14 The Director-General's opinion that Section 41J has no application to the disposal of land of a registered club by an administrator exercising a power of sale pursuant to the Corporations Act is apparently founded on the view that the administrator being given that power by the Corporations Act, it prevails over any restriction imposed by State legislation. So far as is relevant, Schedule 8 to the Corporations Regulations confers on a deed administrator power to sell assets and property of the corporation. By Corporations Act, s 444A(5), the deed is taken to include that provision "except so far as it provides otherwise." In this case, the deed included a provision which specifically incorporated reference to and compliance with the Registered Clubs Act, s 44A. Thus, in the circumstances of this case, prima facie there would be no inconsistency between the deed and the State law and, in those circumstances, it is at least doubtful that the administrator would have power to sell without complying with s 41J. But ultimately, my decision does not depend on that provisional view.
15 By originating process filed in court by leave today, but on notice to the defendants to whom I have referred, and on notice also to Perpetual Nominees who, with the defendants, appeared to oppose the application, the plaintiff seeks, in substance, relief under Corporations Act, s 447E, which provides as follows:
Supervision of administrator of company or deed
(1) Where the Court is satisfied that the administrator of a company under administration, or of a deed of company arrangement:
(a) has managed, or is managing, the company's business, property or affairs in a way that is prejudicial to the interests of some or all of the company's creditors or members; or
(b) has done an act, or made an omission, or proposes to do an act, or to make an omission, that is or would be prejudicial to such interests;
the Court may make such order as it thinks just.
16 In particular, the plaintiff seeks an injunction restraining the defendants from completing the contract for sale. It is not at this stage entirely clear what final relief, other than a permanent injunction, the plaintiff might seek, and that will require further consideration in due course. In addition the plaintiff seeks, pursuant to s 449B, the removal and replacement of the administrator; that aspect of the plaintiff's application has not been argued on this occasion and will have to be determined at a later date. In essence, the plaintiff's case is that, by entering or purporting to enter into and proposing to complete the contract for sale in the absence of approval of members of the club, the administrator was acting to the prejudice of those members within the meaning of s 447E.
17 I have concluded that the plaintiff's case is at least a seriously arguable one, on the following bases.
18 The purposes of this deed of company arrangement were not limited to advancing the interests of creditors, but extended also to preserving the ability of the company, and the club, to remain in existence, to return to profitability and to carry on business and thus to promote the interests of the members as well as the creditors. That is evidenced by reference to those concepts in the reports of the administrator which preceded the approval of the deed, and in observations made at meetings prior to the approval of the deed. It is reflected by the inclusion in the deed of a provision that the members would have a right of veto over a proposed sale of the core property, albeit subject to the administrator's entitlement to form the view this would make continuation of the deed impractical or undesirable and thus entitle him to convene a meeting to consider termination of the deed. That this was the purpose of clause 5.1, and not merely to reflect an assumption that s 41J applied so as to require compliance with it were it applicable, is supported by the following matters.
19 First, if it be the case that s 41J does not apply to a sale by an administrator (because of the primacy of the Commonwealth legislation giving the administrator powers of sale), then its inclusion in the deed of company arrangement served no purpose at all. The provision has work to do if, and only if, it applies regardless of whether s 41J applies also of its own force.
20 Secondly, in answer to the proposition that it is unlikely that the creditors intended to place themselves at the mercy of the members in respect of a sale of the property of the corporation, it is clear enough from the context of clause 5.2 that, in respect of non-core property (as to sale of which, on no view, could the Registered Clubs Act have required the approval of members), nonetheless a stipulation was included that the administrator would place any proposed sale of non-core property before members, although he would not be bound by their refusal to approve it; which stands in contradistinction to clause 5.1, where there is no equivalent provision to the effect that the administrator would not be bound by non approval.
21 Moreover, clause 13.2 plainly envisages that there might be a conflict between the administrator's desire to sell the core property and the members' refusal to approve a sale.
