Blundell, in the matter of Reacon Australia Pty Ltd (in liq) v Ctrl Print Pty Ltd as trustee for

1. Pursuant to s 445G of the Corporations Act, the Amended Deed of Company Arrangement entered into on 30 June 2025 is valid.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. The present application is the sequel to that heard and determined by Derrington J in Blundell, in the matter of Reacon Australia Pty Ltd (in liq) v Ctrl Print Pty Ltd as trustee for Ctrl Print Management Unit Trust [2025] FCA 578, and I gratefully adopt his Honour's description of the background to the proceedings.
2. For present purposes, it is sufficient to note that while on 9 May 2025, Reacon Australia Pty Ltd was ordered to be wound up in insolvency, with the plaintiffs appointed joint and several liquidators, on 23 May 2025 Derrington J granted the plaintiffs leave to appoint themselves as administrators of Reacon, and stayed its winding up for the period of the administration.
3. The reason the plaintiffs sought leave to appoint themselves administrators, and to stay the winding up, was because a new deed of company arrangement was proposed (a deed on different terms had been proposed when the company was in administration, before it was ordered to be wound up) which, if accepted, would facilitate returning Reacon to solvency.
4. On 30 May 2025 the second meeting of creditors was held, and 24 creditors with debts totalling $3,738,223.61 voted on whether Reacon should enter the DOCA. A majority of those creditors, in both number and value, voted in favour of it doing so. Indeed, 20 creditors (83%) owed a total of $2,922,546.70 (78%) supported the DOCA. (Furthermore, of the creditors who voted against the DOCA, it was the Australian Taxation Office that was owed by far the largest amount, with a debt of $739,429.67.) The DOCA was entered into on 2 June 2025. On 30 June 2025, an Amended DOCA was entered into for the stated purpose of rectifying a drafting error and properly reflecting the proposal approved by creditors.
5. In those circumstances, the plaintiffs now seek orders (a) pursuant to s 482 of the Corporations Act 2001 (Cth), terminating the winding up of Reacon and (b) pursuant to s 445G of the Corporations Act, declaring the Amended DOCA to be valid.

1. The plaintiffs relied upon affidavits of Andrew Blundell (one of the plaintiffs) affirmed on 20 May 2025, 30 June 2025 and 2 July 2025, an affidavit of Stuart Bailey (one of the plaintiffs' solicitors) affirmed on 4 July 2025, and an affidavit of Vikrant Gulati (the sole director of both Reacon and its parent company, and its ultimate owner) affirmed on 8 July 2025.

1. On 1 July 2025, the plaintiffs issued a circular to all creditors notifying them of the interlocutory application that had been filed. On 2 July 2025, a further circular was issued, enclosing a filed copy of the interlocutory application, and informing creditors of the time, date and place at which the application would be heard. The evidence disclosed that there were five email bounce-backs received, but in each case a hard copy of the notices were sent by registered post to the relevant creditors. Furthermore, alternative email addresses for those five creditors were later obtained, and the emails re-sent (apparently successfully).
2. The interlocutory application and supporting evidence were also served on ASIC.
3. I am satisfied that the application has been served on all relevant persons.

1. In Re Living Creatively Exhibitions Pty Ltd (in liq) (subject to deed of company arrangement) [2013] NSWSC 717, Black J said as follows: [7]

Generally, the court will not terminate a winding up unless a company will have additional financial strength and stability to provide confidence that it can continue without an appreciable risk of returning to liquidation: Re Data Homes Pty Ltd (in liq) [1972] 2 NSWLR 22 at 27; Leveraged Equities Ltd v Hilldale Australia Pty Ltd [2008] NSWSC 190; (2008) 26 ACLC 182; Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797. A question will arise as to whether sufficient steps have been taken to recapitalise a company or restore its solvency so that, in the language of Re Pine Forests of Australia (Canberra) Pty Ltd [2010] NSWSC 1127 at [3], its "financial health" is such that it may safely be released from the form of external administration focussed mainly on the interests of creditors and returned to the mainstream of commercial life where it may, under the control of its directors, incur new debts that have to be paid as and when they fall due. Similarly in Re SNL Group Pty Ltd (in liq) above at [24] Bergin CJ observed that:

it is clear that in determining whether to terminate the winding up of a company, it is usual that the most significant matter for consideration is the solvency of the company. The other considerations, such as the extent of the creditors, the status of the debts and the nature of the company's business will be taken into account in determining whether the company has returned to or will be returned to solvency.

