FEDERAL COURT OF AUSTRALIA

Promnitz v Indochine Mining Limited (Subject to a Deed of Company Arrangement); In the Matter of Indochine Mining Limited (Subject to a Deed of Company Arrangement) [2015] FCA 857

IN THE MATTER OF INDOCHINE MINING LIMITED (ACN 141 677 385) (SUBJECT TO A DEED OF COMPANY ARRANGEMENT)

THE COURT ORDERS THAT:

1.    This proceeding be wholly dismissed.

2.    The plaintiff pay the defendants’ costs of and incidental to this proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE MATTER OF INDOCHINE MINING LIMITED (ACN 141 677 385) (SUBJECT TO a DEED OF COMPANY ARRANGEMENT)

REASONS FOR JUDGMENT

1    The plaintiff, Stephen Promnitz, is a creditor of the first defendant, Indochine Mining Limited (Subject to a Deed of Company Arrangement) (ACN 141 677 385) (Indochine). Indochine was placed into administration on 27 March 2015. On that day, Martin Jones, Darren Weaver and Ben Johnson were appointed as the joint and several administrators of Indochine (the administrators). They are the second to fourth defendants in this proceeding.

2    The plaintiff commenced this proceeding on 17 June 2015. On 8 July 2015, it was fixed for hearing on 23 July 2015.

3    The plaintiff claims the following relief:

(a)    An order setting aside the resolution passed at the second meeting of Indochine’s creditors held on 13 May 2015 (the 13 May creditors’ meeting) “that [Indochine] execute a Deed of Company Arrangement as set out in the Administrator’s report dated 4 May 2015” (the Kandahar DOCA resolution);

(b)    An order setting aside the Deed of Company Arrangement executed by Indochine on 4 June 2015 (the Kandahar DOCA);

(c)    An order requiring that a further meeting of Indochine’s creditors be held at which meeting those creditors are to be afforded an opportunity to consider and vote upon (inter alia) the merits of a proposal for a Deed of Company Arrangement propounded by Second Floor Gold Pty Ltd (SFG); and

(d)    Other consequential relief.

4    The plaintiff also complains that an adjournment resolution put to the 13 May creditors’ meeting (the adjournment resolution) was only defeated because of related parties’ votes and should have been passed. That resolution was in the following terms:

That the second meeting of creditors be adjourned for a period not to exceed twenty (20) business days.

5    The remedy sought by the plaintiff in respect of the failed adjournment resolution is an order “quashing” the vote against an adjournment and an order requiring the holding of a further creditors’ meeting.

6    The plaintiff relies primarily upon s 600A of the Corporations Act 2001 (Cth) (the Act). In the alternative, he also relies upon s 445D and s 447A of the Act.

7    Section 600A gives the Court power to set aside a creditors’ resolution where the outcome of the voting in respect of that resolution was determined by particular related creditors and where the passing of that resolution was contrary to the interests of the creditors as a whole (s 600A(1)(c)(i)) or where the passing of the resolution has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the resolution to an extent that is unreasonable having regard to certain specified factors (s 600A(1)(c)(ii)(A) to (C)). The section may also be engaged where a resolution is not passed by a meeting of creditors in circumstances where, had the votes of related creditors been disregarded, the resolution would have been passed.

8    “Related creditor”, in relation to a vote in respect of a company, is defined in s 600A(3) as “… a person who, when the vote was cast, was a related entity, and a creditor, of the company”.

9    Section 445D of the Act gives the Court power to terminate a Deed of Company Arrangement if satisfied of certain matters specified in that section. Section 447A gives the Court a general power to make orders in respect of a corporation which is or might become under administration pursuant to Pt 5.3A of the Act.

10    Regulation 5.6.21 of the Corporations Regulations 2001 (Cth) (the Regulations) governs when a vote is or is not carried after a poll has been demanded at a meeting of creditors.

11    When this proceeding was commenced, there was an issue between the plaintiff and the defendants as to whether the plaintiff was able to establish the threshold requirements set out in s 600A(1)(a)(i)(A) and s 600A(1)(b) of the Act in relation to either of the resolutions which were put to a vote at the 13 May creditors’ meeting. In order to satisfy the threshold requirements laid down in those subparagraphs of s 600A(1), a claimant for relief under s 600A must satisfy the Court that, if the vote or votes that a particular related creditor, or particular related creditors, of the company cast on the proposed resolution had been disregarded for the purposes of determining whether or not the proposed resolution was passed, the proposed resolution:

(a)    If it was in fact passed—would not have been passed; or

(b)    If it was in fact not passed—would have been passed;

or the question would have had to be decided on a casting vote.

12    However, the contest as to whether or not the plaintiff had satisfied those threshold requirements evaporated at the hearing. The parties agreed certain facts concerning each of the resolutions voted upon at the 13 May creditors’ meeting.

13    In relation to the failed adjournment resolution, the parties agreed that, if the votes of related creditors (as defined for the purposes of s 600A) were removed from the poll taken at the 13 May creditors’ meeting, the final outcome of that poll would have been:

(a)    Fourteen (14) votes for the adjournment resolution with a value of $712,164.22; and

(b)    Thirteen (13) votes against that resolution, with a value of $3,907,268.82.

14    Martin Jones, one of the administrators, acted as Chairman at the 13 May creditors’ meeting. The Minutes of that meeting make clear that, had there been a theoretical deadlock in relation to the proposed adjournment resolution, Mr Jones would have used his casting vote in favour of the adjournment resolution. That is, Mr Jones would have supported an adjournment of the 13 May creditors’ meeting had he had the opportunity to do so.

15    The evidence before me established unequivocally that there was such a deadlock in relation to the proposed adjournment resolution because, by number, there was a majority of votes in favour of that resolution but, by value, there was a majority against that resolution (see reg 5.6.21(3)). Therefore, had Mr Jones been called upon to exercise his casting vote in relation to the proposed adjournment resolution (as he should have been), that resolution would have been passed.

16    Having regard to Mr Jones’ evidence, I should therefore proceed to address the issues in this proceeding upon the basis that, had the related creditors not voted in respect of the adjournment resolution, that resolution would have been passed. In that event, the 13 May creditors’ meeting would have been adjourned for a period of no more than twenty business days. It also follows that, had that meeting been adjourned, the Kandahar DOCA resolution would never have been put or passed. The adjourned meeting would have been held by no later than 11 June 2015.

17    In respect of the Kandahar DOCA resolution, if the votes of related creditors had been removed from the poll taken at the 13 May creditors’ meeting in respect of that resolution, the final outcome of that poll would have been:

(a)    Twelve (12) votes for the resolution with a value of $3,734,468.82; and

(b)    Fourteen (14) votes against that resolution with a value of $876,964.21.