22 Those matters tell very strongly against the proposition that the creditors could not have intended to subject their interests to those of the members in this way. Ultimately the power remains in the hands of the creditors: in any event, if the administrator decides that his ability to sell has been impeded, he could convene a creditors' meeting and the creditors can resolve to terminate the deed if so minded.
23 In my view, therefore, it is at least seriously arguable that the application of clause 5.1 is not limited to circumstances in which the law requires prior compliance with s 41J. On that view, any "dispensation" on the part of the Director-General under reg 19(1)(h) is beside the point.
24 In any event, at least so far as the evidence presently goes, what the Director-General has done is not an "approval" under reg 19(1)(h) but an expression of an opinion that s 41J does not apply in the circumstances.
25 In those circumstances, it seems to me that it is at least seriously arguable that the sale of the core property, without the approval of the members as envisaged by clause 5.1, would be an act prejudicial to the interests of some or all of the company's members.
26 It also seems to me at least seriously arguable that such a sale is beyond the authority and capacity of the deed administrator, since clause 5.1 imposes limitations on the administrator's powers of sale, and it is at least seriously arguable that the purchaser would be on notice of any such want of authority - since it is plain on the face of the contract, that the company was subject to a company arrangement, so that the purchaser would be on notice of the contents of the deed of company arrangement and the restrictions it places on the administrator's powers.
27 I conclude, therefore, that the plaintiff has made out a seriously arguable case that the sale, or proposed completion of the sale, would be an act prejudicial to the interests of some or all of the company's members, and/or unauthorised and beyond authority of the deed administrator, of which lack of authority the purchaser had notice. On either of those bases, it is at least conceivable that the court might ultimately avoid the contract or at least permanently restrain the administrator from completing it. If that were to leave the company liable under the contract in circumstances where it had been entered into by the administrator outside and beyond the scope of his proper authority it would be possible to grant a remedy which would indemnify the company from the consequences. None of this is to suggest that such would necessarily, or even probably, be the outcome; but it is an answer to the suggestion that granting the relief sought would be futile.
28 It was suggested also that relief would be futile, because the secured creditor Perpetual Nominees wants the sale to proceed, and is in a position to control any creditors' meeting. However, there are several problems with this argument also.
29 The first is that it assumes that the secured creditor would want the sale to proceed and exercise its power to that effect at any meeting, regardless of what argument or what alternatives might be advanced at the meeting. The provision for a meeting in such circumstances is of itself an important right of the members.
30 Secondly, and perhaps even more importantly, the secured creditor agreed to be bound by the deed of company arrangement. That deed imposes certain limitations on what sales can take place and how they are to take place. It is at least seriously arguable that the terms the secured creditor agreed to included a provision that the core property was not to be sold without the approval of the members. In those circumstances, I fail to see why the secured creditor's desire that the sale should proceed, in the face of that limitation, should be any ground at all for dispensing with the limitations contained in that respect in the deed, to which the secured creditor had previously agreed.
31 As to the balance of convenience, relevant considerations include the apparent strength of the plaintiff's case. In my view this is not a case in which the plaintiff's seriously arguable case is one which only just reaches that threshold. To the contrary, as presently advised, it seems a strongly arguable case.
32 Next, the company has ample assets to satisfy all the creditors in due course, if necessary with interest. Even the purchaser under the contract did not press any claim of prejudice arising from delay in completion. Indeed, the court was informed that the purchaser did not at this stage wish to complete this afternoon (as had originally be envisaged), because it was concerned with the implications of Registered Clubs Act, s 41.
33 Moreover, the plaintiff offers an undertaking as to damages and it is evident has an ability to satisfy that undertaking.
34 It seems to me, therefore, that the balance of convenience is all one way, there being no indication of prejudice to any party arising from a delay in completion. Of course, if that position changes between now and the final hearing, it is open to the parties to approach the court again to reconsider the interlocutory position.
35 It is for those reasons that I concluded that the plaintiff had established a seriously arguable case for final relief - namely, to place a permanent injunction restraining completion of the contract, and potentially also avoiding the contract - and that the balance of convenience plainly favours the grant, rather than the withholding, of interlocutory relief. Accordingly, I made the orders previously announced.