Federal Court of Australia

Deputy Commissioner of Taxation v Pope Joan Hospitality Pty Ltd (Restructuring Practitioner Appointed) [2023] FCA 872

ORDERS

THE COURT ORDERS THAT:

1.    The Restructuring Plan made by the Defendant on 20 July 2023 be varied in accordance with the Restructuring Practitioner’s Notice to Creditors dated 17 July 2023 at exhibit “AJM-4” to the affidavit of Andrew James MacNeill affirmed on 20 July 2023.

2.    The Plaintiff’s originating process is dismissed.

3.    The Plaintiff’s costs of the originating process be fixed in the sum of $3,270.00.

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

REASONS FOR JUDGMENT

SARAH C DERRINGTON J:

Introduction

1    On 20 April 2023, these proceedings were commenced by originating application seeking to wind up the defendant, Pope Joan Hospitality Pty Ltd (Restructuring Practitioner Appointed) (Company), for the failure to comply with a statutory demand of the plaintiff, the Deputy Commissioner of Taxation (DCT).

2    On 2 June 2023, the Court made orders pursuant to s 453Q(1) of the Corporations Act 2001 (Cth) adjourning the DCT’s originating application to enable the creditors of the Company to vote on a proposed restructuring plan pursuant to Pt 5.3B of the Corporations Act. By further order made on 30 June 2023, the adjournment was extended until 21 July 2023.

3    On 20 July 2023, the Company lodged the present application seeking orders pursuant to reg 5.3B.61 of the Corporations Regulations 2001 (Cth) to vary the restructuring plan. The restructuring plan had been accepted by its creditors on 19 July 2023 and was made on 20 July 2023.

4    I heard the interlocutory application on 21 July 2023. The DCT neither consented to nor opposed the order sought. The total admissible debt under the Company’s restructuring is $939,030.34 of which the DCT is owed $599,559.22.

5    At the conclusion of the hearing, I made orders in terms proposed by the Company, which varied the restructuring plan in accordance with the variation of Restructuring Plan dated 17 July 2023 (Restructuring Plan).

6    My reasons for making those orders follow.

Factual Background

7    On 31 May 2023, Mr Andrew James MacNeill, a registered liquidator, was appointed the restructuring practitioner of the Company: Affidavit of Andrew James MacNeill affirmed 20 July 2023 (Fourth McNeill Affidavit) at [1] and [4].

8    On 28 June 2023, Mr MacNeill proposed the Restructuring Plan, pursuant to reg 5.3B.21 of the Corporations Regulations, to the Company’s creditors and provided them with the required documents: Affidavit of Andrew James MacNeill affirmed 28 June 2023 (Second McNeill Affidavit) at [30]-[31]. Mr McNeill deposed that, in his professional opinion, the Restructuring Plan would provide a materially better return for unsecured creditors than would occur if the Company were liquidated: Second McNeill Affidavit at [32].

9    The Restructuring Plan contemplated the sale of the Company as a going concern to Kerala Foods Pty Ltd. On or about 31 May 2021, the Company had entered into a contract for sale with Kerala for a price of $125,000.00: Affidavit of David Mackintosh affirmed 1 June 2023 (First Mackintosh Affidavit) at [16]. The contract is due to settle on 1 August 2023: First Mackintosh Affidavit at [5].

10    The Company’s Restructuring Plan was taken to have been made on 20 July 2023, being the day after the end of the acceptance period on 19 July 2023: regs 5.3B.25 and 5.3B.26; Fourth MacNeill Affidavit at [5]. The Restructuring Plan, as accepted, proposed that the net sum of $128,128.00 would be applied towards unsecured creditor claims after deducting 9% of the total value of the Company’s property to pay the Restructuring Practitioner’s remuneration. This was an estimated dividend to creditors of 13 cents in the dollar: Affidavit of David Mackintosh affirmed 20 July 2023 (Second Mackintosh Affidavit) at [5].

11    Subsequent to the making of the Restructuring Plan, it became apparent that the Company’s Landlord would not agree to an assignment of the lease to Kerala: Second Mackintosh Affidavit at [18]-[21].

12    As a consequence of that hurdle, the Directors of the Company agreed to pay a cash contribution, in lieu of the sale proceeds, to guarantee the estimated return to creditors under the approved Restructuring Plan: Second Mackintosh Affidavit at [32]. On 17 July 2023, the Directors paid the required cash contribution into Mr MacNeill’s trust account to be held pending acceptance of the varied Restructuring Plan and the outcome of this application: Second Mackintosh Affidavit at [35].

