FEDERAL COURT OF AUSTRALIA

ION Limited, in the matter of ION Limited (Subject to Deed of Company Arrangement) [2011] FCA 1513

THE COURT ORDERS THAT:

1.     The Deed Administrators are justified in declaring a third interim distribution, any further interim distribution, and a final distribution under the deeds of company arrangement of the entities listed in Schedule 1 attached (collectively, ION DOCAs), without making provision for any potential distribution (whether declared already or in the future) in respect of the disallowed claims of current and former shareholders of ION Limited (subject to Deed of Company Arrangement) whose proofs of debt have been rejected by the Deed Administrators (wholly or in part) and notice of such rejection given to the relevant shareholder by a Form 537 Notice of Rejection of Formal Proof of Debt or Claim dated on or before 1 November 2011 (Rejection Notice), save for the disallowed claims of the following current and former shareholders:

(a)    the third to fourteenth applicants to the interlocutory process issued on 24 October 2011 in proceeding VID 634/2010;

(b)    any shareholder whose Rejection Notice has, as at the date of this order, been returned to the Deed Administrators undelivered;

(c)    each of the shareholders listed in part 1 of Schedule 2 attached;

(d)    each of the shareholders listed in part 2 of Schedule 2, PROVIDED THAT, in the case of each such shareholder, they make application to any Court of competent jurisdiction on or before 10 February 2012 for an extension of the time in which to appeal the Deed Administrators' determination of their claim(s); and

(e)    any shareholder whose Rejection Notice has, at the date of this order, been revoked by the Deed Administrators and not subsequently reissued on or prior to 1 November 2011.

2.    The costs of this application be costs in the ION DOCAs.

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

REASONS FOR JUDGMENT

Introduction

1    By an application dated 7 December 2011, the plaintiffs, Keith Crawford, Peter McKenzie and others, as deed administrators of a number of entities with the ION group (“the ION Pooled entities”), which are each subject to a deed of company arrangement (“the ION DOCAs”), seek, pursuant to s 447D(1) and (2) of the Corporations Act 2001 (Cth) (“the Act”), directions and orders justifying their declaration of a third interim distribution, any further interim distribution and a final distribution under the ION DOCAs without (subject to some exceptions) making provision for potential distribution for the disallowed claims of current and former shareholders of ION Limited (subject to DOCA), whose proofs of debt have been rejected and whose time to appeal has now expired.

2    Section 447D provides:

(1)    The administrator of a company under administration, or of a deed of company arrangement, may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers.

(2)    The administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the operation of, or giving effect to, the deed.

3    The plaintiffs seek the following relief:

1.    That the Deed Administrators are justified in declaring a third interim distribution, any further interim distribution, and a final distribution under the ION DOCAs, without making provision for any potential distribution (whether declared already or in the future) in respect of the disallowed claims of current and former shareholders of ION Limited (subject to Deed of Company Arrangement) whose proofs of debt have been rejected by the Deed Administrators (wholly or in part) and notice of such rejection given to the relevant shareholder by a Form 537 Notice of Rejection of Formal Proof of Debt or Claim (Rejection Notice) dated on or before 1 November 2011, save for the disallowed claims of the following current and former shareholders:

(a)    the third to fourteenth applicants to the interlocutory process issued on 24 October 2011 in proceeding VID 634/2010; and

(b)    any shareholder whose Rejection Notice has, as at the date of this order, been returned to the Deed Administrators undelivered.

2.    Such further or other orders as the Court deems appropriate.

3.    The costs of this application be costs in the DOCAs.

4    The application was supported by:

1.    The affidavits of Keith Alexander Crawford sworn on 7 December 2011 and 15 December 2011.

2.    The affidavit of Tania Cini sworn on 19 December 2011.

3.    Outline of submissions dated 19 December 2011.

5    The application was unopposed, although Mr Dennis, a solicitor representing several creditors, appeared and expressed satisfaction with the process proposed by the plaintiffs.

background

6    The background to the application is as follows.

7    Messrs McIntosh and Anderson (since 18 November 2011, Messrs Crawford and Anderson) are the deed administrators of a group of companies, comprising ION Limited (“ION”) and 17 subsidiaries (“the ION group”), which (together with other related entities not now relevant) went into voluntary administration on 7 December 2004 and executed DOCAs (all contained in one instrument and effectively pooling the companies’ assets and their liabilities). On 14 October 2010, I made orders and directions under s 447D(1) and (2) of the Act, pursuant to which the deed administrators could adopt certain procedures to provide specified material to creditors and prospective creditors.

