Decon Australia Pty Ltd v TFM Epping Land Pty Ltd

Federal Court of Australia (Full Court)|2022-04-06|Before: Mr J, Halley JJ

Counsel for the Appellant: Mr J Giles SC with Dr E Ball and Mr R Size

Solicitor for the Appellant: Piper Alderman

Counsel for the First and Second Respondents: The First and Second Respondents did not appear

Solicitor for the Third and Fourth Respondents: Henry Williams Lawyers

BETWEEN: DECON AUSTRALIA PTY LTD ACN 078 021 333 Appellant

AND: TFM EPPING LAND PTY LTD ACN 605 600 253 First Respondent

KATOOMBA RESIDENCE INVESTMENT PTY LTD ACN 606 106 405 Second Respondent

STEPHEN JOHN MICHELL (and another named in the Schedule) Third Respondent

order made by: YATES, O'CALLAGHAN AND HALLEY JJ DATE OF ORDER: 6 APRIL 2022

The appellant has leave to amend paragraph 5 of its notice of appeal dated 19 February 2021 by removing the words "the matters listed in Grounds 1(b) and 2(b) above;", adding a new paragraph 5(c)(i) containing those same words, and substituting "3(b)" for "2(b)" in paragraph 5(c)(i).
The appellant has leave to amend paragraph 5 of its notice of appeal dated 19 February 2021 by adding a new paragraph 5(c)(ii) as follows: "the manner in which the business, property, affairs and financial circumstances of each of TFM and KRI were treated as interchangeable and the same as one another and with those of their parent company, Tasman Development Holdings Pty Limited and other related entities,".
The appellant's interlocutory application dated 1 November 2021 to amend its notice of appeal otherwise be dismissed.
The appeal be dismissed.
The appellant pay the respondents' costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The appellant, Decon Australia Pty Ltd (Decon), is a substantial judgment creditor of the first and second respondents, TFM Epping Land Pty Ltd (TFM) and Katoomba Residence Investment Pty Ltd (KRI) (collectively, the companies). 2 At first instance, Decon applied for orders that deeds of company arrangement (DOCAs) entered into by TFM and KRI on 17 August 2020 be terminated pursuant to s 445D of the Corporations Act 2001 (Cth) (the Act) or s 75-41 of Schedule 2 to the Act, the Insolvency Practice Schedule (Corporations) (IPSC), and that the companies be wound up. The primary judge dismissed Decon's application. 3 TFM and KRI did not appear at the hearing below, although written submissions were filed on their behalf. The companies did not appear at the hearing of the appeal. 4 The third and fourth respondents, Stephen Michell and John Melluish, were appointed administrators of the DOCAs (the deed administrators) on 30 June 2020. On the same date, receivers and managers were appointed to the assets and undertakings of the companies by its ultimate shareholder, Tasman Development Holdings Pty Limited (TDH) and an unrelated secured creditor. 5 Decon now appeals from the whole of the judgment of the primary judge, and seeks orders that the DOCAs be terminated, the administrations end, the administrators' appointments be terminated and that a named liquidator be appointed as liquidator of each of the companies in their deemed winding up. 6 It is, regrettably, necessary later in these reasons to set out lengthy portions of the reasons of the learned primary judge, because Decon's case is that his Honour erred in making a series of evaluative judgments, in which he weighed in the balance various competing considerations about a wide range of different matters which are not easily summarised.

