sale of the relevant properties and monies held in particular bank accounts are held on trust for Mr Guo. 7. In the Main Proceedings, the Guo parties bring, variously, claims for breach of trust, a claim for breach of fiduciary duty, a claim for dishonest assistance in a breach of trust against Ms Zhang and oppression claims. The Guo parties initially sought orders for an account, equitable compensation and damages; orders pursuant to s 233 of the Corporations Act; and interim relief in the form of a freezing order up to an unencumbered value of $3,080,543. It is common ground that all of the Guo parties' evidence has been served and the only evidence that remains to be served is expert evidence to be led by the Song parties in response to an expert report of Mr Potter on which the Guo parties rely in those proceedings 8. On 27 March 2015, Slattery J made ex parte freezing orders against all Defendants in the Main Proceedings up to and including 4.00pm on 31 March 2015. A note of the hearing before Slattery J, served by the Guo parties in accordance with an order made by his Honour, referred to the risk of further dissipation of assets up to a value of approximately $3 million out of Australia. Mr Guo's affidavit in support of the original ex parte application for an interim freezing order identified the basis of that application (Guo [141]) as that: "I have the deepest concern that Song will transfer all profits from the Warwick Farm Property and Southbank Project to China to save and fund his other projects in China and I will not be distributed with any of the proceeds from the sale of those two projects." 1. On 31 March 2015, by consent and without admissions, and without prejudice to the Defendants' rights to challenge the terms of the freezing order, the Court varied the freezing order to continue up to and including 4.00pm on 22 April 2015, when the matter was made further returnable, and varied the order to permit expenditure for living expenses and up to $5,000 a week in reasonable legal expenses. On 22 April 2015, Lindsay J extended the freezing order up to and including 4.00pm on 30 April 2015, and listed the matter on that date. 2. On 30 April 2015, the Court noted the Plaintiffs' undertaking as to damages and noted that the Defendants (including the Companies) undertook that: "they will not remove from Australia or in any way dispose of or diminish the value of or vary their interest in any of the assets listed in the table below, without the written consent of the plaintiffs, for so long as the Proceedings and any appeals thereto remain on foot or until further order of the Court" A table then set out the account name and number and amount held in several bank accounts. The Court then set aside the orders made on 27 March, as varied on 31 March and 22 April 2015, on the basis of those undertakings. 1. That undertaking was then varied on 1 July 2015 and again on 29 October 2015 to apply to five bank accounts with funds totalling $3,083,217.16, of which $697,279.82 represented funds held in the name of Mr Song; $789,575.26 represented funds held in the name of SGC; $554,437.82 represented funds held in the name of Dameng; and $1,041,924.26 represented funds held in the name of New Mangrove. The Companies were not then under any form of external administration. 2. On 27 June 2017, the Companies' accountants, Grant Thornton, wrote to the Australian Taxation Office disclosing the unpaid withholding tax in respect of the Companies. 3. The Administrators were appointed by resolutions of the directors of the Companies made on 5 July 2017, being Mr Song and Ms Jiaqi Song in respect of SGC, Ms Song in respect of New Mangrove and Ms Zhang in respect of Dameng. Each of those resolutions recorded, consistent with s 436(1)(a) of the Corporations Act, the relevant directors' or director's opinion that the relevant company was likely to become insolvent at some future time. 4. It seems to me that the Companies' directors could reasonably consider they were insolvent or likely to become insolvent as at 5 July 2017, given their respective obligations to the Australian Taxation Office; their lack of assets available to meet those obligations where their remaining funds were then subject to the undertaking; and the fact that those funds were also insufficient to meet both those tax liabilities and the amounts claimed by the Guo parties. It seems to me that the Administrators were properly appointed in those circumstances, notwithstanding that that appointment potentially had implications for the claims against the Companies in the Main Proceedings. Mr Durack contests that position and submits that the Companies' tax liabilities are not true liabilities of the Companies, but result from a false contention by Mr Song that he was entitled to be paid interest on the funds that he contributed to the joint venture, which is a matter that will be determined by the Court in the Main Proceedings. I do not accept that submission, which has the obvious difficulty that the Companies have in fact paid substantial amounts characterised as interest to Mr Song, and the Guo parties did not establish that a liability to pay withholding tax did not arise on the making of those payments. Whether or not the Guo parties may in future obtain relief which alters the present position in the Main Proceedings, the present position seems to me that the Companies have substantial withholding tax liabilities and cannot meet both those liabilities and the amounts claimed by the Guo parties. 5. Mr Durack also contests that position on the alternative basis that any tax would or may be payable by the beneficiaries of any trust rather than the Companies, and the Guo parties raised that possibility in a letter dated 14 July 2017 from their solicitors to the Administrators' solicitors, as to which Mr Vaughan was cross-examined (T95). The scope of s 96 of the Income Tax Assessment Act 1936 (Cth) (to which Mr Durack referred), the question whether that section could now apply to a constructive trust which would arise only from the point of the Court's judgment, and any relevance of the fact that Mr Song is outside the jurisdiction so that any tax assessed on that basis may well not be recoverable, were not addressed in any detail. Mr Vaughan's evidence, not contradicted by other evidence, was that his understanding was that the corporate trustee was liable to pay any applicable income tax (T95). In any event, the fact that such a trust exists has yet to be established, since it will only be determined in the Main Proceedings. 6. On 7 July 2017, the Administrators' solicitors requested the Guo parties to agree to release the Companies from the relevant undertaking as to monies held in the several bank accounts. On 11 July 2017, Mr Vaughan instructed that administrators' bank accounts be set up for each of the Companies and that all monies held in the pre-appointment bank accounts be transferred into the new accounts. There was no suggestion that transfer affected the substance of the undertaking. As at 15 August 2017, the amounts in each bank account were $803,163.23 in respect of SGC, $749,087.40 in respect of Dameng and $1,067,845.86 in respect of New Mangrove. 7. From the commencement of the administration, the Guo parties also made clear that their position was that the Companies' financial statements were incorrect and that the loans and interest recorded in those statements as being due to Mr Song were not genuine. On 14 July 2017, the Guo parties' solicitors also advised the Administrators' solicitors that the Guo parties did not agree to the release of the Companies from the undertaking and that: "… it is our clients' contention that the funds in the frozen accounts are trust property to which Mr Guo or his company, Dalavin Holdings Pty Ltd, is exclusively, beneficially entitled." 1. The first meetings of creditors of the Companies were held concurrently on 17 July 2017. 2. Mr Song advanced a proposal for a deed of company arrangement to the Administrators on 25 July 2017. On 28 July 2017, the Administrators convened the second meetings of creditors and issued a report under s 439A of the Corporations Act ("Section 439A Report") (Ex P6, tab 62) which referred to a deed of company arrangement proposed by the Song parties and noted that: "the accuracy of the [Companies'] records, and in particular, the classification of advances as loans rather than equity, is disputed by a former director, Mr Guo. This is a central issue of contention in these administrations." The key terms of the deed of company arrangement then proposed by Mr Song were summarised in section 9.2 of the Section 439A Report. Those terms included that Mr Song would accept a dividend payment amount calculated as the higher of $5,172,000 or 60% of his admitted claim. As Mr Vaughan fairly accepted in cross-examination, that term would be unfavourable to the Companies if it bound the deed administrators to accept a proof of debt in that amount, particularly if there was a substantial issue as to the validity of Mr Song's claim for interest. It seems to me at least arguable that that term — which was expressly directed to Mr Song's position — would require only that Mr Song not contest any decision by the deed administrators to allow a claim in that amount, rather than binding the deed administrators to allow such a claim in that amount or at all. In any event, that approach was later abandoned in a revised proposal for a more favourable deed of company arrangement made by Mr Song. The Section 439A Report also indicated the Administrators' opinion that the proposed deed of company arrangement potentially provided a better return to creditors than liquidation. 1. On 1 August 2017, after the circulation of the Section 439A Report, the Guo parties' solicitors wrote to the Administrators' solicitors observing that: "The stance taken by the Administrators is so remarkable that we can only conclude that the Administrators have not acted with the independence and care required of them and the Administrators have failed to take into account [Mr Guo's] interests and the interests of all the creditors of each company." That letter went on to allege that "[a]cting properly, the Administrators could never countenance the companies accepting such a position" namely that Mr Song was entitled to a dividend under a deed of company arrangement and, apparently disregarding the statutory timetable for a voluntary administration, also complained of the "undue haste with which the administration is proceeding". 1. The Administrators' solicitors and Mr Vaughan met with the Guo parties' solicitors on 2 August 2017 and, on 3 August 2017, the Administrators' solicitors responded to and disputed the allegations made against the Administrators in the letter dated 1 August 2017. On 3 August 2017, the Guo parties' solicitors also wrote to the Administrators' solicitors outlining "the basic facts concerning the trust" for which Mr Guo contended and alleging that: "It would appear that the appointments [of the Administrators] were made, and are being utilised, for collateral purposes, namely to ensure that the frozen funds are no longer available to satisfy any judgment in our client's favour in the Court proceedings; for Mr Song to obtain as much of those funds for himself as possible; and to bring an end to the litigation as soon as possible by depriving our client of any clear or ready means of judgment recovery. Such an administration is an abuse of process. It has become clear that there was and is no proper purpose for the administration." 1. By a further letter dated 4 August 2017, the Guo parties took issue with the Administrators' attitude to Mr Song's claim and his proposed DOCA. Further correspondence followed, where the Administrators' solicitors responded to the matters raised by the Guo parties. 2. On 7 August 2017, the second meetings of creditors for the Companies were held concurrently. Mr Guo was admitted to vote for the full amount of the debts he claimed at those meetings (Ex P6, tab 74). Creditors approved the Administrators' remuneration and disbursements for the period to 21 July 2017 and their prospective remuneration and disbursements to 7 August 2017, with Mr Guo voting against those resolutions, and resolved that the second meeting of creditors be adjourned for a period not exceeding 45 business days. 3. On 16 August 2017, the Guo parties' solicitors wrote to the Administrators' solicitors advising that: "Shortly, we will be sending you and [the solicitors for the Song parties] a proposed Further Amended Statement of Claim that seeks to add declarations that the frozen funds are trust monies and some additional allegations in support of that relief. The pleading of such a cause of action has only become necessary as a result of the appointment of the Administrators and the stance they have taken in relation to the frozen funds, which has given rise to a priority issue between the Companies and our clients that had not previously existed. Such additional cause of action develops from the existing trust allegations in the current pleading. These allegations are now the precursor to the current contention about the status of the frozen funds. Please note that such cause of action arises from the evidence already served on behalf of our clients. It is not proposed that our clients would seek to rely upon any additional evidence in support of it." 1. The Guo parties served the proposed FASOC on 25 August 2017, which they now seek leave to file. On 29 August 2017, the Administrators filed their notice of motion seeking to be released from the undertaking previously given by the Company as to the relevant funds. On 4 September 2017, the Guo parties filed a notice of motion seeking leave to carry on the Main Proceedings under s 440D of the Corporations Act, leave to file the FASOC and orders as to costs. 2. Prior to the adjourned second meeting of creditors, the Administrators came to the view, and advised the Song parties, that they would only recommend the DOCA on the basis that Mr Song withdrew any claim to an entitlement to participate in the deed fund (Vaughan T24). Mr Vaughan's evidence in cross-examination was that he formed the view that it would be unfair for Mr Song to prove in the DOCA where the amounts held in the bank accounts represented approximately the amount due to the Australian Taxation Office in respect of withholding tax on interest payments to Mr Song and that it did not seem to be fair or likely to be attractive to creditors that Mr Song participate in a dividend from funds that would otherwise be available to other creditors (T30). Mr Vaughan's evidence in cross-examination was that, if the Administrators had not received a revised proposal from the Song parties, he would have recommended that the Companies be placed in liquidation (T132). 3. On 26 September 2017, Mr Song put a revised proposal to the Administrators for a deed of company arrangement under which he would not prove against the deed fund in respect of his claims against the Companies. That proposal was more favourable to the creditors than the earlier proposal if Mr Song's claim to interest was well founded and, even if it was not, would have removed any dispute as to whether that claim should be admitted. It was a condition precedent to the operation of cll 5 and 6 of that proposed DOCA, which provided for the distribution of funds, that the deed administrators obtain orders for the discharge of the undertaking to the extent required to give effect to the release of the Companies' funds, which would be used to constitute a deed fund. The DOCA also provided that it would bind all creditors and members of the Companies; there would be a moratorium on all claims against the Companies; the DOCA may be pleaded as a bar to any claim by creditors; and creditors must accept their entitlements under the DOCA in full satisfaction and complete discharge of their claims. 4. On 28 September 2017 the Administrators issued a supplementary report to creditors under s 439A of the Corporations Act ("Supplementary Section 439A Report") (Ex P6, tab 91), which attached a draft DOCA (Ex P6, tab 92) documenting that revised proposal. The Administrators recommended that the Companies' creditors execute that DOCA rather than placing the Companies in liquidation. The Executive Summary of that report noted that: "The revised Deed proposal offers the prospect, although not certainty, of a better return to creditors than what they would likely achieve in a winding up, and earlier distribution of available funds to participating creditors" (p 5) 1. The Supplementary Section 439A Report also noted that more substantial investigations would need to be conducted to consider the merits of pursuing any recovery actions and that considerations included the complex nature of insolvency law; potential defences available to the directors and other parties; the cost and time involved; and a high degree of uncertainty including that recovery of any judgment debt could involve enforcement in a foreign jurisdiction (p 29). The report also referred (p 31) to a suggested benefit of Mr Song's revised proposal, that he agreed not to accept any dividend under the DOCA so that "a lower amount of creditor claims would rank for a dividend in a DOCA thereby raising the level of potential distributions available to other creditors after costs" and noted (p 33) that: "Mr Song's offer to compromise his claim by 100% has the effect of significantly reducing the amount of creditor claims which in turn offers an improved return to other creditors … The proposal potentially offers an opportunity for a more certain and quicker resolution for creditors. However we note the claims that were made in the Proceedings (before the stay), the claim by Mr Guo to a trust over funds of the Companies and the possibility for further legal challenges." The Administrators expressed the view (p 33) that, in the case of SGC, "the estimated returns under a DOCA is potentially better than the low scenario in a liquidation and the low scenario under the DOCA is potentially the same as the high scenario in a liquidation"; in the case of Dameng, "the low scenario estimated returns under a DOCA is potentially better than the low scenario but less than the high scenario in a liquidation"; and, in the case of New Mangrove, "the estimated returns under a DOCA is potentially better than both the low scenario and the high scenario in a liquidation". The Administrators also indicated their opinion that, for each of SGC, Dameng and New Mangrove: "The DOCA potentially provides a better return to creditors than liquidation. The DOCA offers a more certain outcome because it is not dependent on possible recovery actions, and offers the prospect of an earlier return to creditors". 