(c) an order pursuant to section 600A that the resolution of 4 April 2005 to enter the Deed be set aside.
The Structure of the Plaintiff's Argument on Section 445D
137 The plaintiff alleges that every one of the paragraphs in section 445D(1) has been satisfied in the present case.
138 Before the Court is able to rely upon any particular paragraph of section 445D(1) as a ground for termination, it must be satisfied that that particular ground has been made out. The onus of proving that a ground has been made out is on the party who seeks termination of the deed. However, that a ground has been made out does not of itself lead to the Court making an order terminating a deed - there is always a discretion for the Court to exercise, even if a ground is made out. In exercising that discretion, it can be appropriate for the Court to take into account whether more than one of the grounds listed in the individual paragraphs of section 445D(1) has been made out.
Section 445D(1)(a), (b) and (c)
Bidald's Particulars - Relationship of Section 445D(1)(a) and 445D(1)(b)
139 Particulars which Bidald provided made clear that the false or misleading information which it was alleging had been supplied was contained in the Second Report to Creditors, and in the Addendum Report of 31 March 2005.
140 Section 439A(3) and (4) have the effect that the Second Report to Creditors must be given at least five business days before the second meeting of creditors. Thus, it is only the Second Report to Creditors, not the Addendum Report, which is the report referred to in section 445D(1)(b). However, Mr Aldridge SC relies upon the Addendum Report, and in particular the differences between the Second Report to Creditors and the Addendum Report, as identifying at least some of the information contained in the Second Report to Creditors which was false or misleading. As well, he submits that the Addendum Report contained information given to creditors, and so to the extent to which it contained false or misleading information it can be, in its own right, a basis for termination under section 445D(1)(a).
141 Mr Lucarelli points out that the plaintiff neither pleaded nor particularised an allegation that information which was false or misleading was given to the administrator of the Company (as opposed to the creditors). He submits that, thus, it should not be open to Bidald to make a case that it was Mr Kovacic who supplied Mr Warner with false or misleading information, which Mr Warner then repeated in the Report to Creditors.
142 There is an element of truth in this submission. I accept that, if Bidald were required to list seriatim the elements of the case it presented for the Court having jurisdiction under section 445D(1)(a) or (b) to terminate the Deed, it could not, in light of its pleading and particulars, include in that list an allegation that it was Mr Kovacic who gave false or misleading information to the administrator.
143 However, the submission will not carry the full distance to which Mr Lucarelli seeks to make it go. It is to be observed that section 445D(1)(a) is in the passive voice - it requires that the information "was given" to the administrator, or to the creditors, and does not specify by whom it was given.
144 One way in which the limb of section 445D(1)(a) which is concerned with false or misleading information being given to the administrator of the Company might have an independent role to play, to the limb concerned with false or misleading information being given to the creditors, is if information was given to the administrator, and relied on by the administrator in forming a judgment, but where that information was not passed on to the creditors. The limb of section 445D(1)(a) which is concerned with false or misleading information being given to the creditors can cover a situation where it is the administrator who provides that false or misleading information to the creditors, or where it is someone else who provides the false or misleading information to the creditors (as might happen if a creditor intent on opposing a proposed deed made direct contact with other creditors of the company). That limb covers the situation where the administrator gives the false or misleading information to the creditors in a report which is formally required by the Act, or where the information is conveyed by some other means, such as at a meeting of creditors or by an informal mail-out to creditors. Thus, the ground contained in section 445D(1)(b) is really a subspecies of the ground contained in section 445D(1)(a).
145 If false or misleading information has been given to the creditors, on the topic identified in section 445D(1)(a), and which meets the materiality test in section 445D(1)(a)(ii), the ground in section 445D(1)(a) is made out, regardless of what might have been the genesis of that information. It is understandable as a matter of policy that this should be so - administrations require important decisions to be made in a short space of time, on the basis of such information as can be gathered in the time, and it is understandable that the ground upon which a deed can be terminated depends upon the adequacy of the information ultimately provided to the administrator, or the creditors, regardless of where that information might have come from.