13    On that same day, Mr MacNeill sent a notice to the Company’s creditors in relation to the issue with the lease and advised them of the Directors’ proposal to pay a cash contribution that would guarantee the same return to creditors as if the sale were to be completed. That notice pointed out to creditors that, under Pt 5.3B of the Corporations Act, there is no legislative mechanism to amend or vary a restructuring plan during the acceptance period.

14    The notice invited any creditor who had already cast their vote on the Restructuring Plan to change their vote if they so wished up until 5pm on 19 July 2023. The notice also foreshadowed this interlocutory application and informed the creditors that if the Court did not approve the variation, Mr MacNeill would immediately terminate the Restructuring Plan and the Company would likely be placed into liquidation: Affidavit of Andrew James McNeill affirmed 20 July 2021 (Third MacNeill Affidavit) at [14]. No creditor changed its vote. Four remained in favour of the Restructuring Plan (representing $624,417.40 of debt) and two remained against (representing $1,484.57 of debt): Third MacNeill Affidavit at [19]-[22].

15    Mr MacNeill deposed that, in his professional opinion, the Restructuring Plan as varied by the cash contribution is in the best interests of the Company’s creditors because it guarantees the same return to creditors as did the original Restructuring Plan (Third MacNeill Affidavit at [16]) and so provides for a better return to unsecured creditors than would occur in a liquidation of the Company: First MacNeill Affidavit at [30]-[34].

Regulatory Framework

16    Corporate rescue provisions were first modernised in Australia in 1993 with the introduction of Pts 5.3A and 5.7B into the Corporations Act which established the voluntary administration and insolvent trading regimes, respectively. Part 5.3A sought to maximise the chance for a company to continue in existence, or, where that was not possible, result in better returns for a company’s creditors. The Part has been described as a “one-size-fits-all” approach to corporate rescue which did not meet the needs or expectations of MSMEs (micr-, small- and medium sized enterprises): Jason Harris, “Should Voluntary Administration Remain a One-Size-Fits-All Procedure? Do We Need a Fast Track System for Small Business Rescue?” in Shelley Griffiths, Sheelagh McCracken and Ann Wardrop (eds), Exploring Tensions in Finance Law: Trans-Tasman Insights (Thomson Reuters, 2014) 101, 106.

17    From 1 January 2021, the corporate rescue scheme was expanded with the introduction of Pt 5.3B of the Corporations Act. Part 5.3B was introduced by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) (Reform Act) and established a new debt restructuring process for eligible small companies to allow a faster and less complex process to restructure existing debts, continue trade and maximise their chances of survival: Explanatory Memorandum to the Reform Act (EM).

18    The Reform Act was enacted partly in response to the economic impact of the COVID-19 pandemic and an anticipated consequential increase in the number of businesses facing financial distress. The reform aim to achieve greater economic dynamism and to ultimately help more small businesses to survive: EM at p 9. In particular, the EM states at p 13 at [1.3]-[1.4]:

The intention of the debt restructuring process is to provide an alternative to the ‘one-size-fits-all’ voluntary administration regime for small businesses with non-complex debt. It reduces the complexity and cost of the administration process, providing a greater role for the company directors during the process and allowing them to retain control over the company throughout. These changes are intended to encourage more small businesses to seek debt restructuring earlier, increasing their chance of regaining viability.

The ultimate aim of restructuring is to have a plan in place which sets out an approach to repayment of the company’s existing debts, thereby enabling the company to stay in business and avoid being wound up. The restructuring process covers the period during which a plan is being developed by the business owners, following the appointment of a small business restructuring practitioner. The restructuring process may also be referred to as the period where the company is ‘under restructuring’ or ‘during restructuring’. The restructuring process ends once the plan is in place.

19    This aim is reflected in the Object of Pt 5.3B of the Corporations Act, which is expressed in s 452A:

Object of this Part

The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for a restructuring process for eligible companies that allows the companies:

(a)     to retain control of the business, property and affairs while developing a plan to restructure with the assistance of a small business restructuring practitioner; and

(b)     to enter into a restructuring plan with creditors.

(Emphasis added.)

20    Division 3 of Pt 5.3B, containing ss 455A-B, of the Corporations Act, regulates restructuring plans. Section 455B(1) provides that the regulations may regulate, inter alia, how a restructuring plan is proposed, what the restructuring plan must retain, how a restructuring plan may be accepted or rejected, when a restructuring plan lapses and the consequences of lapse.