Background 7 TFM and KRI were incorporated in May 2015. They formed part of a group of companies referred to below as the Tasman Group. 8 At all relevant times, TDH held 62 of 100 of the ordinary shares in TFM. The remaining ordinary shares were held by Sino-AU Property Investments Pty Ltd (Sino-AU). TDH in turn held all the ordinary shares in Sino-AU. 9 Mr Yihao Zhang (also known as Mr Eric Zhang): (a) was a director of TFM and KRI until 19 June 2020 (the now sole director of the companies is Mr Guoqiang Zhang); (b) has been the sole director of TDH since March 2014 and its sole shareholder since 18 September 2018; and (c) has been the sole director of Sino-AU since August 2016. 10 The principal activity of TFM and KRI was the development of a complex in Epping, New South Wales comprising 99 residential apartments (the Epping Development). Decon was engaged by TFM and KRI to design and build the Epping Development, which was completed in September 2018. 11 TFM and KRI acquired the land located at Hazelwood Place, Epping in May 2016 for the purpose of the Epping Development. The total purchase price was $16,650,000. According to the deed administrators, a further $6,961,669 was spent in connection with the purchase of the land between May 2015 and January 2018. 12 In December 2016, TFM and KRI (as principals) entered into a construction contract with Decon (as contractor) for the design and construction of the Epping Development. 13 In January 2017, TFM also entered into a construction contract with a company related to Decon called Vannella Pty Ltd (Vannella) (often also spelt "Vanella") for Vannella to provide project management services for the Epping Development. Vannella is also a judgment creditor of TFM and KRI. It was not a party to the proceeding below. 14 Work progressed on the Epping Development during 2017 and 2018. 15 The work was financed primarily by a loan facility obtained by TFM and KRI from National Australia Bank Limited in March 2017. Decon was paid $19.5 million from this facility. Decon has also received some payments from Tasman Funds Management Pty Ltd (Tasman Funds) (another company in the Tasman Group and of which Mr Eric Zhang is the sole director and shareholder) for construction work. Each payment to Decon was in partial discharge of the obligations owed by TFM and KRI to Decon under its contract with the companies. To date, Vannella has not been paid under its contract with TFM. 16 In August 2018, an interim occupation certificate was issued for the Epping Development, and in September 2018 the strata plan was registered. The Epping Development was, at that time, completed. 17 As of August 2020, TFM and KRI had sold at least 49 of the apartments, and were otherwise leasing all or some of the remaining apartments to tenants. According to the deed administrators, the gross revenue from sales of the apartments was slightly under $41 million, all of which was received before their appointment. 18 In June 2019, Decon served a payment claim on TFM and KRI pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act) in the amount of $6,355,352 (the SOP Claim). 19 TFM and KRI did not subsequently provide a payment schedule within the time limit specified by the SOP Act, nor did they pay the amount claimed. 20 Accordingly, TFM and KRI were liable under the SOP Act to pay Decon the amount of the SOP Claim. 21 On 11 October 2019, Decon obtained a judgment in the New South Wales Supreme Court against TFM and KRI under the SOP Act in the amount of $6,355,352 with costs (the judgment debt). 22 On 14 May 2020, the New South Wales Court of Appeal dismissed with costs an appeal by TFM and KRI against the judgment debt. 23 On 29 May 2020, the New South Wales Supreme Court dismissed with costs an application by TFM and KRI to stay the judgment debt pending the determination of a cross-claim against Decon in separate proceedings. In his reasons, Stevenson J made the following observations (see Vannella Pty Ltd v TFM Epping Land Pty Ltd [2020] NSWSC 659 at [43]-[46]): First, as long ago as 11 October 2018, the Developers acknowledged that the "total outstanding amount" to the builder was some $5.7 million. Henry J noted that in her judgment of 11 October 2019 … Nonetheless, despite that acknowledgment, the Developers have since then taken every step available to them to resist paying anything to the Builder on account of that acknowledged debt. The Developers did not pay the amount in the payment claim, did not serve a payment schedule, resisted summary judgment before Henry J and sought to overturn the Judgment on appeal. Further, although subject to a direction to do so last year, the Developers did not seek to bring a Cross Claim in these proceedings until they had failed to resist the Builder's claims in the SOP Proceedings. (Footnotes omitted.) 24 On 16 June 2020, the New South Wales Court of Appeal dismissed with costs an appeal by TFM and KRI against that judgment. 25 On 19 June 2020, Mr Eric Zhang ceased to be a director of each of TFM and KRI. 26 On 22 June 2020, Decon filed a winding up application in this court (proceeding NSD 684 of 2020), in which it sought orders that each of TFM and KRI be wound up under ss 459A, 459P, and 459T of the Act. No issue arises on this appeal in relation to that application. 27 On 30 June 2020, the remaining (and sole) director of each of TFM and KRI, Mr Guoqiang Zhang, resolved to place the companies into voluntary administration and appointed the deed administrators. 28 Decon (and Vannella) and the companies are still engaged in ongoing litigation in the New South Wales Supreme Court. 29 Decon (and Vannella) claim outstanding amounts from TFM and KRI under construction and joint venture contracts relating to 50 apartments in the Epping Development that remained unsold at the date of the appointment of the deed administrators. At the time of the judgment debt there were extant Construction List proceedings commenced by Decon and Vannella, seeking at least the amount of the judgment debt. TFM and KRI filed a cross-claim, which included a claim for damages arising from the failure to achieve practical completion and certificates, the use of inappropriate cladding and rectification of defects. TFM and KRI asserted that the value of their cross-claim exceeds the quantum of the total claims by Decon and Vannella. 30 Between February 2018 and November 2019, TFM and KRI entered into a number of transactions. Decon contended below that these should have been investigated by the deed administrators, or alternatively should be investigated by a liquidator, including in circumstances where the Epping Development was completed in September 2018, and where it said there was a possibility that the companies were insolvent by October 2018 and not between June and September 2019, which was the deed administrators' view. It was contended below and on appeal that there was "a not unrealistic prospect" that if one or more of the transactions were to be unwound, creditors would enjoy a better return in a liquidation than under the DOCAs. 31 Only four such transactions were pressed on appeal. The primary judge summarised the complaints made by Decon about these four transactions at J [75], as follows: (1) Shanghai Yilian Loan (November 2018): In November 2018, the companies provided mortgages over the Epping Development in their capacity as guarantors of a loan of $4,751,455 made by Shanghai Yilian Investment Management Co Ltd (Shanghai Yilian) to Tasman Funds. Decon contended that this appeared to have been of no benefit to the companies, and in that sense, voidable by operation of ss 588FB, 588FC and 588FE(3) or 588FE(4) of the Act. Further, and given the benefit accruing to Tasman Funds (of which Mr Eric Zhang was the sole shareholder and director), the transaction may also have been considered a related-party transaction or an unreasonable director-related transaction within the meaning of s 588FDA insofar as Tasman Funds was a "close associate" of Mr Eric Zhang, and thus also voidable pursuant to ss 588FE(4) or 588FE(6A). (2) Securities provided to TDH (October and November 2019): Each of TFM and KRI entered into secured loan arrangements with their parent, TDH, shortly following the award of Decon's judgment debt, to "formalise" earlier unsecured advances. Decon contended that this was of no benefit to the companies and plainly for the benefit of TDH, and that the possibility that those arrangements may be unwound pursuant to ss 588FE(3), 588FE(4) or 588FE(6A) of the Act on the basis that they were related-party transactions, uncommercial transactions under s 588FB, or unreasonable director-related transactions under s 588FDA, was apparent. (3) Weili Jia Loan (February 2018 and February 2019): In February 2018, KRI (as borrower) entered into a loan agreement with Ms Weili Jia (as lender) for $4.98 million. In February 2019, TFM entered into an "Extension Agreement" pursuant to which it assumed KRI's obligations under the Weili Jia Loan. Decon contended that this was arguably an uncommercial transaction under s 588FB of the Act insofar as each company assumed and repaid loan obligations unnecessarily and without benefits accruing to them. Further, and due to the timing of the repayment and extension, it would have been an insolvent transaction within the meaning of s 588FC and voidable under s 588FE(3). Decon also argued that the transaction, in those circumstances, appeared to constitute a breach of directors' duties. (4) CLG Share Agreement (April 2018 and October 2018): In April 2018, TFM entered into a share subscription agreement with Mr Eric Zhang and CLG Corporate Pty Ltd (CLG), under which CLG agreed to pay $8.3 million to TFM to subscribe for shares in TFM. TFM purported to repay the $8.3 million to CLG in October 2018. Decon argued that this purported redemption appeared to be a reduction in share capital or a share buyback, contrary to Part 2J of the Act. No consideration appeared to have been given to the limits and requirements of ss 256B(1) or 257A, including whether the redemption materially prejudiced TFM's creditors. Decon contended that, in this way, the redemption appeared to have been a breach of directors' duties.

