High Court confirms flexibility of Deeds of Company Arrangement

The High Court of Australia has delivered its reasons for orders it made in June 2018 dismissing two appeals from the West Australian Court of Appeal and affirming the flexibility of the available purposes for Deeds of Company Arrangement (‘DOCA’).

In Mighty River International Ltd v Brian Hughes and Daniel Bredencamp as Administrators of Mesa Minerals Ltd [2018] HCA 38, the DOCA provided for a moratorium on creditors’ claims, required the Administrators to conduct further investigations and report to creditors within 6 months about possible variations to the Deed, and provided that no property of Mesa Minerals be made available for distribution to creditors.

In Mighty River’s appeal to the High Court, there were two primary submissions –

(a) The DOCA was invalid mainly because it was an extension of time not ordered by the Court under s 439A(6) of the Corporations Act 2001 (C’th) and was contrary to the object of Part 5.3A, and

(b) The DOCA should have been declared void under s 445G(2) for contravening ss 438A(b) and 439A(4), or s 444A(4)(b), or both sections.

Majority decision upheld the Deed of Company Arrangement

A majority of the High Court (Kiefel CJ, Edelman J and Gageler J) held that –

(a) The Deed was a valid deed of company arrangement. It was formally executed, and created and conferred genuine rights and duties.

(b) It did not involve an impermissible sidestepping of s 439A(6);

(c) the effect of extending the time for investigations by the Administrators was only incidental to the purpose of the DOCA;

(d) The moratorium was consistent with the object of Pt 5.3A;

(e) The Deed was not required to be declared void under s 445G(2);

(f) Section 444A(4)(b) did not require the Deed to specify some property should be available to pay creditors’ claims; and

(g) the Administrators had formed and expressed the views required by s 438A(b) and, at the relevant time, by s 439A(4).

Dissenting opinion

The dissenting judges, Nettle and Gordon JJ, held that the Deed did nothing more than seek to extend the administration of the Company.

Good news for practitioners and creditors

This is a welcome decision for practitioners and creditors because it confirms the breadth of the purposes for which a DOCA can be used and that decisions by creditors can have a primary role in determining the future of an insolvent company.

 

The judgment may be read in full by clicking here

 

 

Do you or your business need help or advice about a Deed of Company Arrangement?

At Bell Legal Group we have skilled and experienced lawyers ready to help you with your Deed of Company Arrangement queries and needs. Call us on 07 5597 3366  or complete the ‘Contact Us’ form below.

 

 

 

Please note that this article was written by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not nor is it intended to be legal advice and should not be relied upon as such.