146 Thus, if information contained in the Second Report to Creditors or the Addendum Report was false or misleading, and on the topic and with the materiality required by section 445D(1)(a), it can provide the jurisdictional basis for an order terminating the deed even if, as it happens, it was Mr Kovacic who provided that information to the administrator.
"False or Misleading"
147 Concerning the concept of false or misleading information in section 445D(1)(a) and (b) I accept the submissions of Mr Aldridge SC that
- the expression looks at an objective quality of the information, not at whether anyone was actually misled.
- The expression looks at whether the information was actually false or misleading, not whether anyone intended it to be false or misleading, or did not care whether or not it was false or misleading.
- Whether the information is false or misleading is judged at the time of the hearing, not on the basis of information available at the time of giving the information.
148 In the present case, some of the matters which are alleged to be false or misleading related to events that lay in the future, at the time the Deed was adopted. Even though there are always difficulties about making accurate predictions of the future, it is still possible for a statement about an event which lies in the future at the time the statement is made to be demonstrated, as events unfold, to be a false statement. Further, it is possible for a statement about an event which lies in the future to be misleading, if it is a statement with the capacity to lead a recipient of it into error.
149 In deciding whether a statement about an event in the future ought properly be regarded as one which is false or misleading, the Court should take into account whether or not it purports to be anything more than the present estimate or prediction of the author.
150 Section 445D(1)(a) and (b) is analogous, both in language and purpose, to section 222(4) Bankruptcy Act 1966 (Cth). Section 222(4) permits a court to declare a deed or composition entered into by a debtor to be void if the debtor has (inter alia) omitted a material particular from the statement of affairs or included an incorrect and material particular in that statement. In applying section 222(4), if a debtor has failed to include an estimate of a liability which is close to the actual liability later revealed, that amounts to an "omission of a material particular"; if the debtor has included an estimate of a liability which is likely to arise in the future in a statement of affairs, and that figure proves to be far too low, then the statement of affairs has included "an incorrect and material particular": Re Cufari; Ex parte Commissioner of Taxation v Huppatz (1992) 34 FCR 544 at 551. The same approach should be applied to construing section 445D(1)(a) and (b). Any special caution which is exercised about terminating deeds on the basis of statements about the future which turn out to be inaccurate arises at the level of the court's discretion, not at the jurisdictional threshold.
151 Even though there is some similarity between section 445D(1)(a) and (b) on the one hand, and section 52 Trade Practices Act 1974 (Cth) on the other, there are also very significant differences. The prohibition in section 52 is against engaging in conduct that is misleading or deceptive or likely to mislead or deceive. "Conduct" is necessarily human action, and deciding whether conduct is misleading or deceptive can, particularly when the conduct in question consists of making statements about the future, involve evaluation of the state of mind of the person who makes the statement: James v ANZ Banking Group Ltd (1986) 64 ALR 347 at 372 per Toohey J.
152 In contrast, section 445D(1)(a) and (b) attaches the description "false or misleading" to "information". In that way, section 445D(1)(a) and (b) look at the truth or falsity of the information itself, and whether the information is misleading, without any consideration of the state of mind of the person who provides the information. This is consistent with the concern of section 445D(1)(a) and (b) being with the adequacy of the information base which is presented to the administrator, or to the creditors, to enable them to make decisions.
False or Misleading Information in the Second Report to Creditors
153 To describe the Barclay Mowlem work as "work in progress" at all was false or misleading. The Second Report to Creditors said that the costs to complete of the two Barclay Mowlem jobs was "nil", while the Addendum said that the costs to complete them was $4,000. Even if it were true that $4,000 worth of work remained unperformed under the Contract, there was no recency or currency about the $400,000 worth of work said to have been done for Barclay Mowlem which justified it being described at "work in progress". I recognise that both reports said that the two Barclay Mowlem jobs were 100% complete, but there is nothing odd in a builder describing a job which is 100% complete as work in progress if it has only very recently been completed and is not yet invoiced for. That is the impression that a reasonable reader of the two reports would gather, concerning the Barclay Mowlem work. It is an impression that is quite mistaken.