1. Mr Vaughan fairly accepted in cross-examination that there was a methodological error in the report to creditors which had overstated the return to creditors under the DOCA in respect of SGC, because an amount due by Dameng to SGC had been allowed in full rather than discounting the recovery to the amount that would be received by SGC from Dameng under the DOCA (T43). 2. Mr Vaughan was also cross-examined so as to seek to establish that he should have modelled, in the Section 439A Report and Supplementary Section 439A Report, the result of a successful claim for the recovery of interest by the Companies against Mr Song. I do not accept that proposition. First, the scenarios shown in those reports made clear the assumptions on which they were based and, second, the inclusion of such an amount would have significantly overstated the potential return to creditors, at least on a liquidation scenario, if such a claim was brought and ultimately failed or if such a claim succeeded but a judgment could not practically be enforced against Mr Song in the People's Republic of China. 3. In submissions, Mr Durack also criticises the Supplementary Section 439A Report for a failure to identify any agreement between Mr Song and Mr Guo for interest to be paid on funding provided to the Companies. The proper question in the deed administration or a liquidation may be a different one, namely whether there existed any such agreement between Mr Song and the Companies, as distinct from between Mr Song and Mr Guo. The Supplementary Section 439A Report also considered, at some length, some evidence of borrowings by Mr Song in China and the payment of interest on those borrowings, although the fact that Mr Song made those borrowings and incurred interest on them seems to me to be necessary but not sufficient to establish a right to reimbursement of that interest from the Companies. 4. The Supplementary Section 439A Report also drew attention to financial statements and tax returns (Ex P6, tab 116) prepared by the Companies' previous accountants, before Grant Thornton were retained, which recorded significantly lower interest expenses for the Companies for the years ended 2011 to 2015. That information was plainly unfavourable to Mr Song's claim for reimbursement of interest, and called in question the larger amount of interest recorded in the Companies' financial statements as later prepared by Grant Thornton. The Administrators also drew attention to inconsistency between the interest expense in the tax returns prepared by the Companies' former accountants and the interest expense recorded in the Companies' financial statements and that information was also adverse to the Song parties' claim. 5. The adjourned second creditors meeting was held on 10 October 2017 (Ex P6, tab 97) and attended in person or by proxy by persons claiming to be creditors of the Companies, namely Mr Song, Ms Zhang and Ms Song; Mr Guo, represented by his proxy, his solicitor; Arnold Bloch Leibler, which had acted for the Companies and the Song parties in the Main Proceedings and now continue to act for the Song parties in those proceedings and this application; Grant Thornton, the accountants for the Companies and the Song parties; the State Revenue Office Victoria, which is a creditor of SGC but not the other Companies; and the Australian Taxation Office. 6. I should refer to the proofs of debt lodged by relevant creditors before turning to the result of that meeting. Proofs of debt were lodged by Ms Song (Ex P6, tab 68), Ms Zhang (Ex P6, tab 69) and Mr Song (Ex P6, tab 70). Mr Song's proof of debt was supported by loan agreements between the Companies and Mr Song, although only the loan agreement for New Mangrove was signed on behalf of the relevant company, and all loan agreements significantly postdated the funding advanced by Mr Song to the Companies. 7. The Guo parties' informal proof of debt (Ex P6, tab 58) had described the amount of their entitlement or debt claimed as: "Refer to the Amended Statement of Claim and to the letter to Clayton Utz from W & H Lawyers dated 14 July 2017, referring to claim for trust monies. Amount of claim is at least about $3.45 mill before interest (see affidavit of Guo dated 14 July 2017). Services supplied in carrying out the joint venture agreement, since in about April 2010." 1. Mr Guo's formal proof of debt dated 7 August 2017 (Ex P6, tab 73) in turn described the amount of his claim as follows: "This is to state that the company was on 5 July 2017, and still is justly and indebted in equity or in contract to [Mr Guo] for amounts that Mr Guo has done his best to estimate in his affidavit in Supreme Court proceedings 2015/92649 dated 14 July 2017 being the amount against: (i) [SGC] of $7.488 million to $7.738 million. (ii) New Mangrove Ltd of $3 million to $3.5 million; (iii) [Dameng] of $6.75 million. Particulars of the debt are: Monies owing to Mr Guo arising out of a joint venture with Mr Song involving the above companies formed in April 2010 for the purchase and sale of properties in Sydney and Melbourne, the subject of Mr Guo's claim in the above proceedings and as further explained in the letter from Mr Guo's solicitors to Clayton Utz dated 3 August 2017." 1. Mr Guo's proof of debt was admitted for a nominal value of $1 at the adjourned second meeting of creditors and Mr Vaughan observed, in explanation of that course, that: "With regard to the proof of debt by Mr Guo, the Chairperson noted that, in light of the further investigation conducted since the adjournment of the meeting on 7 August 2017, and as reported on in the supplementary report, the Chairperson was is [sic] in doubt as to whether a proof should be admitted for voting purposes. The Chairperson also noted that there was insufficient documentation to substantiate and quantify the claim. Therefore the proof of debt was marked as objected to and admitted for a nominal value of $1 for each of the Companies subject to the vote being declared invalid if the objection is sustained. The Chairperson advised the meetings that the Administrators wrote to W&H Lawyers, representing Mr Guo, on 9 October 2017 advising that Mr Guo's claim was objected to and would be admitted for a nominal value of $1 for voting purposes at the reconvened second creditors meetings. The Chairperson enquired if there were any objections to such treatment. No objections followed." 1. The voting at the meeting on 10 October 2017 was on the voices and a show of hands, and no poll was requested (Vaughan 17.11.17 [20]). The creditors voting at that meeting passed three resolutions concerning the Administrators' remuneration; passed a resolution that each of the Companies should execute a deed of company arrangement, with the Australian Taxation Office and Mr Guo voting against that resolution; passed resolutions concerning the remuneration of the deed administrators, with the Australian Taxation Office and Mr Guo also voting against those resolutions; and passed resolutions concerning the destruction of the Companies' books and records. I assume that last of those resolutions has not been and would not be implemented where proceedings against the Companies are under way. 2. On 18 October 2017, pursuant to the resolutions passed at the adjourned second meeting of creditors, Mr Song, the Administrators and each of the Companies entered into the DOCA which commenced on that date but is subject to the conditions precedent in cl 3.1 that have not yet been satisfied. 3. The Guo parties served an Amended Statement of Claim on 28 October 2017, although they now seek leave to file the FASOC. As I noted above, on 16 November 2017, the Guo parties commenced separate proceedings by Originating Process seeking orders concerning the DOCA, which have been heard together with the interlocutory applications in the Main Proceedings. Affidavit and other evidence 1. The Guo parties read the affidavits of their solicitors, Mr Zhang, dated 4 September 2017 and Ms Lou, dated 18 September 2017 and 9 November 2017. The Guo parties also read the affidavits of Mr Guo dated 10 March 2016, 1 September 2016 and 14 July 2017, in each case subject to a limiting order under s 136 of the Evidence Act 1995 (NSW) that it was read only to establish the evidence that would be read by the Guo parties at trial and not to prove the truth of its contents. The Guo parties also tendered Mr Song's affidavit dated 17 June 2016 (Ex P1), Ms Zhang's affidavit dated 20 June 2016 (Ex P2) and Ms Jiaqi Song's affidavit dated 22 June 2016 (Ex P3), in each case with a limiting order under s 136 of the Evidence Act as proof of the evidence to be led by the Song parties in the substantive proceedings and not to establish the truth of their contents. 2. The Administrators rely on Mr Vaughan's affidavits dated 29 August 2017, 12 September 2017, 24 October 2017 and 17 November 2017. Mr Vaughan was cross-examined at length, although he inevitably had no personal knowledge of matters that had occurred prior to his appointment as administrator and then deed administrator. I have referred to some aspects of Mr Vaughan's evidence in dealing with the chronology of events and will address some broader aspects of his cross-examination here. Mr Vaughan presented as a thoughtful and careful witness, who made appropriate concessions as to matters that might support the position advanced by the Guo parties, although he largely did not accept the conclusions that the Guo parties sought to draw from those matters. I accept Mr Vaughan's evidence, including his denial of the allegations put to him that he was committed to advancing the interests of the Song parties to the disadvantage of the Guo parties. 3. Mr Vaughan has been a registered liquidator since 2012 and has held approximately 50 appointments as external controller of companies, including solvent external administrations, in that period, and has worked on up to 240 external administrations through his career (T15–16). Mr Vaughan had no direct contact with either Mr Song or Ms Zhang during the voluntary administration, and he met Ms Song on four occasions — once with the Companies' accountants, Grant Thornton, prior to the appointment of the Administrators; at a formal interview early in the voluntary administration; at a meeting with her, the Songs' legal advisers and the Administrators' legal advisers to discuss the proposed DOCA; and at the creditors' meetings for the Companies — and had several telephone conversations with her (T16). That level of contact does not seem to me to be out of the ordinary or to provide any support for the allegations of partiality to the interests of the Song parties made against the Administrators. 4. Mr Vaughan was cross-examined at length as to his view of the merits of the Guo parties' claim and frankly acknowledged in cross-examination that he had come to the view at some point that Mr Song's claim for $19 million of interest on the funding that he had provided to the Companies was meritorious (T36). As will emerge below, it seems to me that there are potential difficulties with Mr Song's claim which meant that assessment is open to question. Mr Vaughan accepted that the Companies' transfer of monies referable to that interest to Mr Song would not have been appropriate if he was not entitled to interest on that funding, at least to the extent that it had exceeded his entitlement to a share of the profits of the venture (T40–41). Mr Vaughan also later accepted in cross-examination that, by the time of the adjourned second meeting of creditors, the Administrators had formed a "very strong view" that Mr Guo did not have a valid claim and considered that it would have been a neglect of their duties to admit his proof of debt for the full amount of that claim, although he considered that did not depend upon the Administrators' assessment of Mr Song's position (T64–65). 5. Mr Vaughan explained that he took the view that Mr Guo's claim to be a creditor was not well founded because he did not consider there were any profits in the Companies, which he understood to be the basis of Mr Guo's claim, although he also recognised (in consultation with the Administrators' legal advisers) a possibility that other claims may be available to Mr Guo, for example of a quantum meruit nature (T67). He accepted that his most important reason for not accepting Mr Guo's proof of debt (or, more precisely, accepting it only for a nominal value for voting purposes) was that Mr Guo was basing that claim upon profits in the Companies, which Mr Vaughan did not consider existed, although he again recognised the possibility of an alternative claim in quantum meruit (T68). Mr Vaughan also identified a third reason for that approach in cross-examination, namely that he had taken advice about the matter and that Mr Guo's proof of debt was not straightforward and did not identify the documents relied upon, but instead referred the Administrators to the substantial quantity of the evidence in the Main Proceedings (T68). 6. It was also put to Mr Vaughan in cross-examination, and he accepted, that a further reason not to accept the proof of debt was that Mr Vaughan did not accept that Mr Guo had a trust claim (T69). That question, and Mr Vaughan's acceptance of that proposition, was perhaps based on a misapprehension. Mr Guo's establishing his trust claim would arguably establish a proprietary interest in assets allegedly held by the Companies on trust for him, rather than establishing a debt owed to him by the Companies. It was also put to Mr Vaughan, and he accepted, that it would be important to know whether there was an agreement between Mr Song and Mr Guo that Mr Song would be paid interest on his funding contribution (T69). That question may also be based on an incorrect premise, where Mr Song's right to recover interest against the Companies would likely depend upon the existence of such an agreement with the Companies, rather than the existence of such an agreement with Mr Guo, particularly where Mr Guo was not a director of the Companies beyond 2011. 7. Mr Vaughan also pointed out in cross-examination that, in determining whether Mr Song had a right to recover interest, he also had regard to the fact that Mr and Mrs Song were resident in China and did not speak English and that there was at least a possibility that the earlier arrangements in respect of reimbursement of interest were formed by reference to different customs as to the conduct of business (T73). I accept that matter may be relevant where there may be different cultural norms as to the extent to which parties, particularly with family connections, conduct business under informal arrangements. Mr Vaughan also pointed out that the Companies generally did not have good documentation of their business arrangements (T73). Mr Vaughan also frankly accepted in cross-examination that the approach which he adopted to Mr Guo's proof of debt for voting purposes had the consequence that he was unlikely to be admitted to proof for dividend purposes (T128). 8. Mr Vaughan was also cross-examined as to a document prepared by the Guo parties headed "Illustrations of recovery for Mr Guo better than DOCA" (MFI 8) (T155ff). That document made a series of robust assumptions, including that there would be no recovery for any of the Song interests, Grant Thornton, Arnold Bloch Leibler or the State Revenue Office of Victoria; that there would be recovery for the Australian Taxation Office for income tax, but not withholding tax, but not if there was a trust; and that the Administrators would not receive any remuneration for their work. Some of those assumptions were not established by evidence and others, including the assumption that there would be no remuneration payable to the Administrators, are not consistent with the conclusions that I have reached. A further difficulty with those scenarios was that three of them were based on Mr Potter's expert report on which the Guo parties will seek to rely in the Main Proceedings, which was not admitted in this application as proof of its truth but only of the evidence that Mr Guo would seek to lead in those proceedings. Those scenarios therefore demonstrate no more than the matters that Mr Guo will seek to establish in the Main Proceedings, and not that that result will be achieved in them. There is no doubt that several of those outcomes are more favourable to the Guo parties than the DOCA, as Mr Vaughan readily and properly conceded in cross-examination. That, however, is the necessary consequence of the assumptions made, and does not establish that a liquidation will be more beneficial than the DOCA where the basis of those assumptions was not established. 9. The Administrators also tendered Mr Guo's affidavit dated 25 March 2015 with a limiting order under s 136 of the Evidence Act that it was evidence of the evidence that had been led in support of the Plaintiffs' application for a freezing order and not as proof of its contents (Ex A1). The Companies' application for release from their undertaking 1. By their motion filed on 29 August 2017, the Companies seek to be released from their undertaking to the Court given on 30 April 2015, as varied on 1 July and 29 October 2015. 2. In opposing that application on behalf of the Guo parties, Mr Durack submits that, in order to lift the relevant undertakings, the Companies must show new facts that have come into existence which render its enforcement unjust: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 178. Mr Durack also submits that the Court should decline to lift the undertaking and should grant leave to continue the Main Proceedings against the Companies because of the importance of the issues to be dealt with in the proceedings, the amount and seriousness of the parties' rival contentions, the degree and complexity of the relevant factual issues, the risk that the proceedings will be relitigated if claims are dealt with by proofs of debt, the arguable merits of Mr Guo's claims and the injustice to Mr Guo and, if a trust is not established, the Australian Taxation Office, if the undertaking is lifted to allow the release of funds for distributions to occur under the DOCA. All but the last of those matters are directed to the grant of leave to continue the Main Proceedings and the last would not support a freezing order or undertaking in its place, where there was no risk of an improper dealing with the relevant funds in order to defeat the Court's judgment. 