8    In June 2005, the deed administrators had invited formal proofs of debt or claim. They had advertised the invitation in The Australian and on their website and had announced it on the Australian Stock Exchange.

9    A large number of former shareholders (over 3,300) lodged proofs alleging misleading and deceptive conduct and contraventions of ION’s disclosure obligations as a publicly listed company.

10    The shareholders’ allegations and their dates of purchase and sale (if any) differed. Some shareholders alleged a failure to disclose certain matters, while others relied on different matters. Some had purchased their shares before and some after the alleged misconduct. Some had sold their shares before administrators were appointed, while others had maintained them.

11    While the majority of the shareholders based their claims on specific alleged misconduct on which they allegedly relied in purchasing their shares, a large group (including the Slater & Gordon shareholder claimants) alleged that causation would be established if ION’s share price were inflated by reason of the contravening conduct, even if they did not rely on it.

12    Most claimants sought the full purchase price of their shares. As at October 2010, many shareholders had used an earlier s 439A Report (2005) in preparing their proofs.

13    By October 2010, the administrators had further investigated, after the decision in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 in January 2007, and concluded that if ION had complied with its legal obligations, it would have ceased trading and been placed in administration by 10 September 2010.

14    While not accepting that mere inflation of the price would establish causation as the law stood, they proposed to offer post 10 September 2004 shareholders admission to prove for 80% of the value of their shares without the need to submit any specific evidence of causation, as they would constitute the group most likely to succeed.

15    On 14 October 2010, I gave directions that the deed administrators could properly send material to potential new claimants inviting them to lodge proofs of debt and to existing claimants inviting them to lodge revised proofs in the light of an updated report (to which access would also be provided), and to offer post 10 September 2004 claimants an election to prove for 80% of their claim without submitting evidence of causation or to seek admission of 100% of the claim, together with evidence of causation.

Relevant provisions of DOCAs and applicable legislation, regulations and rules

16    As Mr Crawford deposed, cl 12.6 of the DOCAs incorporates some but not all of the Corporations Regulations 2001 (Cth) (“the Regulations”) concerning the declaration and distribution of dividends applicable to creditors in a liquidation.

17    The DOCAs executed on 27 May 2005 define “asserted claim” to include a claim asserted to be a deed claim.

18    “Deed claim” is defined to mean, broadly, a debt or claim against an ION pooled entity which arose on or before 6 December 2004, which would be admissible to proof against the ION pooled entity had it been wound up pursuant to Part 5.6 of the Act.

19    Clause 1.3 states “Except as expressly included in the deed, each prescribed provision contained in Schedule 8A to the Regulations is expressly excluded from this Deed.”

20    Section 444A(4) of the Act prescribes contents of the deed. Some matters are expressly required. Section 444A(5) states that “[t]he instrument is taken to include the prescribed provisions, except so far as it provides otherwise.”

21    Regulation 5.3A.06 states that for subsection 444A(5) of the Act, the prescribed provisions are those set out in Schedule 8A.

22    Schedule 8A contains a number of provisions, including the powers of the administrator, termination of the deed, priority, and the discharge of debts. By subclause 8(1), it provides that subdivisions A, B, C and E of Division 6 of Part 5.6 of the Act apply to claims made under the deed as if the reference to the liquidator were references to the administrator of the deed. Sub-clause 8(2) provides that for subclause 8(1), the remainder of the Act and the Regulations are taken to apply, as far as practicable, as if:

(a)    a reference to the liquidator were a reference to the administrator;

(b)    a reference to any other matter in relation to the liquidation were a reference in a form applicable to the administration of this deed; and

(c)    a reference to the relevant date were a reference to the date of the administrator’s appointment.

23    Thus, by cl 1.3 of the ION DOCAs, the provisions in Schedule 8A, including those applicable to proofs of debt referred to in subclause 8.1 of Schedule 8A, only apply to the Deed if they are expressly included.

24    Sub-clause 12.5 of the ION DOCAs provides that the deed administrators will determine whether all or part of an asserted claim should be entered on the “Admitted List”.

25    Sub-clause 12.6 provides that, except to the extent, if any, that they are excluded or modified or are inconsistent with the terms of the Deed, s 563A of the Act and subdivisions A, B, C and E of Division 6 of Part 5.6 of the Act (other than ss 553(1A) and s 554F of the Act) and Regulations 5.6.39 to 5.6.57 apply to an asserted claim with such modifications as may be necessary.