21    Division 3 of Pt 5.3B of the Corporations Regulations are made pursuant to s 455B of the Corporations Act. By reg 5.3B.14(1) of the Corporations Regulations, a company under restructuring proposes a restructuring plan if it prepares a restructuring plan, to be voted on by the creditors (reg 5.3B.21(1)(b)), and a restructuring proposal statement.

22    A restructuring plan must set out what property of the company is to be dealt with under the plan and include a schedule of debts and claims: regs 5.3B.15(2) and 5.3B.16. A restructuring plan may include information relating to the company’s financial affairs, it does not, however, need to disclose the assets of the company or other financial matters: reg 5.3B.15(3). Further, there is no requirement that creditors to be provided with a general report to explain the nature of the procedure, or the creditors’ alternative options if the plan is not approved: Jason Harris and Christopher Symes, “The chimera of restructuring reform: An opportunity missed for MSMEs in pt 5.3B” (2021) 36 Australian Journal of Corporate Law 182, 189.

23    The date on which a restructuring plan is proposed in accordance with reg 5.3B.14 is the date on which the restructuring proposal period commences. The proposal period continues to a period of 20 business days: reg 5.3B.17(1).

24    Each affected creditor must also be asked to give a written statement as to whether or not the restructuring plan should be accepted and to verify, or otherwise, the company’s assessment of the creditor’s admissible debts or claims: reg 5.3B.22.

25    The proposal to make a restructuring plan will lapse if the restructuring plan is not accepted within the acceptance period or if the restructuring practitioner cancels the proposal before it is made: reg 5.3B.20.

26    The acceptance period commences on the date that the restructuring practitioner provides the company’s creditors with the restructuring plan. The acceptance period ends 15 days later unless a dispute arises with a creditor by reason of the schedule of debts and claims or unless extended by the Court: reg 5.3B.21(3).

27    Regulation 5.3B.25(1) provides that a company’s restructuring plan is accepted if, at the end of the last day of the acceptance period, the majority in value of those creditors from whom the restructuring practitioner for the plan has received a statement under reg 5.3B.21(1)(b) stated that the restructuring should be accepted.

28    As soon as practicable after the company executes a restructuring plan, the restructuring practitioner must give notice of the plan, the standard terms, the proposal statement and the declaration to as many of the company’s creditors as is reasonable practicable: reg 5.3B.21.

29    The company’s restructuring practitioner must make a declaration pursuant to reg 5.3B(18)(2)(a) in which he or she state, on reasonable grounds or in accordance with reasonable belief that the eligibility criteria for restructuring are met in relation to the company and that if the restructuring plan is made, the company is likely to be able discharge the obligations created by the plan as and when they become due and payable.

30    It is significant that this obligation does not amount to a declaration that the company will be rescued by the restructuring plan; merely that there are reasonable grounds for believing the obligations in the plan will be met by the company.

31    A restructuring practitioner who makes such a declaration, but who fails to make reasonable inquiries into the company’s business, property, affairs and financial circumstances, or to verify those circumstances, commits a strict liability offence: reg 5.3B.18(4).

The power to vary a restructuring plan

32    As noted above, under Pt 5.3B of the Corporations Act, there is no legislative mechanism to amend or vary a restructuring plan during the acceptance period. This is in contrast to the provision made in s 445A for a deed of company arrangement to be varied by creditors in circumstances where the variation is not materially different, and subject to the power of the Court in s 445B, to cancel the variation.

33    Section 458A(1) of the Corporations Act provides:

General power to make orders

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

34    The equivalent section in Pt 5.3A is s 447A(1).

35    Section 458B of the Corporations Act, for which there is no equivalent in Pt 5.3A, provides:

Other powers of the Court

(1)    The regulations may:

(a)     confer powers on the Court in relation to the restructure of companies or restructuring plans; and

(b)     prescribe whether those powers are to be exercised on the initiative of the Court or on the application of one or more persons; and

(c)    prescribe persons who may apply to the Court for the exercise of those powers.

(2)    Without limiting subsection (1), the powers that may be conferred on the Court include the power:

(a)     to vary or terminate a restructuring plan; and

(b)     to declare a restructuring plan void.

(3)    The powers conferred on the Court under regulations made for the purposes of this section are in addition to any other powers conferred on the Court.

36     Regulation 5.3B.61 of the Corporations Regulations provides:

When Court may vary restructuring plan

(1)     A restructuring plan that has been made by a company must not be varied except in accordance with this regulation.