1. That decision was cited with approval by Banks-Smith J in Re Black Oak Minerals Ltd (subject to a deed of company arrangement) (in liq) [2019] FCA 293. Her Honour also said (at [73]):

The Court has discretion as to whether the winding up should be terminated, and in exercising its discretion it considers the interests of the company's current and future creditors, the liquidator, the contributories, and the public interest in matters of commercial morality and the winding up of insolvent companies: Vero Workers Compensation (NSW) Ltd v Ferretti [2006] NSWSC 292 at [17] (Austin J).

1. Other principles have been developed. The general considerations informing an application of the present kind were considered by Barrett J in Metledge v Bambakit Pty Ltd [2005] NSWSC 160 at [5]:

The jurisdiction to terminate a winding up under s 482 is discretionary. The court may have regard to a range of factors. While not to be rigidly applied (Dubolo Pty Ltd v Codrington Investment Corporation Pty Ltd (1998) 26 ACSR 723), the list of criteria set out in the judgment of Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526 provides useful guidance:

1. The granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay: In Re: Calgary and Edmonton Land Co Ltd (In liq) (1975) 1 WLR 355 at pp 358-359 per Megarry J. See also sec 243 of the Act [i.e, Companies Act 1961].
2. There must be service of notice of the application for a stay on all creditors and contributories, and proof of this_; Re South Barrule Slate Quarry Co_ (1869) 8 Eq 688; Re Bank of Queensland Ltd (1870) 2 QSCR 113.
3. The nature and extent of the creditors must be shown, and whether or not all debts have been or will be discharged: Krextile Holdings Pty Ltd v Widdows (supra) [1974] VicRp 83; [1974] VR 689]; Re Data Homes Pty Ltd (supra) [1971] 1 NSWLR 338], Law of Company Liquidation (supra) at p 395.
4. The attitude of creditors, contributories and the liquidator is a relevant consideration: sec 243(1), Calgary and Edmonton Land Co Ltd (supra).
5. The current trading position and general solvency of the company should be demonstrated. Solvency is of significance when a stay of proceedings in the winding-up is sought: In re a Private Company [1935] NZGazLawRp 17; (1935) NZLR 120; Re Mascot Home Furnishers Pty Ltd [1970] VicRp 78; (1970) VR 593 at p 598.
6. If there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given: Re Telescriptor Syndicate Ltd (supra) [1903] UKLawRpCh 65; [1903] 2 Ch 174].
7. The general background and circumstances which led to the winding-up order should be explained: Krextile Holdings Pty Ltd v Widdows (supra).
8. The nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to 'commercial morality' or the 'public interest': Krextile Holdings Pty Ltd v Widdows (supra).

1. These considerations were approved in Re Judson (in his capacity as the liquidator for Maneroo Pty Ltd) (in liq) [2015] FCA 783 at [21]- [22] and Re The King & I Pty Ltd [2007] FCA 2085. In the former, Gleeson J said at [23]:

In Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64 ; (2010) 77 ACSR 84 at [58], Finkelstein J noted that there may be cases, which he characterised as exceptional, where a stay of a company's winding up would not be granted when the company was solvent, but noted that such an order would usually be made if all the creditors are paid out, the liquidator's costs and expenses are covered and the members agree.

1. Where, as is the case in this instance, an application is made to terminate a winding up in the context of a DOCA having been entered into, the policy underlying Part 5.3A of the Corporations Act also becomes relevant (See Re Plaza West Pty Limited (in liq) [2013] NSWSC 168 at [15]- [17] (Black J) and the cases cited therein).

1. It follows that the plaintiffs must make out a positive case that Reacon's financial health is such that it may "safely be released from the form of external administration focussed mainly on the interests of creditors and returned to the mainstream of commercial life where it may, under the control of its directors, incur new debts that have to be paid as and when they fall due": Re Living Creatively at [7]. That matter must be positively proved by reference to objective facts; mere assertions and optimism will not suffice: Re The King & I at [8]; Metledge at [31]-[34].
2. The principal evidence relied on in that respect was a monthly cashflow analysis for the period through to 31 May 2026 prepared by Mr Blundell. In relation to the method and assumptions he used to prepare that analysis, Mr Blundell said in his affidavit:

(a) I have used the cash method to record the receipts and payments (as opposed to an accrual method) as the cash method is the more accurate method for a cashflow analysis.

(b) I have included the capital injection from the Deed Proponents referred to at paragraph 13(d) above.

