- Bestcare Foods Ltd v Origin Energy LPG Ltd

Judgment The nature of the application 1By Originating Process filed on 25 March 2014, Mr David Ingram and Mr David Anthony Ross in their capacity as deed administrators ("Deed Administrators") of Bestcare Foods Ltd (subject to Deed of Company Arrangement) ("Company") seek directions from the Court under s 447D of the Corporations Act 2001 (Cth) that they would be justified in paying interest on deed participants' claims under s 563B of the Corporations Act. 2When the matter was heard before me on 22 April 2014, I granted leave to a director of the Company, Mr Michael Goldring, and a contributory, Oakroft Pty Ltd, which is a company associated with Mr Goldring ("Interested Parties"), to be heard in the application under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). I also ordered that the question whether the Deed Administrators would be justified in paying interest on deed participants' claims under s 563B of the Corporations Act, but for the execution of any deeds of release by deed participants, be determined as a separate question and before the determination of the question as to the effect of any such deeds of release. Such an order was necessary because the Interested Parties had raised an issue arising from the fact that the Company had obtained deeds of release from many but not all of its creditors, which would potentially extend to any interest payable by the Deed Administrators, and the Interested Parties seek to rely on those deeds of release to contend that interest was not payable and should not be paid. It seemed to me, and the parties accepted, that creditors' interests were affected by that argument and that it was appropriate that they be given notice of the issue and an opportunity to seek to be heard. It nonetheless seemed preferable to determine that part of the matter which could be determined without creditors being heard, to avoid the loss of a hearing day, and because the determination of that issue adverse to the Deed Administrators might mean that no issue as to the effect of the deeds of release arose. The Court's power to give directions to a deed administrator 3The directions sought by the Deed Administrators relate to the question whether interest is payable to the Company's creditors in respect of their proofs of debt, by the operation of s 563B of the Corporations Act and any application of that section in the administration under the terms of the Deed of Company Arrangement ("DOCA"). There is a difference of view between the Deed Administrators and the Company's directors as to this question, and it appears that the parties have each taken Counsel's advice as to the question, and the Counsel they have respectively briefed have expressed different views. The Deed Administrators have calculated the amount of interest potentially payable as exceeding $1.9 million, based on interest of 8% specified under reg 5.6.70A of the Corporations Regulations 2001 (Cth). 4Section 447D of the Corporations Act provides that the administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the performance or exercise of its functions and powers, or in connection with the operation of, or giving effect to the deed. An administrator or deed administrator's power to approach the Court for directions under this section is designed to facilitate his or her functions and should be interpreted widely to give effect to that intention, and the Court may give directions to provide guidance on matters of law or to protect the administrator against accusations that it has acted unreasonably: Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83 at [27]ff; Re Green (as voluntary administrators of Bevillesta Pty Ltd) [2011] NSWSC 417; (2011) 254 FLR 324; 84 ACSR 215 at [10]. In Re Ansett Australia Ltd and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433 at [65], Goldberg J summarised the relevant principle as follows: "There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance." 5The principles applicable to a deed administrator's application for directions broadly correspond to those applicable to a liquidator's application for a direction in relation to a matter arising under a winding up under s 479(3) of the Corporations Act, which authorises the Court to give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion, although the Court will typically not do so where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision: Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-7; 5 ACSR 673; 9 ACLC 1291; Re Ansett Australia Ltd above at [65]; Re One.Tel Networks Holdings Pty Ltd at [32]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [7]. 