The first and second meetings of creditors 32 On 2 July 2020, the deed administrators issued notices for the first meetings of creditors for each of TFM and KRI. Decon submitted proofs of debt in the amount of the judgment debt in respect of each company. 33 The first meetings of creditors were held on 10 July 2020. At each of those meetings, Decon was admitted to vote for $1. Vannella, who had lodged a proof of debt in respect of TFM for over $1.5 million, was also admitted to vote for $1. All other creditors were admitted for the full amount of their claims. 34 On 20 July 2020, the deed administrators issued notices of the second meetings of creditors and reports to creditors for each of TFM and KRI. 35 On 28 July 2020, the second meetings of creditors were held. Decon (and Vannella, in the case of TFM) were admitted to vote for the value of the claims they had lodged. It follows, and Decon did not say otherwise, that because Decon was admitted for the entirety of its proof of debt, it is presupposed, for that purpose, that any cross-claim in the Construction List proceeding will fail. 36 It was resolved at the second meetings of creditors that each of TFM and KRI would enter the DOCAs. Decon (and Vannella, in the case of TFM) were the only creditors that voted against that course. As the primary judge noted (at J [57]), it was agreed by the parties that, but for the votes of related creditors at each meeting: (1) a majority of creditors by number, being all creditors except Decon (and Vannella, in the case of TFM), would still have voted in favour of entry into the DOCAs; and (2) a majority of the creditors by value, being Decon (and Vannella, in the case of TFM), would have voted against entry into the DOCAs. 37 Mr Melluish deposed that had a situation arisen at the second meetings of creditors that required him to exercise his casting vote, he would have cast in accordance with the deed administrators' recommendations to vote in favour of the DOCAs. 38 The DOCAs were executed on 17 August 2020. In each case, the proponent was TDH. 39 Relevantly, in addition to what the primary judge called the "usual restraints, bars, and releases of claims by creditors (including Decon and Vannella) against the companies, as well as by the company against its directors from time to time" (J [58]), each of the DOCAs contained provisions relating to cash contributions to be made by the DOCA proponent, for the purpose of funding the cross-claim brought by it against Decon in the New South Wales Supreme Court and a litigation funding agreement for that purpose. Under the terms of both DOCAs, TDH (as the ultimate shareholder of TFM and KRI) would fund the cross-claim. In the event that the cross-claim yields a recovery, the net litigation proceeds will be paid to the Deed Fund (as defined), to be applied 70% towards TFM and 30% towards KRI. In the case of the TFM DOCA, the total cash contribution it was to make was $210,000. In the case of the KRI DOCA, the total cash contribution it was to make was $90,000. Any proceeds of the cross-claim are to be paid to the deed administrators (after TDH as the proponent, and the companies). 40 We interpolate to add that Decon's complaint about the operation, or possible operation, of those provisions of the DOCAs was that, as the primary judge put it, "[t]he discriminatory effect … is thus to extinguish Decon's [j]udgment [d]ebt (and any other proceedings Decon has on foot against the companies), while simultaneously promoting and facilitating claims against Decon on the other hand". See J [58].

The reports to creditors 41 The deed administrators' position was (and is) that the matters raised by Decon have not caused them to alter their view, expressed in the creditors' reports (which were signed by Mr Melluish as deed administrator), that the DOCAs will allow a greater return to the companies' ordinary unsecured creditors compared to a liquidation. 42 Relevantly, the TFM report to creditors provided as follows: 1.1 Second Meeting of Creditors Pursuant to Section 75-225 of the [Insolvency Practice Rules (Corporations) 2016 (Cth)], the second meeting of creditors of the company is being held at 11:00am AEDT on 28 July 2020 by electronic means. At this meeting, creditors will decide the company's future, the options for which, are as follows:- a. That the company execute a Deed of Company Arrangement; or b. That the Administration should end; or c. That the company be wound up. … 2.1 Investigations Section 438A of the Act, provides that as soon as practicable, after an Administration begins, the Administrator must investigate the company's business, property, affairs and financial circumstances. Please note that the outcome of my investigations into the company's affairs to date, is detailed in section 12 of this report. The main issues arising from my investigations, which are dealt with in this report, may be summarised as follows: - • A review of the value of the company's assets, comprising apartments owned by the company situated at 228 Hazelwood Place, Epping, New South Wales, known as the Juniper project. The assets of the company are subject to the control of the Receivers and Managers. Accordingly, my assessment is based on the estimated surplus real estate, and or its proceeds, that may become available after satisfaction of all valid securities held over the apartments owned by the company. This is detailed in section 8 of this report; • An assessment of the validity of related party creditors' claims as detailed in section 9.3; • Insolvent trading investigations as detailed in Section 12.6 of the report; and • An assessment of the transactions entered into by the company and whether any such transactions are voidable under the provisions of the Act, as detailed in Section 12.7 of this report. 2.2 Administrators' Recommendation At the meeting of creditors to be held on 28 July 2020, creditors will be asked to make a decision by passing a resolution, in respect of the options available to them. A Deed of Company Arrangement has been proposed by the company's director, Mr Guoqiang Zhang. I have conducted an analysis of the estimated return to creditors under the proposed Deed and compared this return to creditors should the company be wound up. This analysis is detailed in section 14 of this report. I recommend to creditors that the company execute the proposed Deed of Company Arrangement and I have detailed in this report, why this option is in the creditors' best interests. In summary, the estimated returns to creditors under each scenario are as follows:- High cents in the dollar Low cents in the dollar Deed of Company Arrangement 5.00 cents 2.78 cents Liquidation 1.41 cents 0.02 cents

43 Section 12.7 was headed "Voidable and Insolvent Transactions", and provided as follows: During the course of my investigations, I have endeavoured to ascertain whether there are any transactions that appear to be voidable in respect of which money, property or other benefits might be recoverable in a winding up, under Part 5.7B of the Act. These transactions include: - • Unfair Preferences (s.588FA); and • Uncommercial Transactions (s.588FB) 12.7.1 Unfair Preferences … TDH As reported earlier, on 18 October 2019, the company and TDH entered into a Loan Agreement to secure past and future borrowings made by TDH to the company. Subsequently, the company made repayments to TDH totally $277,231 comprising of interest repayments and some repayments of the principal debt owed. The director of TDH is Mr Yihao Zhang. Accordingly, by virtue of his position as a director of both the company and TDH, I consider that these payments may be recoverable by a Liquidator as an unfair preference claim. I consider that any claim made against TDH by a Liquidator may be strenuously defended by TDH on the basis that it was continuing to support the company and in the event that an unfair preference claim was made against TDH, it would be expected that it would seek to rely on a the [sic] fact that the transactions were part of a continuing business relationship under Section 588FA(3) of the Act. In this regard, the highest point of indebtedness during the relation back period was as at 30 June 2020 in the amount of $3,254,099.86. Accordingly, there would be no claim against TDH in a liquidation. … 44 Under the heading "12.7.2 Uncommercial Transactions", the deed administrators summarised the effect of s 588FB of the Act and stated that, in the case of the granting of the security to TDH referred to above, it "may be classified as an uncommercial transaction". Under the heading "Shanghai Yilian", the report summarised the position as follows: The granting of the security to Shanghai Yilian may be classified as an uncommercial transaction or alternatively an unfair preference. In this regard, I have formed the view that the company was insolvent from June 2019 to September 2019. Accordingly, a liquidator may not be successful in satisfying all of the elements required to prove an uncommercial transaction/unfair preference, unless an earlier insolvency date is proven. 45 The report made some passing references to the Weili Jia Loan and the CLG Share Agreement, but not in relation to possible voidable and insolvent transactions, or uncommercial transactions, in section 12.7. 46 The KRI report to creditors was along similar lines. The estimated returns to creditors under each scenario were as follows: High cents in the dollar Low cents in the dollar Deed of Company Arrangement 2.27 cents 1.08 cents Liquidation Nil Nil