3. Mr Potts, who appears with Mr Reynolds for the Administrators, submits, and I accept, that the evidence to which I have referred above indicates that the freezing orders were initially made, on an interim basis, to avoid the risk of further dissipation of the Companies' assets to China by Mr Song, and the Companies' undertaking was then offered in place of a continuance of the freezing order. The Song parties support the Administrators' application for release from the undertaking on the basis that the appointment of the Administrators was a significant change in circumstances since the undertaking was given and removed the risk that monies in the Companies' accounts would be dissipated to China, by reference to which the freezing orders had originally been sought and the undertaking had been given. The Song parties also submit that the Guo parties impermissibly seek to use the undertaking as security for any judgment they may obtain against the Companies. 4. The overriding principle, in considering whether a party should be released from an undertaking, is that the Court "should do whatever is in the interests of justice having regard to the particular circumstances of the case": Just Group Ltd v Peck [2016] VSC 614 at [88]; see also Create Business Australia Pty Ltd v AURFS Pty Ltd [2017] NSWSC 680 at [24]–[26]. Mr Potts submits, and I accept, that the appointment of the Administrators was a substantial change in circumstances, so far as the Companies are no longer under the management of the Song parties and are now under the control of an independent insolvency practitioner. (I have not neglected the Plaintiffs' initial attacks upon the Administrators' independence, which may not have been pressed in full in closing oral submissions, in making that observation.) Mr Potts submits, and I accept that: "There is plainly no longer any risk of removal of the frozen funds from Australia. If released from the undertaking, the frozen funds would be in the hands of the Administrators, who now hold appointment as deed administrators under the DOCA. There can be (and is not) any suggestion that the Administrators would cause the improper dissipation of the frozen funds." 1. Mr Potts also submits that, even if the Guo parties are ultimately successful in establishing that the Companies held monies on trust, that would not allow them absolute priority over the monies held in trust, since the trustee would have a right of indemnity against trust assets for liabilities properly incurred in the administration of the trust, potentially including tax liabilities and liabilities of the Administrators and liquidators so far as they were incurred in the administration of trust assets and the Companies do not have the ability to meet them in their personal capacity: Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 at 367; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [147]; Re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426 at [50]; Re Primespace Property Investment Ltd (in liq) [2016] NSWSC 1821 at [13]ff. I would add that, so far as the alleged trust is a constructive trust, then the existence of third party claims against the relevant assets may be a strong reason why such a trust should not be imposed. 2. Mr Potts also submits, and I also accept, that the continuance of the undertaking would operate as a form of security for the judgment that the Guo parties hope to obtain against the Companies. Mr Potts submits that the use of the undertaking to give security to the Guo parties for any judgment that they might ultimately obtain in the Main Proceedings is not a proper purpose for a freezing order or corresponding undertaking: Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 621; Australian Turf Club Ltd v Wallace [2012] NSWSC 292 at [21]. I accept that the aim of freezing orders and equivalent relief is to prevent the removal, dissipation or misappropriation of assets that would be available to meet a judgment and not to prevent legitimate spending or to operate as de facto security for a plaintiff's judgment: Anglo Eastern Trust Ltd v Kermanshahchi [2002] EWHC 3152; Goumas v McIntosh [2002] NSWSC 713; Deputy Commissioner of Taxation v Bollands [2012] FCA 1050 at [22]; Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 611; Re Colorado Products (in prov liq) [2013] NSWSC 1590 at [4]. 3. It seems to me that the continuation of an undertaking in this case, which was given in place of the freezing order, is no more appropriate than the continuation of the freezing order would be, where the risk against which it protected no longer exists. In summary, it seems to me that new facts have come into existence that would make the continued enforcement of the undertakings unjust. The Companies are plainly presently insolvent, since they are unable to meet at least the substantial debt that is owed by them to the Australian Taxation Office; voluntary administrators and deed administrators were appointed; and, as will emerge below, the Administrators will now be appointed as liquidators of the Companies. There is no continuing need for orders of the Court, or an undertaking in their place, to prevent the Companies transferring the funds to China in a manner that may defeat a judgment of the Court, since there can be no suggestion that the Administrators would take that course. The maintenance of the undertaking, in its present form, would amount to requiring the Companies to give security for the Guo parties' claims, and that is not a proper basis on which such an undertaking should be continued. 4. For these reasons, I am comfortably satisfied that the Companies should be released from their undertaking not to deal with funds that are presently held in the relevant bank accounts although, given the result that I reach below, those funds will not now be applied to funding the proposed DOCA. I am inclined to make that order conditional on the Administrators (and liquidators) giving a further undertaking to the Court that they will not distribute the funds to the parties to the proceedings or creditors of the Companies without leave of the Court while the proceedings are ongoing. Those funds may, however, be applied without such leave to the remuneration of the Administrators, deed administrators and liquidators as approved by creditors or the Court and other proper costs and expenses of the administration, deed administration and liquidation, including the costs of the conduct of the Main Proceedings by the Companies. 5. Mr Potts submits that, if the undertaking was to be continued, there should at least be a carve out to permit the Administrators to incur the expenses of the defence of the Main Proceedings. In Anglo Eastern Trust Ltd v Kermanshahchi above, Neuberger J observed that "[i]t is certainly not normally even the indirect purpose of a freezing order to prevent a defendant from defending himself in the very proceedings in which the freezing order is made". In Goumas v McIntosh above at [22], Barrett J similarly observed that: "Where a Mareva order is being imposed in relation to the whole of a person's property, the approach must be to impose it in terms that create an exception for necessities, particularly reasonable living expenses and reasonable expenses of the litigation itself: see, for example, the views expressed by Powell J (as his Honour then was) in Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552." I took the same view in Re Colorado Products Pty Ltd (in prov liq) above. I would have accepted an amended undertaking including such an exception had I not ordered that the Companies be released from the undertaking. The Guo parties' application for leave to file the FASOC and associated orders 1. By their motion filed on 4 September 2017, the Guo parties seek leave under s 440D of the Corporations Act to carry on the Main Proceedings; leave to file the FASOC; and orders that the costs of the application under s 440D be costs in the cause, save that any costs of the Administrators should not be costs in the administrations of the Companies. The application for leave under s 440D of the Corporations Act is now moot where the Companies are no longer in voluntary administration and are subject to the DOCA, although a corresponding application is pressed if the Companies are placed in liquidation. 2. I first address the legal principles applicable to whether to grant leave to file the FASOC. I am required to exercise my discretion whether to grant that leave having regard to the provisions of ss 56–58 and 64 of the Civil Procedure Act 2005 (NSW). Section 58 of the Civil Procedure Act requires the court to have regard to the dictates of justice when considering an order for the amendment of a document and requires the court also to have regard to the provisions of ss 56 and 57. Section 56 of the Civil Procedure Act identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceedings and s 57 of the Civil Procedure Act requires proceedings to be managed having regard, inter alia, to the just determination of the proceedings. These provisions point to, and I am conscious of, the requirement that a party have a fair opportunity to put the case it wishes to put; however, they also point to the need to take into account the wider public interest in the administration of justice, as to which delay is a significant matter. Section 64(2) of the Civil Procedure Act in turn provides that, subject to s 58, all necessary amendments should be made for the purpose of determining the real questions raised by the proceedings. 3. I should also have regard to the High Court's decision in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 ("Aon"), where the High Court, in the context of an amendment application, emphasised the significance of delay for the opposing party and the fact that a costs order should not be treated as an automatic solution to problems created by failures to conform to the objectives of case management. The joint judgment there observed, in relation to rules of court that are similar to s 56 of the Civil Procedure Act, that: "Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and costs are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs." 1. The joint judgment also observed (at [103]) that an explanation will generally be required for delay in raising a matter and that: "Not only will [the applicants] need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the Court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules." 1. The principles identified by the Court in Aon above are, of course, to be applied having regard to the statutory context established by the Civil Procedure Act and particularly the emphasis on the dictates of justice and the need for the just, quick and cheap resolution of the real issues in dispute in the proceedings: Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36]. In Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 2) [2013] NSWSC 574 at [73], upheld on appeal in Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297, and again in National Australia Bank Ltd v C&O Voukidis Pty Ltd [2015] NSWSC 185, Davies J emphasised that the explanation for delay offered by a party which sought an amendment will in most cases "not be regarded as subsidiary to showing the bona fides of the proposed amendment" and treated the absence of evidence providing such an explanation as relevant in declining leave for that amendment. 2. The Companies also here opposed the amendment on the basis of a suggested lack of merit in the claim sought to be introduced by the amendment. That question is to be dealt with by applying the same principles as would be applied to an application for summary judgment or summary dismissal: Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 at [11]; Australian Securities Ltd v Borina Pty Ltd [2017] NSWSC 1073 at [46]. Those principles are set out in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129; Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [57] and Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]. 3. In Agar v Hyde above at [57], the plurality of the High Court observed that: "Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." (footnote omitted). That formulation has been adopted in Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46] and Spencer v Commonwealth of Australia above at [24]. In Shaw v New South Wales [2012] NSWCA 102 at [30]–[32], Barrett JA summarised the relevant principles and noted that the relevant question was: "… whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated." 1. In Ren v Jiang [2014] NSWCA 388; (2014) 104 ACSR 149 at [49], the Court of Appeal in turn observed that: "The test to be applied before entering summary judgment has been variously stated, and little is to be gained by reiterating those formulations; cf General Steel Industries Inc v Cmr for Railways (NSW) (1964) 112 CLR 125 at 129. There is no controversy that the power must be exercised with "great care" and "exceptional caution": Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at [24] and [55] (noting that this was said of the lesser standard made applicable by s 31A of the Federal Court of Australia Act 1976 (Cth)). In Spencer, Hayne, Crennan, Kiefel and Bell JJ referred to the (unamended) test as "requiring formation of a certain and concluded determination that a proceeding would necessarily fail": at [53]. Repeatedly, it has been said that the court must be so certain of the outcome that to permit the proceeding to go forward would amount to an abuse of process: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 90; Spencer at [54]; O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; 16 BPR 31,705 at [3] and [67]." 1. In Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; (2016) 117 ACSR 176 at [30], Barrett AJA summarised the proper approach in determining whether to allow leave for an amendment as follows: "… his Honour's task, upon an application for leave to amend, was not to arrive at any concluded view as to the ultimate merits of the pleaded allegations. The central inquiry is that indicated by Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 91, General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69 at 130 and, more recently, Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 …: 1. I also recognise that a pleading may be struck out under Uniform Civil Procedure Rules r 14.28, or an amendment not permitted, if the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings: Shelton v National Roads & Motorists Association Ltd [2004] FCA 1393; (2004) 51 ACSR 278 at [18]; McGuirk v University of New South Wales [2009] NSWSC 1424 at [30], [33]. 2. In support of the application for leave to file the FASOC, Mr Durack refers to cases in which a constructive trust has been established in respect of a breach of fiduciary duty between joint venturers. I accept, of course, that the Court may order relief by way of a constructive trust in respect of a breach of fiduciary duty, although the existence of third party creditors whose claims would be prejudiced by such an order would potentially be a reason not to do so. Mr Durack also refers to the possibility that a trust may be an express, implied or constructive trust. In written submissions, Mr Durack submits that it is "not accepted" by the Plaintiffs that there are unsatisfied rights of exoneration, although he recognised that such rights may exist over trust assets in oral submissions. That question would only arise if the relevant trust over the monies held in the bank accounts was established. 3. Mr Potts submits that the amendments to plead the claim for a trust in respect of the funds standing to the credit of the Companies in the specified bank accounts should not be allowed, because that claim is hopeless. Mr Potts notes that the Guo parties contend for an express, implied or constructive trust. He submits that there is nothing in the particularised evidence capable of making out a trust on any of those bases, even at the level of a merely arguable case. Mr Potts also refers to the terms of Mr Guo's second affidavit and the other evidence particularised to support the allegation in support of that submission, and to the pleadings of the relevant trusts in paragraph 15 of the FASOC in relation to New Mangrove's interest in the Warwick Farm property; paragraph 19 in relation to shares in New Mangrove; paragraph 22A in relation to the proceeds from the sale of the Warwick Farm property; and paragraphs 27A, 33A, 37, 41A, 42A, 43A and 46D–46E in a similar form. 4. Mr Potts refers to the circumstances in which an express trust may be established, as summarised by the High Court in Korda v Australian Executor Trustees (SA) Ltd [2015] HCA 6; (2015) 225 CLR 62, where French CJ referred to a summary of the requirements for an express trust in JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia, (7th ed, 2006, LexisNexis Butterworths) at [306], where the learned authors note that an intention to create a trust may be found based on language which expressly or impliedly expresses that intention, or from the conduct of the parties concerned, but that no trust will be established if there is any uncertainty as to that intention. Hayne and Kiefel JJ also there noted (at [72]) that whether a trust should be found to exist depends on the proper construction of the documents which record the parties' intention, and Gageler J observed (at [109]) that whether recognition and enforcement of a trust is appropriate is to be determined according to ordinary principles of contractual construction. Mr Potts also refers to the observations of the Court of Appeal in Ashton v Pratt [2015] NSWCA 12; (2015) 88 NSWLR 281, where Bathurst CJ also summarised the requirements for an intention to establish a trust. In Jacobs' Law of Trusts in Australia, at [501], the learned authors similarly observe that: "[a] trust will be created, whether or not the creator thereof is precisely aware of so doing, provided that in substance the creator intends that his or her actions should have the legal effect of creating the relationship which is known in law as a trust." 