154 Asserting that $400,000 was collectable for the Barclay Mowlem work was also false or misleading. There was no disclosure that there was the slightest cloud over the collectability of that amount - yet, now that he knows all the facts, Mr Warner accepts that the amount recoverable from Barclay Mowlem for work in progress should be "valued pretty much at nil" (para [77] above).
155 To estimate the value of the work in progress due from John Holland, in the Second Report to Creditors, at a total of $133,000, was likewise false or misleading. The evidence does not establish whether it was prior to the date of the Second Report to Creditors that the John Holland contracts came to an end, but, even so, the financial circumstances which led to their coming to an end are likely to have been in existence at the time of the Second Report to Creditors, even if the actual ending of the contracts had not occurred by that date.
156 Mr Warner tried to remedy this error in the Second Report to Creditors, by sending out the Addendum. Even if he had been totally successful in communicating the Addendum to every creditor before the Second Meeting of Creditors, the jurisdictional ground contained in section 445D(1)(b) would still be made out concerning the valuation of the John Holland debt. Success in communicating with the creditors is something which would be given effect to at the level of discretion whether to terminate the Deed by reason of a breach of section 445D(1)(b).
157 The Addendum was sent to creditors in effect one working day before the date of the Second Meeting of Creditors (para [42] above). Those to whom Mr Warner sent it by email would have had it available for their consideration for a full working day before the meeting. However, I cannot reach any conclusion about the number or value of the creditors who received the email version. Nor is it possible to have confidence about the number or value of creditors who received, and had time to consider, the posted version of the Addendum prior to the meeting. There were some creditors who had sent Mr Warner proxies before the Addendum was sent, and who communicated with him to say they wished their proxy to stand notwithstanding the information in the Addendum. BankWest, a creditor for over $409,000, at that time had submitted its proxy on 29 March 2005 as a special proxy in favour of the Deed. Metal Corp Steel, a creditor for $17,696, had submitted a special proxy on 31 March 2005 requiring an abstention on whether a Deed should be approved. Australian Industrial Abrasives, a creditor for $6,161, submitted a proxy on 31 March 2005 requiring a vote in favour of the Deed. However, both BankWest and Australian Industrial Abrasives later confirmed to Mr Warner that they support the Deed notwithstanding the information in the Addendum. Other proxies which were used at the meeting were given on 1 April 2005 or later. There is a possibility that creditors who did not vote, either by proxy or in person, might have been stirred into taking action to vote against the Deed if they had received the Addendum earlier, but the evidence gives no basis for believing that this is anything more than a mere possibility. In all these circumstances, I conclude that it is more likely than not that the comparatively short time between dispatch of the Addendum and the Second Meeting of Creditors did not lead to the result of that meeting being different to what it would have been if more time had been allowed.
158 In those circumstances, while the differences between the Second Report to Creditors and the Addendum are sufficient to establish the ground contained in section 445D(1)(b), success in communicating the Addendum means that it would be a wrong exercise of discretion to use the fact that section 445D(1)(b) had been made out in that way as a sufficient ground for terminating the Deed.
159 The same considerations as that in para [155] above lead to the conclusion that the attribution of a value of $121,800 to the John Holland retention debt in the Second Report to Creditors was also false or misleading.
160 The Second Report to Creditors valued the Barclay Mowlem retention debt as being worth $65,013. The amount ultimately recovered from that source was $39,008, and the view of Mr Warner in the Updating Report that nothing more is likely to be recovered from Barclay Mowlem for retention debts seems likely to be correct.
161 Another respect in which the Second Report to Creditors was false or misleading was in saying that the realisable value of the stock would be $104,855. In fact, the amount ultimately received for the stock was $65,408.
162 Concerning all the statements which I have identified so far as being false or misleading, a reader of the report would realise - and indeed sometimes Mr Warner expressly stated - that the figures given were estimates. However, there was no qualification or doubt expressed concerning the recoverability of any of these amounts (apart from the possibility of having to spend money on warranty work to receive the retention debts). In fact, as is now known, the extent of risk relating to their recoverability was well beyond the sorts of factors which make any estimate of recoverable proceeds of debts to some extent uncertain. The statements were false or misleading even though they were estimates.