47 Other relevant parts of the creditors' reports are also summarised in the reasons of the primary judge, set out at [69] below.

The proceeding at first instance 48 Decon commenced the proceeding at first instance on 27 July 2020, applying for urgent relief to restrain the companies from holding their second meetings of creditors (which were to take place the next day) or from executing the DOCAs recommended in the creditors' reports. Justice Stewart heard, and refused, Decon's application on the same day. See Decon Australia Pty Ltd v TFM Epping Land Pty Ltd [2020] FCA 1085. His Honour also made orders granting leave for Decon to commence this proceeding pursuant to s 440D of the Act, which was heard before the primary judge in September 2020. 49 The trial occupied two days. As has already been noted, TFM and KRI did not appear at the hearing, although they filed written submissions mainly in relation to their cross-claims. Decon and the deed administrators relied on the evidence of one witness each, who both broadly addressed similar factual matters, including: (1) the Epping Development; (2) the Supreme Court proceedings, including the SOP Claim and the winding up application; (3) various financing transactions entered into by TFM and KRI between 2015 and 2019; and (4) the history of the administration, including the two meetings of creditors and the entry into the DOCAs. 50 Decon relied on an affidavit of its director, Mr Daniel Saab, affirmed 13 August 2020. In addition to giving evidence about the matters above, Mr Saab also exhibited correspondence between the representatives for Decon and the deed administrators, as well as correspondence and court documents relating to Decon's interim application before Stewart J. Mr Saab's evidence regarding the financing transactions was limited to exhibiting copies of documents, mostly agreements, including documents relating to the Shanghai Yilian Loan and the CLG Share Agreement. Mr Saab also deposed that he understood that Decon was, at the date of his affidavit, willing and able to fund any litigation which may be brought by a liquidator in respect of any voidable transactions. 51 The deed administrators relied on two affidavits of Mr Melluish sworn on 27 August and 5 September 2020. 52 In addition to giving evidence about the matters described above, Mr Melluish summarised the actions taken by the deed administrators following their appointment. He gave evidence about his reasons for assessing Decon's and Vannella's proof of debt as $1 for voting purposes at the first meetings of creditors, and for his opinion to recommend the DOCAs to the creditors in the second creditors' reports. Mr Melluish's evidence was also that the quantification of TFM and KRI's cross-claim did not flow through to the estimation of the likely return to creditors under the DOCA compared to the liquidation, because the cross-claim was too contingent. His evidence also summarised section 12.7 of each creditors' report, which addressed his investigations into voidable transaction claims that might have been available under s 588FE of the Act in a liquidation. Mr Melluish's evidence also provided more detail regarding the land acquisition, development, commission and marketing costs of the Epping Development, as well as the companies' ongoing litigation costs. 53 Mr Melluish, who was cross-examined by senior counsel for Decon, also responded to aspects of Decon's points of claim (POC) and evidence below, including in relation to each of the four transactions pressed on appeal. His view was that, having read this material, his recommendations to creditors remained substantively unchanged. 54 Neither of the companies adduced evidence to explain the transactions the subject of Decon's complaints on appeal. As Mr J Giles SC, who appeared with Dr E Ball and Mr R Size for Decon, observed: … one of the forensic oddities of this case was that often the debate in this field, that is, on setting aside a deed is that we would, of course, participate as the disaffected, so to speak, creditor, and it would be the proponent of the deeds or the company which were deposed. That didn't happen here. Some submissions, as his Honour refers to, were filed late in the piece on behalf of the company, but that was the universe of its involvement. So no evidence was led by the company or the director, the proponent, Mr Zhang, to explain the transactions that were in issue. Instead, the administrators gave some evidence about their inquiries. And that was the evidentiary position. 55 As the primary judge observed (J [13]), the parties did not provide "the ultimate detail" in relation to many of the transactions, and Decon's case was "that they are so obviously suspicious that greater exploration and explanation of them [in a liquidation] is necessary". 56 In substance, Decon sought the following relief under s 445D of the Act, namely orders: (a) terminating the administrations of each of TFM and KRI; (b) setting aside the entry into the DOCAs executed by each of TFM and KRI on 17 August 2020; and (c) for the winding up of each of TFM and KRI, and the appointment of a Mr Mansfield of Deloitte (accountants) as liquidator of each. 57 As noted earlier, Decon also relied on IPSC s 75-41. Decon accepted on appeal that whether it succeeded or failed under s 445D of the Act, no additional issue arose under the IPSC. As Mr Giles put it: [We also rely on] clause 75-41 of the IPSC … But we immediately say about that - and the focus of the argument will be on 445D - because of the framing of the criteria, we do not suggest that this is a case in which we could win on 75-41 but lose on 445D or vice versa. Now, other than that 75-41 is directed to the resolution and 445D is directed to a deed of company arrangement, it's not at all apparent to us, except perhaps in exceptional cases - difficult to imagine - where there would be some difference in outcome. So for that reason, we will focus attention on, and we accept that we have to get ourselves within, 445D. 58 It is convenient at this point to set out the terms of s 445D(1) of the Act: 445D When Court may terminate deed (1) The Court may make an order terminating a deed of company arrangement if satisfied that: (a) information about the company's business, property, affairs or financial circumstances that: (i) was false or misleading; and (ii) can reasonably be expected to have been material to creditors of the company in deciding whether to vote in favour of the resolution that the company execute the deed; was given to the administrator of the company or to such creditors; or (b) such information was contained in a document that accompanied a notice of the meeting at which the resolution was passed; or (c) there was an omission from such a document and the omission can reasonably be expected to have been material to such creditors in so deciding; or (d) there has been a material contravention of the deed by a person bound by the deed; or (e) effect cannot be given to the deed without injustice or undue delay; or (f) the deed or a provision of it is, an act or omission done or made under the deed was, or an act or omission proposed to be so done or made would be: (i) oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more such creditors; or (ii) contrary to the interests of the creditors of the company as a whole; or (g) the deed should be terminated for some other reason. 59 Decon's case before the primary judge concerned three inter-related categories of complaint. First, that the creditors' reports contained materially misleading information or omissions, largely about the extent of claims of the secured creditors of TFM and KRI. Secondly, that entry into the DOCAs precluded investigations into various transactions, largely connected to securities, which Decon said could give rise to further recoveries. Thirdly, that the DOCAs were unfairly prejudicial to or unfairly discriminatory against Decon (and Vannella) because they did not enable further investigation into the security position and enabled the litigation against Decon (and Vannella) to continue.