18    Thus, as was the case with the adjournment resolution, there would have been a deadlock in respect of the Kandahar DOCA resolution. I infer that, in that event, had he been called upon to exercise a casting vote in respect of that resolution, Mr Jones would have voted in favour of it. That circumstance would only have arisen if the adjournment resolution had been defeated and the only real choice left for the meeting had been between liquidation and the Kandahar DOCA proposal.

19    In light of the parties’ agreement concerning the results of the voting in respect of the two resolutions in question had related creditors not voted, I am satisfied that the requirements of s 600A(1)(a)(i)(A) and s 600A(1)(b) have been met in the present case in respect of both resolutions. The critical issues in the case therefore turn on whether, on the evidence, I am satisfied that s 600A(1)(c) has been engaged and, if so, whether I should exercise my discretion to:

(a)    Set aside the Kandahar DOCA resolution;

(b)    Set aside the Kandahar DOCA; and

(c)    Make an order convening a further meeting of the creditors of Indochine.

The Relevant Statutory Provisions

20    Section 600A of the Act is in the following terms:

600A    Powers of Court where outcome of voting at creditors’ meeting determined by related entity

(1)    Subsection (2) applies where, on the application of a creditor of a company or Part 5.1 body, the Court is satisfied:

(a)    that a proposed resolution has been voted on at:

(i)    in the case of a company—a meeting of creditors of the company held:

(A)    under Part 5.3A or a deed of company arrangement executed by the company; or

(B)    in connection with winding up the company; or

(ii)    in the case of a Part 5.1 body—a meeting of creditors, or of a class of creditors, of the body held under Part 5.1; and

(b)    that, if the vote or votes that a particular related creditor, or particular related creditors, of the company or body cast on the proposed resolution had been disregarded for the purposes of determining whether or not the proposed resolution was passed, the proposed resolution:

(i)    if it was in fact passed—would not have been passed; or

(ii)    if in fact it was not passed—would have been passed;

or the question would have had to be decided on a casting vote; and

(c)    that the passing of the proposed resolution, or the failure to pass it, as the case requires:

(i)    is contrary to the interests of the creditors as a whole or of that class of creditors as a whole, as the case may be; or

(ii)    has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposed resolution, or for it, as the case may be, to an extent that is unreasonable having regard to:

(A)    the benefits resulting to the related creditor, or to some or all of the related creditors, from the resolution, or from the failure to pass the proposed resolution, as the case may be; and

(B)    the nature of the relationship between the related creditor and the company or body, or of the respective relationships between the related creditors and the company or body; and

(C)    any other relevant matter.

(2)    The Court may make one or more of the following:

(a)    if the proposed resolution was passed—an order setting aside the resolution;

(b)    an order that the proposed resolution be considered and voted on at a meeting of the creditors of the company or body, or of that class of creditors, as the case may be, convened and held as specified in the order;

(c)    an order directing that the related creditor is not, or such of the related creditors as the order specifies are not, entitled to vote on:

(i)    the proposed resolution; or

(ii)    a resolution to amend or vary the proposed resolution;

(d)    such other orders as the Court thinks necessary.

(3)    In this section:

related creditor, in relation to a company or Part 5.1 body, in relation to a vote, means a person who, when the vote was cast, was a related entity, and a creditor, of the company or body.

21    Section 445D of the Act is in the following terms:

445D     When Court may terminate deed

(1)    The Court may make an order terminating a deed of company arrangement if satisfied that:

(a)    information about the company’s business, property, affairs or financial circumstances that:

(i)    was false or misleading; and

(ii)    can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed;

was given to the administrator of the company or to such creditors; or

(b)    such information was contained in a report or statement under subsection 439A(4) that accompanied a notice of the meeting at which the resolution was passed; or

(c)    there was an omission from such a report or statement and the omission can reasonably be expected to have been material to such creditors in so deciding; or

(d)    there has been a material contravention of the deed by a person bound by the deed; or

(e)    effect cannot be given to the deed without injustice or undue delay; or

(f)    the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be:

(i)    oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or

(ii)    contrary to the interests of the creditors of the company as a whole; or

(g)    the deed should be terminated for some other reason.

(2)    An order may be made on the application of:

(a)    a creditor of the company; or

(b)    the company; or

(ba)    ASIC; or

(c)    any other interested person.

22    Section 447A of the Act gives to the Court a broad power to make orders as may be required in respect of the operation of Pt 5.3A of the Act. That section provides:

447A    General power to make orders

(1)    The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.

(2)    For example, if the Court is satisfied that the administration of a company should end:

(a)    because the company is solvent; or

(b)    because provisions of this Part are being abused; or

(c)    for some other reason;

the Court may order under subsection (1) that the administration is to end.

(3)    An order may be made subject to conditions.

(4)    An order may be made on the application of:

(a)    the company; or

(b)    a creditor of the company; or

(c)    in the case of a company under administration—the administrator of the company; or

(d)    in the case of a company that has executed a deed of company arrangement—the deed’s administrator; or

(e)    ASIC; or

(f)    any other interested person.

23    Regulation 5.6.21 of the Regulations provides:

5.6.21    Carrying of resolutions after a poll has been demanded at a meeting of creditors

(1)    This regulation applies to a poll taken at a meeting of creditors.

(2)    A resolution is carried if:

(a)    a majority of the creditors voting (whether in person, by attorney or by proxy) vote in favour of the resolution; and

(b)    the value of the debts owed by the corporation to those voting in favour of the resolution is more than half the total debts owed to all the creditors voting (whether in person, by proxy or by attorney).

(3)    A resolution is not carried if:

(a)    a majority of creditors voting (whether in person, by proxy or by attorney) vote against the resolution; and

(b)    the value of the debts owed by the corporation to those voting against the resolution is more than half the total debts owed to all creditors voting (whether in person, by proxy or by attorney).

(4)    Subject to subregulation (4B), if no result is reached under subregulation (2) or (3), then:

(a)    the person presiding at the meeting may exercise a casting vote in favour of the resolution, in which case the resolution is carried; or

(b)    the person presiding at the meeting may exercise a casting vote against the resolution, in which case the resolution is not carried; or

(c)    if the person presiding at the meeting does not exercise a casting vote, the resolution is not carried.

(4A)    If no result is reached under subregulation (2) or (3), and the meeting is not a meeting of eligible employee creditors, the person presiding at the meeting must include in the minutes of the meeting the reasons for exercising, or not exercising, as the case may be, a casting vote under subregulation (4).

(4B)    In the case of a meeting of eligible employee creditors mentioned in paragraph 444DA(2)(a) of the Act, if no result is reached under subregulation (2) or (3), the resolution is not carried.