163 Another respect in which the report gave false or misleading information was in saying that the company will continue to trade. The reality is that, no later than two days after the Second Meeting of Creditors, the company irretrievably lost its workforce (para [95] above). Under the terms of the license agreement to the New Company, the New Company had the right to enter new contracts in its own right. No new contracts were entered by the Company during the period of the administration. The amount of actual ongoing work for the Company to perform (once the alleged work in progress for Barclay Mowlem and John Holland was discounted) was quite small.
164 Another significant factor concerning the likelihood of the Company continuing in existence is that the debts to the associated creditors, totalling well over $1m, would continue in existence. For the reasons given in para [97] above, there was a high likelihood that, if the Company resumed trading, it would be trading while insolvent. While one does not know whether Mr Kovacic would have regarded that as a serious problem, at the least it is consistent with the conclusion that the Company was unlikely to continue to trade. Mr Warner's assessment, that there was no possibility that the Company was going to continue to trade once the unfinished work was completed (para [94] above) is realistic.
Materiality of the False and Misleading Information
The Materiality Test Itself
165 In the context of section 445D(1)(a) "material" means something which was relevant and did affect, or might have affected, the outcome: see Re Segal; Lensworth Finance Ltd v Segal (1975) 9 ALR 154; 45 FLR 85 followed in Beard v Prestige Baking Industries Pty Ltd (1981) 36 ALR 307; 52 FLR 384 (in particular per Fox J at FLR 398 and Lockhart J at FLR 418) and Re Cufari; Ex parte Commissioner of Taxation v Huppatz (1992) 34 FCR 544; Commissioner of Taxation v Comcorp Australia Ltd and others (1996) 70 FCR 356 at 392. In the present case, the relevant "outcome" was the decision of the creditors at the Second Meeting of Creditors to adopt the Deed.
166 The test of materiality under section 445D and 445G is an objective one: Commissioner of Taxation v Comcorp Australia Ltd and others (1996) 70 FCR 356 at 385 per Carr J (with whom Lockhart J agreed) (special leave to appeal to the High Court refused 14 February 1997 -- Deputy Commissioner of Taxation v Comcorp Australia Ltd [1997] 4 Leg Rep SL3).
167 On occasions, when there is an application to terminate a Deed, the courts have adjourned the proceedings, and invited the administrators to call a meeting so that the actual views of the creditors can be ascertained on whether, once they have been provided with the material with which they were not provided prior to adopting the Deed, they still wish the Deed to continue to operate: Greek Orthodox Community of Oakleigh and District Inc v Pizzey Noble Pty Ltd (admin apptd) and others (1997) 23 ACSR 274. Ascertaining the views of the creditors in this way is not something which goes to the materiality of the information, but rather goes to discretion. I consider it below at para [283].
168 The materiality test in section 445D(1)(a)(ii) is also incorporated by reference in section 445D(1)(b) and (c).
169 In deciding whether the materiality test has been passed, all the information about the company's business, property, affairs or financial circumstances that has been found to be false or misleading should be considered collectively. As an example, I doubt that the overvaluation of the stock, if it had been the only false or misleading statement in the report, would pass the materiality test. However, when there are other false or misleading statements, it should be considered along with those other false or misleading statements.
Recoveries Under a Deed
170 All of the false or misleading statements which I have found, apart from that the Company would continue to trade, were relevant to a common topic, namely how much was likely to be recovered by the creditors through operation of a Deed. Those false or misleading statements collectively resulted in the assets likely to be realised under a Deed shrinking form the $1,019,947 actually estimated in the Second Report to Creditors, to an amount of $224,447. That last-mentioned figure is derived from the "DOCA Worst Case" figures of the Updating Report (para [63] above), minus the amount included in the Updating Report for plant and equipment, because the plant and equipment was not distributable according to the Second Report to Creditors. As the only difference between the "DOCA Worst Case" and "DOCA Best Case" in the Updating Report is that the "DOCA Best Case" includes a further $400,000 recoverable from Barclay Mowlem, and Barclay Mowlem continues to oppose payment, the "DOCA Worst Case" figures seem to be the more realistic ones to adopt.