The reasons of the primary judge 60 The primary judge dismissed the application. 61 It was not disputed below that the reports to creditors contained errors. As the primary judge said at J [63]-[64]: It was not in dispute that the reports to creditors for TFM and KRI each contain errors. Chief among them, Decon argues, were the twin errors of the substantial understatement of Decon's judgment debt ($6,355,352.46 represented to be $ nil) and the very substantial overstatement of TFM and KRI's alleged cross-claims quantified at $17 million, but unsupported by any evidence or consideration of whether there is actually any basis for the claim in the first place. Such an assessment of the cross-claim is also contrary to the companies' (then) senior counsel's earlier statement to the Court of Appeal that the value of the claim was only 'slightly above' Decon's judgment debt and not millions of dollars above it. The report to creditors for KRI also wrongly reported debts to Shanghai Yilian and under a CLG Facility in the order of $1,404,000 and $8,300,000, (which are now claimed to be mere 'typographical errors') while the TFM Report to creditors stated that Ms Weili Jia was a creditor of the company in an amount of $4,980,000 without mentioning the fact (now alleged by the Administrators) that this debt had been assumed from KRI. Decon stresses that the sums comprised by the errors in the reports to creditors for each of TFM and KRI are significant, in excess of several millions of dollars. Moreover, the misleading presentation to creditors of the size and strength of the companies' alleged claim against Decon is particularly significant in circumstances where the litigation against Decon and the payment of proceeds from that litigation, forms a central plank of the DOCAs. Those matters might, therefore, have affected the outcome of the vote on the DOCAs and therefore justify the exercise of the power in s 445D(1)(a). 62 It was also not in dispute that the reports to creditors "contain[ed] little or no discussion of a number of the financial agreements and security arrangements entered into by TFM and KRI after completion of the Epping Development, some of which involved related parties, and many of which did not have an apparent purpose that benefitted the companies". See J [67]. Decon contended below that that omission was material within the meaning of s 445D(1)(c) of the Act. The primary judge put Decon's contention along those lines as follows at J [68]: Decon argues that had creditors been aware of the companies' actions in the lead up to their insolvency in July 2019 (if not earlier) then there is a very real likelihood that some or all of them would have voted to wind up the companies so that a liquidator could be appointed to investigate and interrogate whether any of those transactions were defeasible and voidable within the meaning of Pt 5.7B, Div 2 of the Corporations Act. This not only provides justification for the Court to exercise its discretion under s 445D(1)(c), but in the circumstances also constitutes an injustice to creditors (who have otherwise lost the opportunity to make an informed choice as to whether such investigations and interrogations should occur) within the meaning s 445D(1)(e). Furthermore, the combination of these matters renders the DOCAs contrary to the interests of TFM and KRI's creditors as a whole. 63 Having then set out the substance of Decon's case with respect to s 445D(1)(f)(i) (unfairly prejudicial or discriminatory against Decon and Vannella) and s 445D(1)(g) (detriment to commercial morality), among other things, his Honour made various findings, which are the subject of this appeal. 64 Under the heading "Consideration" and the sub-heading "Overview", his Honour made the following general observations at J [98]-[99]: Before dealing with the detail of the various facts and transactions raised by Decon, I propose setting out some general considerations which are relevant to the approach I have taken to the complaints raised. Having regard to authorities such as [Britax Childcare Pty Ltd v Infa Products Pty Ltd [2016] FCA 848; (2016) 115 ACSR 322] and Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (No 2) [2011] FCA 178, the key question is whether the Administrators have adequately performed their statutory duty to investigate such that they have a sufficient basis to recommend a DOCA instead of liquidation. 65 The primary judge then summarised the general, and uncontroversial, principles applicable under s 445D(1) of the Act and then continued at J [117]-[120]: I accept the Administrators' submission that the failure to recognise the judgment debts at the first meeting of creditors is something of a distraction now because it has no bearing on the outcome of the ultimate decision to adopt the DOCAs. The debts were recognised at the second creditors meeting. The explanation given by Mr Melluish for not recognising the judgment debts at the first meeting by reason of the existing cross-claim was in my view plausible and falls within the discretionary range of decision-making which is appropriate for an administrator. I do not consider that the decision reflected any bias against Decon, and it is difficult to see how any material prejudice arises given that Decon was admitted for the full amount of its judgment debt at the second meeting. Speaking generally again, in relation to the various errors or omissions in reports to creditors, taken individually or indeed cumulatively, I am not satisfied that they are, objectively viewed, sufficiently 'material' in the sense used in the legislation to the vote of the creditors. I was not persuaded that objectively viewed there were errors or omissions which might realistically have affected the outcome on the DOCA vote [citing Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510 (at [292]-[294])]. At all times for these single purpose companies, the fundamental issue for the Administrators was the likely comparative return to creditors by entry into the DOCA on the one hand or liquidation on the other. There was no prospect of a return to trade. In my assessment, the Administrators have conducted that exercise sensibly and have applied their skill and expertise to the evaluation of the comparative prospects of recovery by creditors in the two situations. Another way to approach the analysis is to ask the question whether, if hypothetically voting came down to a casting vote of the Administrators, it would have been appropriate for the Administrators to support the DOCAs. That is to be answered in this case at least, by reference to the question of whether there is a realistic prospect of a better return under a liquidation such that entry into the DOCA would be unfairly prejudicial to Decon. I consider that in that hypothetical scenario it would be appropriate for the Administrators to support the DOCA with a casting vote. Indeed, the Administrators have deposed to the fact that, even in light of errors identified by Decon which they have accepted, they are still of the view that the DOCAs will provide a better prospect of return than under a liquidation and would have exercised any casting vote accordingly. 