1. Mr Potts submits that the arrangements reached between the parties as to their shareholdings in the relevant companies were the means addressed to deal with their respective interests and that: "Nothing, even on an arguable basis, in the proposed pleading, in light of the now complete evidence relied upon to support those proposed pleas, gives rise to an arguable case of an express, implied or constructive trust." 1. Mr Potts also submits, and I accept, that the cases concerning fiduciary duties and joint ventures to which Mr Durack refers do not advance the Guo parties' claim and it seems to me that they ultimately do no more than establish that a constructive trust may arise in an appropriate case, which is hardly open to dispute. Mr Potts also submits, and I accept, that the question of the nature of a beneficiary's interest in a trust, also addressed in Mr Durack's submission, does not advance the Guo parties' position. 2. Mr Reynolds, who made the oral closing submissions for the Administrators, points out, and I accept, that the focus in the Guo parties' Summons filed on 27 March 2015 is on an entitlement to 20% of the profits of the relevant venture. For example, the declarations sought in paragraphs 1–4 of the Summons refer to Mr Song's entitlement to 80% of profits and Mr Guo's entitlement to 20% of profits and the relief for oppression sought in paragraph 8 of the Summons refers to Mr Guo's entitlement to a "share of the profits from the sale". Mr Reynolds points out that the Guo parties' initial Statement of Claim, and the Amended Summons and Amended Statement of Claim, also advanced allegations as to the Guo parties' entitlement to a share of profits, which in turn founded an allegation of a constructive trust arising from a breach of fiduciary duty. Mr Reynolds submits, and I accept, that the then pleadings were directed to a claim for a constructive trust attaching to the 20% profit share that had not been paid to Mr Guo, and not to a claim for a trust over the gross realisations of the project, whether capital or profit, or the monies held in a bank account derived from those gross realisations. 3. Mr Reynolds submits that, taking Mr Guo's evidence at its highest, it establishes no more than an entitlement to a share in the profit of the venture. That proposition is relevant to identifying the subject matter of any relevant trust. Mr Reynolds points out that Mr Guo's affidavit dated 27 March 2015, on which the Guo parties relied in the application for the freezing order, refers to his entitlement to a share of profits, where Mr Guo has a Master's degree in accounting and would plainly understand the concept of profit or a "profit share". Mr Guo refers to a conversation with Mr Song in April 2010, when Mr Guo met Mr Song on a business trip to China, where Mr Song described his proposal as that: "I will solely be responsible in funding the projects, and you will be solely responsible for developing the projects, and we will share the profits 80/20. You will get 20% of the profit from every project when the property is sold." 1. Mr Guo in turn referred (at [44]) to his belief that he had reached an agreement with Mr Song which provided that Mr Guo "will be entitled to 20% of the profit for [his] skills and effort once the property is sold" and "[t]he profit is calculated by deducting the acquisition fees and all the costs of the company which can be proved by invoices and/or costs agreements entered into". Mr Guo also referred (at [46]) to his recollection of the terms of the written agreements, which are now in evidence, as including a provision for: "Profits sharing: 20% of the profits belong to me once the property is sold and 80% of the profits goes to Song once the property is sold." It seems to me that the concept of profits used in those conversations must amount to profit after tax since the relevant agreement would otherwise not have permitted the Companies, the Song parties or Mr Guo to comply with their obligations in respect of tax payable on the Companies' profits. 1. Mr Guo also refers (at [83]) to a discussion, when Dameng became involved in the Southbank project, in which Mr Song is said to have informed him that: "Rest assured that our profit sharing arrangement remains the same that you are entitled to 20% of the overall profits of the project." Mr Guo also refers (at [97]) to having asked Mr Song, in January 2015 to give him "20% of the profits from selling of the two projects" and to a disagreement as to how interest was to be taken into account in determining the calculation of the profit. Mr Guo also refers (at [111]) to the agreement between him and Mr Song "that I was entitled to get 20% of the profits" and again describes the agreement (at [125]) in those terms. Mr Guo also identifies his concerns (at [137]) as that, at the time of swearing that affidavit: "I have not received 20% profits as a shareholder of New Mangrove and I have not received 20% profits for the sale of the Southbank Project." Mr Guo also sets out (at [145]) his estimate of his entitlement to profit from the projects, after allowing for costs of the projects, but without expressly referring to payment of tax. The note of the proceedings before Slattery J, at which a freezing order was initially made (Ex A3, 158) also referred to the submissions then made by the Guo parties that Mr Guo had not received "a profit share of 20%" or remuneration in respect of the venture. Mr Guo's affidavit evidence plainly provides little support for a trust extending beyond the 20% profit share to which he frequently refers. 1. In oral submissions, Mr Reynolds also identified a suggested deficiency in the pleading of the trust claims in the proposed FASOC. Mr Reynolds pointed out that the proposed FASOC still seeks final relief in terms of declarations that Mr Guo was entitled to 20% of the profits from the relevant developments although, I interpolate, it now adds claims for declarations that the funds held in the relevant bank accounts are held on trust for Mr Guo. Mr Reynolds points out that paragraphs 8–10 of the proposed FASOC continue to plead that the terms of the joint venture entitled Mr Guo to 20% of the profits of the venture although, I interpolate, an additional allegation is introduced in paragraph 9 of the proposed FASOC that Mr Guo was entitled to 20% of the "project". 2. Mr Reynolds points out that the constructive trust in respect of the Warwick Farm property pleaded in paragraph 15 of the proposed FASOC is said to be express or implied, derived from the matters pleaded in paragraphs 8–14 of the FASOC, or a constructive trust that arose by operation of law, although it is further particularised on the basis that New Mangrove held the Warwick Farm property as trustee for, relevantly, Mr Guo who was "beneficially entitled to an undivided 20% share of the property". Paragraph 22A of the proposed FASOC pleads that New Mangrove held the Warwick Farm Property Sale Proceeds (as defined) in trust for Mr Guo and Mr Song "commensurate with their interests under the Joint Venture" which are pleaded as an entitlement to a 20% profit share of the venture or as 20% of the property subject to the venture. The allegation in paragraphs 22E–22F of the proposed FASOC that refers to the "whole, or most" of the monies held to the credit of New Mangrove at the Commonwealth Bank of Australia being held on trust for the sole benefit of Mr Guo is then not linked to the alternative formulations of the trust, or the facts giving rise to it, in the pleading. The pleadings in respect of the other Companies and properties adopt a similar structure. 3. Mr Reynolds submits, with substantial force, that the proposed FASOC does not clearly identify how the alleged joint venture could support the various forms of trusts and agreements that are alleged, and also points out that Mr Guo's affidavit evidence, directed to a 20% entitlement of the profits from the venture, does not support the wider allegations as to a share of the property subject to the venture. 4. The Song parties also oppose leave to file the proposed FASOC so far as it contains allegations that the Companies hold money on trust for Mr Guo or consequential allegations and seeks associated relief. The Song parties submit that those allegations cannot succeed on the basis of the evidence led by the Guo parties and adopt the Administrators' submission in that respect. The Song parties also submit that: "The insurmountable hurdle to the proposed trust claims concerning the money in the [Companies'] bank accounts is that the [Guo parties] cannot establish any intention for the relevant [Company] to hold such money on trust, nor any reason why the Court would impose a constructive trust over such money. This is so in respect of both the Warwick Farm development property and the Southbank development property." 1. Mr O'Brien, who appears for the Song parties, also points out that the joint venture concerning the Warwick Farm development property was governed by a Co-Operation Agreement between New Mangrove, then under Mr Guo's control, and Mr Song, which provided that profits from the venture would be split 80% to Mr Song and 20% to New Mangrove rather than to Mr Guo. The Song parties submit that that agreement is inconsistent with any suggestion that Mr Guo, as distinct from New Mangrove, was party to the joint venture or that New Mangrove would hold property and funds on trust for Mr Guo. Mr O'Brien points out that Mr Guo's evidence is also that the Southbank development was to be undertaken through a corporate vehicle in which Mr Song and Mr Guo would hold shares. Mr O'Brien submits that the choice to structure the joint venture through a corporate vehicle is fundamentally inconsistent with the trust claims now advanced by Mr Guo in respect of SGC and Dameng and that the Guo parties' amended pleading is so obviously futile that it would be liable to be struck out if it had appeared in the original pleading. 2. I have concluded that leave should not be granted to file the FASOC in its present form. It seems to me that the Guo parties' proposed trust claim in respect of New Mangrove is not arguable, on the basis of the pleading and the Co-Operation Agreement on which it relies and the evidence led by the Guo parties which is now complete. The allegation of an express or implied trust is inconsistent with the terms of the Co-Operation Agreement, so far as it contemplated a splitting of the profits of the joint venture between Mr Song and New Mangrove, which could not occur if the relevant property or its proceeds were held on trust, such that monies would be distributed to the beneficiaries rather than to the participants in the joint venture, and to Mr Guo as the alleged beneficiary of the trust rather than to New Mangrove as the party to the joint venture. It also seems to me that a constructive trust could not be established in favour of Mr Guo, where the imposition of that trust would be inconsistent with the express terms of the arrangement by which New Mangrove rather than Mr Guo participated in the joint venture, quite apart from the detriment it would impose on third party creditors of New Mangrove. To the extent that consequential amendments are derivative of a trust claim in respect of New Mangrove, then leave to amend would also not be permitted for those amendments. 3. It seems to me that it would also not promote the just, quick and cheap resolution of the real issues in dispute to permit leave to file the FASOC in its present form in the Main Proceedings, so far as it advances trust allegations against SGC and Dameng in respect of the monies held in the relevant bank accounts, as distinct from a share of profits arising from the joint venture. First, the application for leave to amend is made late, although I recognise that the Guo parties have indicated that they do not seek to rely on additional evidence in respect of the amendments, and would require a further round of pleadings and delay the matter being set down for trial. Second, the Guo parties lead no affidavit evidence in explanation of the delay in making the amendments. I have referred above to their solicitors' explanation of the intent of the amendments, on which Mr Durack relied in submissions, in the letter dated 16 August 2017 to the Administrators' solicitor. That letter supports an inference that the amendments were made in order to seek to provide a basis for resistance to the application for release of the funds that are presently the subject of the undertaking, and so as to seek to advance the Guo parties' position over that of other creditors of the Companies. That does not necessarily establish that the amendments are improperly made, but it is not a persuasive explanation for a delay in making them. 4. Third, so far as the claim relies on an express or implied or constructive trust over the remaining assets of the Companies or the proceeds of the venture or the monies in the bank accounts, it is not supported by its basis in the pleading, and throughout Mr Guo's evidence, in an entitlement to a share of the profits of the venture. Fourth, although I do not exclude the possibility that a claim in tracing might have been articulated, the proposed FASOC does not presently articulate that claim or the material facts that might support it. Leave to continue the proceedings against the Companies 1. The Guo parties seek leave to proceed with the proceedings under s 471B of the Corporations Act if the Court winds up the Companies under s 75-41 of the Insolvency Practice Schedule (Corporations), or under s 447A of the Corporations Act if the Companies are placed in Court-ordered liquidation, or under s 500(2) of the Corporations Act if the Court terminates the DOCA under s 445D of the Corporations Act and the Companies are deemed to have passed resolutions to enter into creditors' voluntary liquidation. For the reasons set out below, the DOCA will be terminated under s 447A of the Corporations Act and the Companies will be placed in a Court-ordered liquidation, and it is therefore necessary to consider whether leave should be granted for the Guo parties to continue the Main Proceedings against the Companies in liquidation. 2. The purpose of s 471B of the Corporations Act is to prevent a company's assets being dissipated by unnecessary litigation; an applicant for leave will be required to show why it should not be left to prove its debt in the winding up, and it must show that the claim has a solid foundation and gives rise to a serious question to be tried; and factors relevant to the exercise of the court's discretion may include the degree of complexity of legal and factual issues and the prospect that a proof of debt would be rejected: Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669; 1 ACLC 742; Ogilvie–Grant v East (1983) 1 ACLC 742 at 743–5; Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 554–6; Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) (No 2) [2009] FCA 42 at [17]–[23]. In Swaby v Lift Capital Partners Pty Ltd [2009] FCA 749, to which the Administrators and the Song parties refer, Gilmour J summarised matters relevant to the grant of leave, including the amount and nature of the claim, the risk that issues would be relitigated, prejudice to other creditors, the cost of the hearing and the Companies' resources, and the risk that a liquidator may make proceedings inconsistent with that of the Court. 3. Mr Durack submits that the Court will ordinarily grant leave to proceed against a company in liquidation where there is a serious question to be tried and a claim for a proprietary remedy is brought, which cannot be proved in the winding up: Hewlett Packard Australia Pty Ltd v Siltek Holdings Pty Ltd [2005] NSWSC 672 at [7]; Oliveri v PM Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311 at [10]. Mr Durack also points to relevant factors, as summarised in Austin & Black's Annotations to the Corporations Act [5.471B], quoted in Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2012] NSWCA 435 at [33] as follows: "The relevant factors to be taken into consideration include the amount and seriousness of the claims; the degree and complexity of the legal and factual issues involved; the stage to which the proceedings, if commenced, have progressed; the risk that the same issues would be relitigated if the claims were to be the subject of a proof of debt; whether the claim has arguable merit; whether proceedings are already in motion at the time of liquidation; whether the proceedings will result in prejudice to creditors; whether the claim is in the nature of a test case for the interest of a large class of potential claimants; whether the grant of leave will unleash an "avalanche of litigation"; whether the cost of the hearing will be disproportionate to the company's resources; delay; and whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial (Austin and Black's Annotations to the Corporations Act at [5.471B])." 1. Mr Potts submits that leave to proceed against the Companies should not be granted, first, because the trust claims sought to be advanced in the FASOC are futile, and leave to amend should be refused. I have accepted that leave to file the FASOC in its present form should not be granted but the question of leave to continue the proceedings also arises in respect of the claims against the Companies in their existing form. Mr Potts also submits that the Court should not assume that the Administrators (or liquidators) will simply reject the Guo parties' claims because of the manner in which they treated Mr Guo's proof of debt for voting purposes. I do not make that assumption, although Mr Vaughan was frank, in cross-examination, about the fact that the view he took in respect of Mr Guo's claim for voting purposes provided an indication of the view he was likely to take in the proof of debt process. Having said that, there is no reason to think that the liquidators' (or Mr Vaughan's) minds are closed or that they or he would not have regard to the observations in this judgment or the result of the Main Proceedings as between the Guo parties and the Song parties if they were determined before they came to adjudicate the proofs of debt. Mr Potts also submits that the Court should not assume that it is inevitable that an appeal under s 1321 of the Corporations Act would be made against a decision of the deed administrators or liquidators adjudicating on the proofs of debt. I also do not assume that an appeal is inevitable, although the history of these proceedings suggests that it may well be probable or highly likely. 