(c) For the expected sales invoices I have:

1. calculated the average sales for each customer based on the actual sales during Reacon's administration;
2. applied the payment terms which were in place for that customer;
3. increased the amount of all sales invoices by 10% to reflect Reacon increasing their prices;
4. assumed that each customer makes one order per month with the total monthly average being purchased in that order; and
5. assumed the invoice date as being the average date on which the bulk of the customer's ordering was done during Reacon's Administration.

(d) I have allowed for costs of $255,000 to move premises (to a new premises in Warwick Farm, to be shared with Westman Printing) on 1 September 2025. This amount is based upon an estimate of the likely moving costs that has been provided to me by Mr Gulati. In my analysis contained in the 20 May Affidavit I had assumed that this expense would be incurred on 1 July 2025; however, my more recent discussions with Mr Gulati have indicated that the move would be later than had previously been anticipated. For the rental expenses before 1 September 2025, I have included the total rent payable in respect of Reacon's current premises. For the rent after 1 September 2025, I have included 70% of the ongoing lease costs of the new Warwick Farm premises to be occupied by both Reacon and Westman Printing because I am informed by Mr Gulati that Reacon will take up around 70% of the shared premises.

(e) I have not included any amount in respect of costs of Reacon exiting the lease in respect of its current location at Regents Park. I have taken this approach as:

1. the lease is actually in the name of Reacon Group; and
2. I am informed by Mr Gulati and believe that there has been interest from third parties in taking an assignment of the lease for Reacon's current premises.

(f) I have assumed that the payments to overseas contractors would remain at the same rate they were during Reacon's administration.

(g) For the wages and salaries I have assumed that, during the period ending 31 May 2026, Reacon's staffing position would remain the same as it was at the commencement of the DOCA (including the Transferring Employees). I have made the assumption because:

1. as set out in the 20 May Affidavit, during the administration Reacon engaged in a cost cutting process which included a reduction in Reacon's total employees; and
2. I am informed by Mr Gulati and believe that the current staffing levels are required and sufficient for the ongoing trading of Reacon.

(h) For the calculation of the PO Invoices to Reacon's suppliers I have:

1. excluded the amounts referred to at paragraph 29 of my 20 May Affidavit as I believe those payments were specific to the context of an administration and are not representative of ordinary trading;
2. otherwise calculated the average purchase orders for each supplier based on the orders made during Reacon's administration;
3. assumed that the billing cycle would remain the same as during the administration (e.g. if a supplier was issuing weekly invoices during the administration I have assumed the same position going forward);
4. applied the payment terms which that supplier has previously provided to Reacon; and
5. applied 60 Day terms to the orders to Westman Printing (as agreed by Mr Gulati).

(i) Applied software costs of approximately $180,000 per annum (a reduction of software costs which is intended to be carried out by Mr Gulati). I believe this is a reasonable assumption to adopt because Reacon has previously maintained multiple subscriptions for software packages where only one was required, meaning that Mr Gulati ought to be able to reduce this expense as predicted by cancelling some of Reacon's subscriptions. I have spread the costs out over the year based on the historic payment terms of Reacon's various software packages.

(j) Accounted for operating and other expenses in line with the costs incurred during Reacon's administration.

1. The analysis predicts that Reacon will remain solvent during the period ending on 31 May 2026, and that it will be in a strong position to continue that solvent position going forward. Mr Blundell's evidence is that Reacon is currently solvent and will, on the assumptions underpinning the cashflow analysis, remain so in the near future.
2. An assumption of particular significance to the cashflow analysis was the fact of funding in the amount of $500,000 to be provided by Mr Gulati or his companies (referred to in sub-paragraph (b) in the quotation from Mr Blundell's affidavit above). When the matter was first before me, the extent of the evidence concerning the validity of that assumption was Mr Blundell's statement that those entities "have the $500,000 in cash funds ready to inject as capital and that those funds have already been made available to Reacon for payment of its expenses". Given the importance of that capital injection in the cashflow analysis, I was concerned to understand precisely its status.
3. When the matter resumed, the plaintiffs read the affidavit of Mr Gulati to which I have referred above. The effect of that evidence was that the $500,000 funding was being provided through an overdraw facility, secured against a commercial property owned by Mr Gulati. Any drawdowns on that facility incur interest at a rate of about 8% per annum, with the result that Mr Gulati arranges for funds to be drawn down and provided to Reacon only as and when required. Mr Gulati has already advanced about $308,000 to Reacon, and evidence demonstrated that there remained more than $214,000 available to draw down. Importantly, the plaintiffs also tendered a signed undertaking from Mr Gulati. Relevantly for present purposes, that undertaking provided:
   1. Subject to:
      1. The Court making orders pursuant to section 482 of the Corporations Act and the Reacon DOCA not being terminated (other than by effectuation); and
      2. Reacon not otherwise being placed into liquidation by an entity not related to me,

I will continue as needed to provide the $500,000 referred to in my affidavit of 8 July 2025 in support of Reacon Australia Pty Ltd's (in Liquidation) (Subject to a Deed of Company Arrangement) (Reacon) ongoing trading until at least 30 May 2026.