66 His Honour then dealt with the debate between the parties about the companies' likely date of insolvency, as follows (J [122]): Decon has also raised a question about the actual date of insolvency as assessed by the Administrators. Decon's argument relies on statements made by the companies' then senior counsel to the Supreme Court and the Court of Appeal to the effect that, absent a stay of Decon's judgment debt obtained in 2019, the companies were insolvent. When read together with statements recorded by Stevenson J that the companies had acknowledged their debt to Decon 'as long ago as 11 October 2018', Decon says it is reasonably arguable that the companies were indeed insolvent from at least October 2018. In their reports, the Administrators' view, on the basis of the investigations carried out, was that the companies were insolvent from at least June 2019. Decon has led no further evidence to support its asserted date of insolvency and while it may be an arguable position, I do not see this as being a fertile field of complaint. 67 Next, he turned to Decon's complaint that the deed administrators did not treat the companies as separate entities, as follows (J [123]-[124]): Another argument advanced for Decon is that the Administrators failed to recognise the importance of different creditors for different companies within the group such that treating TDH, KRI and TFM as though they are all part of one group entity fails to distinguish between the financial consequences attaching to the separate entities in their own right. The approach taken by the Administrators was essentially that although securities were given over the real property of both KRI and TFM, those companies derived the benefit of the Epping Development. In relation to the Administrators' effectively proceeding on a group basis, the rationale of that decision was that the benefit of the purchase of the land accrued to KRI and TFM. The Administrators considered it was therefore appropriate for those companies to bear some burden in exchange for the benefit. I will come to the detail of these transactions in due course. I am not persuaded that the Administrators relevantly erred in this regard. Other than some relatively minor errors in the amounts involved, the two companies shared the same creditors as might be expected because they were engaged in what would typically be understood as a joint enterprise. It has not been shown that this gloss, if it be fairly so described, resulted in any adverse or incorrect outcome for creditors as a whole, or even Decon specifically. 68 His Honour then summarised his views about whether or not the deed administrators had erred in forming the view that there were not realistic prospects of a greater recovery under liquidation, and whether Decon had discharged its onus in that regard, as follows: 125 There is an important question of onus. It seems clear from Britax (at [91]), Mediterranean Olives (at [179]) and Bidald (at [138]) that the onus rests upon the plaintiff to establish that s 445D(1) has been engaged. There is some suggestion by Besanko J in Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 (at [1384]) that while the plaintiff has the onus to show the section applies, it may be within the discretion of the Court to treat that onus as shifting. Either way, in this case the consideration for the Court is whether or not there are realistic prospects of a greater recovery under liquidation (and that the Administrators were in error in concluding otherwise) and whether Decon has discharged its onus of establishing that fact. I am not satisfied that it has. Generally speaking but importantly, there is some prospect of establishing some possible breaches, but there is little to no evidence as to the likely benefits of doing so in a recovery sense. That matter must be approached in a practical way guided by suitable expertise based on experience and qualifications. I am satisfied that the Administrators have approached the question in this manner. Relevant to the Administrators' recovery assessment was the understanding that the former director, Mr Eric Zhang, owns only one real property with an estimated value of between $1.6 million and $2.2 million however during cross-examination Mr Melluish conceded that the Administrators were not aware of the exact financial positions of Mr Eric Zhang or TDH. The current director, Mr Guoqiang Zhang was only appointed in April 2020 and would not be of interest in relation to transactions occurring prior to that time. In any event, he does not own real property in Australia. The former director does own shares in TDH. The value of those shares is quite unclear. Although Mr Melluish did ask for that information, he was not provided with it. He had no power of compulsion to obtain the information. … 128 Dealing again, at a general level at this stage, the security granted to Shanghai Yilian arose in 27 November 2018 when KRI and TFM guaranteed TFM's debt to Shanghai Yilian. It does not appear to be challenged that TFM provided part of the purchase price for the Epping land through a loan from United Investment Australia Holdings Ltd and in turn from Shanghai Yilian. The Administrators proceeded on the basis that it was appropriate in the circumstances for TFM and KRI to assume obligations to Shanghai Yilian because TFM's obligations arose from that purchase in which TFM and KRI derived a direct and material financial interest. In a liquidation perhaps there might be some scope for challenging an approach on this basis but there may also be weaknesses in the challenge and certainly there would be a danger of spending good money in a somewhat speculative pursuit. 129 In any event, as disclosed in the creditors' report for TFM, the assessment of the Administrators was that there would be difficulty in pursuing or further investigating the dealings with Shanghai Yilian because they appear to have arisen in November 2018 when the Administrators regarded the insolvency date as being between June and September 2019. Similar considerations apply to the other impugned transactions which I examine in more detail below. … 131 As to oppression or prejudice, Decon would need to establish that any oppression or prejudice was unreasonable. It points to the terms of the DOCAs which provide for pursuit of the cross-claim against Decon. This does not constitute material prejudice in the sense explained by the authorities. There is no suggestion that this course could not be pursued under a liquidation. Decon has not been treated as a separate class of creditor against which adverse considerations would be applied. 