171 The Second Report to Creditors had estimated that, under a Deed, additional amounts would be available for the licence fee and stock purchase, and for the directors' contribution, totalling $55,680 (para [25] above). Thus, after correcting for the false or misleading statements, the total resources available under the Deed would have been $280,127.
172 The Second Report to Creditors estimated that from the total resources available under a Deed, priority payments of $319,593 would need to be made. No reason has been shown to doubt that estimate. It follows that, if correct statements of recoverable amounts had been substituted for the false or misleading statements, the outcome of adoption of the Deed shown by the Second Report to Creditors, there would have been no funds available at all for distribution to non-priority creditors. That is clearly material.
173 The reason why the Updating Report continues to show, on the "DOCA Worst Case" a return to non-priority creditors in connection with a Deed is because it provides for amounts to be distributable to the deed creditors which the proposal put forward in the Second Report to Creditors had not counted as distributable - namely, the proceeds of sale of the plant and equipment, the amount payable by Mr Kovacic under the shortfall guarantee, and amounts totalling less than $20,000 for bank interest and GST refund.
174 If the Addendum was corrected for the false or misleading statements, in a similar way to that outlined in para [171] above, and the estimate of the amount of priority payments made in the Addendum is adopted, that set of figures would also show no funds available at all for distribution to non-priority creditors.
Company Continuing to Trade
175 Many of the creditors were either suppliers, or employees. That the Company was going to continue to trade was a material matter to them.
176 The materiality test requires the information to "reasonably be expected to have been material to creditors …". That test has some imprecision about it. It does not require the information to reasonably be expected to have been material to all the creditors. In the present case, there were enough creditors who fell into the class of employees and suppliers to satisfy me that the false or misleading information that the Company would continue to trade passes the materiality test.
177 Concerning each of the topics on which false or misleading information was provided, there was an omission to state the correct position, or a reasonable approximation of the correct position. I am satisfied that the ground in section 445D(1)(c) is made out.
Section 445D(1)(d) - Material Contravention of the Deed
178 Bidald alleges that there has been a material contravention of Clause 2.3 of the Deed (para [50] above).
179 By the time of the Updating Report on 12 September 2005, Mr Warner was estimating that the total resources available in the "DOCA Worst Case" were $536,276. However, that amount included the proceeds of the plant and equipment ($55,341), and $186,262 estimated as then being payable by Mr Kovacic under his guarantee. Even though the Second Report to Creditors had stated that the plant and equipment would not be sold, the proceeds of the sale of the plant and equipment fall within the terms of Clause 2.1(b) of the Deed, and so are distributable to creditors under the Deed. Thus, the amount then estimated to be recoverable, and which would fall within Clause 2.1 of the Deed, was $350,014.
180 In cross-examination, Mr Warner explained his failure to call a meeting so far, by reference to the cost of doing so, and the fact that Clause 2.3 does not include any statement of when such a meeting is to be called.
181 Neither of those reasons is sufficient to prevent there being a breach of Clause 2.3. The cost of calling a meeting is one of the costs of his properly administering the Deed. At the time he requested the guarantee on 6 June 2005, Mr Warner's view must have been that there was at least enough of a prospect of the Deed Fund not reaching $500,000 to make it worthwhile asking for the guarantee. I recognise that sometimes people request a guarantee as a precaution, rather than because they expect it is likely to be called on. However, by at least the time of the Updating Report collections had been stagnant for sufficiently long for there to be an obligation under Clause 2.3 to call the meeting.
Improper for Mr Warner to Call a Meeting?
182 Mr Lucarelli submitted that there was another reason why Mr Warner could not have called the meeting, namely that the pendency of these proceedings made it improper of him to do so.