(2)    The Court may make an order varying a restructure plan:

(a)    on its own initiative; or

(b)    on the application of:

(i)    the company; or

(ii)    an affected creditor; or

(iii)    the restructuring practitioner for the plan; or

(iv)    ASIC.

37    This power is in addition to the apparently similar power conferred by cl 90-15(1) Insolvency Practice Schedule Corporations, being schedule 2 to the Corporations Act, which provides that the “Court may make such orders as it thinks fit in relation to the external administration of a company”. Clause 5-15 has been amended to include within the meaning of “under external administration” where the company is under restructuring (cl 5-15(ba)), or where a restructuring plan has been made in relation to the company (cl 5-15(bb)).

38    The Company relied only on s 458A of the Corporations Act and reg 5.3B.61 of the Corporations Regulations in seeking the order to vary the Restructuring Plan. It did not rely on cl 90-15.

39    Whether or not cl 90-15(1) could provide an alternative source of power for the relief sought, it seems to me, will be determined on the facts of each case and will depend upon whether the order sought in fact seeks to modify Pt 5.3B, or is concerned with a provision outside that Part: see for example In the matter of DSHE Holdings Ltd [2021] NSWSC 608 at [69]; cf Quinlan, in the matter of Halifax Investment Services Pty Ltd (in liq) (No 4) [2019] FCA 604.

40    In Re One.Tel Ltd [2002] NSWSC 1081; 43 ACSR 305 at [44], Barrett J dealt with the cognate provision in Pt 5.3A. His Honour held that s 447A could not be the source of an order relieving liquidators of the necessity of complying with specified notice requirements with respect to creditors having claims of $100 or less unless the order could properly be described as an order about how Pt 5.3A, as distinct from Pt 5.6 “is to operate in relation to” the relevant companies.  After examining s 446A, at [49] and [50], Barrett J concluded that s 446A, once activated, becomes the source of a winding up regime different from the regime that comes to apply by the taking of the steps dispensed with by s 446A. His Honour said at [49]-[50]:

…One may therefore properly regard s 446A as having and ongoing and sustaining operation for the duration of the winding up it has created. It is not, as it were, exhausted and spent once the winding up regime is in place.

In Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70, Austin J referred to the decision of Gummow J in Brown v Carpet Design Group Pty Ltd (1994) 50 FCR 526 as demonstrating that s 446A supplants, pro tanto, the general statutory provisions dealing with voluntary winding up. As a result of that supplanting – and particularly in light of the modified ongoing regime based on s 482 that it imposes – s 446A must continue to sustain the winding up until it reaches its natural conclusion. It is therefore both permissible and appropriate to regard a winding up of that kind as continuing to be referable to its sustaining source in Pt. 5.3A.

41    Barrett J concluded, at [56], that “because s 446A – a Pt. 5.3A provision – is the continuing source of the modified winding up regime, s 447A is available to modify the future operation of s 446A in this case”. In reaching this conclusion, his Honour applied the reasons of Austin J in Gibbons v Libertyone Ltd [2002] NSWSC 274; 41 ACSR 442, subsequently applied in  Application of Walker & anor [2002] NSWSC 705.

42    The question of the relative scope of the power conferred by s 447A (and so by analogy s 458A) as compared with that in cl 90-15 was considered by Gleeson J in Natkunarajah (Liquidator), in the matter of FLY365 Pty Ltd (in liquidation) [2020] FCA 419. The circumstances concerned whether the power in cl 90-15 was wide enough to permit an order in respect of the information required to be given by the liquidator referred to in s 497(1) that “electronic notification would be ‘validly given’ to creditors”. Her Honour said, at [39]:

In my view, such an order is tantamount to seeking to vary the operation of the legislation. In the face of an explicit power to that effect in Pt 5.3A, in my view, s 90-15 could not be read to have such a broad operation.

43    As the Company did not rely on cl 90-15, and directed no argument as to its utility in the present case, it is unnecessary for me to reach a conclusion as to whether a variation of the Restructuring Plan should be characterised as “tantamount to seeking to vary the operation of the legislation”. It would however seem, on a preliminary view, that the express provision in s 458B(2) allowing for regulations to be made to vary a restructuring plan, and reg 5.3B.61 made pursuant to that section, is sufficient to ground reliance on cl 90-15(1) as a source of the power for the relief sought.

How should the power be exercised?