(5)    In this regulation

creditor includes a debenture holder.

The Relevant Principles

Section 600A(1)(c)

24    Section 600A(1)(c)(i) provides that, before the Court can exercise its discretion to grant any relief under s 600A, the Court must be satisfied that the passing of the proposed resolution or the failure to pass it, as the case may be, was contrary to the interests of the creditors as a whole.

25    In DSG Holdings Australia Pty Ltd v Helenic Pty Ltd (2014) 86 NSWLR 293 (DSG), Leeming JA (with whom Meagher JA and Bergin CJ in Eq agreed) said (at 312–314 [83]–[95]):

… The argument at first instance and in this Court turned upon the third precondition, in s 600A(1)(c), to the availability of power under s 600A(2).

84    Section 600A(2) thereby confers a discretionary power upon the Court, only if the Court is first satisfied of either of the two matters in s 600A(1)(c). The first step involves an evaluative exercise of broadly worded language: “contrary to the interests of the creditors as a whole” and “unreasonable prejudice to the interests of creditors”. The second step involves the exercise of a discretion.

85    The state of satisfaction in s 600A(1) is jurisdictional, for in its absence there is no power available under s 600A(2); Barrick Australia Ltd v Williams [2009] NSWCA 275; 74 NSWLR 733 at [26]. Although that state of satisfaction involves the making of multi-faceted value judgments, it is a question of objective fact: cf Singer v Berghouse (1994) 181 CLR 201 at 211. Strictly speaking, it is not discretionary – either the Court is satisfied, or it is not: Foley v Ellis [2008] NSWCA 288 at [3]; Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254 at [29].

86    These considerations inform what is required when an appeal by way of rehearing is brought from the exercise of power under s 600A(2). Very little attention was given to this in submissions in this Court, nor did the reasoning of the primary judge disclose separate consideration of the s 600A(2) discretion. Strictly, it might be thought that the jurisdictional finding pursuant to s 600A(1) is reviewable in accordance with the principles reflected in Warren v Coombes (1979) 142 CLR 531, while review of the exercise of discretionary power pursuant to s 600A(2) is subject to the principles in House v The King (1936) 55 CLR 499. However, here as elsewhere, it is unlikely that anything will turn on this (see eg Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41 at [40]). The amended notice of appeal was drafted and the hearing proceeded on the basis that appellate intervention was restricted to review of discretionary decisions, because of the obvious link with the discretionary power conferred by s 600A(2): see DAO v The Queen [2011] NSWCCA 63; 81 NSWLR 568 at [93]; Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656 at [6] and [42] and Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [22]. I will proceed on that basis, although it will be clear from what follows that if Warren v Coombes applied, the outcome and essential reasoning would remain the same.

The terms of s 600A(1)

87    The following propositions flow directly from the terms of s 600A(1). First, there are two possibilities by which the passing of a resolution can engage the subsection: (i) that it is contrary to the interests of creditors as a whole, or (ii) that the prejudice or likely prejudice to the interests of creditor dissentients is unreasonable having regard to certain factors. It follows immediately that there may be prejudice to the interests of the class of creditors who voted against the resolution but which falls short of unreasonable prejudice. In that event the curial power to override the decision of the meeting will not be enlivened. As Martin CJ said in Ravenswood Resort Pty Ltd (in liq) v Kammal [2006] WASCA 217; 60 ACSR 507 at [27], mere prejudice to those voting against the resolution is not sufficient. The same point was made by Austin J in Portinex at [137]:

“Pt 5.3A clearly contemplates that the wish of an individual creditor may be overridden, and permits related creditors to take part in the decision to do so, subject to s 600A.”

88    Secondly, the onus lies upon the applicant to make out the elements of s 600A: Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 at 548; Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612 at [308]; TNT Building Trades Pty Limited v Benelong Developments Pty Limited (administrators appointed) [2012] NSWSC 766; 91 ACSR 17 at [11].

89    Thirdly, the provision applies to creditors who were creditors when the resolution was passed. Barrett J regarded this as “plain” in Hoath v Comcen Pty Ltd [2005] NSWSC 477; 53 ACSR 708 at [18], and the primary judge agreed at [175]-[176]. As much was, rightly, common ground between the parties. (That said, as noted above, relevant to the exercise of discretion for which DSG and Bicheno apply under s 447A is the fact that the numerical majority of creditors who voted on 2 September 2013 are no longer, in 2014, creditors who will be bound by the varied proposal which DSG and Bicheno wish to have RAPL execute.)

90    Fourthly, the section focusses on “the interests of the creditors”. The “interests of the creditors” twice used in s 600A(1)(c) is to be construed as identical in substance to the “creditors’ interests” required to be addressed in the opinions required by s 438A to be formed by an administrator, and the s 439A statement by an administrator to creditors. The purpose of that investigation and the report to creditors is to permit them to make an informed choice. Where (as will usually be the case) the company is found to be insolvent, the choice is likely to be between winding up or accepting a compromise on the basis of which the steps in the deed of company arrangement may be implemented.

91    Fifthly, “the interests of creditors” falls to be construed in such a way as would best promote the express object of Pt 5.3A (the effect of s 5C(2) and (3) is that the purposive construction required by the form s 15AA of the Acts Interpretation Act 1901 (Cth) took prior to 27 June 2011 applies, but nothing material turns on the difference for present purposes). The express object of Pt 5.3A is contained in s 435A:

“435A Object of Part

The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)    maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)    if it is not possible for the company or its business to continue in existence – results in a better return for the company's creditors and members than would result from an immediate winding up of the company.”

92    The section is to be construed harmoniously with other related provisions in the Act. In particular, a deed of company arrangement may be terminated pursuant to s 445D(1)(f) if it is “oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more [creditors of the company]” or “contrary to the interests of the creditors of the company as a whole”. That section repeats the interests of the creditors as a whole, but introduces a category of oppression or unfair prejudice to or unfair discrimination against any particular creditor or group of creditors.

The interests of creditors as creditors

93    Sixthly, and consistently with all of the foregoing, and critical to the resolution of these proceedings, it has been said that it is the interests of creditors as creditors to which regard must be had.

94    Lindgren J, whose views command great weight in a matter of this nature, said in Federal Commissioner of Taxation v Wellnora Pty Ltd [2007] FCA 1234; 163 FCR 232 at [211]:

“It is the interests of the company's creditors as creditors with which an administrator must be concerned. Accordingly, if it appeared to an administrator that a proposed DOCA would be in the interests of certain creditors in a different capacity, such as the capacity of directors, it would be impermissible for the administrator to support the proposed DOCA by reference to those interests.”