1. On that basis, I was satisfied that the assumption of funding by Mr Gulati in the amount of $500,000 that underpinned the cashflow analysis was valid.
2. Overall, Senior Counsel for the plaintiffs submitted, and I accept, that confidence in the cashflow analysis was supported by the following considerations:

(a) Mr Blundell is an experienced insolvency practitioner, with a breadth of experience enabling him to form a sensible business judgment about the company;

(b) The plaintiffs have now caused Reacon to trade for 11 weeks, affording them valuable information about, and intimate familiarity with, the company's operations and the steps required to return it to profitable operation;

(c) In the critical respects, individual assumptions are based on the liquidators' own assessment of the companies' affairs, and do not rely merely on the say-so of its controller;

(d) It is thus the case that the assumptions underpinning the cashflow analysis have been able to be tested against the actual trading experience of Reacon, as observed personally by the plaintiffs;

(e) The plaintiffs have already placed Reacon in the position where it is once again paying all of its creditors within their trading terms.

1. Overall, I am satisfied that the cash flow analysis is a rigorous and objective assessment of Reacon's financial health and trading prospects, derived from an assessment of the company's books and records, and a detailed knowledge of its trading operations. To the extent possible, the assumptions underpinning it have either been established in the evidence, or are reasonable assumptions based on the evidence. I am satisfied that it provides an affirmative basis for concluding that Reacon may be returned to the mainstream of commercial life.
2. The liquidators have confirmed that they support the termination of the winding up.
3. The plaintiffs also submitted it was significant that a significant majority of Reacon's creditors voting at the second creditors' meeting, by both number and value, supported the termination of the winding up. It was a term of the DOCA that the winding up be terminated, and it may thus be inferred that they are supportive. That inference is strengthened in circumstances where no creditor, including those who voted against the DOCA, appeared to oppose this application.
4. The evidence was to the effect that, under the DOCA, Reacon's unsecured creditors will receive between 5.74c and 16.53c on the dollar, whereas in a liquidation they will not receive any dividend. It may thus be observed that terminating the liquidation will achieve the objects of Pt 5.3A of the Corporations Act (see s 435A), in that the company will continue in existence with a better return for creditors also being achieved.
5. Insofar as employees are concerned, it is significant that if the liquidation is terminated, 24 employees who would otherwise lose their jobs will retain their employment. The full entitlements of all employees, whether continuing or not, will be paid in full. It follows that I am satisfied that the interests of employees will not be adversely affected by reason of the termination of the winding up.
6. Certain employees of a related company will also be transferring to Reacon, with Reacon assuming liability for their accrued entitlements. As consideration for that transfer and assumption, the related company is required to transfer certain assets to Reacon. Mr Gulati's affidavit explained that the assets (which are printing equipment) are already being used by Reacon in its business, but that title has not been formally transferred yet due to ongoing negotiations with a lender that has a security interest in them. In a portion of the affidavit over which I have made confidentiality orders, Mr Gulati explained the current status of the negotiations with the secured creditor. I am satisfied that nothing in connection with this issue gives rise to any concern as to the present or future solvency of Reacon. That is especially so because, to the extent that certain payments will be required to be made to the secured creditor, Mr Gulati's undertaking provided:
   1. If at any time Reacon has insufficient cash available to make the instalment payments to Judo Bank Pty Ltd (as referred to in my affidavit of 8 July 2025), when such payment falls due either myself or one of my related entities will provide funds (over and above the $500,000 referred to above) in order to allow Reacon to make that payment.
7. Unsurprisingly, the evidence was that Reacon's sole shareholder, Reacon Group, also supported the termination of the winding up. Reacon Group's intention is that Reacon should continue to trade in both the short and long term.
8. Finally, the plaintiffs submitted, and I accept, that there is no concern as to public morality that would arise if the liquidation were terminated. This is not a case where the former controllers of a company placed into liquidation will be permitted to resume trading:

(a) At the time Reacon was placed into administration, and then liquidation, it was controlled by Mr Jahangir Khan. Mr Khan had also controlled Reacon's sole shareholder, Reacon Group Pty Ltd. On 7 April 2025, however, the day before Reacon was placed into administration, Mr Vikrant Gulati was appointed sole director of Reacon Group.