2. Mr Potts submits that the Administrators, or liquidators, would not be required, as the Guo parties assume, to take a passive role in the Main Proceedings. I accept that submission, although I also recognise that steps could sensibly be taken by the Administrators or liquidators of the Companies to seek to minimise the costs incurred by the Companies in the Main Proceedings, and leave issues that are in contest between the Guo parties and the Song parties to be determined between those parties, to the extent that it is practicable to do so. Mr Potts also submits that the expense of defending the Main Proceedings is likely to be considerable and the distraction for the Administrators (or liquidators) is also likely to be considerable. I also accept that submission, again subject to any steps which could be taken to minimise the liquidators' role in the Main Proceedings. The Song parties adopted the Administrators' submissions concerning the application for leave to proceed against the Companies. 3. I have regard to the fact that the claims made by the Guo parties against the Companies are substantial, although plainly not without difficulties, and relatively complex; that the Main Proceedings have been under way for a considerable time and are well-advanced, and a stay of those proceedings could bring about significant unfairness for the Guo parties, including in respect of their ability to recover costs incurred to date; that the Guo parties' existing claims are in part, proprietary in character, and to that extent could not readily be determined by a proof of debt process; and, in particular, a constructive trust claim is already pleaded by the Guo parties in respect of a share of the profit, although I have held above that leave should not be granted to the Guo parties to file the FASOC to extend that claim to, inter alia, the monies in the relevant bank accounts. 4. I also have regard to the fact that, if the Companies defend the proceedings, at least in respect of all issues, the costs of that defence could be substantial, given the range of matters in issue and the likelihood that a hearing would be relatively lengthy. It is probable that those matters would be dealt with more cost-efficiently by a proof of debt process, particularly if the liquidators deferred any determination of proofs of debt, at least by Mr Guo and the Song parties, until after the proceedings between them were determined and the liquidators could take account of the Court's findings in those proceedings. That course would address a difficulty that I noted in submissions, as to how the liquidators could adjudicate the respective claims, where they partly turn on an informal and oral arrangement of which the parties have very different versions. The grant of leave to bring the claim would not bring about a multiplicity of claims by other persons against the Companies. 5. I also recognise that it is possible, or probable, that Mr Guo or the Song parties would appeal under s 1321 of the Corporations Act from an adverse determination of their proofs of debt by the liquidators and that raises the risk that that appeal would be determined separately, and quite possibly before a different Judge, from the Main Proceedings. I also recognise that there is force in Mr Reynolds' submission that such an appeal is likely to be narrower in scope than the Main Proceedings, and therefore less costly, and that reduces the weight to be given to the risk of that appeal as a factor supporting the grant of leave to pursue the claims against the Companies in the Main Proceedings. 6. The matters to which I have referred above are finely balanced but, on balance, seem to me to support the grant of leave to continue the Main Proceedings, particularly given the extent to which they are already advanced, the fact that proprietary claims are already brought in them and the risk of appeal from the Administrators' or liquidators' decision as to proofs of debt. I am reinforced in that view by an additional factor, as to which I gave the parties an opportunity to make submissions after I reserved judgment, although it is not necessary to that view. I invited submissions as to the following questions: "1. If the proceedings against the Companies are stayed, if an order for winding up is made and leave is not granted to pursue them, would Mr Guo or the Song parties be bound, vis a vis the Companies, by any determination of matters in issue in the proceedings, including whether Mr Song had or did not have a right of reimbursement from the Companies of interest which he may have paid. In principle, his Honour considers that the parties would not be bound, vis a vis the Companies, by such a determination if the proceedings, by definition, did not proceed to hearing against the Companies. 2. If the parties would not be bound by such an outcome, vis a vis the Companies, does that support a grant of leave to pursue the proceedings, inter alia, so that the Companies and the Song parties are bound by any determination that the Song parties are or are not entitled to such interest which may respectively exclude or found a claim by the Companies against the Song parties." 1. It was common ground between the parties, in addressing those questions, that the Guo parties and the Song parties would not be bound as against the Companies if the proceedings brought by the Guo parties against the Companies were stayed. Although no party identified authority that was directly on point, the Guo parties submitted, with substantial force, that a company against which proceedings were stayed could not be treated as a party to proceedings for the purpose of determining questions of res judicata, issue estoppel or Anshun estoppel. The Administrators noted that the conclusion that a party against which proceedings had been stayed under s 471B of the Corporations Act was not bound by a determination of those proceedings was reinforced by the text of s 471B which extended that stay to proceedings "against the company or in relation to [its] property", although they noted that a liquidator could agree to be bound by the proceedings and also noted the possibility that it might amount to an abuse of process for the Guo parties or the Song parties to relitigate a position, inconsistent with the findings made in the proceedings, even if the Companies were not party to them. The Song parties accepted that, if the Main Proceedings were stayed, a liquidator would not be bound by a determination of the matters in issue in them, unless he undertook to be bound by the Court's findings, and did not address whether they (as distinct from the liquidators) would be bound by determination of any issue as between them and the Companies in that situation. 2. The Guo parties relied on this matter to repeat the submission as to the risk of the multiplicity of proceedings arising from a stay of the proceedings against the Companies. The Administrators accepted that, if a winding up order was made (which they submitted should not occur) the question whether the Court's factual determinations in the main proceedings would bind all parties was relevant to the discretion whether leave should be granted to continue the Main Proceedings, although they submitted that other reasons that weighed against the grant of leave should be given more weight. The Administrators also submitted, and I of course accept, that that is only one factor among a number of other factors that would be relevant to the grant of leave. The Administrators repeat their submissions, to which I have given substantial weight, as to the risk of depleting the resources available to the liquidators and creditors, if the Companies were required to attend a hearing taking approximately 4 weeks, rather than taking a narrower role in the proceedings. The Administrators also distinguish the decision in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 406, by reference to the complexities in that matter, and I accept that there is force in that distinction. The Song parties also accepted that that was a discretionary matter that would support the grant of leave, but only one of the relevant matters. 3. The Administrators also submitted that a reasonable external administrator, including the Administrators, would likely abide by any relevant factual determinations made by the Court in contested litigation in adjudicating a proof of debt. While there is substantial force in that proposition, that does not address the question whether, for example, the Song parties would be bound by a factual finding in the Main Proceedings that Mr Song had no proper claim for interest against the Companies, if the proceedings were stayed as against the Companies. The Administrators also indicated, for the first time in their submissions as to that issue, that they were prepared to agree to be bound by the Court's factual determination as to whether Mr Song had or did not have a right of reimbursement from the Companies of interest which he may have paid in their adjudication of the proof of debts relating to both the Song parties and the Guo parties, and that is a significant matter as the Court recognised in Swaby v Lift Capital Partners Pty Ltd above. No such concession was offered by the Song parties so far as the Court may find that they had no entitlement to interest, so as to found a claim by the Companies against them. 4. It seems to me that a potential outcome of the Main Proceedings, as between the Guo parties and the Song parties, is that the Court could find that Mr Song was not entitled to payment of interest on the amount to which he funded the Companies. The Companies would then have a claim against Mr Song for the repayment of the substantial amounts of interest paid to him and may also have arguable claims against the directors of the Companies who authorised or permitted the payment of those amounts to him. The Court could also find that the Guo parties (as distinct from the Companies) do not have any such claim against the Song parties and their only claim is as creditors of the Companies. It would be a most unfortunate result if the Companies did not have the benefit of the former finding, so as to found any claims by them against the Song parties, and that supports the grant of leave to continue the proceedings so that possibility is not foreclosed. I have not neglected the fact that there may be complexities in determining whether an issue estoppel arises as between the Companies and the Song parties, including by reference to whether there is an issue as between them in the Main Proceedings as to the Song parties' entitlement to interest, although the parties did not address that matter in submissions. That matter may depend on the position taken by the Administrators or liquidators in the Main Proceedings, including whether they advanced any cross-claim against the Song parties to seek to ensure that the Companies had the advantage of any finding that the Song parties were not entitled to such interest. 5. I should add that the fact that leave will be granted to the Guo parties to continue the proceedings against the Companies reinforces the Companies' claim to be released from the undertaking, so that the liquidators have the capacity to access the Companies' assets in order to pay costs that are properly incurred in the defence of the Main Proceedings or the prosecution of any cross-claims brought in them against the Guo parties or the Song parties. It seems to me that it would not have been in the interests of justice to allow the result sought by the Guo parties, that they were granted leave to continue the proceedings against the Companies but that the Companies were prevented, by the existing undertaking, from funding the costs of their defence or prosecution of cross-claims in those proceedings. The Guo parties' application to set aside the resolutions passed at the adjourned second creditors' meeting in respect of the DOCA or terminate the DOCA 1. By the proceedings commenced by Originating Process filed in Court on 16 November 2017, the Guo parties seek orders setting aside the resolutions passed at the adjourned second meeting of creditors under s 75-41 of the Insolvency Practice Schedule (Corporations); terminating the DOCA under s 445D of the Corporations Act; varying the DOCA under s 447A of the Corporations Act; and also seek personal costs orders against the Administrators and Mr Song. The Administrators vigorously resisted those orders. I make no comment as to whether the Administrators would preferably have taken a neutral role, leaving these issues to be addressed by the Guo parties and the Song parties: compare Vero Insurance Ltd v Kassem [2010] NSWSC 1481. The Song parties adopted the Administrators' submissions concerning those applications and submit that there is no basis for the Court to draw the inferences of improper purpose on Mr Song's part for which the Guo parties contend. 2. Before turning to the substance of those applications, I should note that the Guo parties attacked the treatment of both the Song parties' and Mr Guo's proofs of debt for voting purposes at the adjourned second meeting of creditors, although Mr Guo had not sought and did not seek review of the Administrators' decision as to the admission of his proof of debt for voting purposes. In written submissions, and from time to time in the cross-examination of Mr Vaughan, Mr Durack proceeded on the basis that the Administrators had rejected Mr Guo's proof of debt for voting purposes at the second creditors' meeting. That proposition was incorrect as a matter of fact, since that proof of debt had been admitted at a nominal value on the basis of the perceived difficulty in estimating its value. Mr Durack also submitted that the wrong procedure was adopted by Mr Vaughan at the second meeting of creditors, on the basis that Mr Guo's proofs could be marked as objected to if Mr Vaughan was in doubt whether the proofs should be admitted or rejected, or could be admitted for a just estimate of their value for voting purposes. Mr Durack also submits that the amount of $1.00 is not a just estimate of value for voting purposes. Mr Durack also submitted that the treatment of Mr Guo's proof of debt was inconsistent with the admission of the proofs of debt of Mr Song, Ms Zhang and Ms Song for voting purposes at the second meeting of creditors. The treatment of the claims was plainly different, but the circumstances of the claims were also different. 3. I have referred above to Mr Vaughan's explanation at the second meeting of creditors as to the basis on which he took that approach. Mr Vaughan's evidence in cross-examination was also that Mr Guo's proof of debt was admitted for voting purposes for $1.00 only because, although he may have some sort of claim, the Administrators could not estimate its outcome (T147). Mr Vaughan's approach was not objected to by Mr Guo's legal representatives at that meeting or challenged by a subsequent application to the Court, and it seems to me that such a challenge would have failed. The making of a just estimate for voting purposes at a second meeting of creditors is an exercise of a summary nature, as Barrett J observed in Selim v McGrath [2003] NSWSC 927; (2003) 47 ACSR 537 at [103]. An estimate of that character may properly be made in an appropriate case: Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; (2002) 44 ACSR 21 at 103; Re Opes Prime Stockbroking Ltd (admins apptd) (recs and mgrs apptd) [2008] FCA 1425; (2008) 171 FCR 473 at [63]; Weriton Finance Pty Ltd v PNR Pty Ltd (in admin) [2012] NSWSC 1402; (2012) 92 ACSR 88 at [51]. 4. The last of the proofs of debt submitted by Mr Guo (Ex P6, tab 73) referred to a claim in equity or contract for amounts that Mr Guo had "done his best to estimate" by his affidavit evidence in these proceedings. Where Mr Guo had himself identified that his claim was an estimate, and implicitly acknowledged the uncertainty in that estimate, it seems to me that the Administrators were entitled to approach that claim on that basis. A further difficulty with Mr Guo's claim arises from a matter put by Mr Durack in cross-examination to Mr Vaughan, namely that Mr Guo either claimed to be a beneficiary of monies held in trust by the Companies for him or to be a creditor of the Companies, and was putting one or the other but, implicitly, could not be both (T67). If that proposition was correct, then there was significant uncertainty as to the validity of Mr Guo's claim to be a creditor of the Companies, since it could only succeed if he was not properly treated as a beneficiary of the trusts which he asserted. 5. The Guo parties also criticise the Administrators' conduct in admitting Ms Song and Ms Zhang for voting purposes at the second meeting of creditors where their claimed debts appear to relate substantially to legal costs of the proceedings and costs of Grant Thornton that may or may not properly be payable by the Companies as distinct from by the Song parties. Mr Vaughan's evidence in cross-examination was that, to the extent that Ms Zhang's and Arnold Bloch Leibler's proofs of debt included legal costs, he proceeded on the basis that the parties were most likely jointly liable for the amounts of legal costs incurred in the proceedings and that the proofs of debt could be admitted to vote on that basis, where he was not adjudicating the proofs of debt on a final basis for the purpose of a distribution under a deed of company arrangement or in a liquidation (T55). I accept that there may well be an issue as to whether those claims would properly be admitted in whole or in part in determining proofs of debt in a deed administration or liquidation. However, it has not been shown that there was any impropriety in the Administrators' admitting them for the purposes of voting at the second meeting of creditors. 