(Emphasis in original)

95    Lindgren J’s statement of principle also reflects the legislative recognition that the creditors can and must vote in a single class, in contradistinction with what occurs in a creditors' scheme of arrangement. The uniting characteristic they share is the debt owed to them by the company. The only relevant interest they have at the meeting is the timing and magnitude and risk attending to their having some of their debts being repaid, and, in some cases, the desirability of continuing to provide goods or services to the company.

26    At 315–316 [99]–[102], his Honour also said:

99    It does not follow from the foregoing that the examination of prejudice is limited to a comparison of the expected returns under the proposed deed of company arrangement as opposed to winding up. A trading outcome may be preferable for the creditors as a whole, which is something which would further the first purpose stated in s 435A. In order to achieve that outcome, it is well recognised that it may be necessary to permit some differentiation. In Re Cancol Ltd [1996] 1 BCLC 100 at 119, Knox J said there was no unfair prejudice in an arrangement which gave different creditors a differential outcome, in circumstances where the distinction appeared to be “a realistic and commercially sensible one”.

100    The position was summarised by Lightman J in IRC v Wimbledon Football Club Ltd [2005] 1 BCLC 66 at [18]:

“[18]… [D]epending on the circumstances, differential treatment may be necessary to ensure fairness (see Cazaly Irving Holdings Ltd v Cancol Ltd [1996] BPIR 252 at 269-270 and Sea Voyager Maritime Inc v Bielecki [1999] 1 BCLC 133 at 148-149, 154, [1999] 1 All ER 628 at 642-643, 647); and (I would add) ... differential treatment may be necessary to secure the continuation of the company's business which underlies the arrangement: (consider Re Business City Express Ltd [1997] 2 BCLC 510)."

101    That accords with the differently worded Australian requirement for “unreasonable prejudice”, and is consistent with this Court’s concern in Khoury v Zambena Pty Ltd at [74] with the absence of any “rational explanation for the different treatment of participating creditors” and the acknowledgement in [105] that “an arrangement under Part 5.3A may discriminate between creditors or classes of creditors; but nevertheless it ought to deal fairly with the interests of creditors of the insolvent company”.

102    There may be difficult cases where the risks and delay are large, but so too is the potential for a greater return. There may also be difficult cases where there is little to choose between a deed of company arrangement and winding up: Grocon Constructors Pty Ltd v Kimberley Securities Ltd [2009] NSWSC 541; 72 ACSR 305 at [84]. However, most commonly difficulties will arise when regard is had to the divergent interests some but not all creditors have in continuing to maintain a trading relationship with the company. In such cases the qualitative analysis entailed by the statutory requirement of unreasonable prejudice may require a process of weighing and balancing many competing, and indeed incommensurate, considerations: cf Ravenswood at [28]-[30]. However, contrary to the tenor of the submissions of Bicheno and DSG, I would not read those paragraphs of Ravenswood to mean that a lengthy, wide-ranging examination is called for in every case under s 600A(1)(c)(ii). It cannot invariably be necessary to examine the consequences which the passage of the resolution would have on the other creditors, or the liquidator, or the public interest, although that is not to say that those matters are always foreign to the assessment of unreasonableness. But there will be cases, of which the present is one, where the financial disadvantage to the creditors voting against the proposal is so substantial, and certain, that it amounts to prejudice which is unreasonable.

27    I agree with his Honour’s exposition of s 600A(1)(c) and s 600A(2) of the Act and propose to apply his Honour’s observations in the present case.

28    As submitted by the defendants, the dividend payable under the scenarios being compared, while frequently central to the Court’s consideration, is not always the sole or most important consideration.

29    In Ravenswood Resort Pty Ltd (In Liq) v Kammal (2006) 60 ACSR 507 (Ravenswood) at 514 [28], Martin CJ in the WA Court of Appeal (with whom McLure and Buss JJA agreed), said (in respect of s 600A(1)(c)(ii)):

But in addition to taking account of those two specified factors, the court must, before exercising the powers conferred by the section, arrive at the conclusion that the prejudice which has been suffered or is reasonably likely to be suffered, is “unreasonable”. Two conclusions seem to me to flow from the adoption of that criterion by the legislature. The first is that the evaluation of prejudice, to be undertaken by the court, is a qualitative process in which the nature, degree and extent of the prejudice is to be weighed and its significance assessed by the court. The second conclusion and which is related to the first, is that the process of qualitative evaluation which I have described, will also require the court to take into account any other matter that is relevant to the qualitative evaluation of whether or not the prejudice is unreasonable. This will require the court to identify the consequences which the passage of the resolution would have on parties or interests other than those of the related creditor or creditors and the creditor voting against the proposed resolution, including creditors generally, the liquidator, and the public interest, and then to qualitatively weigh and evaluate those interests and to assess the extent to which consideration of those other interests might ameliorate or negate the conclusion that the prejudice which has been or is likely to be suffered by the opposing creditor is properly characterised as unreasonable.

30    But the exercise described in Ravenswood does not need to be elaborate or wide-ranging.

31    Consideration of the requirements of s 600A(1)(c)(ii) will only be necessary if the Court is not satisfied of the matters set out in s 600A(1)(c)(i).

Section 445D

32    The defendants argued that the plaintiff is obliged to proceed under s 445D of the Act because, in substance, he is seeking an order terminating the Kandahar DOCA.

33    I do not accept this submission.

34    As explained by Leeming JA in DSG (at 310–311 [78]–[82]) (citing the joint judgment of the High Court in Lehman Brothers Holdings Inc v City of Swan (2010) 240 CLR 509), s 600A is part of the protection given to creditors who are disadvantaged by a Deed of Company Arrangement. A discretion is conferred upon the Court to set aside the outcome, or require a further vote, perhaps under different conditions.

35    In Federal Commissioner of Taxation v Wellnora Pty Ltd (2007) 163 FCR 232 at 266 [180], Lindgren J said:

Section 600B(3) empowers the Court, if it sets aside the resolution, to make such further orders, and give such directions, as it thinks necessary. It seems reasonable to think that if a Court thought it proper to make an order setting aside the resolution, the Court would think it necessary to make a further order setting aside the DOCA — the very instrument that the Act required to be executed and to which the Act gave certain effects by reason of the resolution (see ss 439C(a) and 444A to 444H). The setting aside of the resolution and of the DOCA go hand in hand. Section 600E preserves the validity and binding effect of acts done pursuant to the resolution before the making of the order. It was not suggested that this provision extended to preventing the Court from making an order setting aside the DOCA under s 600B(3)(b) and I do not think it does: under the Act, the passing of the resolution and execution of the DOCA are so closely interrelated that it would be irrational to provide for the resolution to be set aside without permitting the resulting DOCA to be set aside too. In any event, s 447A of the Act, whether read alone or as allowing modification of the operation of one or more of ss 445D, 445G and 445H of the Act is another source of the Court’s power to set aside the DOCA which may be invoked by “any … interested person” (s 447A(4)(f)), such as the FCT.