26    Thus, save for some specifed exceptions not presently relevant, the following subdivisions of Division 6 of Part 5.6 of the Act, which deals with proof and ranking of claims, apply:

Subdivision A – Admission to proof of debts and claims

Subdivision B – Computation of debts and claims

Subdivision C – Special provisions relating to secured creditors

Subdivision E – Miscellaneous

(Subdivision D “Priorities” is not included).

27    In subdivision B, s 554A(1) applies where a liquidator (or administrator) admits a debt or claim that at the relevant date did not bear a certain value, and by s 554A(2), the liquidator (or administrator) must:

(a)    make an estimate of the value of the debt or claim as at the relevant date; or

(b)    refer the question of the value of the debt or claim to the Court.

28    By s 554A(3), a person who is aggrieved by the liquidator’s estimate of the value of their claim may, in accordance with the Regulations, appeal to the Court against the estimate.

29    By s 554A(4), the Court’s duties, including to make an estimate or to determine the applicable method of working out the claim, are set out.

30    Regulation 5.6.43A (which is applicable under sub-clause 12.6) provides that an appeal under s 554A(3) of the Act must be made:

(a)    within 21 days after the person aggrieved becomes aware of the liquidator’s estimate (or within a period as extended under sub regulation (2)); and

(b)    in accordance with the rules.

31    Regulation 5.6.43A(2) provides that the Court may extend the period before or after the 21 day period, on application by a person aggrieved.

32    Regulation 5.6.54(1)(b)(i) requires a liquidator, when notifying a creditor of rejection of all or part of a formal proof, also to give notice that the creditor may appeal within the time specified therein (not less than 14 days after service of the notice).

33    Regulation 5.6.55 provides, inter alia, for the liquidator to revoke or amend decisions to admit or reject proofs.

34    Section 1321 of the Act relevantly provides:

Appeals from decisions of receivers, liquidators etc.

(1)    A person aggrieved by any act, omission or decision of:

(a)    a person administering a compromise, arrangement or scheme referred to in Part 5.1; or

(b)    a receiver, or a receiver and manager, of property of a corporation; or

(c)    an administrator of a company; or

(ca)    an administrator of a deed of company arrangement executed by a company; or

(d)    a liquidator or provisional liquidator of a company;

may appeal to the Court in respect of the act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit.

35    Rule 14.1 of the Federal Court (Corporations) Rules 2000 (“Corporations Rules”) governs appeals to the Court authorised by the Corporations Act.

36    Rule 14.1(2) provides that unless the Act or the Regulations otherwise provide, the originating or interlocutory process must be filed within

(a)    21 days of the act, omission or decision appealed against; or

(b)    any further time allowed by the Court.

37    The period specified under reg 5.6.54 thus takes precedence over the time limit imposed by r 14.1 in a winding up, but in either case an extension of time may be granted.

38    In the present case, under the ION DOCAs, it appears clear that deed creditors or claimants whose proofs are rejected in whole or part may appeal and that the court may grant an extension of the time in which to appeal.

39    Regs 5.6.65 to 5.6.70, inter alia, are not incorporated into the ION DOCAs, which provide for a different process for declaration and distribution from that applicable to corporate liquidations.

40    The combined effect of regs 5.6.65 to 5.6.68 of the Regulations is that:

(a)    a dividend must be declared only in favour of those creditors whose debts or claims are admitted; and

(b)    those whose claims are subsequently admitted are entitled to a catch-up dividend (reg 5.6.68), but only if there are sufficient funds available and subject to sharing such funds as might be available for a catch-up dividend pro rata with any new claims that are subsequently lodged and admitted.

41    As Mr Crawford deposed, the ION DOCAs provide the following procedure for lodging and determining claims:

23.    Clause 12 of the DOCAs contemplates the following procedure for the lodgment and determination of claims. Unless otherwise defined in this affidavit, capitalised terms used in paragraphs 23 to 28 have the meaning ascribed to them in the DOCAs.

(a)    The Deed Administrators are required to prepare and settle a list of Admitted Claims (clause 12.2).

(b)    Persons with claims are to notify the Deed Administrators of their Asserted Claims together with relevant supporting material (clause 12.3).

(c)    The Deed Administrators are required to determine whether all or part of an Asserted Claim should be entered on the Admitted List (clause 12.5) and then enter that Deed Claim onto the Admitted List in accordance with their determination (clause 12.7),

(d)    The Admitted List might be amended, for example, in order to correct an error made by the Deed Administrators or because an amendment is required due to a Court order made in relation to the Admitted Claim following an appeal by the creditor (clauses 12.10 and 12.11).