6The present application largely involves questions of the construction and application of the Corporations Act, Corporations Regulations and the DOCA in the applicable circumstances, and it is plain these questions involve a legal issue that is both substantial and controversial, and that the Deed Administrators could well be exposed to allegations that they acted unreasonably in either recognising, or not recognising, the substantial amount of interest that is in issue. I am satisfied that this is a proper case for a direction to be given to the Deed Administrators, but reserving the question of the effect of the releases given by creditors to a later hearing. The factual background 7The factual background to this application is set out both in Mr Ingram's affidavit sworn 19 March 2014 and in Mr Goldring's affidavit sworn 14 April 2014, and was largely common ground between the parties. From at least mid-2001, the Company manufactured dry pet food at a factory at Gunnedah. An explosion occurred at the Gunnedah factory in January 2003 which substantially destroyed the factory. The Company subsequently received payments from its insurers under liability and business interruption policies and acquired a replacement factory in Dubbo from which it commenced manufacturing operations in about October 2003. However, its business did not return to profitability and it was placed in voluntary administration on 24 November 2004 and Mr Richard Albarran was appointed as administrator. 8On 17 February 2005, the second meeting of creditors in the Company's administration voted to accept a proposal for a deed of company arrangement which contemplated that the Company's business and assets would be sold; the directors would forego outstanding directors' fees and would assist the Company's insurer in a negligence action to be brought against Origin Energy LPG Ltd and Origin Energy Retail Ltd ("Origin Energy") in respect of the circumstances of the explosion that had destroyed the Company's factory; that funds received by the Company from that action would form part of the deed fund; monies from the deed fund would be distributed in accordance with the priorities provided under s 556 of the Corporations Act; and that any surplus funds from that action, after paying claims of creditors in full, would be returned to the Company. 9The Interested Parties draw attention to the supplementary report to creditors made by the administrators dated 9 February 2005, prior to the entry into the DOCA. That document is admissible as part of the surrounding circumstances, so far as the DOCA is ambiguous and where it casts light on the genesis of the DOCA, its objective aim and the meaning of any descriptive term, but not to establish the subjective intention of the parties to the DOCA, which is not relevant to a question of its construction: Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [24] per Heydon JA; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35] per French CJ, Hayne, Crennan and Kiefel JJ. That supplementary report to creditors attaches a pro-forma deed of company arrangement, which in turn includes item 11 which states: "Item 1 (Order of Priority) In accordance with Division 6 of Part 5.6 of the Corporations Act 2001, as if the references to a winding up where [sic] a reference to the Deed of Company Arrangement." That statement seems to me to be neutral as to the incorporation of an obligation to pay interest in the DOCA were it admissible as to that question. The Interested Parties also point out that Item 12 in the pro-forma deed of company arrangement deals specifically with interest on overdue payments at 7%, but contend that provision makes no reference to the circumstances in which interest is to be paid. I also do not find that provision of particular assistance, where there is no indication as to what is meant by "overdue payments", although it is by no means inconsistent with the creditors having approached matters at the second meeting on the basis that there was a question whether interest should be paid on amounts that had not been paid over a considerable period. 10Mr Laughton, who appears for the Interested Parties, contends that no reference was made to interest to creditors, either by creditors or by the then administrator, because it was never intended that interest would be paid to creditors. It may well be the case that no party had given any thought to the possibility of payment of interest to creditors, where that would have required a level of recovery in the proceedings sufficient to generate a surplus, which at that point would (as I will note below) have been no more than a possibility. Even if that were the case, the subjective intent of the parties in that regard is not admissible so far as the proper construction of the DOCA is concerned. 11The Company entered into the DOCA on 10 March 2005 and Messrs Albarran and Elliott were appointed as Deed Administrators. At the time of entry into the DOCA, the proposed proceedings against Origin Energy were at a preliminary stage and their prospects were uncertain. At the same time as the DOCA was executed, Bestcare also entered into a Deed of Deferral with several creditors which agreed not to participate in the fund administered under the DOCA. 12The Interested Parties also relied on Mr Goldring's evidence as to the conversations with the then deed administrator in early 2005 and the circumstances in which the arrangements for the conduct of the proceedings were varied in June 2005. It seems to me that these matters are of limited assistance in respect of the construction of the DOCA. So far as the DOCA on its proper construction incorporates the relevant provisions of the Corporations Act and Corporations Regulations, it is by no means clear that a representation by the administrator of his opinion as to the likely financial distribution to creditors could alter the operation of the DOCA on its proper construction. 