(b) The effect of the DOCA has been to transfer the control of Reacon from Mr Khan to Mr Gulati and his related entities. Mr Gulati and his related entities are third party purchasers unrelated to Mr Khan.

(c) The plaintiffs have thoroughly investigated the potential for claims to be made by or on behalf of Reacon against Mr Khan. The result of those investigations was to conclude, as Derrington J observed at [29], that the advantages of bringing such claims appeared slight. But any rights that Reacon may have against Mr Khan are preserved under the DOCA, and there is no reason to think that Mr Gulati would not cause Reacon to prosecute such claims if it was in the company's interests to do so.

(d) There is certainly no reason to conclude that the termination of the liquidation will enable Mr Khan to avoid scrutiny to which he would otherwise be subject.

1. Overall, I am satisfied that the evidence shows that Reacon has the financial strength and stability to provide confidence that it can continue to trade without appreciable risk that it will be returned to liquidation. I am satisfied that, in the circumstances I have just described, it is appropriate to exercise my discretion and terminate the winding up.

1. The Amended DOCA was entered into by all parties on 30 June 2025.
2. The effect of the amendments was to put beyond doubt that a secured creditor of Reacon, Innovis Media Group Pty Ltd (the sole shareholder of Reacon Group, and thus the ultimate owner of Reacon), does not release its claims against Reacon.
3. It is clear that the DOCA proposal that was voted on at the second meeting of creditors contemplated the preservation of Innovis' claims against Reacon. That proposal defined "Excluded Creditors" to include Innovis, and said (at [6]): "Except for Innovis (whose claims and interest as a secured creditor remained), the claims of the Excluded Creditors shall be forever released and discharged on effectuation of the DOCA".
4. When the DOCA was drafted, the term "Excluded Creditors" was defined to include Innovis. Clause 9.1 then provided that "The Excluded Creditors ... except for Innovis (whose Claims and interest as a Secured Creditor remain), will defer all their Claims against the Company behind other unsecured creditors for the period of this Arrangement, such Claims being reinstated on termination (other than termination of the Deed pursuant to clause 19.5).". Clause 10.1(b) provided, however, that "Each Excluded Creditor agrees that upon this Deed terminating pursuant to clause 19.5 of this Deed, each of their Claims are extinguished and released."
5. In this way, the intention that Innovis' claims not be released was imperfectly reflected in the final drafting of the DOCA.
6. I am satisfied that the amendments to the DOCA are necessary to conform the terms of that document to the substance of the proposal that was adopted by creditors at the second meeting of creditors.
7. All parties to the DOCA have executed the Amended DOCA, albeit not pursuant to a resolution passed at a meeting in accordance with s 445A of the Corporations Act.
8. In the circumstances, I am satisfied that there has been substantial compliance with the requirements for authorising entry into of the Amended DOCA, and no injustice will be suffered by any person if the extent of non-compliance is disregarded. It is thus appropriate that the Court declare, pursuant to s 445G(3) that the Amended DOCA is valid.

1. In the course of the hearing, I made an interim order pursuant to s 37AI of the Federal Court of Australia Act 1976 (Cth) in relation to Exhibit A, which was a report filed with ASIC by the plaintiffs pursuant to s 438D of the Corporations Act. Such a report is excluded from the general right to inspect registers maintained by ASIC conferred by s 1274 of the Corporations Act (see s 1274(2)(a)(iv)). The plaintiffs were concerned that, in those circumstances, the report ought be kept confidential. So as not to delay the hearing, I made the interim order I have mentioned. At the resumed hearing, however, the plaintiffs indicated, by reference to In the matter of S.C.W. Pty Ltd [2014] NSWSC 1537 at [6]- [7], that they no longer pressed for a confidentiality order, and I said I would discharge the interim order.
2. I do, however, accept that it is appropriate that paragraphs [14] to [17], and Annexure VG-3, to Mr Gulati's affidavit should be made subject to an order pursuant to s 37AF, on the ground specified in s 37AG(1)(a), for a period of four weeks. The relevant evidence concerns Mr Gulati's position in relation to ongoing commercial negotiations with the secured creditor to which I have referred above. Those negotiations are expected to be concluded within four weeks, and at that point will cease to possess any significance justifying confidentiality. Until that time, however, it is appropriate that the negotiations be allowed to continue without disclosing Mr Gulati's confidential position.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Owens.