36    Although his Honour was there dealing with s 600B of the Act, his Honour’s reasoning applies equally to s 600A.

37    In the present case, the plaintiff relies upon s 445D(1)(f) and (g).

38    If I were to make an order terminating the Kandahar DOCA pursuant to s 445D, Indochine would automatically be wound up voluntarily (as to which see reg 5.3A.07 of the Regulations and Commonwealth v Rocklea Spinning Mills Pty Ltd (2005) 145 FCR 220 at 230 [35] per Finkelstein J). Theoretically, the Court might use its powers under s 447A of the Act to vary the operation of reg 5.3A.07 to alter that outcome. The authorities only support such use in order to bring about a winding up in insolvency. Section 447A has not been deployed to avoid a winding up altogether in circumstances where a Deed of Company Arrangement has been terminated by the Court.

The Relevant Facts

39    Indochine is a mining company whose principal asset is its 100% shareholding interest in Summit Development Ltd (Summit), a company listed in Papua New Guinea. Summit owns Exploration Licence EL1093 for the Mount Kare Gold Project in Papua New Guinea. Summit, with funding from Indochine, is currently seeking a renewal of the Mount Kare mining lease. Indochine has no income producing assets and, in the past, its expenses have almost entirely been funded through equity raisings.

40    On 6 February 2014, Indochine entered into a secured loan agreement with Aude Holdings Pty Ltd (Aude) as trustee for Lastours Investment Trust. The sole director of Aude is Brian Rodan. Mr Rodan is also the largest shareholder in Indochine. The amount of the loan to be made by Aude to Indochine pursuant to this arrangement was initially agreed at $1.5 million.

41    In May and June 2014, Aude served default notices upon Indochine.

42    On 6 July 2014, Aude and Indochine entered into formal variations of the loan arrangements between those two parties. Further variations to those arrangements were negotiated and agreed in August 2014 and again in January 2015. Two aspects of the January 2015 variation were a commitment from Aude to extend the term of the loan to 30 April 2015 and a commitment from Aude to increase funding to $3.75 million.

43    In March 2015, Aude withdrew its funding support for Indochine. In light of that circumstance, the directors of Indochine formed the view that Indochine was likely to become insolvent and, accordingly, on 26 March 2015, resolved to appoint administrators to Indochine. As I have already mentioned, the current administrators were appointed as administrators of Indochine on 27 March 2015.

44    The first meeting of creditors of Indochine was held on 10 April 2015. On that occasion, it was resolved that the second creditors’ meeting would be held on 13 May 2015.

45    On 16 April 2015, Richard Hill wrote to Mr Jones on behalf of a consortium of investors known as “The Wanbel Consortium” offering an expression of interest to Mr Jones to provide a framework proposal in draft form in respect of a possible Deed of Company Arrangement for Indochine.

46    A few days later, on 20 April 2015, Kandahar Holdings Pty Ltd (Kandahar) was registered.

47    On 27 April 2015, SFG was incorporated. Richard Hill is the sole director and a shareholder of SFG.

48    On 28 April 2015, Mr Hill submitted to Mr Jones the first SFG DOCA proposal. The administrators took the view that this was an early draft and, on 4 May 2015, sought clarification from Mr Hill as to whether their understanding was correct or whether the 28 April 2015 SFG DOCA proposal was, in fact, a final DOCA proposal from SFG.

49    On 4 May 2015, the administrators published their report in respect of Indochine pursuant to s 439A of the Act (the s 439A report). In that report, the administrators specifically addressed a DOCA proposal from Kandahar which, by then, had been submitted to them. At the time when that report was circulated, no firm proposal had been received from SFG. In the s 439A report, the administrators recommended that the creditors approve the Kandahar DOCA proposal because it was likely to provide a better return to creditors than an immediate winding up. This recommendation was made notwithstanding the fact that, if the Kandahar DOCA proposal was accepted, there would be no return for the general body of unsecured creditors of Indochine. The relevant comparison undertaken by the administrators in the s 439A report was a comparison between the result of the company entering into the Kandahar DOCA and immediate liquidation.

50    In the s 439A report, the administrators said (at p 31):

The risk to creditors/beneficiaries of any delays are an increase to the completion risk of the transaction, an increase to the risk of the renewal of EL1093 and an increased risk to meeting other conditions precedent, and other time sensitive deadlines which must be met.

51    In the s 439A report, the administrators stressed the need for urgent action in respect of Indochine. At par 11.2 (p 54) of that report, the administrators said:

We are of the opinion that the DOCA proposal put forward by Kandahar Holdings Pty Ltd should be accepted by creditors as it seeks to meet the first objective of the Act – preservation of the Company and its business and therefore represents the best prospect for ongoing employment for the Company’s staff and for suppliers to potentially benefit from future trading with the Company.

For ordinary unsecured creditors, there is no immediate return anticipated under the DOCA unless claims against the former directors are identified and successfully pursued.

52    The administrators did not recommend liquidation.

53    On 6 May 2015, Mr Hill sent a revised DOCA proposal on behalf of SFG to the administrators. This was the second such proposal from SFG.

54    On 8 May 2015, the administrators circulated a supplementary s 439A report (the supplementary s 439A report). In that report, the administrators referred to the second SFG DOCA proposal. In the report, the administrators noted, amongst other things, that SFG had not provided any evidence of its financial capacity to complete the proposal embodied in its second DOCA proposal and that the administrators were unable to provide any detailed financial analysis of that proposal. The administrators said that, as at 8 May 2015, they were unable to recommend the second SFG DOCA proposal be accepted by creditors.

55    In the supplementary s 439A report, the administrators commented on the position of the secured creditor (Aude). At p 2 of the supplementary s 439A report, the administrators said:

Secured Creditor Position

The Secured Creditor has received a copy of our earlier report and also a copy of the SFG DOCA proposal and it has told us that it:

•    Does not consent to the SFG proposal due to the lack of funding evidence and the mechanical and commercial problems in the proposal;

•    Is assessing the Kandahar DOCA proposal, whether it consents to that proposal and in turn whether it will vote at the second meeting of creditors; and

•    Would not (in its view) be in the best interests of the company’s creditors for the meeting to be adjourned.

Accordingly, we anticipate the Secured Creditor is more likely to consider the appointment of a receiver and manager to the Company in the event that the meeting of creditors is adjourned and the progress of the restructure is less timely or otherwise not in accordance with its expectations.