44    Regulation 5.3B.61 grants the Court an apparently unfettered discretion whether and when to grant an order varying a restructuring plan. This wide discretion can be contrasted with the power vested in the Court to adjourn a winding application in s 453Q(1) of the Corporations Act, by which the Court is obliged to adjourn the winding-up proceedings if it is satisfied that it is in the interests of the company’s creditors for the company to continue under restructuring rather than be wound-up: see in relation to its cognate provisions in Pt 5.3A, s 440A(2), Deputy Commissioner of Taxation v Fyna Constructions (Hire & Sales) Pty Ltd (administrators appointed) [2019] FCA 578 at [20].

45    The question of how the discretion conferred by reg 5.3B.61 should be exercised is one of statutory construction. The principles applicable to statutory construction, which require consideration of the text, context and purpose, are well established: see, in particular, s 15AA of the Acts Interpretation Act 1901 (Cth); Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [69]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 at [39]; Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [25]-[26]; SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 262 CLR 362 at [14].

46    Relevantly, the Object of Pt 5.3B speaks to the Part providing for a restructuring process that allows the company to “retain control of the business…while developing a plan” and to enter into that plan with creditors”. As the EM elaborates, at p 13 [1.2] it is “to establish a formal debt restructuring process for eligible companies”. The EM explains, at p 13 [1.4], that the “restructuring process may also be referred to as the period where the company is ‘under restructuring’ or ‘during restructuring’. The restructuring process ends once the plan is in place”.

47    Section 453A(b) of the Corporations Act and reg 5.3B.02(j) of the Corporations Regulations provide that restructuring itself ends when, inter alia, a company makes a restructuring plan. Despite the restructuring of the Company having technically ended on 20 July 2023, it would be inconsistent with the Object of Pt 5.3B of the Corporations Act to refuse the Company’s application to vary the Restructuring Plan in accordance with the variation of Restructuring Plan dated 17 July 2023 where the consequences of that refusal would be to negate a restructuring process which allowed the Company to retain control of the business while developing a plan with Mr MacNeill and entering into that plan with creditors. It is of particular relevance to the exercise of the discretion in this case that the Restructuring Plan, as varied, results in the same return to creditors, and the Company’s most significant creditor, the DCT, did not oppose (nor consent) to the variation.

The Objects of Parts 5.3A and 5.3B of the Corporations Act compared

48    Although not strictly relevant to the present application, the Company relied expressly at the hearing of the interlocutory application on its written submissions before the Registrar on the hearing of its application pursuant to s 453Q(1), on 2 June 2023, for an adjournment of the DCT’s application to wind up the Company.

49    The Company contended that, having regard to the purpose and objectives of Pt 5.3B, as compared with Pt 5.3A, the threshold test by which the Court is satisfied that it is in the interests of a company’s creditors for a company to continue under restructuring rather than be wound up is a lesser standard of satisfaction than required under Pt 5.3A. It submitted that because the intent under Pt 5.3B is to provide for a restructuring process that allows a company to retain control while developing a plan, it does not demand that the process must achieve the objectives set out in s 435A – maximising the chances of the company continuing in existence – and so does not demand the extensive investigations and report to creditors to substantiate such outcome.

50    The Company submitted that, in considering whether there is sufficient evidence to be satisfied as to the interests of creditors under s 453Q for the restructuring to continue, the Court should have due regard to the allowing the restructuring process to play out and to address the evidence of a company as to interests of creditors in light of the more circumscribed investigative process of Pt 5.3B. Consequently, the authorities concerned with the cognate provision in Pt 5.3A, s 440A, ought not necessarily be applied mutatis mutandis.

51    The Object of Pt 5.3B can be contrasted with its equivalent in Pt 5.3A, which provides in s 435A:

Object of this Part

The object of this Part, and Schedule 2 to the extent that it relates to 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.

(Emphasis added.)

52    It is apparent that the Object of Pt 5.3B is significantly more modest than that of Part 5.3A. The latter is concerned with attempting to save the company; the former is simply concerned with providing the opportunity for a restructuring plan to be put to the creditors.

53    There has been considerable judicial consideration of s 435A. In particular, in Mighty River International Ltd v Hughes [2018] HCA 38; 265 CLR 480 at [7], Kiefel CJ and Edelman J observed:

This object is pursued by an intended flexibility or, put another way, by a wide variety of different possible deeds of company arrangement. These possibilities include extinguishing or varying debts and imposing moratoria on claims. As Finkelstein J observed in Commonwealth v Rocklea Spinning Mills Pty Ltd, “Pt 5.3A assumes that it might often be necessary to extinguish by composition or bar certain claims”. Similarly, in the Explanatory Memorandum to the Bill that introduced what became Pt 5.3A, it was suggested that a deed of company arrangement may commonly provide for “some form of compromise of debts, such as repayment of debts by delayed instalments”. Consistently with this object, Pt 5.3A creates a structured, sequential process for the creation and duration of a deed of company arrangement.