13Mr Goldring's evidence is that he requested information from Mr Albarran in early 2005 as to "the total owed to creditors after the first dividend is paid and what you will charge to complete the administration" and was advised that the total would be no more than $1 million. Mr Goldring also gives evidence of attending a meeting with, inter alia, a representative of the then administrators, from which he understood that creditors would still be owed around $900,000 following payment of the first dividend; and that he was informed by his solicitor about that time of a further conversation with Mr Ingram who had advised that $1 million should be sufficient to pay out creditors. Mr Goldring's evidence, which is not contested by the Deed Administrators, is that there was no mention of interest made in that meeting. Mr Golding's evidence is also that, had he been informed by Mr Albarran that interest was payable to the creditors, he would have sought to renegotiate the terms of a Deed of Variation made in June 2005 (to which I will refer below) to include a provision for interest in that deed and claim interest on the unpaid amounts due to creditors in the proceedings against Origin Energy. 14The statements made by the then administrators must be approached in the context that they were made in 2005, at a time the proposed proceedings were at a preliminary stage. It is clear that the then administrators had a somewhat tentative view as to the prospects of those proceedings. That view was reflected in their supplementary report to creditors dated 9 February 2005 which observed that the proposed proceedings "if successful may result in a return to creditors of 100¢ in the dollar" (emphasis added) and noted advice from the solicitor for the Company's insurers that the proceedings were "not without reasonable prospects", and that realistically it was then too early to make an assessment in respect to a likely return, and that the proceedings would likely take 3-4 years, which in the event was a significant understatement. 15The question which Mr Goldring says he asked the then deed administrator in early 2005 was directed to "the total owed to creditors" after the first dividend was paid. It is not surprising that the administrators would then answer that question by reference to the total amount of the principal owed to creditors, as they appear to have done. The administrators could not reasonably have been understood to forecast, in 2005, that the proceedings would several years later recover a sufficiently large judgment to pay out the claims of the insurers and the creditors, so that a surplus would be available that might trigger an entitlement to interest under the provisions of the DOCA, the Corporations Act and the Corporations Regulations. It is also scarcely conceivable that, in 2005, the administrators could have made any sensible estimate as to the amount of interest that would be payable, if interest were payable, where that would depend upon the length of time that was taken to resolve the proceedings, so as to obtain a judgment from which any payment to creditors, let alone any payment of interest, could be made. To the extent that the administrators made any representation, it does not seem to me that it is properly understood as a representation that no interest would be payable in circumstances that might arise many years later, or that their departing from it in order to give effect to the provisions of the DOCA, the Corporations Act or the Corporations Regulations would involve any element of unconscionability or establish any estoppel, if that were relevant to whether a direction under s 447D of the Corporations Act should be made. 16The arrangements in respect of the proceedings were further varied in June 2005. The document implementing that variation is described as a "Deed of Agreement", rather than as a variation of the DOCA, and its parties include the Company's insurers, the Company, the Deed Administrators and the Company's then directors. Clause 2.1 provides for sharing of entitlements of any recovery in the proceedings between relevant parties, and cl 2.2 expressly provides that the clause "does not in any way affect as amongst the Bestcare interests the respective rights of those parties under the Deed of Company Arrangement." It does not seem to me that that document is properly described as a variation of the DOCA nor does it seek to vary the distribution provided under the DOCA. 17The Company commenced the proceedings against Origin Energy in 2005. Mr Albarran retired as deed administrator in March 2008 and creditors were paid a dividend of 81¢ in the dollar on 12 August 2008. Mr Elliott retired as deed administrator in March 2011 and Messrs Ingram and Ross were appointed as deed administrators at that time. 18Judgment as to liability was delivered in the proceedings brought against Origin Energy in August 2011 and judgment as to quantum in November 2013, some eight years after their commencement. The Company and related entities were ultimately awarded the sum of $67,126,499.51, inclusive of interest (BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1673). Under arrangements agreed between the insurers, the Company, the Deed Administrators and other interested parties, the amount received in satisfaction of the judgment was split between those parties and the Company currently holds a substantial sum received from the judgment. The money received from the judgment would be sufficient to permit payment of all creditors and the administrators' costs in full and leave a balance for distribution to the Company's shareholders. 