6. I now turn to the Guo parties' application for orders setting aside the resolutions passed at the adjourned second meeting of creditors under s 75-41 of the Insolvency Practice Schedule (Corporations). That section applies in this case, by reason of s 1606 of the Corporations Act, where a proposal was voted on or a resolution passed before, on or after the commencement of Sch 2 Pt 1 to the Insolvency Law Reform Act 2016 (Cth). That section deals with matters formerly dealt with in s 600A of the Corporations Act in relation to a company under external administration, and I have regard to case law dealing with that section in considering this application: DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 86 NSWLR 293; 307 ALR 143; 99 ACSR 121; Promnitz v Indochine Mining Ltd (subject to deed of company arrangement) [2015] FCA 857; (2015) 108 ACSR 134. 7. Mr Potts points out, and the evidence establishes, that the votes for the DOCA passed on a show of hands at the adjourned second meeting of creditors and that no poll was requested, although the Guo parties were represented by their proxy, their solicitor, at that meeting. Mr Potts provides a detailed analysis of the voting at the second meeting of creditors, which it is not necessary to repeat in this judgment. He submits that the relevant resolutions cannot and should not be set aside under s 75-41 of the Insolvency Practice Schedule (Corporations). 8. The first requirement to set aside a resolution under s 75-41 is, under s 75-41(1)(a), that a proposal was voted on by creditors, including at a meeting of creditors and that requirement is satisfied in this case. The second requirement is, under s 75-41(1)(b), that, if the vote or votes that particular related creditor(s) of the company cast on the proposal had been disregarded for the purposes of determining whether the proposal was passed, the proposal would, relevantly, not have passed. The term "related creditor" is defined for the purposes of s 75-41 as a person who was a "related entity" and a creditor of the company. The term "related entity" is defined in s 9 of the Corporations Act, in relation to a body corporate, as including a director or member of the body and a relative of such a director or member. It was not contested that each of Mr Song, Ms Zhang and Ms Jiaqi Song is either a director or a relative of a director of each of the Companies. 9. It seems to me that s 75-41(1)(b) is not satisfied and that section does not apply in respect of the resolutions passed in respect of SGC. The resolution to approve the DOCA in respect of SGC was passed on the voices rather than on a poll, and, disregarding the Song parties, three creditors (State Revenue Office Victoria, Arnold Bloch Leibler and Grant Thornton) voted in favour of that resolution in the case of SGC and two creditors (Australian Taxation Office and Mr Guo) voted against it. Although Grant Thornton had provided accounting and taxation advice to the Companies on the instructions of the Song parties, and Arnold Bloch Leibler previously represented the Companies and the Song parties in the Main Proceedings and continues to represent the Song parties in the proceedings, Mr Durack properly accepts that they are not related creditors for the purposes of s 75-41 of the Insolvency Practice Schedule (Corporations). 10. Mr Durack submits that the outcome of a hypothetical poll is relevant to satisfying the requirements of s 75-41(1)(b). I do not accept that s 75-41(1)(b) can be satisfied because a different result might have followed had a poll been requested by Mr Guo, where that did not occur. To that extent, I prefer the approach adopted in Kantfield Pty Ltd v Plastamatic (Aust) Pty Ltd (1994) 14 ACSR 687 and QBI Corporation Pty Ltd v Plantation Rise Pty Ltd [2010] QSC 102; (2010) 77 ACSR 573 at [38]–[40] to the approach taken in M & G Oyster Supplies Pty Ltd v Nonchalont Pty Ltd (admin apptd) (1995) 19 ACSR 27; 14 ACLC 415, on which the Guo parties rely. It seems to me that the section needs to be applied to the facts as they exist, not to the facts that might have existed had the parties conducted themselves differently. The requirement in s 75-41(1)(b) that, if the votes of the Song parties were disregarded, the resolution would not have passed or would have had to be decided in a casting vote is therefore not satisfied in respect of SGC. 11. It seems to me that s 75-41(1)(b) is satisfied in respect of the resolutions passed in respect of Dameng and New Mangrove. The resolution to approve the DOCA in respect of those companies was also passed on the voices rather than on a poll, and, disregarding the Song parties, two creditors (Arnold Bloch Leibler and Grant Thornton) voted in favour of that resolution and two creditors (Australian Taxation Office and Mr Guo) voted against it, so that the resolution would not have passed or would only have been decided on a casting vote. 12. Where the requirements of s 75-41(1)(b) are satisfied in respect of Dameng and New Mangrove, the remaining requirements to allow orders to be made under s 75-41, under s 75-41(1)(c), are that the passage of the resolution is contrary to the interests of the creditors as a group or of a relevant class of creditors, or that the resolution has prejudiced, or is reasonably likely to prejudice, the interests of creditors who voted against the proposal, to an extent that is unreasonable having regard to the matters specified in s 75-41(2). The reference to "interests of creditors" in s 75-41(1)(c) corresponds to the creditors' interests to be addressed in an administrator's opinion under s 438A of the Corporations Act and the administrator's report under s 439A of the Corporations Act and that concept is to be construed so as to promote the object of Pt 5.3A specified in s 435A of the Act: DSG Holdings Australia Pty Ltd v Helenic Pty Ltd above at [90]–[91]. 13. As Mr Potts points out, where the real alternatives appear to be the entry into the DOCA or liquidation, then the question of "unreasonable prejudice" for the purposes of s 75-41(1)(c)(ii) will depend on whether creditors are better off with the DOCA or with a liquidation: Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; (2000) 156 FLR 453; 34 ACSR 391 at [89]–[92]. The matters specified in s 75-41(2) relevant to that assessment are the benefits resulting to the related creditor, or to some or all of the related creditors, from the resolution; the nature of the relationships between the related creditors and the Companies; and any other relevant matter: M & G Oyster Supplies Pty Ltd v Nonchalont Pty Ltd (admin apptd) above; Joseph Khoury & Sons v Zambena Pty Ltd [1999] NSWCA 402; (1999) 217 ALR 527 at [108]–[112]. 14. It is not necessary to decide whether the DOCA should be set aside under s 75-41 in respect of Dameng and New Mangrove, where I hold below that the DOCA should be terminated in respect of all of the Companies under s 447A of the Corporations Act. Had it been necessary to determine the matter on that basis, I would have held that the DOCA does unreasonably prejudice other creditors where it would exclude the prospect of further investigation of any possible recovery of the amounts paid to Mr Song, purportedly in reimbursement of interest, beyond the amounts he contributed to the Companies by way of funding, and for the reasons noted below in dealing with s 445D(1)(e) of the Corporations Act. On that basis, I would have made orders under s 75-41(3) of the Insolvency Practice Schedule (Corporations) setting aside the resolutions to execute the DOCA in respect of Dameng and New Mangrove and setting aside the DOCA in respect of those companies. Application under s 447A of the Corporations Act 1. The Guo parties contend, and Mr Potts accepts, that the Court also has power to order that the Companies be wound up under s 447A of the Corporations Act, if it is satisfied that course is appropriate in the circumstances. The Guo parties refer to my decision in Re Hayes Steel Framing Systems Pty Ltd (admins apptd) [2017] NSWSC 385 and I draw upon my review of the authorities in that decision in outlining the applicable legal principles below. 2. In Joseph Khoury & Sons v Zambena Pty Ltd above, in a passage quoted with approval by Campbell J in Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510, Fitzgerald JA (with whom Beazley JA and Davies AJA agreed) observed that: "… the Court should not encourage the notion that 'anything goes' provided only that a deed of company arrangement provides some benefit for dis-satisfied creditors. Commonly, companies proposing deeds of company arrangement are insolvent and what is proposed involves some benefit for unsecured creditors. That cannot be permitted to be used by those who promote such proposals as a critical factor which warrants the Court's refusal to terminate or declare void such deeds, especially when different groups of unsecured creditors are treated differently." 1. Mr Durack also relies on Erol v Cavus [2012] QSC 371, where the Supreme Court of Queensland, in a brief judgment, ordered the termination of a deed of company arrangement under s 447A of the Corporations Act where it found that the deed of company arrangement involved an attempt to avoid investigation into past transactions and deprive the plaintiff of the protection afforded by freezing orders, which directors of the company had unsuccessfully attempted to vary. It seems to me that that is a decision on the facts of the particular case. By contrast, in this case, it seems to me the companies were properly placed in voluntary administration and the DOCA was not necessary in order to obtain the lifting of the undertaking, where it ought to have been apparent to all parties that the Court would likely order the release of that undertaking once independent insolvency administrators were appointed and the need for it was displaced. While I recognise that Boddice J there gave weight to the fact that the release of funds would result in a loss of protection afforded to the plaintiff in the proceedings (at [43]) I give little weight to that matter in this application, because neither freezing orders, nor undertakings in substitution for them, are properly granted so as to treat a plaintiff as a secured creditor to the disadvantage of other creditors of a company. 2. In Erol v Cavus above at [44], Boddice J also gave weight to the fact that there was a significant risk that, after distribution by the deed administrators, remaining funds would be insufficient to meet the plaintiff's claims. That risk does not arise in that particular form in this case, where I have held that the DOCA should be terminated and the Companies placed in liquidation. I recognise that there is, here, a risk that the monies held by the Companies will be dissipated, at least in part, by the Administrators', deed administrators' and liquidators' remuneration and costs and expenses and the costs of this application and any review of the liquidators' adjudication of proofs of debt under s 1321 of the Corporations Act, and to that extent will or may not ultimately be available to meet the Guo parties' claim, if they are successful, or the claims of other creditors. That, however, is the consequence of the fact that the Guo parties are not or may not be entitled to priority over the remuneration, costs and expenses of the insolvency practitioners or over other creditors and face the same risks as any other litigant that brings proceedings against entities that may not have the capacity to meet a judgment. 3. The Guo parties also refer to Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883; (2003) 47 ACSR 391, where Barrett J terminated a voluntary administration where a company's sole director placed the company in voluntary administration with a view to adopting a deed of company arrangement by a decision of creditors (being himself and two persons allied with him) of doubtful value that would bar particular claims already being litigated against the company, and Mr Durack submits that this case has similarities to that case. It does not seem to me that that similarity is a strong one, since, quite apart from the debts claimed by the Guo parties and the Song parties, the Companies owe a substantial unpaid withholding tax debt to the Australian Taxation Office, as matters stand, and would owe substantial income tax to the Australian Taxation Office if the payment of interest to Mr Song was set aside and, in consequence, they had earned substantial profits on the projects. There is no suggestion that they can presently pay both the amounts claimed by the Guo parties and the amounts presently due to the Australian Taxation Office, or the amount that would be due to the Australian Taxation Office as income tax if the payments of interest to Mr Song were set aside. 4. In Public Trustee (Qld) v Octaviar Ltd (subject to deed of company arrangement) (recs and mgrs apptd) [2009] QSC 202; (2009) 73 ACSR 139 at [182], McMurdo J noted that a winding up may serve the public interest where investigations and recovery proceedings are likely to be funded and could realistically lead to persons who engaged in suspect transactions being brought to account. In Workers Compensation Nominal Insurer v Perfume Empire Pty Ltd [2011] NSWSC 379 at [22], Barrett J observed that the cases in which the court has intervened to terminate a voluntary administration are all cases in which there has existed what might be termed some "ulterior element" and referred to several cases where such an order had been made. It seems to me that the Song parties likely have such an ulterior motive in this case, at least in the sense that the continuance of the proceedings against them may be less likely, in a practical sense, if the Guo parties have no practical prospect of enforcing a judgment against the Companies' funds, where Mr Song and Ms Zhang are resident in China and Ms Zhang's assets in Australia may be limited to a residential property. 5. In Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) (2015) 110 ACSR 203; [2015] FCA 1360 above, Beach J considered the circumstances in which an order could be made under s 447A of the Corporations Act to set aside a resolution of creditors before a deed of company arrangement was executed, and noted the relevance of the factors under s 445D of the Corporations Act in those circumstances. His Honour held that such an order could be made where it was in the public interest that the company's administration come to an end and that it be wound up. His Honour observed (at [67]–[68]) that the Court's power under that section is to be exercised having regard to, inter alia, the interests of creditors as a whole and the public interest, but the public interest may override the creditors' interests and favour liquidation, and that the public interest included considerations of commercial morality and the interests of the public at large. His Honour also observed (at [69]) that the Court could apply by analogy the principles applicable under s 445D in exercising a power under s 447A to set aside a resolution to enter into a deed of company arrangement and order a winding up. His Honour noted that that power extended to the situation where creditors may be better off under the deed of company arrangement than a liquidation, although the Court would no doubt have regard to that matter as tending against such an order. His Honour also noted (at [74]) that the fact that the entry into a deed of company arrangement may prevent an effective investigation by a liquidator into relevant transactions and the opportunity for greater returns may render it contrary to creditors' interests. 6. I will deal here with the factual matters and the parties' submissions that are relevant to the Guo parties' applications to set aside the DOCA under s 447A or alternatively s 445D of the Corporations Act. In support of the submission that the DOCA should be terminated under s 447A of the Corporations Act (or alternatively s 445D of the Corporations Act), Mr Durack drew attention, in written submissions, to voluminous correspondence from the Guo parties' solicitors to the Administrators, throughout the period of the voluntary administration, asserting the Guo parties' position. I have had regard to that correspondence, although it provides limited assistance where these are matters to be determined in this application or in the Main Proceedings. 7. The Guo parties submit, and I accept, that the DOCA was unlikely to maximise the chances of the Companies continuing in business, where the business of the Companies had substantially ceased in 2014. The Guo parties also submit that Mr Song's purpose, through the DOCA, was to obtain a substantial portion of the funds that were the subject of the undertaking to the Court for the benefit of himself, Ms Zhang and Ms Song. I accept that that was a possible outcome of the DOCA, but only to the extent that Mr Song, Ms Zhang and Ms Song were properly treated as creditors of the Companies when proofs of debt were assessed. The Guo parties also submit that Mr Song planned that, through the DOCA and the claims by Ms Zhang and Ms Song, he could recoup substantial legal costs of the litigation and accountancy costs in respect of the Companies. That would also be a possible outcome of the DOCA, but also only if those amounts claimed by Ms Zhang and Ms Song were treated as proper claims when proofs of debt were assessed for the purposes of the DOCA. 8. The Guo parties submit that Mr Song also planned that the DOCA would bring the Main Proceedings to an end, including the claims against himself, Ms Zhang and Ms Song and allow extra leverage for a settlement with Mr Guo. I accept that the DOCA would have brought the Main Proceedings to an end as against the Companies, by compromising the claims advanced against the Companies in them. The suggestion that Mr Song could have expected that the DOCA would bring to an end the proceedings against himself, Ms Zhang and Ms Song is somewhat speculative, although I accept that the level of assets available in Australia to meet a judgment would plainly have been an important practical consideration for the Guo parties. It is otherwise not necessary to reach findings as to the subjective purposes of Mr Song in respect of the DOCA, where this application can be determined on other grounds. 