Case: Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to Deed of Company Arrangement) [2007] SASC 296
Outcome: considered
The expression "injustice" in s 445D(1)(e) is of wide import. As Austin J pointed out in Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (subject to Deed of Company Arrangement) (2001) 37 ACSR 394 at 430: "The case law does not provide any significant assistance as to the meaning of this provision [subpar (e) of s 445D(1)]." What is important to recognise is that it is the "effect" of the deed rather than the purpose of the deed which is to be considered and taken into account: Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (supra) at 430; Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to Deed of Company Arrangement) [2007] SASC 296 at [112] . In the context of s 445D(1)(e) I consider that I should ask whether the effect of the Deed is unfair or inequitable in the impact it has upon one or more of the creditors bound by it. 54 Similar considerations apply when considering the application of s 445D(1)(f). In Mondello Farms Pty Ltd v Annatom Pty Ltd (supra), Layton J said at [114]: "In determining whether a deed is oppressive or unfairly prejudicial or unfairly discriminatory, the background of the general principles underlying Pt 5.3A of the Act must be considered. A creditor has the basic right to payment, to the winding up of a company, or to the administration of the company in a manner that keeps the business of the company going which ultimately resulting [sic] in the creditor receiving payment out of the property of the company. The court will look at the whole of the effect of the deed and assess 'its unfairness, if any, to the plaintiff creditor bearing in mind the scheme of Pt 5.3A , the interests of the other creditors, the company and the public generally'. It is necessary to consider the total circumstances of the case so as to determine whether there is overall unfairness." [footnotes omitted]. In the circumstances of the present case, the last sentence of this quotation is critical. 55 The plaintiff's case, in essence, was that effect could not be given to the Deed without injustice and that the Deed was oppressive, prejudicial to and discriminatory against creditors because of the amount for which the land is to be sold pursuant to the Deed of Company Arrangement. Although the Administrators had received an independent valuation of the land which provided a valuation of $5.93 million net of rectification costs, the Administrators had set out in their report factors which made it problematic whether such a value could be received on the sale of the land. Having regard to the circumstances and factors set out in the Administrators' report, I do not consider that effect cannot be given to the Deed without injustice. It is the plaintiff who is complaining about the injustice but I do not consider that there is any injustice to the plaintiff in circumstances where in a context and with the background to which I referred, the creditors, by a majority of number and value, have decided to go the route of deed of company arrangement rather than liquidation. 56 The assumptions and factors identified by the Administrators required the creditors to make a choice. The choice they made did not result in a Deed which was oppressive to, or prejudicial to, or discriminatory against the general body of creditors, and the plaintiff in particular, having regard to the factors which had to be taken into account in determining whether what the Administrators called either a high scenario, a medium scenario or a low scenario in terms of return to creditors might be achieved.