19The Company has subsequently paid creditors the remaining $0.19 monies which it holds to them so as to discharge their claims, not including interest, and some creditors have executed deeds of release, the effect of which is not to be addressed in this stage of the hearing. It appears that the claims of a small number of creditors remain outstanding. Whether interest is payable to creditors on the proper construction of the DOCA 20The parties each advanced detailed submissions as to the proper construction of the DOCA. Clause 2.3 of the DOCA provides that: "The provisions of Schedule 8A of the [Corporations] Regulations will apply to this Deed and shall be taken to be incorporated into this Deed SAVE THAT the provisions of paragraphs 4, 10 and 11 of Schedule 8A of the Regulations shall not be taken to be incorporated into this Deed." Mr Martin, who appears for the Deed Administrators, points out that the incorporation of Sch 8A to the Corporations Regulations into the DOCA follows an approach contemplated by the Australian Law Reform Commission, Report 45, General Insolvency Inquiry (Harmer Report) (1988) at [116] which contemplated the incorporation of standard provisions into deeds of company arrangement referring to relevant sections of the companies legislation, which could be modified by resolution of creditors, so as to "lessen the often voluminous amount of documentation with which creditors are burdened in relation to a scheme of arrangement". 21One of the provisions of Sch 8A of the Corporations Regulations that is thereby incorporated into the deed, cl 8(1) of Sch 8A, in turn provides that: "Subdivisions A, B, C and E of Division 6 of Part 5.6 of the Corporations Act 2001 apply to claims made under this deed as if the references to the liquidator were references to the administrator of this deed." The Deed Administrators contend that the incorporation of Sch 8A into the DOCA, by cl 2.3 of the DOCA, and cl 8(1) of Sch 8A, in turn brings about the application of s 563B of the Corporations Act since that section is found in Part 5.6 Div 6 Subdiv E of the Corporations Act. That section provides that: "(1) If, in the winding up of a company, the liquidator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the winding up, interest, at the prescribed rate, on the amount of the payment in respect of the period starting on the relevant date and ending on the date on which the payment is made. (2) Subject to sub-section (3), payment of the interest is to be postponed until all other debts and claims in the winding up have been satisfied, other than subordinate claims (within the meaning of section 563A)." Section 563A and s 563B(3), to which s 563(2) is subject, are not relevant in this application. The Deed Administrators contend that cl 8 of the DOCA incorporates s 563B of the Corporations Act into the terms of the deed. The Interested Parties draw attention to the fact that Subdiv E comprises ss 563B and 563C and contend that s 563B only operates when the Company is wound up. It seems to me that this submission assumes the answer to the question to be decided, which is whether that section has been applied to the DOCA so as to apply in the relevant deed administration. 22Clause 8(2) of Sch 8A then provides that: "For subclause (1), the remainder of that Act, and the Corporations Regulations 2001, are taken to apply, so far as practicable, as if: (a) a reference that is relevant to the liquidator were a reference in a form that is applicable to the administrator; and (b) a reference that is relevant to any other matter relating to liquidation were a reference in a form that is applicable to the administration of this deed; and (c) a reference to a relevant date were a reference to the date of the administrator's appointment." 23Mr Laughton, who appears for the Interested Parties, submits that no provision in the DOCA substitutes the words "in the winding up of a company" for a reference to the DOCA and that, in consequence, that interest is only paid under s 563B of the Corporations Act in the event of a winding up, which has not occurred. Mr Martin submitted, in reply, that it would be a nonsensical result if s 563B of the Corporations Act were to vary references to a liquidator to refer to the administrator, but not vary references to the winding up to refer to the deed administration, and pointed to cl 8(2) of Sch 8A as making the other consequential changes which are required. 