- Because of Gzell J's Directions?
183 The direction of Gzell J of 2 March 2005 (para [16] above), that no resolution that the Company be wound up be put to a meeting of creditors unless Bidald had been given seven days written notice, did not prevent the calling of a meeting of creditors. Mr Aldridge SC correctly submits that various resolutions could have been put to a meeting of creditors which would not have required any notification to Bidald to comply with the direction of Gzell J. Examples he gave were a resolution to vary the Deed to enable the administrator to take the shortfall guarantee, or a resolution that the Deed not be terminated because of the failure of the Deed Fund to reach $500,000. If that latter resolution was lost, it would be necessary to adjourn the meeting before a resolution that the Company be wound up could be put, so that the notice required by Gzell J's direction could be given to Bidald, but that would not stop the meeting being called in the first place. As well, there would be nothing to stop Mr Warner from calling a meeting to consider a resolution to wind the Company up, after giving seven days notice to Bidald. Proceeding in either of those ways would not only involve no breach of the direction, it would carry through the evidence purpose of Gzell J in giving the direction, namely that Bidald should have the opportunity to seek an interlocutory injunction if there were to be a real threat to have the Company wound up pursuant to a creditors' resolution.
- Because it Would Have Been a Contempt?
184 Mr Lucarelli also submitted that it would have been improper for Mr Warner to have called a meeting of creditors to consider a resolution to wind up, when the Winding Up Proceedings were still on foot. For the creditors to pass such a resolution would be to thwart the Winding Up Proceedings. For Mr Warner to facilitate that result by calling a meeting would be improper. I do not accept that conclusion follows.
185 There are some circumstances in which the taking of proceedings in a court in itself limits the action which can be taken outside of court, without the need for any court order. For example, the mere initiation of court proceedings brings with it an obligation to not bring pressure to bear on witnesses concerning their testimony, and an obligation to not carry out any of the other kinds of actions which would amount to contempt of court by interfering with the course of justice in those proceedings. Mr Lucarelli's submission is that, if Mr Warner were to call a meeting of creditors to consider an action to wind the Company up, he would be committing that kind of contempt. As that kind of contempt is a crime, and there is lawful excuse for not performing an obligation if to do so would involve a crime, Mr Warner was, he submits, excused from performing the obligation to call the meeting.
186 Mr Lucarelli relied particularly on In re Septimus Parsonage & Co Ltd [1901] 2 Ch 424. It concerned a situation where a petition for winding up had been presented to the Court, and the directors called a meeting to consider a voluntary winding up. The conduct of one of the directors had been the subject of criticism. That director agreed with another director to arrange for an employee of the company, who held 200 preference shares which had been given to him by the director whose conduct was subject to question, to send a circular to other shareholders. That circular was in substance drafted by the two directors, but was signed by the employee and purported to come from the employee's home address. In it, the employee said he was a large shareholder, expressed concern as to the management of the company, said that he proposed, at his own expense, to make a thorough investigation of the management, and solicited proxies. He received proxies from holders of 60,000 shares. Those proxies, together with others which the directors held, commanded a majority. At the meeting, when a shareholder moved an amendment to appoint a committee of investigation, the shareholder who had solicited the proxies did not use them or demand a poll, and the amendment was lost. The resolution for the company to be wound up voluntarily was then put, and was carried on a poll, with the proxy-holding shareholder using those proxies in favour of the resolution.
187 The court made an order for compulsory winding up of the company notwithstanding this resolution, and directed an inquiry into the circumstances relating to the circular. This led to contempt proceedings being brought against the two directors and the employee. The result was that the two directors were committed to prison for contempt. In the course of his reasons for so doing, Wright J held that the shareholders had been trapped into giving their proxies, which were then used in a way different from what was intended, thus depriving them of their representation. The circular had represented that the person soliciting the proxies was a large shareholder, and was independent, when he was neither.
