Case: City of Swan v Lehman Brothers Australia Limited (subject to a Deed of Company Arrangement) (2009) 260 ALR 199
Outcome: followed
Deputy Commissioner also pointed to the absence of any particular evidence as to the nature and extent of voidable payments which a liquidator might recover for the benefit of creditors. He also drew attention to the releases found in cl 11.5 of the proposed deed of company arrangement and submitted that, having regard to City of Swan v Lehman Brothers Australia Limited (subject to a Deed of Company Arrangement) (2009) 260 ALR 199 (City of Swan v Lehman Brothers Australia Limited), such a term "may be contrary to the rights of creditors and render the term void". As against this, attention was directed to the recommendation, albeit voiced only in a draft report, of the administrators that it is in the interests of the company's creditors to accept the proposal for a deed of company arrangement. Yet the presence, in the draft report, of what I have described as significant omissions in terms of an analysis of the ramifications of the company's having acted as the trustee of the Barr Trust detracts from giving weight to that recommendation. Indeed, without such an analysis, the draft report is apt to mislead as to the benefits of the proposed deed. The want of any appearance by or on behalf of the administrators meant that I did not have the benefit of submissions from them as to such ramifications or those omissions. In fairness to the administrators, it must be said that the report is but a draft. I do not in truth have any evidence as to the recommendation that the administrators are finally disposed to make or their reasons for such a recommendation. There is no presumption, arising from the presence of Pt 5.3A in the Corporations Act , in favour of allowing the administration to continue so as to allow a vote to be taken at the meeting proposed to be held on 2 December 2009. Rather, what is offered by that Part of the Corporations Act is an alternative to liquidation but an alternative which is regulated by the provisions of that Part. Of course the object of Pt 5.3A of the Corporations Act as expressed in s 435A must be borne in mind, but the question for immediate resolution remains that posed by another of the Part's provisions, s 440A(2). In City of Swan v Lehman Brothers Australia , supra, it was the opinion of each of the judges comprising the Full Court that Pt 5.3A of the Corporations Act could not be employed by creditors so as to prevent the exercise by some of their number of such legal rights as they had against persons other than the company the subject of the deed of company arrangement: (see at [4], [92] and [151]). Clause 11.5 seeks to achieve this so far as Mr Mark Tonge is concerned. That clause seems to me to be an essential feature of the proposed deed. Though City of Swan v Lehman Brothers Australia Limited is presently the subject of as yet unheard applications for special leave to appeal to the High Court, I am for the moment bound to follow the views expressed in the Full Court. For this additional reason, I am not satisfied that it is in the interests of creditors for the company to continue under administration. It does not axiomatically follow that the winding up application must proceed. However, there was nothing put forward that might enliven a residual discretion to adjourn the hearing of the winding up application. To the contrary, it is in the public interest that an insolvent corporation be wound up. I note that Mr Gregory Michael Maloney, an official liquidator, has consented to be the liquidator of the company in the event that a winding up order is made. There was no submission made to me that I should instead appoint the present administrators. There are doubtless some advantages to be gained from the work which they have already undertaken but I do not assume that they will deprive Mr Maloney of that benefit. There may equally be some advantages in a fresh mind being brought to bear on the subject of recoveries for the benefit of creditors. I see no reason not to appoint Mr Maloney as requested by the Deputy Commissioner.