69 Having made those general observations, his Honour turned to consider the application of principles in more detail, relevantly with respect to the CLG Share Agreement, the Shanghai Yilian Loan, the Weili Jia Loan and the securities provided to TDH, as follows: The CLG Share Agreement 160 Next, and as noted above (at [26]-[28] and [75(b)]), there is an issue concerning the CLG Share Agreement. Decon asserts, amongst other things, that the Administrators have inappropriately treated an equity contribution as a loan, which it says warrants further investigation. Again, it is not at all apparent how this investigation could improve the likely return to unsecured creditors. In my view, there is nothing to suggest that the payment to CLG appears to have been for an improper purpose and it follows that it is relatively immaterial to the interests of creditors whether this payment is characterised as repayment of a loan or an equity contribution. What is important is that the TFM Report correctly characterises the dealings between TFM and CLG as, effectively, giving rise to an obligation owed by TFM in circumstances where the shares taken up by CLG were subject to redemption at the option of CLG (and as to which such redemption did occur). Equally, the KRI Report correctly characterises the dealings between KRI and CLG as, effectively, a transaction which required KRI to adhere to repayment obligations in circumstances where the shares taken up by CLG were subject to redemption at the option of CLG (and as to which such redemption did occur). Decon says that no thought appears to have been given by the Administrators to the limits and requirements of s 256B(1) or s 257A, including, specifically, whether the share redemption materially prejudiced TFM's creditors. The share redemption appears, in this way, Decon argues, to have been a breach of directors' duties. In my view, while there may be some unanswered questions as to the process adopted which gave rise to this liability and perhaps the application of these statutory provisions ought to have been mentioned to creditors, in the end, it is quite unclear how further exploration of this issue is likely to be of greater benefit to creditors. 161 KRI was the guarantor for obligations owed by TFM to CLG concerning the Epping Development in which both entities had a direct interest. Nevertheless, CLG was not recorded as a creditor in the KRI Report. 162 At [18] to [21] of the POC, Decon asserts Transactions warranting investigation 18. On or about 3 April 2018, TFM entered into a share subscription agreement with CLG Corporate Pty Ltd and Eric Zhang valued at $8.3 million by which CLG Corporate Pty Ltd agreed to pay $8.3 million to TFM to subscribe for shares in TFM. 19. By about October 2018, TFM had purported to repay to CLG Corporate the money paid under the share subscription agreement pleaded above in paragraph 18 (probably using money borrowed from another lender). … 21. On or about 27 November 2018, TFM and KRI (as guarantors) entered into a loan agreement between Shanghai Yilian Investment Management Co Ltd (as lender) and Tasman Funds Management Pty Ltd (as borrower) valued at $4,751,455 secured by mortgages over the Epping Development. 163 The circumstances referred to at [18] and [19] of the POC are addressed in the Creditors' Reports as follows: (a) on or about 3 April 2018, TFM obtained $8.3 million under the CLG Share Agreement; (b) of the $8.3 million obtained, $6,937,576.18 was received by TFM and the balance accounted for brokerage and other fees, professional costs, and an advanced calculation of a preferred dividend; (c) $119,601 of the $6,937,576.18 was used to pay interest, costs, and expenses to Ms Weili Jia; (d) the remaining $6,720,000 was used to pay down the obligation owed by Tasman Funds to Shanghai Yilian; (e) in the CLG Share Agreement, cl 4.1(e) obliged TFM to redeem the shares; (f) clause 5.1 provided that redemption was to occur on the earlier of 10 business days after CLG notified TFM of an event of default or on the 'Redemption Date'; (g) clause 12.1 of the Agreement defines the term 'Redemption Date' as 'the date that is six (6) months after the date of this document', which was 3 October 2018; (h) … 164 In these circumstances, it is difficult to see how any further investigation or interrogation of the transaction concerning CLG presents any realistic prospect of a better return to creditors in a winding up scenario than that presented by the DOCAs. … The Shanghai Yilian Loan 168 In relation to the description and treatment of the Loan from Shanghai Yilian, at [48], [49], [61] and [62] of the POC, Decon asserts: 48. The TFM Report stated that Shanghai [Yilian] Investment Management Co Ltd was a secured creditor of TFM in the amount of $1,404,000. 49. At the time of the TFM Report, Shanghai [Yilian] Investment Management Co Ltd was not a creditor of TFM. … 61. The KRI Report stated that Shanghai Yilian Investment Management Co Ltd was a secured creditor of KRI in the amount of $1,404,000. 62. At the time of the KRI Report, Shanghai Yilian Investment Management Co Ltd was not a creditor of KRI. 169 It will be recalled that on 27 November 2018, TFM and KRI (as guarantors) entered a loan agreement between Shanghai Yilian (as lender) and Tasman Funds (as borrower) valued at $4,751,455. In December 2018, Shanghai Yilian registered mortgages over seven apartments in the Epping Development by way of security (see above at [30]). In reality, the Shanghai Yilian Loan appears to have formalised Shanghai Yilian's intent to continue its line of credit to Tasman Funds following a default on repayment of a loan of $11.7 million that was entered into via a 'Cooperation Deed' in October 2015 to finance the purchase of the Epping Development land. The practical effect therefore, of the Shanghai Yilian Loan was to adjust the amount owing by Tasman Funds and grant Shanghai Yilian security over the apartments owned by TFM. 170 As deposed to in the First Melluish Affidavit, in the Report on Company Activities and Property (ROCAP) for TFM, the director, Mr Guoqiang Zhang recorded Shanghai Yilian (referred to in the document as United Investment) as a secured creditor for $1,511,740.11. In the Creditors' Reports, the Administrators listed Shanghai Yilian as a secured creditor of both companies in the full amount of its proof of debt, by which Shanghai Yilian claimed $1,404,000 in the administration. 171 The Administrators accept that Shanghai Yilian was inadvertently and incorrectly recorded as a secured creditor of KRI in the KRI Report when it ought to have been recorded as an unsecured creditor on the basis that KRI only guaranteed the TFM debt to Shanghai Yilian. However again, this error was not reflected in the quantification of the likely return to unsecured creditors. In the Creditors' Reports, the Administrators calculated that after realising the value of its security against TFM, Shanghai Yilian would be entitled to prove as an unsecured creditor of both companies in the shortfall amount of $223,091. 