188 Wright J said, at 429, of the two directors:
"I think I must give them credit for knowing perfectly well that if the resolution for a voluntary liquidation was passed it would destroy the power of the Court to make the compulsory winding-up order, unless there was proof, which it is sometimes not very easy to obtain, that the petitioning creditor would be prejudiced by the continuance of the voluntary winding up. It seems to me an obvious inference that all that was done by the respondents was done for the purpose of defeating the creditors petition, and that what they wanted to avoid was a compulsory winding up."
189 The purpose of these remarks was to enquire how far the fraud which had been practiced was directed against the court, and therefore amounted to a real interference with the jurisdiction of the court. It was only by interfering with the jurisdiction of the Court that contempt of court would have been committed. The focus of Wright J's reasons was on the fraud that had been practiced on the shareholders who were sent the circular. The case is not authority for the proposition that, simply because a winding up petition is before the Court, shareholders acting honestly are never able to call a meeting to consider the voluntary winding up of the company, without committing a contempt.
190 Mr Lucarelli also relied upon Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460. That case related to a contempt alleged to have been committed by the Trade Practices Commission by issuing notices under section 155 Trade Practices Act 1974 (Cth) to a party which was already the subject of court proceedings relating to the same subject matter as that into which the statutory notices inquired. The Commission was not, however, a party to those proceedings.
191 Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460 was not a case, like the earlier decision in Brambles Holdings Ltd v Trade Practices Commission (1980) 32 ALR 328 where the Trade Practices Commission had itself commenced proceedings seeking pecuniary penalties (a type of proceeding in which discovery and interrogatories were in principle not available), and then served a section 155 notice on the company charged. It was the use of that notice for the purpose of overcoming the inability to get information through compulsory processes under the processes of the Court which led to the conclusion that the serving of the notice was, in Brambles, a contempt.
192 Mr Lucarelli directed my attention to the remarks of Gibbs CJ in Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission (1982) 152 CLR 460 at 467-8, where his Honour said:
"No doubt it is right to say that the power conferred by the section might in some cases be used so as improperly to interfere with judicial proceedings. I incline to think that if the power were used to assist a party in proceedings already pending, in a way that would give such a party advantages which the rules of procedure would otherwise deny him, there would be a contempt of court."
193 However Gibbs CJ went on to recognise, at 468, that
"… not every investigation into facts which are the subject of pending proceedings constituted a contempt of court … In the present case it was not shown that the person who gave the notice had any intention to interfere with the course of justice, or that there was a real risk that the exercise of the powers under s155 would in the circumstances have that effect."
194 Brennan J, at 475, reserved his opinion on the question of whether the service of the notice for the purpose of obtaining information for use in proceedings already commenced by the Commission against the person to whom the notice is directed would amount to a contempt. Murphy J said nothing on this question. Mason J, at 474, gave as his reason for there being no contempt, that:
"… here there is no reason to suppose that the Commission seeks information for other than a legitimate reason, that is, to perform its functions under the Act."
195 Thus, the remarks of Gibbs CJ quoted at para [192] above, which were in any event obiter dicta, are not concurred in by the rest of the Court. Further, any principle about the extent to which illegitimate advantages cannot be obtained for the purpose of court proceedings does not translate directly to the situation now under consideration, where action out of court would be likely to have the practical effect of making pending court proceedings redundant.
196 Sometimes, actions out of the court in which proceedings are on foot, which have an effect on how those proceedings are carried on, is not contrary to public policy: AG Australia Holdings Limited v Burton & Anor [2002] NSWSC 170; (2002) 58 NSWLR 464; (2002) 58 IPR 268 at [88]-[172], 491-512 of NSWLR. In the present case, for the creditors to consider a resolution to wind the company up would not amount to a contempt of court, even though the Winding Up Proceedings were on foot. It is part of the statutory scheme relating to Deeds of Company Administration under the Corporations Act 2001 (Cth) that a creditor bound by a Deed cannot make or proceed with winding up proceedings until the Deed terminates (section 444E(1) and (2).) Consistently with that, section 444A(5) says that the deed "… is taken to include the prescribed provisions, except so far as it provides otherwise.". Pursuant to Regulation 5.3A.06 Corporations Regulations 2001 (Cth), the prescribed provisions (set out in Schedule 8A of those Regulations) include:
"7. … a creditor … must not before the termination of this deed:
(a) take or concur in the taking of any step to wind up the company …"
197 While section 444E(3) permits the Court to grant leave to begin or proceed with a proceeding against the Company or in relation to any of its property, that general provision would give way to the specific provision in section 444E(2), which does not admit even of the possibility that the Court could grant leave to a person bound by a deed to begin or proceed with an action to wind the company up, while the deed remained on foot.