24It seems to me that cl 8.2(b) of Sch 8A, incorporated by cl 2.3 of the DOCA, does have the effect that the provisions that are applicable in a winding up, and are incorporated in the DOCA, are applied in the deed administration. Obviously, it would be an odd result if the DOCA incorporated provisions providing for the payment of interest directed to a winding up, rather than the administration, where the entry into the DOCA would ordinarily be an alternative to a winding up, and there was no need to include such provisions in the DOCA other than to apply them to the deed administration, since they were already applicable to a winding up under s 563B of the Corporations Act. The effect of substitution (by cl 8.2(b) of Sch 8A, applied by cl 2.3 of the DOCA) of a reference to the deed administrator for references to the liquidator, and of a reference to the administration of the deed for reference to liquidation, in s 563B of the Corporations Act, is that if, in the administration of a deed of company arrangement, the administrator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the administration of the deed, interest, at the prescribed rate, on the amount of the payment in respect of the period starting on the date of the administrator's appointment and ending on the day on which the payment is made. Payment of the interest would be postponed until all other debts and claims in the administration of the deed have been satisfied, other than subordinate claims as defined. The Deed Administrators contend, and I accept, that, in the present case, the pre-conditions to statutory interest under the section would be satisfied, and an entitlement to interest would arise as a debt to be met under the deed. 25It seems to me that that result is consistent, first, with the terms of the DOCA, which incorporates Subdiv E (including s 563B) and applies that subdivision (by Sch 8A cl 8(1)-(2) applied by cl 2.3 of the DOCA) in the administration of the deed. That result is consistent with the commercial context, where the compromise implemented by the DOCA could sensibly recognise that creditors who may be out of funds for a substantial period should be compensated by interest, if a surplus was available to permit it to be paid. That result does not require that the Deed Administrators, creditors or the Company had specifically devoted their minds to that question, since it could be addressed by the wider choice, made by cl 2.3 of the DOCA and the incorporation of Sch 8A (including cl 8), to apply provisions of the Corporations Act that would apply in a liquidation to the deed administration. The several other arguments raised by the Interested Parties, to which I refer below, do not seem to me to displace that conclusion. 26The Interested Parties refer to cl 6 of the DOCA which returned control of Bestcare to its directors upon execution of the DOCA, but preserved to the Deed Administrators "full power to do any act, exercise any control and/or perform any action on behalf of the Company and/or in the Company's name to the extent that the Deed's Administrators in their sole discretion determined it necessary" for specified purposes, including exercising any of the Company's rights under the deed and preserving, collecting and/or realising any assets of the Company. The Interested Parties submit that the power conferred on the Deed Administrators under cl 6 of the DOCA does not include the payment of interest. While that proposition is strictly correct, the power conferred by cl 6 does not include any power relating to the payment of creditors under the DOCA, and it can scarcely be contended that the Deed Administrators did not have the power to make such a payment if the Company failed to do so. To the extent that an entitlement to interest arises under the DOCA, it seems to me that either the Company is bound to make the relevant payment, or the Deed Administrators would have a right to do so, which is necessarily to be implied to give effect to any obligation to pay such interest arising under the DOCA. 27Clause 8.1 of the DOCA, under the heading "Making claims", in turn provides that: "Sub-divisions A, B, C and E of Division 6 of Part 5.6 of the Corporations Act and the Regulations 5.6.39 to 5.6.56 (inclusive) apply to the manner in which Claims are to be made under this Deed (but not to the priority in which claims are to be paid) as if the references to a liquidator were references to the Deed's Administrators." The term "Claim" is in turn defined in cl 1.1 of the DOCA as "a claim against the Company in any amount, including a claim which is present or future, certain or contingent, ascertained or sounding only in damages, including any fine or penalty, being a claim the circumstances giving rise to which occurred on or before the Fixed Date". The term "Fixed Date" is defined as 24 November 2004. As I have noted above, Pt 5.6 Div 6 Subdiv E of the Corporations Act includes s 563B of the Corporations Act. 28The Interested Parties contend that the purpose of incorporation of Pt 5.6 Div 6 Subdiv E of the Corporations Act in the DOCA by cl 8 is to provide for the manner in which claims are to be made under the DOCA, and not the manner in which claims are to be paid, and does not incorporate the specified subdivisions of Pt 5.6 Div 6 other than in respect of that matter. Mr Martin responds that the reference to the "manner in which claims are to be made" in cl 8.1 of the DOCA reflects the fact that that clause does not determine the manner in which payments are to be made, which is separately addressed in cl 13 of the DOCA. In any event, the proposition advanced by the Interested Parties is not an answer to the wider incorporation of Sch 8A of the Corporations Regulations under cl 2.3 of the DOCA, to