(e)    Time is of the essence in respect of the obligation of a person notifying an Asserted Claim (clause 12.12).

(f)    The Deed Administrators may in their absolute discretion accept a written notification of a Deed Claim at any time and irrespective of whether any distributions have been made to Admitted Creditors. If the Deed Administrators are satisfied that the Asserted Claim is valid, they may enter it (or part of it) on the Admitted List (clause 12.8).

24.    Clause 14 of the DOCAs deals with the distribution of the proceeds of the Fund. After payment of priority claims, the Deed Administrators must distribute the proceeds of the Fund to pay those creditors whose claims have been included on the Admitted List in respect of their right to share on a proportionate basis with other Admitted Creditors (clause 14.1)

25.    Clause 14.2 of the DOCAs provides that:

"The proceeds of the Fund will be distributed by the Deed Administrators at such time as they determine in their absolute discretion"

and that:

"The Deed Administrators may make interim distributions out of the Fund at such times as they see fit."

26.    Clause 12.11(c) and (d) of the DOCAs operate to entitle a person whose claim has been admitted or whose Admitted Claim is increased after a distribution has already been made to Admitted Creditors, to receive a catch-up dividend (if funds are available for that purpose). In this respect, clause 12.11 of the DOCAs effectively replicates regulation 5.6.68 (which is not incorporated by reference into the DOCAs).

27.    The DOCAs are otherwise non-prescriptive as to the mechanics by which an interim distribution should be made.

28.    In addition, the DOCAs generally give the Deed Administrators wide powers to do anything that is necessary or convenient for the purpose of administering the DOCAs (clause 16.3(ee)). Clause 23.2 similarly provides that:

"If any circumstances arise for which this Deed does not either expressly or by necessary implication provide, the Deed Administrators will in their absolute discretion make such provision as they think fit for the purpose of effectuating this Deed and they may, if they think fit, apply to the Court for directions."

Interim distributions

42    Since 13 December 2010, when the deadline for lodgement of new or amended proofs of debt by shareholders expired, the deed administrators have declared two interim dividends, as follows:

43    They did so on the basis that both interim distributions were for the benefit of those who had lodged their claims by a particular deadline, rather than for those whose claims were admitted by the deadline (as would ordinarily occur in a winding up). The reason for that approach was, Mr Crawford deposed, that the deed administrators had such a large volume of shareholder claims (ultimately over 5,000) at the time of the first deadline for participation (7 January 2011) that it was clear that they could not adjudicate those proofs by the date of declaration of the first interim dividend on 21 January 2011, although they had adjudicated the trade and financier creditors’ proofs by that time.

44    Mr Crawford deposed:

32.    The First Declaration was to the effect that a First Interim Distribution at the rate of 45 cents in the dollar was declared for the benefit of all creditors of the ION Pooled Entities who had lodged their proofs of debt or claim with the Deed Administrators on or before the First Deadline and whose debts or claims were already admitted or were subsequently admitted (First Distribution Creditors). Any proofs lodged with the Deed Administrators after the First Deadline would not be eligible to participate in the First Interim Distribution.

33.    Given the large number of proofs of debt that had been lodged but not yet adjudicated at this time, it was not possible to declare the First Interim Distribution on the basis that it was available only to those whose claims had already been admitted (as might ordinarily occur in a winding up - see paragraph 21 above). To do so would have exposed creditors who had lodged their claims prior to the First Deadline to the risk that they may not receive a full catch up dividend under clause 12.11 of the DOCAs if there was an unexpectedly large number of new claims lodged after the First Deadline.

34.    Accordingly, the First Declaration confirmed that the First Interim Distribution would be paid as follows:

(a)    by 28 January 2011 to those First Distribution Creditors whose debts or claims had been adjudicated and admitted by that date; and

(b)    within 7 days after the date of admission for those First Distribution Creditors whose debts or claims were not adjudicated and admitted by 28 January 2011 but which are subsequently admitted by the Deed Administrators.

35.    As such, for shareholders with claims lodged by the First Deadline that were still in the process of being adjudicated as at 28 January 2011, the First Declaration confirmed that those shareholders would receive payment of the 45 cent in the dollar First Interim Distribution as and when their claims were admitted.

36.    On or about 28 January 2011 the First Interim Distribution was paid to admitted trade creditors, financiers and those shareholders whose claims related solely to shares purchased on or after 10 September 2004 and who had accepted the Deed Administrators' compromise offer (as set out in paragraph 2.4.7 of their Report). Other shareholder creditors have received payment of the First Interim Distribution as and when their claims have been admitted (either in whole or in part).