56    On 12 May 2015, SFG submitted a third draft DOCA proposal.

57    The 13 May creditors’ meeting commenced at 11.00 am. Detailed Minutes of that meeting were prepared, signed by Mr Jones as Chairman and ultimately tendered in evidence before me.

58    The Minutes record under the heading “Purpose of Meeting” that, after certain formalities were completed, Mr Jones said:

The Chairman advised that the purpose of this meeting was to decide the future of the Company, whether:

•    That a Deed of Company Arrangement should be executed by the Company; or

•    That the Company should be wound up; or

•    That the Administration of the Company should end; or

•    The meeting be adjourned for up to forty-five (45) business days.

The Chairman noted that the Administrators’ Report recommended acceptance of the DOCA proposal put forward by Kandahar Holdings Pty Ltd, however further proposals have been received since from Second Floor Gold Pty Ltd (SFG), with their DOCA proposal dated 12 May 2015 as supplemented by emails dated 13 May 2015 having been provided to creditors after signing in, at and prior to the commencement of this meeting. The SFG DOCA proposal has been further varied and will be discussed further later in this meeting.

59    Mr Jones then tabled his reports and gave an overview of those reports. He then outlined the options available to creditors in the following way:

•    Chairman noted investigations show the Company is insolvent and therefore no reason why control of the Company should be returned to directors.

•    DOCA proposals had been received to restructure the Company to enable its continuance. The Administrators considered in their report that the proposal put forth by Kandahar would offer a greater return to creditors than under a liquidation scenario. The Chairman also noted the prospect of a better return under a DOCA proposal by SFG, however the Administrators had only received the varied SFG proposal this morning and needed further time to consider that proposal.

•    In a liquidation scenario the Liquidator would be able to pursue claims for preferential payment, however due to the estimated risk and cost associated with these recovery actions the Administrators did not recommend this avenue.

60    Mr Jones then made a powerpoint presentation in which he compared the positive and negative features of each of the Kandahar DOCA proposal, the second SFG DOCA proposal (the one dated 6 May 2015) and a third revised SFG DOCA proposal dated 12 May 2015. The SFG DOCA proposal of 12 May 2015 had been supplemented by emails of 13 May 2015. I shall refer to the SFG DOCA proposal of 12 May 2015 as supplemented by those emails as the 13 May SFG DOCA proposal. This proposal was SFG’s fourth draft DOCA proposal sent to the administrators in the period from 28 April 2015 to 13 May 2015.

61    The Minutes record that a question and answer session followed the Chairman’s powerpoint presentation. During that part of the meeting, Mr Hill, who attended the meeting by invitation, on behalf of SFG, answered the following question: “Has SFG engaged with the secured creditor?” He said:

No. Have assumed the secured creditor would agree to the SFG proposal as it involves full payment of the secured claim.

62    Mr Jones then put the adjournment resolution to the meeting. What then occurred is recorded on p 8 of the Minutes:

On return Chairman noted most attendees at the meeting are or represent sophisticated creditors and that it is in the interests of the Company to come to a resolution of the future of the Company in a timely manner due to the risk delaying the decision might have on the MRA’s decision in renewal of the exploration license [sic]. Chairman enquired of Roger Gunson when the date the next MAC meeting would be. Mr Gunson noted it would be in the last week of June.

Given the late flurry of proposals and variations received from SFG, the Chairman considered that it was in the best interests of creditors to adjourn the meeting in order to obtain certainty on the detail of the respective proposals and inform creditors accordingly.

The Chairman then put forward an adjournment resolution that:

“That the second meeting of creditors be adjourned for a period not to exceed twenty (20) business days”

Resolution was put to a poll.

Paul Menere enquired as to the secured creditor’s right to vote at the meeting. Chairman confirmed secured creditor may vote pursuant to Corporations Regulation 5.6.24. Paul Menere asked if the Chairman had taken legal advice in this point. The Chairman confirmed that indeed he had.

Resolution lost on poll result.

-    2 abstained (the Chairman’s vote and Mineral Resources Authority)

-    15 in favour to dollar value of $1,579,293.22

-    22 against to dollar value of $4,464,662.30

On both number of creditors and dollar value the resolution was lost.

The Chairman went on to inform the meeting that in hypothetical circumstances where the secured creditor vote was not counted, the result of the poll was that the dollar value was in favour and the numbers against. As this result created a theoretical deadlock the Chairman advised the meeting that if he had the opportunity, he would have used his casting vote in favour of an adjournment.

Discussion then ensued:

63    The Chairman then asked Mr Hill whether he wished to seek permission to propound the 13 May SFG DOCA proposal. The only reply to that suggestion was that Mr Hill said that he was not a creditor and thus was in no position to move such a resolution. I infer that, had Mr Hill been willing to allow the 13 May SFG DOCA proposal to be considered and voted on at the 13 May creditors’ meeting, Mr Jones would have propounded an appropriate resolution designed to allow such consideration to occur.

64    The Minutes record that the Kandahar DOCA resolution was then put to the meeting. A poll was taken and the resolution was regarded as passed by the Chairman.

Consideration

65    As already noted, I am satisfied that, had the related creditors not voted on the adjournment resolution, that resolution would have ultimately been passed on the casting vote of Mr Jones. Section 600A(1)(c) then obliges me to consider whether the failure of the meeting to pass the adjournment resolution was contrary to the interests of the creditors as a whole or led to the prejudice or likely prejudice described in s 600A(1)(c)(ii) to an unreasonable extent. The specific prejudice is prejudice suffered or likely to be suffered by those creditors who voted in favour of the adjournment resolution. Those creditors are identified in Exhibit C.

66    The consequences of the 13 May creditors’ meeting not being adjourned were:

(a)    The creditors of Indochine were denied the opportunity of considering the 13 May SFG DOCA proposal or a modified version of that proposal after having had time to examine it at a more leisurely pace and not under pressure; and

(b)    The Kandahar DOCA proposal was accepted by Indochine’s creditors and put into effect shortly after the meeting.

67    The question of substance which I have to determine is whether the outcomes referred to at [66] above are such as to engage s 600A(1)(c). If so, then I must consider what relief (if any) should be granted to the plaintiff under s 600A(2).

68    To a large extent, although not entirely, the question of substance which I have distilled at [67] above is answered by a consideration of the pros and cons of each of the Kandahar DOCA and the SFG DOCA proposals.

69    In their submissions, the plaintiff and the defendants examined in detail the advantages and disadvantages of each of the Kandahar DOCA and the 13 May SFG DOCA proposal.

70    The parties accepted that the intention of both proposals was to preserve Indochine’s business and, in particular, to ensure that the valuable exploration licence held by Summit was not jeopardised.