which I have referred above. The Interested Parties also point to the fact that the definition of "Claims" in the DOCA does not include a reference to interest, and contend that, if interest were to be part of a claim, then a reasonable person would expect interest to be incorporated in that definition. I do not accept that submission. The amount of the original claim is, of course, what is to be admitted to proof under the DOCA. Any interest on that claim arises from the application of s 563B of the Corporations Act and the relevant provisions of the Corporations Regulations, as incorporated by the DOCA, as it would arise from the application of the Corporations Act and the Corporations Regulations in the case of a winding up without the need for reliance upon the DOCA. 29Mr Laughton also submits that the Deed Administrators, in their construction of Sch 8A, cl 8, seek to expand the reference to liquidation to apply to the deed administration, but contends that s 563B is itself confined to a winding up and that there is no warrant in the DOCA or in Sch 8A cl 8 to apply that section other than by reading a reference to a liquidator as a reference to the deed administrator. Mr Laughton contends that Sch 8A cl 8(1) does not work for s 563B because there is nothing in the DOCA or Sch 8A cl 8 which changes the words "winding up". Mr Laughton initially accepted that the effect of that submission would be the surprising result that the only provisions in Pt 5.6 Div 6 which could effectively be applied in a deed of company administration would be any provision which did not include reference to "winding up" or "wound up". Mr Laughton then retreated somewhat from that acknowledgement, to submit that substitution may be made in relation to sections that deal with the manner in which claims are made, but not otherwise, by reason of the limiting words referring to "the manner in which claims are made" in cl 8 of the DOCA, as opposed to the manner in which claims are to be paid. In further submissions, Mr Laughton accepted that each of the provisions in Pt 5.6 Div 6 Subdiv A could be incorporated into the DOCA by reference to cl 8 of the DOCA, because those provisions related to the manner in which claims were made, and that in those provisions, the reference to winding up would be read as referring to the DOCA. Mr Laughton accepted that Subdiv B also related to the manner in which claims were made and would again be applied to the DOCA by substituting a reference to the deed administration for the phrase "winding up". Mr Laughton accepted that Subdiv C also applied to the manner in which claims were made. Mr Laughton submitted that reference to Subdiv E also needed to be included, because it incorporated s 563C of the Corporations Act relating to debt subordination. However, if the intended incorporation were limited to s 563C, that could readily have been done by an express reference to that clause rather than to the subdivision generally. 30The Interested Parties also point to the moratorium on creditors taking any steps to recover their debts under cl 9.1 of the DOCA, which continues during the "Arrangement Period" as defined, up to the point of termination of the DOCA. I do not find that clause of assistance, since it reflects the usual position that creditors' rights to take action against the Company is substituted by a right to their entitlements under the DOCA and does not seek to specify the content of creditors' entitlements under the DOCA. Clause 10.1 of the DOCA in turn provides that creditors must accept their entitlements under the DOCA in full satisfaction and complete discharge of all "Claims" (as defined). That clause again leaves open the question in issue, namely, whether creditors' entitlements under the DOCA include an entitlement to interest. Clause 10.2 provides for termination of the deed and release of all "Claims" in full and their extinguishment upon payment of the Administration Dividend, which is in turn defined as: "the dividend payable to Creditors out of the monies available to the Deed's Administrators pursuant to clause 13 of this Deed of Company Arrangement." 31The Interested Parties contend that the payment of interest would be inconsistent with cl 10, so far as the term "entitlements" is not defined to include interest and the entitlement of a creditor to interest on the amount paid is predicated on a winding up. Mr Laughton also draws attention to cl 12 of Sch 8A of the Corporations Regulations, which similarly provides for termination of the DOCA if the Administrator has paid to the creditors the sum of 100¢ in the dollar or any lesser sum determined by the creditors in general meeting. Mr Martin points out, and I accept, that the reference to 100¢ in the dollar in that clause can comprise the payment of interest that arises by virtue of statute and is not postponed where the Company has a relevant surplus. It does not seem to me that there is any relevant inconsistency in this regard, whether the concept of entitlements does or does not include interest. In either case, these provisions will operate by reference to the content of the creditors' "entitlements" on their proper construction. These provisions seem to me to be neutral as to whether the dividend payable to creditors includes the relevant entitlement to interest. 