9. The question whether the DOCA should be terminated also turns, among other matters, on whether there is sufficient basis for a claim against Mr Song in respect of the interest paid by the Companies to him to warrant further investigation of and potentially pursuit of that claim by liquidators appointed to the Companies, and to have the result that the surrender of a claim to unpaid interest by Mr Song adds no real value to the DOCA. I now turn to the evidence in the Main Proceedings and documentation as to that matter, the Administrators' view and the parties' submissions. I again emphasise that I will determine no more than needs to be determined for the purposes of these applications. 10. Mr Guo's affidavit evidence is that no agreement existed as to payment of interest on funds advanced by Mr Song, including as to when interest was chargeable, any capitalisation of that interest or the rate of interest that was chargeable. Mr Song's affidavit dated 17 June 2016 asserts that the money he advanced would have a cost and would carry interest (Song 17.6.16 [19]) and that proposition is plainly disputed by Mr Guo. Mr Song's evidence does not refer to any conversation as to the amount of that interest and his position is that he would receive both that interest and then the agreed share of the profits. The Cooperation Agreement (Ex P6, tab 27 (Plaintiffs' translation), tab 28 (Defendants' translation)), executed in respect of the Warwick Farm property, does not refer to funding by way of loan or to the payment of interest and refers to an 80/20% split in respect of shares of the "project". 11. I accept that, as Mr Reynolds emphasised, there was some evidence available to the Administrators, and noted in their Supplementary Section 439A Report, that provided some support for the existence of an arrangement that Mr Song should be reimbursed for interest incurred on borrowings made to fund the projects. In particular, there is also evidence that, in October 2011, Mr Guo and Ms Song had sought assistance from PricewaterhouseCoopers in respect of the preparation of a loan agreement between Mr Song and SGC and that that firm was requested to assist SGC: "in estimating an arm's length range of interest rates for the above loan, including initial fact gathering and development an[d] approach, credit quality analysis, interest rate bench-marking and transfer pricing documentation." The Administrators rightly recognised, in their Supplementary Section 439A Report, that that dealing provided some support for a view that Mr Song's advances were in the form of loans to SGC and, I add, that they were intended to bear interest, since otherwise there would have been no purpose in assessing an arm's length rate of interest for such a loan. 1. There are significant inconsistencies in the Companies' financial statements and income tax returns as to the existence of any liability for interest supporting the reimbursement of interest to Mr Song. The Supplementary Section 439A Report noted that amounts had been classified as loans by Mr Song to SGC in the balance sheet prepared by the Companies' former accountants, Addsum Accountants, in the accounts for SGC in the financial years ending 30 June 2010 and 30 June 2011 and for New Mangrove in the financial year ended 30 June 2011, although that does not establish that such a loan was interest-bearing. 2. Ms Song's affidavit (Ex P3) indicates that her evidence in the substantive proceedings will be that loan agreements between the Companies and Mr Song were prepared in late 2013 and that: "[Mr Song] had lent money to [SGC] and [Dameng], but there was no written agreement to that effect. Because a contract had now been entered with [third party] and [SGC] and Dameng would shortly receive payment for the Southbank Properties, my parents and I wanted these financing arrangements to be clearly documented in formalised agreements. Two loan agreements were prepared by [solicitors], one between [Mr Song] and [SGC], and the other between [Mr Song] and [Dameng], but they were not executed." (Ex P3, [105]) Ms Song's evidence will also be that a loan agreement between Mr Song and New Mangrove was prepared in July 2014 (Ex P3, [106]) and that agreement was ultimately executed. Mr Reynolds emphasised, in submissions, that these loan agreements (again, only one of which was executed) could operate retrospectively. While I do not doubt that proposition, that does not address the question of whether the entry into the unexecuted agreements took effect or the executed agreement was a proper exercise of director's duties in the circumstances. 1. On or about 31 March 2017, Grant Thornton prepared further financial statements (Ex P6, tab 51) for the financial years 2010 to 2015 for the Companies, apparently on Ms Song's instructions, which recorded liabilities for interest due to Mr Song on funding that he had provided to the Companies. Mr Vaughan referred, in cross-examination, to his understanding that accounts had been prepared by Grant Thornton as part of a process by which they were engaged to collate and view available records and try to prepare accounts from them for the purposes of the directors, then members of the Song family (T91). Those financial statements were in the nature of special purpose financial reports and the compilation report dated 31 March 2017 signed by Grant Thornton indicated that they had been prepared upon information and instructions provided by the directors and were for the use of the directors. Those financial statements therefore provide little independent assistance as to the existence, or non-existence, of the interest obligations recorded in them, since their content is the product of the instructions given by Ms Song to Grant Thornton. Oddly, each of those financial statements also includes a director's declaration signed by Ms Song, dated 31 March 2017, that there were reasonable grounds to believe that the relevant company would be able to pay its debts as and when they become due and payable. That may or may not have been the case in the period 2010 to 2015, but it was plainly open to question as at 31 March 2017 when withholding tax obligations had arisen and the Companies then did not have funds available, while the undertaking was in place, to meet them or meet both those liabilities and the Guo parties' claims. 2. Mr Durack submits, and I accept, that the Administrators seem to have given significant weight to the Companies' financial statements in making their recommendation in favour of a proposal for a DOCA in the Section 439A Report and Supplementary Section 439A Report. It seems to me that little weight could be given to the financial statements prepared by Grant Thornton where, as I noted above, they did little more than record the consequence of the instructions that Ms Song had given to Grant Thornton and Grant Thornton had made the limits of their role abundantly clear in those financial statements. Mr Durack submits, and I also accept, that the Song parties had obvious incentives to seek to cause an entitlement to interest to be recorded in those financial statements, whether or not it properly existed, where those financial statements were provided to Mr Guo shortly before a mediation in the proceedings held in April 2017; would likely be relied on to support their contention in the Main Proceedings that the Companies had not made a profit in respect of the projects; and would likely also be relied on to provide an explanation for the transfer of funds to Mr Song in excess of the amounts that he had originally lent to the Companies. 3. The Section 439A Report and Supplementary Section 439A Report plainly disclosed the possibility that less interest was owed to Mr Song than he had claimed, by reference to the lower amount of interest expenses in financial reports prepared by Azda Accountants for the Companies. However, Mr Vaughan also acknowledged in cross-examination that, if the position recorded in the Companies' tax returns was correct, and no interest was paid or payable to Mr Song in respect of funding provided to the Companies, then there would be substantial profits in the Companies (T148–149). That was not made clear by the Section 439A Report or Supplementary Section 439A Report, and Mr Vaughan's evidence in cross-examination that the Voluntary Administrators tried to include as much information as they could (T149) is not a complete answer to that difficulty. 4. I have regard to the fact that it is by no means implausible that the arrangements between the parties would initially have contemplated that Mr Song's 80% profit share in the venture would compensate him for his funding costs, rather than that profit share being calculated after those funding costs. I also have regard to the absence of contemporaneous documentation of any arrangement for reimbursement of interest by the Companies to Mr Song; the absence of evidence of Mr Song as to any contemporaneous discussion of that matter and Mr Guo's denial of such an arrangement; the fact that subsequent loan agreements were prepared well after the event, apparently based on a reconstruction of what had occurred, and two of them were not executed in any event; the substantial inconsistencies in the Companies' financial records and income tax returns concerning the treatment of interest; and the possibility that Mr Song, Ms Zhang and Ms Song acted in conflict of interest or conflict of duty and interest in authorising the relevant payments. 5. In cross-examination of Mr Vaughan and in submissions, Mr Durack also devoted substantial efforts to criticising the likely return to creditors under the original DOCA proposal and the DOCA that reflects Mr Song's revised proposal, on the basis of the several scenarios contained in the Section 439A Report and Supplementary Section 439A Report. It seems to me that those scenarios were intended to demonstrate the outcome of creditors accepting the DOCA, on a range of contestable assumptions which were identified in those reports. Those illustrations would have assisted creditors to understand the outcome of accepting the then proposed DOCA, but did not bind the Administrators or deed administrators to accept any or all of those assumptions in adjudicating proofs of debt under the DOCA. Mr Durack, in cross-examination and submissions, largely failed to distinguish between the illustration of the likely outcome of the DOCA if those assumptions proved to be correct and the ultimate result of a DOCA as a matter of fact. 6. Mr Durack also relies, in submissions, on a range of potential outcomes of a liquidation drawn from Mr Potter's evidence on which the Guo parties will rely in the Main Proceedings. Mr Potts responds that several adjustments would be required to Mr Potter's report in order fairly to present the Companies' financial position. It is not necessary to address that submission, since Mr Potter's report was only tendered in this application as proof of the evidence which the Guo parties will seek to lead in the Main Proceedings and not as evidence of the facts asserted in it and it is therefore not necessary to determine its correctness. 7. Mr Potts submits that, if the Guo parties' contention that the Companies' remaining funds are held on trust is correct, then no creditor, including the Australian Taxation Office, would receive money through a deed of company arrangement or a liquidation. I do not accept that submission, which assumes that there could be no recovery of the interest paid by the Companies to Mr Song against him or persons associated with him. 8. Mr O'Brien submits that the DOCA does not unfairly prejudice any unsecured creditor and is not oppressive or discriminatory against Mr Guo, who would be entitled to a distribution from the deed fund so long as his claim is admitted in full or in part. Mr O'Brien also submits that leaving the DOCA in place is consistent with the objectives outlined in s 435A of the Corporations Act, namely to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chance of it, or as much as possible of its business, continuing in existence or, 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. Mr O'Brien also submits that a liquidation would likely result in all admitted creditors (as defined in the DOCA) recovering a lesser return or dividend in an uncertain timeframe. That proposition also depends upon the assumption that the liquidators could not successfully recover the amount of monies transferred to Mr Song, to the extent that they exceed the amount of funding that he provided to the Companies, by claims against him, Ms Zhang or Ms Song. 9. I should add, for completeness, that the Guo parties, by their Counsel, offered an undertaking in oral closing submissions that, if SGC, Dameng and New Mangrove were placed in liquidation then, on application by the liquidators to the Court, the Guo parties would consent to a partial release of the undertaking provided to the Court to release up to $50,000 from the amount subject to that undertaking to be used: "solely for the purposes of the liquidator(s) in conducting an investigation in respect of possible claims arising for the benefit of the Companies from the transfers to China made by Xinwei Song, any loan agreements relating to such transfers and any amounts paid or payable by each of the Companies to Xinwei Song." That undertaking also extended to Mr Guo making available the amount of $50,000 for each Company to be used solely for that purpose, if such monies were not released. Mr Reynolds advanced criticisms of the terms of that undertaking, and it is notable that it seeks to limit the purposes for which the liquidators may use those funds, including the identity of the target of any investigation by the liquidators. In the event, nothing turns on that undertaking, where I have concluded above that the undertaking that prevents access to the Companies' own funds should be released. 1. In summary, there seems to be no prospect of the Companies or their business continuing in existence, where that business is complete. Whether the DOCA would result in a better return for the Companies' creditors and members than would result from an immediate winding up of the Companies depends upon whether recoveries could be made from Mr Song, Ms Zhang or Ms Song of interest paid to Mr Song in excess of the funding that he provided to the Companies. There seems to me a need for further investigation of the payment of the interest to Mr Song and the prospect of recovery proceedings. Given the matters in issue between the parties, it may well be necessary for at least Mr Guo and Ms Song, and possibly also Mr Song and Ms Zhang, to be examined in liquidator's examinations before any determination of a proof of debt is made, unless a liquidator adopts the alternative course, to which I refer elsewhere in this judgment, of deferring any determination of a proof of debt until after the determination of the proceedings between Mr Guo and Mr Song. While I recognise that there may be significant practical difficulties with the enforcement of an Australian judgment against Mr Song in the People's Republic of China, a claim may be available against Ms Zhang (who has property in Australia) and Ms Song, to the extent that they were involved as directors in authorising payments made by the Companies to Mr Song. Mr Song and Ms Song may also have other practical reasons to seek to meet any judgment against them voluntarily, or to settle proceedings against them. 2. It seems to me that creditors' interests are likely to be better served by further investigations and leaving open the option of proceedings against the Song parties, rather than by entry into the DOCA which does not involve a contribution of additional funds by the Song parties, beyond the monies already held by the Companies, or repay all or part of the amounts transferred to Mr Song in China, and merely abandons a claim for interest by Mr Song which is of questionable validity. I am therefore satisfied that an order should be made under s 447A of the Corporations Act that the DOCA be terminated and that each of the Companies be wound up by the Court, subject to determining the identity of the liquidator to be appointed. 3. Alternatively, the Guo parties sought orders modifying the operation of the DOCA so that the 120 day period for release of the funds that are the subject of the undertaking would be suspended until after the Main Proceedings had concluded and no further steps would be taken to implement or amend the DOCA. Had I not ordered that the DOCA be terminated, I would not have made such an order, where that modification would alter the substance of the DOCA approved by the Companies' creditors and would force a very different arrangement from that which they approved upon them. Whether the DOCA should be terminated under s 445D of the Corporations Act 1. Alternatively, the Guo parties seek orders that the DOCA be terminated under s 445D(1)(e)–(g) of the Corporations Act. An order terminating a deed of company arrangement may be made under s 445D(1)(e) if effect cannot be given to the deed without injustice or undue delay and the element of "injustice" may be established if the effect of the deed would be to avoid a proper investigation of relevant transactions: Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd [2001] NSWSC 89; (2001) 37 ACSR 394 at 431, varied on appeal Kirwan v Cresvale Far East Ltd (in liq) above; Irving v Smith [2008] FCA 1391; (2008) 220 FCR 439; 68 ACSR 14 at [53]; Deputy Commissioner of Taxation v TMPL Pty Ltd (subject to deed of company arrangement) (No 3) [2011] FCA 1403; (2011) 289 ALR 69 at [96]. This paragraph is directed to the "effect" rather than the purpose of a deed, namely whether the effect of the deed is unfair or inequitable in its impact: Cresvale Far East Ltd v Cresvale Securities Ltd above at [188]; Irving v Smith above at [53]. 