71    The plaintiff submitted that the 13 May SFG DOCA proposal was superior to the Kandahar DOCA for a number of reasons. In summary, these were:

(a)    The 13 May SFG DOCA proposal provides for a likely return to ordinary unsecured creditors of 25 cents in the dollar whereas the Kandahar DOCA proceeds upon the basis that there will be a nil return for that class of creditors;

(b)    The 13 May SFG DOCA proposal provides that the preferred creditors will receive 50 cents in the dollar whereas the Kandahar DOCA does not ensure that priority creditors will receive any return;

(c)    The 13 May SFG DOCA proposal ensures the payment in full of the secured creditor’s debt together with interest. By contrast, under the Kandahar DOCA, Aude retains the option to continue to maintain full security over the assets of Indochine and its subsidiaries. Aude thus continues to rank ahead of unsecured creditors which is a disadvantage to them when compared with the 13 May SFG DOCA proposal;

(d)    The 13 May SFG DOCA proposal ensures the continuation of funding for the care and maintenance of the Mount Kare mine site and also provides funds for the renewal of the exploration licence; and

(e)    The administrators are also to receive their approved fees in full.

72    The plaintiff argued that, in short, the 13 May SFG DOCA proposal would provide a much better return for creditors than the Kandahar DOCA provides, while, at the same time, it would ensure the ongoing funding of Indochine’s business and repayment of the loans together with interest advanced by the secured creditor. Of course, it is accepted by the plaintiff that, for the 13 May SFG DOCA proposal to work, adequate funding must be in place.

73    The defendants, on the other hand, submitted that:

(a)    The secured creditor, Aude, has made very clear to the administrators that it does not regard the 13 May SFG DOCA proposal (or, for that matter, the earlier iterations of that proposal) as acceptable. Aude’s solicitors have written a number of letters to the administrators in which those solicitors explained in considerable detail that their client will not approve the 13 May SFG DOCA proposal under any circumstances. The principal reason advanced repeatedly on behalf of Aude is that Aude is not at all satisfied that SFG is in a position to fund its proposal;

(b)    The future of Indochine had to be urgently addressed in March, April and May 2015 and was so addressed satisfactorily at the time. Mr Hill and those who are behind SFG had ample opportunity then to place a firm and final proposal before the creditors of Indochine at the 13 May creditors’ meeting but chose not to do so notwithstanding that they must be taken to have appreciated that the future of Indochine needed to be urgently addressed and was likely to be voted upon by the creditors at that meeting;

(c)    The cost to Indochine and its creditors of holding a further meeting is considerable. That cost will be wasted if, as has been clearly and repeatedly indicated by Aude’s solicitors, the secured creditor will not under any circumstances support the 13 May SFG DOCA proposal or any other SFG DOCA proposal; and

(d)    Mr Jones and his co-administrators are of the view that the Kandahar DOCA is in the best interests of the creditors of Indochine because:

(i)    The Kandahar DOCA will provide a better return to creditors than will a winding up of Indochine where the administrators estimate a nil return;

(ii)    The Kandahar DOCA has the support of the secured creditor;

(iii)    The Kandahar DOCA provides for $500,000 to be made available for the administrators’ fees and disbursements and also for the benefit of creditors;

(iv)    The Kandahar DOCA provides for a sensible and workable restructure of Indochine;

(v)    The Kandahar DOCA has the support of management which is critical to the application for extension of the Mount Kare licence; and

(vi)    SFG has constantly changed its position in relation to its proposals and has propounded those proposals at the last minute and in a hurried fashion.

74    The defendants also point to the fact that the plaintiff took no steps to attack the Kandahar DOCA resolution until more than a month after the 13 May creditors’ meeting was held. By then some weeks had passed since the Kandahar DOCA had been signed. It was being acted upon and implemented when this proceeding was commenced. The defendants point to the real prejudice caused by the plaintiff’s delay both in terms of cost to Indochine and its creditors and in terms of risk to its business including the valuable Summit asset at Mount Kare. Since the 13 May creditors’ meeting, Aude has made further advances to Indochine totalling $334,000. Aude has also continued to fund the costs associated with preserving the Mount Kare project as a viable proposition. SFG has still not satisfactorily or adequately explained how it will fund its DOCA proposal. Further, Aude’s solicitors have continued to voice their client’s concerns about the 13 May SFG DOCA proposal and have continued to state emphatically that their client will not vote in favour of Indochine accepting any of the SFG DOCA proposals. Relief should be refused because of the plaintiff’s delay (see Khoury v Zambena Pty Ltd (1997) 23 ACSR 344 where Young J observed that one month appears to be about the maximum time for entertaining a challenge to a Deed of Company Arrangement). See also Deputy Commissioner of Taxation (Cth) v Portinex Pty Ltd (2000) 156 FLR 453 at 468–469 [61]–[66] per Austin J.

75    The cost of holding a further creditors’ meeting of Indochine is estimated to be in the range of $50,000 to $100,000. The further expenditure required to preserve the Mount Kare mine will be several hundreds of thousands of dollars over the next few months. There will need to be further reports prepared and circulated by the administrators.

76    Given the current level of Aude’s secured debt and the quantum of the claims of priority creditors ($767,000), the SFG proposals do not currently provide sufficient funding to create a payout of 25 cents in the dollar to ordinary unsecured creditors. Additional funding of the order of $500,000 would be required in order to cover such a payout.

77    The question posed by s 600A(1)(c)(i) is whether the failure of the creditors to pass the adjournment resolution was contrary to the interests of the creditors as a whole.

78    I do not think that the failure to pass that resolution was contrary to the interests of the creditors as a whole.

79    The creditors who attended and voted at the 13 May creditors’ meeting had the benefit of two s 439A reports from the administrators as well as a detailed report from Mr Jones as to the then current position of Indochine and as to the alternatives thrown up by the Kandahar DOCA proposal and the 13 May SFG DOCA proposal. One of the important features of both s 439A reports was the need to preserve the Summit asset and the need to act in a timely fashion. More importantly, the position of Aude had to be considered and addressed. Aude had already provided additional funds to Indochine to keep its business afloat and, as at 13 May 2015, it would have been in noone’s interests to place Indochine in liquidation or to have a receiver and manager appointed at the behest of Aude. Furthermore, SFG had undertaken a number of strategic moves prior to the 13 May creditors’ meeting. It could have and should have put forward a final DOCA proposal well before it advanced its 13 May DOCA proposal, yet, for some unexplained reason, it failed to do so. When asked at the 13 May creditors’ meeting whether SFG wanted its proposal to be put to the vote, Mr Hill declined to take up that invitation. SFG’s decision not to submit its DOCA proposals to a vote at the 13 May creditors’ meeting was a deliberate and, I infer, considered decision. Mr Hill must be taken to have appreciated that, as at 13 May 2015, the creditors were unlikely to prefer SFG’s 13 May DOCA proposal to the Kandahar DOCA proposal. Indochine required an urgent decision as to its future as at 13 May 2015. It appears that SFG was not then ready to have its DOCA proposals considered. It appears to have tried to slow down the DOCA process in order to give it time to refine its own DOCA proposal and to secure funding for it. In the end, it ran the risk that the meeting would not be adjourned and that the creditors would vote to proceed with the Kandahar proposal.