45    Mr Crawford deposed that:

37.    In determining the amount of the First Interim Distribution at 45 cents in the dollar, the Deed Administrators were concerned to ensure that the position of First Distribution Creditors whose claims are ultimately admitted is entirely preserved. As such, the Deed Administrators assumed, solely for the purposes of calculating the amount of the First Interim Distribution, that the claims of all First Distribution Creditors which were not yet adjudicated, would be admitted in full. The effect of this is that the Deed Administrators retained in the Fund (as defined in the DOCAs) sufficient amounts to ensure payment in full to all First Distribution Creditors of the 45 cents in the dollar distribution should this become necessary.

46    Mr Crawford deposed to a declaration on 9 September 2011 of a second interim distribution of 3 cents in the dollar, for all creditors who lodged their proofs of debt or claim by the second deadline of 2 September 2011 whose debts were either already admitted or were subsequently admitted.

47    Mr Crawford deposed that the second interim distribution was paid as follows:

(a)    by 21 September 2011 to those Second Distribution Creditors whose debts or claims had been adjudicated and admitted by that date; and

(b)    within 7 days after the date of admission for those Second Distribution Creditors whose debts or claims were not adjudicated and admitted by 21 September 2011 but were subsequently admitted by the Deed Administrators.

Adjudication and rejection of shareholder claims

48    Mr Crawford deposed that:

Substantial progress has now been made in relation to the adjudication of the 5,000 plus shareholder proofs of debt lodged with the Deed Administrators with a total value exceeding $140 million. A significant number of proofs of debt have been admitted in whole or in part. In addition, a significant number of shareholder proofs of debt have been rejected in whole or in part. The approximate value and number of rejected claims as at 28 October 2011 are as follows. The figures shown below do not include a small number of shareholder proofs of debt in respect of which the Deed Administrators’ notices of rejection have been returned undelivered and marked ‘Returned to Sender’. For present purposes, the Deed Administrators have not counted such proofs as having been rejected.

49    Mr Crawford deposed that of the 1,994 shareholder claims which have been rejected in whole or in part, only 12 (represented by Cosoff Cudmore Knox) have commenced, or purported to commence, appeals.

50    The other rejected shareholders could appeal pursuant to reg 5.6.54 as incorporated into the ION DOCAs, not less than 14 days after service of the rejection notice, or could appeal to the court 21 days after the rejection of their proof of debt under s 1321(1) of the Act and r 14.1 of the Corporations Rules.

51    Mr Crawford deposed that, subject to the grant of an extension, the time in which to appeal under reg 5.6.64 as incorporated into the ION DOCAs or r 14.1 of the Corporations Rules has long since expired for all of the 1,994 shareholders whose claims have been rejected in whole or in part. Some shareholder claims (or parts thereof) were rejected as early as February 2011, and the last were rejected on 27 October 2011, that is, over five weeks prior to the present application.

52    Only the 12 Cosoff Cudmore shareholders have appealed, and no expired rejected shareholder has sought an extension, although some have stated that they are considering an appeal.

53    The deed administrators therefore regard the claims of the expired rejected shareholders as finally determined, subject to any extension, and have now rejected over $31 million of shareholder claims, yet they made previous interim distributions on the basis that the shareholder claims would be admitted in full.

54    Tania Cini, a partner of the solicitors for the plaintiffs, deposed to her recent correspondence and discussions with various law firms representing shareholders, to whom copies of the originating process and Mr Crawford’s affidavit sworn on 7 December 2011 were forwarded.

55    Ms Cini also deposed to inquiries from individual shareholders whose claims have been rejected in whole or in part and whose time to appeal had expired or their legal representatives, and to shareholders whose rejection notices were irregular.

56    The correspondence was to the effect that, while the plaintiffs reserved the right to object to any application to extend the time in which to appeal, Ms Cini had made contact with shareholders who made inquiries to the deed administrators, including several who would be excluded from the scope of the directions sought, provided that they applied for an extension of time to appeal by 10 February 2012. A number of other shareholders had indicated that they no longer wished to be heard in relation to the application.

plaintiffs’ submissions

57    The plaintiffs submitted:

18.    Under the terms of the DOCAs, it would be open to the Deed Administrators:

a.    to make distributions only to those creditors whose claims have already been adjudicated and admitted; and

b.    insofar as any submitted claims have not been adjudicated when making the distribution, to leave those creditors to claim “catch-up” dividends under cl 12.11(c) of the DOCAs if their claims are subsequently admitted.