2. I have largely referred to the factual matters that are relevant to whether the DOCA should be terminated on this basis in dealing with the application for its termination under s 447A of the Corporations Act above. In support of the application under s 445D(1)(e), the Guo parties also rely on the fact that the funds that are the subject of the undertaking must be released to give effect to the DOCA, and contend that that involves injustice where the Guo parties will lose the ability to recover any judgment against those funds. I do not accept that submission, because I do not accept that the Guo parties have established that they should have priority to other creditors of the Companies, and the Guo parties have no proper basis to expect that those funds will be retained as security for any judgment in their favour, when there is no longer a threat that they will be improperly dissipated to defeat a judgment in a manner that would support the continuance of the undertaking. Having regard to the matters that I set out above in dealing with the application under s 447A of the Corporations Act, I consider the DOCA could properly have been set aside under s 445D(1)(e) of the Corporations Act to allow further investigation of claims against the Song parties to take place. However, I considered it preferable to make orders under s 447A of the Corporations Act so that the liquidators will have the powers available to them in a court-ordered winding up. 3. The Guo parties also seek an order terminating the DOCA under s 445D(1)(f) of the Corporations Act. An order terminating a deed of company arrangement may be made under that subsection if that deed is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more of the company's creditors or is contrary to the interests of the creditors of the company as a whole. Whether a deed of company arrangement is oppressive or unfairly prejudicial or discriminatory under s 445D(1)(f) will be determined by reference to the general principles underlying Pt 5.3A, including a creditor's right to be paid or wind up a company or have the company administered by the administrator in a way which will see the creditor paid from the company's property: Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd [2005] WASC 261; (2005) 228 ALR 598 at [59]–[60]; Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to deed of company arrangement) [2007] SASC 296; (2007) 64 ACSR 91 at [114]; Re Recycling Holdings Pty Ltd [2015] NSWSC 1016; (2015) 107 ACSR 406 at [60]–[61]. 4. It is not necessary to decide whether an order terminating the DOCA may be made under s 445D(1)(f) of the Corporations Act on the basis that it is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more of the Companies' creditors or is contrary to the interests of the creditors of the Companies as a whole, where I have held above that the DOCA should be terminated under s 447A of the Act. Had it been necessary to determine the matter on that basis, I would have held that the DOCA is not unfairly prejudicial to or unfairly discriminatory to the Guo parties where it treats all creditors other than Mr Song equally, and Mr Song less favourably than other creditors, but that the DOCA is contrary to the interests of the Companies' creditors as a whole where it would exclude the prospect of further investigation of claims in respect of the amounts paid to Mr Song, purportedly in reimbursement of interest, beyond the amounts he contributed to the Companies by way of funding, and for the reasons noted above in dealing with the application under s 447A of the Corporations Act. 5. The Guo parties also seek an order terminating the DOCA under s 445D(1)(g) of the Corporations Act which permits the Court to terminate a deed of company arrangement if it is satisfied that the deed should be terminated for some other reason. For example, a deed may be set aside under s 445D(1)(g) if the proposal has a wrongful purpose or there is a public interest in the liquidator's examination of the affairs of the failed company, even if it is not established that that termination is in creditors' interests: Deputy Commissioner of Taxation v Portinex Pty Ltd above at [99]; Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd above at [63]; Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to deed of company arrangement) above at [116]; Deputy Commissioner of Taxation v TMPL Pty Ltd (subject to deed of company arrangement) (No 3) above at [96], [133]–[134]; Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) above at [73]. It is also not necessary to decide whether an order terminating the DOCA may be made under s 445D(1)(g) of the Corporations Act, where I have held that the DOCA should be terminated under s 447A of the Act. Had it been necessary to determine the matter on that basis, I would have held that there was some other reason to set aside the DOCA and it should be set aside as against the public interest where it would exclude the prospect of further investigation of the position as to the amounts paid to Mr Song, purportedly in reimbursement of interest, beyond the amounts he contributed to the Companies by way of funding, and without paying withholding tax on those amounts. Whether the Administrators should be appointed as liquidators of the Companies 1. The Guo parties sought orders appointing liquidators which they nominated to the Companies. This submission and the Guo parties' submissions as to the Administrators' remuneration (which I will address below) turned, at least in part, on their submissions that the Administrators' conduct was inappropriate and possibly improper. 2. In an application before Rein J on 19 September 2017, the Guo parties submitted that the Administrators' conduct had at least been "inappropriate" and "irresponsible" and Mr Durack submitted that: "They [the Administrators] received a payment of some $50,000 by one of [the Song parties] to commence things, and then they have proceeded, and in our submission, proceeded in a way that is inappropriate in the circumstances. So our issue is not just in relation to the bank account monies, it is also in relation to the approach of the [Administrators] and we will be submitting that their approach has been irresponsible, and that they should not be receiving their fees, and certainly not the fees of these motions." 1. In their written submissions in these applications, Mr Durack submitted that the Administrators' approach to the claims of the Song parties has "not been impartial" and that their recommendation to creditors: "reveal a disposition to side with the Song interests in the dispute that was acknowledged by them to be 'a central issue of contention in these administrations'." Those submissions also contended that the Administrators': "preparedness to endorse Mr Song's wishes and assertions disregarded Mr Guo's interests and the interests of other external claimant creditors." Those submissions also suggested, variously, that the Administrators "were disposed to Mr Song's side" and "had a disposition in favour of the Songs which continued in the issue of the supplementary report" and "became partial to Mr Song's interests in the pursuit of [DOCA]" and had "shown partiality to the interests of the Songs" and that: "a much greater concern arises about the performance of the [Administrators]. They have become partial to the Song interests." 1. It is not entirely clear whether those submissions were qualified or abandoned in the Guo parties' oral closing submissions, where Mr Durack observed that the Guo parties: "do not contend that the Administrators' support for the [DOCA] and opposition to the proceedings continuing against the Companies was a consequence of any conflict of interest and duty issue, nor was it a knowing combining with the pursuit of Mr Song's particular purposes." (T173) When I inquired of Mr Durack whether that submission amounted to an abandonment of the Guo parties' previous submissions, he responded that he did not think it did, and that the Guo parties: "don't abandon the proposition that the Administrators have pre-judged the merits of the claim nor that they in effect took Mr Song's side in relation to the merits of the claim. I wasn't conscious that we had made a submission that the Administrators were knowingly combining with Mr Song's particular selfish purposes." (T173) Mr Durack also summarised the Guo parties' submissions (T174) with effect that: "What we were saying is the Administrators had embraced Mr Song's claim for his interest entitlement and had become partial in so doing." 1. As I noted above, the Guo parties submitted that the Administrators had shown partiality to the interests of the Song parties. I am not satisfied that any lack of impartiality on the part of the Administrators or deed administrators has been established. It seems to me that the evidence led in these proceedings confirms that the Administrators have approached the relevant issues with considerable care and in a proper manner, although I have ultimately formed a different view from that reflected in their recommendation to the second meeting of creditors. In particular, Mr Vaughan presented in the documents and in cross-examination as a thoughtful and careful insolvency practitioner who fairly recognised the competing arguments that existed in a complex dispute. 2. Mr Durack also submits that the Administrators have become wedded to the view expressed in the Section 439A Report and Supplementary Section 439A Report and this has led them to incur large fees and disbursements and to the execution of the DOCA to the considerable prejudice of Mr Guo. I do not accept that submission. Although the Administrators and later deed administrators have expressed a view as to the position in respect of the interest claimed by Mr Song, and there seems to be a real issue as to the correctness of that view, their conduct of the administration and deed administration and Mr Vaughan's evidence do not suggest that they have closed their minds to the matters in dispute or will not have regard to the issues addressed in this judgment or to the Court's decision on a final basis in the Main Proceedings. I also do not accept that the view formed by the Administrators and deed administrators had "led them" to incur fees and disbursements, which were incurred because the Administrators had statutory duties to perform in respect of their appointment, after the Companies were properly placed in voluntary administration by reason of their insolvency or likely insolvency. The views expressed by the Administrators also did not lead to the resolution approving the execution of the DOCA which was ultimately passed on a vote of creditors, by a majority including the Song parties, and in circumstances that the Administrators had properly dealt with the relevant proofs of debt at the second meeting of creditors. 3. I also do not accept Mr Durack's further submission that the Administrators "should have taken positive steps to approach the Court to stop the voluntary administration in its tracks". It seems to me that that course would have been inappropriate where the Companies were insolvent or likely to become insolvent and properly placed in voluntary administration. The further submission that the Administrators were prepared "to endorse Mr Song's wishes and assertions [and] disregarded Mr Guo's interests and the interests of other external claimant creditors" was not supported by the evidence. 4. The Guo parties also submitted that the Administrators acted unreasonably in not consenting to their having leave to continue the Main Proceedings against the Companies, in recommending the DOCA proposals and seeking the release of the funds that are the subject of the undertaking. The factual basis of these submissions has not been established, and I reject them. It seems to me that the Administrators had every reason to be reluctant to consent to the grant of leave for the Guo parties to continue the proceedings against the Companies in the relevant circumstances, where that will expose the Companies to the costs of proceedings, and I have only granted that leave with real hesitation. It seems to me that the recommendation of the DOCA proposal was open to the Administrators, particularly in respect of the revised DOCA proposal, although I have ultimately taken the different view that the DOCA should be terminated in the particular circumstances. I may well not have taken that view had, for example, the Australian Taxation Office voted in favour of the DOCA at the second meeting of creditors, as it might well have done. The Administrators' application for the release of the funds that are the subject of the undertaking was not unreasonable, where they have succeeded in that application. 5. Mr Potts submits that, unless the Court accepts the allegations of misconduct made by the Guo parties against the Administrators, it should accept that they should be appointed as liquidators, given the time which they have already spent in familiarising themselves with the Companies' affairs and the costs that would be incurred in the appointment of liquidators who are not familiar with those affairs. The allegations made against the Administrators have not been established. 6. While I accept that, in some circumstances, it will be preferable that another qualified person be appointed as liquidator for the reasons noted by Barrett J in Blacktown City Council v Macarthur Telecommunications Pty Ltd above, I am not satisfied that that result is appropriate in this case. The appointment of a different liquidator would involve substantial wasted costs, where the Administrators and their legal advisers have devoted substantial efforts to understanding the affairs of the Companies, in difficult circumstances. I do not doubt that the Administrators will be able to continue to perform their duties, without partiality, notwithstanding the allegations made but not established against them in these proceedings. 7. I also do not accept the Guo parties' submission that the lesser hourly rates quoted by their proposed liquidators provides reason to appoint them in preference to the Administrators as liquidators. First, a comparison by reference to hourly rates is of little utility, when the ultimate costs incurred by way of a liquidator's remuneration depend on time spent as well as the hourly rate charged. Second, as Mr Potts points out, the costs incurred in new liquidators familiarising themselves with the complexities of the Companies' affairs would erode any suggested saving by lesser hourly rates. The Guo parties' application in respect of the Administrators' remuneration 1. At the adjourned second meeting of creditors, creditors other than Mr Guo and the Australian Taxation Office voted in favour of the future remuneration and expenses of the deed administrators, and the Australian Taxation Office made clear that it voted against that resolution by reason of its opposition to the DOCA. The Guo parties seek orders under s 447A of the Corporations Act that the resolutions approving the administrators' remuneration from 22 July 2017 be set aside and also seek orders under s 75-41 of the Insolvency Practice Schedule (Corporations) setting aside the resolutions approving the deed administrators' remuneration on the basis that those resolutions were passed by related party creditors. 2. This application and the Guo parties' submissions that persons other than the Administrators should be appointed as liquidators of the Companies turned, at least in part, on submissions as to the Administrators' conduct. I have addressed those submissions above in dealing with the identity of the liquidators to be appointed and I do not repeat those matters here. For the reasons that those matters do not support the appointment of different persons as liquidators, they also do not support an order depriving the Administrators of their remuneration. The Guo parties also submit that the Administrators' remuneration is not reasonable in the circumstances, without advancing any detailed analysis of it, and submit that a "full review" of remuneration could subsequently be undertaken by the Court. Mr Potts responds, and I accept, that this submission is not a sufficient basis to set aside a resolution of creditors approving that remuneration. Orders and costs 1. I now set out my preliminary view as to costs, although I will allow the parties an opportunity to make brief written submissions. The Plaintiffs' Originating Process also sought an order that the Administrators pay the costs of the proceedings personally. That matter turns on the allegations of impropriety against the Administrators. I can presently see no basis in the evidence for such an order. 2. The Guo parties have failed in their opposition to the application for the Companies to be released from the undertaking and should pay the Administrators' costs of that application, as agreed or as assessed. The Guo parties have also failed in their application to amend the Statement of Claim and should pay the costs of that application, as agreed or as assessed. The Guo parties have succeeded in their application for leave to continue the Main Proceedings against the Companies, and I will hear the parties as to the question of the costs of that application. There is, however, no apparent basis for an order that the Administrators pay those costs personally. 3. The Guo parties have succeeded in their application, in the Originating Process, that the DOCA be terminated and the Companies be wound up, although they failed to establish the wide range of allegations of partiality and impropriety that were advanced against the Administrators. It is well established that the Court may discount the amount of costs that are awarded in favour of a successful party where it is only successful on a narrower basis and that will bring about a fair result as to costs. My preliminary view is that the Companies should pay one quarter of the Guo parties' costs of the Originating Process, as agreed or as assessed, such costs to be costs in the winding up, and the Song parties should pay one quarter of the Guo parties' costs of the Originating Process, as agreed or as assessed. I can presently see no basis for an order that the Administrators pay those costs personally. 4. I direct the parties to bring in, within 7 days, agreed orders to give effect to this judgment including as to costs, or, if there is no agreement between them, their respective draft minutes of order, and submissions not exceeding 15 pages in one and a half spacing as to the differences between them, indicating whether an oral hearing is requested. ********** Amendments 31 January 2018 - para 118 - final sentence - s 71-41(3) to s 75-41(3); Corporations Act to Insolvency Practice Schedule (Corporations) 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: 31 January 2018