80    The advantages and disadvantages of each of the proposals in play as at 13 May 2015 were best judged by the administrators and the creditors who attended and voted at the 13 May creditors’ meeting. The result of the voting on the adjournment resolution was line ball by number and overwhelmingly against by value.

81    I am not satisfied that the failure of the meeting to pass the adjournment resolution was contrary to the interests of the creditors as a whole.

82    I must now turn to the requirements of s 600A(1)(c)(ii). In this case, that means I must consider whether the failure to pass the adjournment resolution has prejudiced, or is reasonably likely to prejudice, the interests of creditors who wished to have the meeting adjourned to an extent that is unreasonable having regard to the factors listed in subpars (A) to (C) of s 600A(1)(c)(ii).

83    Prima facie, the Court could be forgiven for thinking that a proposal which offers some return to preferred creditors and to the general body of unsecured creditors is preferable to a proposal which offers those persons nothing. However, there are two important matters which have led me to conclude that I am not satisfied of the necessary prejudice in the present case. They are: First, I am persuaded and so I find that the secured creditor, Aude, will not accept the 13 May SFG DOCA proposal or any similar proposal advanced by SFG under any circumstances. Aude’s position has been made abundantly clear on a number of occasions. Its position is not irrational or unreasonable. Were Aude to be confronted with further delay in the implementation of the Kandahar DOCA and the need to attend and vote at a further creditors meeting, it is highly likely that it would appoint a receiver and manager to Indochine and endeavour to preserve Summit and the valuable exploration licence through negotiation with the relevant authorities in Papua New Guinea. There is a considerable risk that such an outcome would be detrimental to Indochine including its unsecured creditors. Second, as has been pointed out by the administrators both in writing and by Mr Jones in his affidavit evidence before the Court, SFG has not explained satisfactorily how its 13 May DOCA proposal is to be funded nor have those behind SFG provided evidence that the proposal will be funded as specified. True it is that there are funding proposals in the offing, but there is still nothing concrete. Indochine’s need for further funding has now become urgent.

84    I also agree with the other submissions made on behalf of the defendants which I have summarised at [73] and [74] above.

85    I do not consider that the significant weight that was given, and continues to be given, by the administrators to the views of the secured creditor (Aude) is unreasonable.

86    The simple fact is that Indochine is insolvent and cannot survive without a workable DOCA. The secured creditor, Aude, which has a large stake in the future of Indochine, is not satisfied that the 13 May SFG DOCA proposal is a workable proposal which can be fully funded. The administrators too are sceptical about those matters. Time is now of the essence.

87    When given the opportunity to vote on the question of whether further time should be given to SFG to propound yet a further proposal or to refine its 13 May DOCA proposal or whether Indochine should be required to enter into the Kandahar DOCA, the creditors were evenly split in terms of the number of votes but strongly in favour of the Kandahar DOCA when value was taken into account.

88    For all of the above reasons, I am not satisfied that the fact that the 13 May creditors’ meeting was not adjourned caused the requisite prejudice to the relevant creditors to an unreasonable extent.

89    Where, then, does that leave the Kandahar DOCA resolution? That resolution too was only carried because of the votes of related creditors.

90    Having arrived at the conclusion that the plaintiff has not satisfied me of either of the limbs of s 600A(1)(c) in respect of the creditors’ failure to pass the adjournment resolution, there is little or nothing to be said in favour of a separate and independent challenge to the Kandahar DOCA resolution. The “no adjournment” hypothesis inevitably requires the Court to compare the benefits and disadvantages of the Kandahar DOCA scenario with a liquidation scenario. The administrators did not support liquidation. The plaintiff submitted that even a liquidation was preferable to the Kandahar DOCA scenario but that submission did not rise above mere assertion. It had no foundation in the evidence.

91    Although the plaintiff relied upon s 445D of the Act, he did not develop his submissions in support of that case. He accepted that s 445D(1)(f) gave rise to similar considerations as those raised by s 600A(1)(c) and did not put any specific submission in respect of s 445D(1)(g).

92    In my judgment, the plaintiff’s case under s 445D(1)(f) must fall with his case under s 600A and for the same reasons.

93    An issue arose at the hearing which was addressed in writing by both the plaintiff and the defendants after the hearing had concluded. That issue is: When considering the requirements of s 600A(1)(c) of the Act and the discretion reposed in the Court by s 600A(2), is the Court entitled to have regard to relevant matters as at the date of the hearing or must it confine itself to such matters as at the date of the relevant meeting of creditors (here, 13 May 2015)?

94    The defendants argued that the Court was not confined to such matters as were relevant as at the date of the creditors’ meeting but could (and should) take into account relevant matters as at the date of the hearing, at least when considering exercising its discretion under s 600A(2). The defendants relied upon the judgment of Fryberg J in Deputy Commissioner of Taxation v Schmierer [2002] QSC 262 where his Honour described the relevant task as “a complete merits review”. See also Helenic Pty Ltd v Retail Adventures Pty Ltd (Administrators Appointed) [2013] NSWSC 1973 per Robb J.

95    The plaintiff took the opposite view but submitted that it did not matter in the present case which view was correct because the necessary prejudice was obvious. According to the plaintiff, the denial to the creditors of a real opportunity to consider and weigh in the balance the 13 May SFG DOCA proposal was sufficient prejudice.

96    I prefer the view reflected in the defendants’ submissions on this issue.

97    However, it is fair to say that, in the present case, there are few important differences between the bundle of relevant considerations as at 13 May 2015 and the bundle of relevant considerations in play now. Aude’s attitude has not changed. Time remains of the essence. SFG’s DOCA proposal remains somewhat contingent because of a lack of concrete funding. However, one matter is new. Because the plaintiff was slow to take steps to challenge the vote against an adjournment of the 13 May creditors’ meeting and the vote in favour of the Khandahar DOCA resolution, delay has now become an important factor to be weighed in the balance against the grant of relief whereas, as at 13 May 2015, it was less significant. In addition, the cost of another creditors’ meeting must also be considered.

Conclusions

98    For all of the above reasons, I am not prepared to grant any relief to the plaintiff.

99    His proceeding must be dismissed with costs.

100    There will be orders accordingly.

Associate:

Dated:    17 August 2015