19.    However, in view of the lengthy and involved process of adjudicating the shareholder claims, in their discretion the Deed Administrators have:

a.    permitted creditors whose proofs of debt are lodged by the relevant deadline, but are admitted after the distribution is declared, to participate in the 1st and 2nd interim distributions as of right: Crawford, [33]-[35]; and

b.    ensured that there will be sufficient funds available for eligible creditors whose claims are later admitted, by making provision for the full amount of those creditors’ unadjudicated claims when determining the amount of the 1st and 2nd interim distributions: Crawford, [37], [40], [47].

20.    In the case of the Expired Rejected Shareholders (save for those shareholders whose Rejection Notices have been returned undelivered, whose claims are carved out of the direction sought), but for the possibility that they might be granted leave to appeal out of time, there would be no question that the Deed Administrators could:

a.    proceed on the assumption that Expired Rejected Shareholders’ disallowed claims have been finally determined; and

b.    cease to make provision in respect of the Expired Rejected Shareholders’ disallowed claims, and thereby making available for distribution to admitted creditors the funds that would otherwise have been provisioned.

21.    The Deed Administrators seek the Court’s direction that, in declaring the third interim distribution and any subsequent distribution, they are justified in ceasing to make provision for the Expired Rejected Shareholders’ disallowed claims (save for those shareholders whose Rejection Notices have been returned undelivered, whose claims are carved out of the direction sought).

22.    The effect of granting the direction sought would be to make available the amounts that have been provisioned thus far in respect of the Expired Rejected Shareholders’ disallowed claims – $30.7 million × (45 + 3) cents ≈ $14.7 million – to be distributed to admitted creditors through the 3rd interim distribution.

23.    Conversely, if the Deed Administrators were required to continue to make provision for the disallowed claims of Expired Rejected Shareholders, against the possibility an Expired Rejected Shareholder might obtain leave to appeal out of time and then succeed on his or her appeal, then it would appear to follow that the Deed Administrators would be required to maintain those provisions within the Fund (and to keep the funds out of the hands of admitted creditors) indefinitely. Although the length of delay (and any explanation therefor) is a significant consideration in determining whether to grant leave to appeal out of time, there is no sunset date beyond which a putative creditor is absolutely precluded from obtaining leave to appeal out of time.

24.    The Deed Administrators therefore respectfully request that the Court grant the directions sought.

discussion

58    In my opinion, in the circumstances, it was appropriate to make directions in the terms sought.

59    The ION DOCAs clearly empower the plaintiff deed administrators to make the contemplated further distribution or distributions without making provision for the possibility that the relevant claimants whose proofs have been rejected in whole or in part may obtain an extension of time to, and successfully, appeal outside the time prescribed. Nor is any corresponding statutory obligation imposed by the Act or Corporations Regulations on liquidators in distributions on a winding up, to which tighter and less flexible timeframes apply than those under the ION DOCAs.

60    The plaintiffs nevertheless sought the comfort of a direction as they now, in the context to which Mr Crawford deposed, proposed a departure from the practice they had hitherto maintained of provisioning for as yet unadmitted shareholder claims. The shareholder claims had now been adjudicated and, of those rejected in whole or in part, very few were the subject of a challenge or appeal, although the prescribed time had expired. The course proposed by the plaintiffs would permit deed creditors to participate in a distribution of, approximately, an additional $14 million as a result of ceasing to maintain the provision.

61    As senior counsel for the plaintiffs made clear, the course advocated did not eliminate the potential for claimants who had hitherto failed to pursue a claim for legitimate reasons to “catch up” pursuant to the DOCAs.

62    In the present case, the administration, investigations and distributions have been long drawn out, resulting in a lengthy delay in any return to deed creditors. The administrators had widely advertised, conferred and made contact with those known shareholders who may seek an extension of time to appeal from the rejection of their proofs and have excised them from the scope of the directions sought, subject to their filing applications for extensions by 10 February 2012.

63    While no arbitrary cut off date for extensions of leave to appeal applies, in my opinion, the administrators should not be required to maintain the provisioning, and thus delay further distribution of a considerable sum to deed creditors, for a further indefinite period, due to the possibility that presently unforeseen applications for extension of time to appeal may subsequently be made.

Associate:

Dated:    20 December 2011

Schedule 1

Schedule 2

Part 1

Part 2