(Footnotes omitted.)

54    Their Honours, at [35], “put to one side” the “difficulties” with a submission that the Object of Pt 5.3A can be treated as a condition of validity independently of the provisions of the Part before continuing:

… the operation of the Deed aims to fulfil the object of the Part by maximising the chance of Mesa Minerals' survival or otherwise providing a better return to creditors than would result from its immediate winding up. In the s 439A report and the supplementary report that preceded the Deed, the Administrators opined that it was not in the interests of creditors that Mesa Minerals be wound up. Even if an approved variation to the Deed caused all Mesa Minerals' assets to be sold to realise its debts, this would be preferable to winding up Mesa Minerals because, as the Master explained, the valuable listed shell would be preserved.

55    The authorities concerned with s 440A which regulates the winding up of a company establish that it is for the person seeking the adjournment to satisfy the Court that in the circumstances of the particular case, it is in interests of the company’s creditors for it to continue under administration rather than be wound up: TCS Management Pty Ltd v CTTI Solutions Pty Ltd [2001] NSWSC 830 at [18]; Australian Securities and Investments Commission, in the matter of Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) v Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) [2009] FCA 269; 71 ACSR 81 at [26]. Such interests are those interests as creditors, not “interests arising from family relationships, friendships or emotional attachments”: Deputy Commissioner of Taxation v Alternative Business Solutions (Aust) Pty Ltd (Administrators Appointed) [2006] FCA 400 at [9]; In the matter of Cresco Opus Fund No 4 Pty Limited (Administrator Appointed) [2019] NSWSC 941 at [29].

56    The Company referred to Re DST Project Management and Construction Pty Ltd [2021] VSC 108, a case in which a submission as to the relevance of the difference between the Object clauses in Pts 5.3A and 5.3B had been urged, and in which the Judicial Registrar had acknowledged, at [30], “there is some force in this argument”. However, in the context of that application, “where the proposed return to creditors under the restructuring far exceeds that available on a best-case scenario liquidation”, he declined to determine whether any lesser standard should be applied. By contrast, in Re Dessco Pty Ltd [2021] VSC 94, a different Judicial Registrar held, at [43], that “the ‘best interests of creditors’ test under s 453Q is analogous to the test under s 440A” of the Corporations Act, albeit it does not appear the argument mounted in Re DST had been put. He observed, however, at [42], that the assessment of whether creditors could receive a better return by way of payment of their debts from administration rather than from liquidation “is made more difficult because until a restructuring plan is developed it is difficult to ascertain the likely return to creditors if the company is allowed to restructure”.

57    There is some difficulty with the Company’s contention that s 453Q should be construed and applied differently from s 440A. First, as a matter of ordinary principles of construction, the section should be construed so as to give the same meaning to the same words as used in another section: Craig Williamson Pty Ltd v Barrowcliff [1915] VLR 450; 21 ALR 349 at 452. Had the Parliament intended there to be a different standard from that in s 440A, by which the Court would be satisfied that an application for an adjournment of an application to wind up company if the company is in restructuring, rather than under administration, it would have been simple enough for the Parliament to say so. To the contrary, the Parliament has chosen to adopt the exact same wording in s 453Q, preserving the sole test of satisfaction as being “in the interests if company’s creditors” for the restructuring to continue rather than be wound up.

58    Secondly to the extent that it is appropriate to have regard to the Object of Pt 5.3B in interpreting s 453Q, it is concerned with adjourning an application for an order to wind up a company if the company is under restructuring. Thus, the “restructuring process”, the provision for which is the very Object of Pt 5.3B has already been achieved. There seems therefore little need to have recourse to s452A in order to construe s 453Q.

59    For these reasons, it seems unlikely that there is any compelling basis to contend that the Court should take a different approach to deciding whether or not to grant an adjournment under s 453Q from that which applies in relation to s 440A. In both respects, the Court’s concern must be its state of satisfaction as to whether continuing under restructuring or under administration is in the interests of the company’s creditors.

60    Nevertheless, it is undesirable that I reach any firm view on the arguments put by the Company in circumstances where there was no contradictor and the point was moot by the time this application came before me, the adjournment having already been granted.

Associate:

Dated:    28 July 2023