Case: Rupert Co v Chameleon Mining (2006) 24 ACLC 635
Outcome: cited
The ASIC guideline notes that it is usual for the deed of company arrangement to be effectuated and to terminate after creditors' claims against the company have been removed in that way. When the deed of company arrangement terminates, the company ceases to be externally administered, the directors regain full control and it is no longer required to use the endorsement "subject to deed of company arrangement" on its public documents: see s 450E(2) of the Act. The relevant ASIC guideline is entitled 'External administration: Deeds of company arrangement involving a creditors' trust A Guide for registered liquidators appointed under Part 5.3A '. The guide is numbered Regulatory Guide 82 and was published in May 2005. The regulatory guide is quoted as an explanation of the creditors' trust in Ford's Principles of Corporations Law , (Butterworths) Part VII Chapter 26 at [26.200]. Creditors' trusts have been helpfully discussed in Heaver-Wren T, "DOCA Termination through Creditors' Trust Deeds" (2004) 12 Insolv LJ 117-120; see also McKenzie R, "Creditors' Trusts and the ASIC Guidelines" (2005) 17(3) Australian Insolvency Journal 4-6; Proudman D, "Some Issues Surrounding Creditors' Trust Deeds Parts 1 and 2 " (2005) 6 INSLB 1-5 and 31-34. The mechanism has been touched on in the Supreme Court decisions: Ian Charles Francis and Michael Patrick Joseph Ryan as Trustees of The West Australian Shed Commercial Pty Ltd Creditors Trust Deed and West Australian Shed Co Pty Ltd Creditors Trust Deed [2003] WASC 39 (Pullin J); Open Telecommunications Ltd (Subject to Deed of Company Arrangement) [2003] NSWSC 1198 (Hamilton J) and Rupert Co v Chameleon Mining (2006) 24 ACLC 635 (Austin J). 51 In Rupert Co 24 ACLC 635, Austin J terminated a winding up of a company under s 482 of the Act having regard to the effect of a deed of company arrangement and creditors' trust which left the company with no significant body of creditors. As a result of those arrangements, it was solvent. The liquidator had advertised for creditors to lodge their claims against the trust. Describing the effect of the deed of company arrangement and the creditors' trust his Honour said (at [18]): ... the effect of the DOCA and the Creditors' Trust is to transfer the creditors' claims to the Trust and release the company from liability to pay those debts. He observed that the arrangements appeared to conform to the ASIC guidelines of May 2005 and that ASIC did not oppose the application. 52 The three creditors' trusts affected by the proposed orders are the KPI Creditors' Trust, the Banwell Creditors' Trust and the Carr Civil Contracting Creditors' Trust. 53 The terms of the KPI Creditors' Trust are found in an amended Creditors' Trust Deed which was executed in December 2003 and took effect upon the termination of an amended varied deed of company arrangement executed by the company and the administrators on the execution date. The trust assets comprised the company's assets, a fund and the sum of $10. The fund was to be formed from the proceeds of realisation of the company's assets. Those assets were all of the company's assets or property and all of the assets or property of the KPI Tri Unit Trust and the KPI Trust No 2. Relevantly, cl 6 provided: 6.1 The Trustees shall consider the Claims of each of the Creditors for the purpose of determining the Creditors' Entitlements under this Trust Deed. 6.2 For the purposes of determining the Entitlements, to the extent that those Entitlements have not been determined under the Amended Varied DOCA, regulations 5.6.39 to 5.6.72 of the Corporations Regulations shall apply to this Trust Deed and to the Trustees as if the reference to the liquidator were references to the Trustees and references to winding up were references to this Trust Deed and with such other modifications as are necessary to give effect to this Trust Deed. 6.3 Subdivision A to E of Division 6 of Part 5.6 of the Corporations Act apply to the admission of Claims and payment of Entitlements under this Trust Deed as if the references to winding-up were references to this Trust Deed and with such other modifications as are necessary to give effect to this Trust Deed.