Case: Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353 ; (2003) 45 ACSR 290
Outcome: distinguished
There is a conflict in the authorities as to the effect of a deed of company arrangement on the assets of the company. In Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353 ; (2003) 45 ACSR 290 , the plaintiff liquidator had previously been the voluntary administrator of the company. After his appointment as administrator, the company entered into a deed of company arrangement which provided for the plaintiff to be the deed administrator. The deed provided for the creation of an administration fund on account of the creditors and provided that the administrator was to hold the administration fund in accordance with the terms of the deed of company arrangement. The deed recorded that the company and its directors had agreed that any monies paid to the administrator towards the fund were not refundable to the company or a third party. The deed of company arrangement required a distribution among the participating creditors. 40 The question for determination for Austin J was whether the administration fund was an asset of the company so as to be available for distribution in the liquidation of the company, or an asset held by the deed administrator for the benefit of the deed creditors and not for the benefit of the company. 41 Justice Austin examined the provisions of the deed of company arrangement and concluded that the plain and natural meaning of the words in the deed created a trust of the amount of the administration fund for the benefit of the participating creditors. The trust arose by reason of the provisions of the deed which created an obligation on the administrator to hold the administration fund in accordance with the terms of the deed. He said that s 444G had the effect of binding the company and the deed's administrators, as well as officers and members, which meant that the administrator was bound to hold the administration fund in accordance with the terms of the deed of company arrangement, which was also binding on all relevant parties. He said the provisions of the deed gave rise to an express trust of the administration fund for the benefit of the participating creditors as beneficiaries. 45 That decision was followed by Gyles J in Purchas v Estore Pty Ltd (in liq) [2006] FCA 1222 ; (2006) 154 FCR 246. His Honour said at [14] and [15]: Counsel for the plaintiffs has pointed out that there is an apparent division of opinion in the authorities upon the critical question. The decisions of Austin J in Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353 ; (2003) 45 ACSR 290 and Campbell J in Sports Mondial favour the conclusion that the fund is held on trust for the deed creditors. After those decisions, Finkelstein J, in Commonwealth v Rocklea Spinning Mills Pty Ltd [2005] FCA 902 ; (2005) 145 FCR 220 , drew attention to the possibility of an inconsistency between them and the earlier decision of Davies J in Commissioner of Taxation (Cth) v All Suburbs Car Repairs Pty Ltd (1994) 29 ATR 329. Davies J held that payments to the administrator were payments to him in his capacity as the agent of the company and consequently the sums received were the property of that company. Barrett J needed to consider the differences in the reasoning in those authorities in Lombe v Wagga Leagues Club Ltd [2006] NSWSC 3 ; (2006) 56 ACSR 387 at [53] - [77] . In circumstances which I cannot distinguish in substance from the present facts, Barrett J in a careful and reasoned decision applied the reasoning of Davies J. It is appropriate to follow the decision of Barrett J unless I am satisfied that it is clearly wrong. Consistency of decision in relation to the Act is desirable. As I am not satisfied that the decision of Barrett J is clearly wrong, I propose to follow it and give directions accordingly. 46 In my opinion, the decision of Barrett J is to be preferred to the decisions of Austin J and Campbell J for the reasons given by Barrett J. 47 The Act provides a statutory scheme for the administration of a company under a deed of company arrangement. There is no reason, in principle, to treat an administrator any differently from a liquidator. The administrator, like a liquidator, is an officer of the company. He or she is obliged to act in accordance with the functions and powers given him or her under the deed of company arrangement which he or she is appointed to administer. 51 Clause 5 of the DOCA simply makes the fund available for distribution amongst creditors in accordance with clause 6 of the DOCA. In my opinion, clause 6 instructs the administrator as to the order in which the administrator shall distribute and apply the fund. Neither clause 5 nor 6, nor clauses 5 and 6 considered together, creates a trust whereby the monies are held by the administrator for the benefit of the deed creditors. For those reasons, this case can be distinguished from the facts in Dean-Willcocks v ACG Engineering Pty Ltd (in liq) [2003] NSWSC 353 ; 45 ACSR 290 and in Shepard v Sports Mondial of Australia Pty Ltd [2005] NSWSC 432 ; 53 ACSR 746. It follows therefore that the fund created by the DOCA is still the property of the company.