32Clause 13.1.3 of the DOCA, under the heading "Priority Claims, Distributions and Dividends", in turn states that the Deed Administrators shall distribute the deed fund in a specified order, namely, third, to: "The Claims of the Creditors who have proved their claims in the priority set out in Section 556 of the Corporations Act as if references to the winding up of the Company were references to the administration of this Deed." The Interested Parties do not expressly make a submission that that clause expressly refers to "claims" and not to interest on claims; however, it does not seem to me that the absence of such a reference tends against a requirement to pay interest, where that requirement would only arise in circumstances that creditors' claims had been paid in full in any event. 33The Interested Parties submit that the DOCA contains no stand-alone provision which obliges the Deed Administrators to pay interest to creditors. While that is the case, it is the necessary consequence of the drafting strategy contemplated by the Harmer Report of incorporating the provisions of Sch 8A of to the Corporations Regulations by reference in deeds of company arrangement, and ultimately leads back to the question whether an obligation to pay interest is incorporated in the DOCA in that manner. For the reasons set out above, particularly in paragraphs 24-25, it sees to me that it is so incorporated. The Interested Parties also contend that there is no suggestion that any of the creditors seek interest. It does not seem to me that that proposition takes the matter further, because the question is whether they have an entitlement to such interest, to which the Deed Administrators should give effect, whether or not they have at this point recognised that entitlement, and subject to the application of any releases which may arise for consideration at a subsequent stage of the proceedings. Other matters 34In support of a submission that it was not the intention of the parties that interest be payable, Mr Laughton also referred to the six monthly accounts lodged by the Administrators with ASIC, which he noted did not include a reference to interest payable to creditors. However, that submission had the difficulty that the relevant table had not been completed, because the relevant information was only required in court-ordered and creditors' voluntary winding ups, and said nothing as to whether interest would or would not be payable under a DOCA. Mr Laughton also draws attention to the absence of any express reference to interest in reports to creditors. It is hardly surprising that that matter was not addressed prior to the point that it was clear that a surplus was available from which interest would be payable under s 563B of the Corporations Act, as applied by the DOCA. Even if it were not addressed after that point, that does not seem to be a matter that goes to the proper construction of the DOCA. 35Finally, the Interested Parties contend that the intention of the parties in entering the DOCA was for there to be a compromise by the creditors, and that there would be no compromise if creditors in fact recover 100% of their claims and interest. I do not accept that submission. The DOCA involved an element of compromise by creditors so far as they were prepared to forego their rights to bring about a winding up of the Company, and prove for their debts in the winding up, and potentially settle for a lesser proportion of their claims depending upon the outcome of the proceedings. That element of compromise exists, notwithstanding that the outcome of the proceedings has been favourable for the Company, and sufficiently so that the amount recovered will now be sufficient to pay creditors' claims in full, pay interest on those claims where it is properly payable and leave a surplus in the Company which would be available for distribution to contributories if appropriate. 36On the other hand, the Deed Administrators submit that the payment of interest is appropriate in the present situation, where creditors have had to wait many years between execution of the deed and payment of dividends, so as to compensate creditors for the amount of time that they have been out of pocket. There is some force in that submission, as a matter of the commercial merits of the application. However, the question whether a right to interest arises is to be determined on the proper construction of the DOCA, the Corporations Act and the Corporations Regulations, rather than by the desirability or otherwise of the result to which it might lead. Outcome 37For these reasons, and without regard to any deeds of releases which may have been executed by creditors, it seems to me that the Deed Administrators would have been justified in paying interest on unpaid creditors' claims pursuant to s 563B of the Corporations Act, as incorporated in the DOCA. However, that direction may well not be appropriate, if creditors have released any entitlement to interest, in a manner that is binding upon them. It will therefore be necessary to hear the subsequent stage of the proceedings, and notice of any issue as to the effect of the releases will need to be given to creditors so that they have an opportunity to seek to be heard if they wish to do so.