198 Section 445C says:
"A deed of company arrangement terminates when:
(a) the Court makes under section 445D an order terminating the deed; or
(b) the company's creditors pass a resolution terminating the deed at a meeting that was convened under section 445F by a notice setting out the proposed resolution; or
(c) if the deed specifies circumstances in which it is to terminate - those circumstances exist;
whichever happens first."
199 Section 446A(1)(c) contemplates that a meeting of creditors convened under section 445F could pass a resolution terminating the deed, and a resolution that the company be wound up.
200 Thus, the legislation contemplates it as being one of the ordinary and proper ends of a Deed of Company Arrangement that the creditors resolve that the company should be wound up. It also contemplates that any winding up proceedings should be subject to a statutory stay unless and until the deed has come to an end.
201 The Deed in the present case, in Clause 19, says, "The Prescribed Provisions to the extent that it is possible are expressly excluded in this Deed", but Clause 18 includes a prohibition on a creditor taking or concurring in the taking of any step to wind up the Company.
202 In these circumstances, it would not have been a contempt of court for Mr Warner to call a meeting of creditors for the purpose of considering a resolution to wind the Company up, provided only that he complied with the restriction imposed by Gzell J.
203 I note that there is a separate line of cases which hold that the ability of a litigant which has itself commenced court proceedings seeking a particular order, to take self-help action outside court to achieve the same objective is restricted. Such cases justify their conclusion by saying that the person who has brought the action has made an election not to pursue the extra curial remedies: Argyle Art Centre v Argyle Bond & Free Stores [1976] 1 NSWLR 377 at 386; Wynsix Hotels (Oxford Street) Pty Ltd v Toomey [2004] NSWSC 236 at [62]. When neither Mr Warner, nor the Company, have instituted any legal proceedings, that line of cases does not apply to them.
204 For these reasons, I conclude that Mr Warner's failure to call a meeting of creditors is a contravention of the Deed.
Materiality of the Contravention - The "Virtual Meeting"
205 The ground in section 445D(1)(d) requires not only a contravention of the Deed, but also that the contravention be a material contravention. The question arises whether, in light of the results of the "virtual meeting" (para [70] above), the contravention should be regarded as a material one.
206 In my view, the "virtual meeting" does not provide a procedure which is a substitute for a meeting of the conventional kind. It does not provide the opportunities which a conventional meeting provides, for one creditor to seek to put information before the other creditors, or to persuade others, or to ask questions. There is no opportunity for interaction through oral discussion - something which the Court's own everyday procedures demonstrate can deepen the understanding and modify the initial views of all participants. Meetings of creditors to decide the fate of companies which have been through an administration are by no means empty formalities. The Second Meeting of Creditors in the present case lasted three hours and five minutes. The means by which the legislation itself provides that creditors shall reach decisions concerning the fate of a company which has been through an administration is a meeting, not an opinion poll amongst creditors
207 Mr Aldridge SC submitted that there is doubt about whether various of the creditors whose "votes" were counted are ones who continue to have a claim against the Company. There were some entities which voted at the virtual meeting, whose names appeared in one or other of the lists of entities which was faxed to Mr Warner on 7 September 2005 (para [126] above). These were:
Entity Amount for which admitted to vote
Australian Industrial Abrasive $6,162.92
JJ Richards & Son Pty Ltd $229.06
Team Couriers Pty Ltd $11,165.89
York Precision Plastics Pty Ltd $2,218.11
Robert J Ford $500.00
Rodgers Reidy $9,079.73
Total $29,355.71