172 Again, the Administrators contend that the actual and relevant circumstances concerning Shanghai Yilian (as referred to at [21] of the POC), are addressed in the Creditors' Reports, the relevant circumstances (as foreshadowed above) being that: (a) a loan was initially procured from United Investments for Tasman Funds in the sum of $11.7 million which became an obligation owed by Tasman Funds to Shanghai Yilian (whether by formal novation or otherwise); (b) whether by 'supplemental deed' (being a reference to a document not in evidence) or by 'Loan Agreement', TFM and KRI became corporate guarantors of the debt owed by Tasman Funds to Shanghai Yilian; (c) in addition to becoming corporate guarantors, Shanghai Yilian was granted security as a consequence of a previous failure by Tasman Funds and TFM (as guarantor) to adhere to their repayment obligations under the 'supplemental deed'; (d) the security was conferred from TFM to Shanghai Yilian over eight apartments of which two remained unsold as at the time TFM entered voluntary administration; (e) the estimated realisation of the properties the subject of the security will likely result in Shanghai Yilian being able to prove as an unsecured creditor in both the TFM and the KRI administrations for $223,091; (f) the TFM Report disclosed the circumstances surrounding the Shanghai Yilian position as a creditor of TFM at clause 12.7.2 concerning 'Uncommercial Transactions' - namely, that on and from 27 November 2018, Shanghai Yilian became a secured creditor of TFM; (g) the TFM Report disclosed that the difficulty with pursuing or further investigating the dealings with Shanghai Yilian is that they appear to have arisen in October 2018 where, in the view of the Administrators, TFM and KRI were not insolvent until somewhere between June and September 2019; (h) it is not clear why the relationship between TFM, KRI and Tasman Funds is relevant when Tasman Funds is not seeking to prove in the administration of either TFM or KRI and, on no view is Shanghai Yilian a 'close associate' of TFM or KRI (or Tasman Funds) for s 588FDA of the Corporations Act purposes; and (i) insofar as the grant of security (and indeed the assumption of obligations by way of agreeing to guarantee debt owed by Tasman Funds to Shanghai Yilian) is concerned, the Administrators proceeded on the basis that it was appropriate for TFM and KRI to assume such obligations in circumstances where both TFM and KRI had a direct and material financial interest in, and derived a benefit from, their respective interests in the Epping Development. … 174 The Administrators' view remains that whatever the mechanism of borrowing, TFM's secured obligation arises from the purchase of the land used for the Epping Development in which TFM and KRI had a 'direct and material financial interest'. 175 The difficulty, in my view, with the complaints raised by Decon is that, in circumstances where the $11.7 million borrowed by Tasman Funds was for the benefit of TFM and KRI acquiring the land the subject of the Epping Development, it is difficult to see how a failure of Tasman Funds to pay off that debt is something that TFM or KRI could ignore where Tasman Funds could and would, presumably, turn to TFM and KRI for recoupment as the parties who benefitted from the advance of those funds in the first instance. It is difficult to see, particularly having regard to the dates of the transactions, how any further investigation or interrogation of the transactions concerning Shanghai Yilian presents any realistic prospect of a better return to creditors in a winding up scenario than what is presented by the DOCAs. 176 Further, the consideration of challenging the arrangements which had been put in place with Shanghai Yilian was set out in the TFM Report. TFM's creditors voted the way they did in any event. The Weili Jia Loan 177 Amongst the complex transactional history for assessment by the Administrators was the circumstance of a loan from Ms Weili Jia. Decon complains that the unsecured loan from Ms Weili Jia could be an uncommercial transaction. 178 At [22], [46] and [47] of the POC Decon contends: 22. The Administrators contend that on about 22 February 2019 TFM entered into a deed by which TFM assumed obligations owed by KRI to [Ms] Weili Jia (or "Weili Jila") in circumstances in which the existing debt was owed by only KRI to Weili [Jia]. … 46. The TFM Report stated that [Ms] Weili Jia (or "Weili [Jia]") was an unsecured creditor of TFM in the amount of $4,307,224.89. 47. At the time of the TFM Report, [Ms] Weili Jia was not a creditor of TFM or, if [Ms] Weili Jia was a creditor, [Ms] Weili Jia's claim arose in circumstances pleaded in paragraph 22 without disclosure of those circumstances. 179 As to [46] and [47] of the POC, it was appropriate for the Administrators to admit Ms Weili Jia as a creditor of TFM as there was evidence to support the debt. The circumstances concerning Ms Weili Jia are addressed in the Creditors' Reports and, the Administrators contend, do not give rise to any clearly identifiable voidable transaction claim, the relevant circumstances being that: (a) on or about 13 February 2018, KRI borrowed the amount of HK$30 million (being the equivalent of approximately AU$4,980,000) from Ms Weili Jia and Yanping Zhu (the Weili Jia Loan) to partly satisfy loan obligations owed to Shanghai Yilian; (b) the Administrators were provided with evidence to substantiate the making of the abovementioned loan; (c) an extension agreement in respect of the above loan arrangements was entered on or about 22 February 2019, where TFM agreed to also become a borrower in respect of the Weili Jia Loan (Weili Jia Extension); (d) pursuant to the Weili Jia Extension, the term of the underlying loan (at that stage HK$23 million) was extended to 31 March 2020; (e) the inclusion of TFM as a borrower under the Weili Jia Extension is not unusual in circumstances where the borrowers were seeking an extension of credit and the lender had sought to have recourse against TFM, as a borrower, and additional comfort was provided from TDH, who is also a party to arrangements with Ms Weili Jia, as guarantor; (f) prima facie, the Administrators contend, there is no wrongdoing where one company provides security for, or guarantees, another's debts when operating in a corporate group and particularly where they are engaged in a common endeavour; (g) these circumstances, amongst others, were explained in correspondence from the Administrators' solicitors to Decon's solicitors prior to the second meeting of creditors; (h) the fact that the copy of the Weili Jia Extension cited by the Administrators was not executed by Ms Jia does not, at least, prima facie, detract from the fact that she has acted in accordance with the terms of the agreement by forbearing any enforcement action against KRI and where she had lodged a proof of debt in the administrations of both TFM and KRI; and (i) in respect of whether or not TFM or KRI ought to have borrowed money from Ms Jia in the first instance, having regard to the fact that the monies borrowed were used to satisfy the debt owed to Shanghai Yilian by Tasman Funds, the position is the same as the Shanghai Yilian Loan, namely, that: (i) it was appropriate for TFM and KRI to assume such obligations in circumstances where both TFM and KRI had a direct and material financial interest in, and derived a benefit from, their respective interests in the Epping Development; and (ii) in circumstances where the $11.7 million borrowed by Tasman Funds was for the benefit of TFM and KRI acquiring the land the subject of the Epping Development, it is difficult to see how a failure of Tasman Funds to pay off that debt is something that TFM or KRI had the option of ignoring when Tasman Funds could and would, presumably, turn to TFM and KRI for recoupment as the parties who benefitted from the advance of those funds in the first instance. 180 It is difficult to either identify any material error or to see how any further investigation or interrogation of the transaction concerning Ms Weili Jia presents any realistic prospect of a better return to creditors in a winding up scenario than what is presented by the DOCAs. … The TDH Loans 192 At [26] and [27] of the POC Decon asserts that 26. On or about 22 November 2019, TFM (as borrower) entered into a loan agreement with TDH (as lender) valued at $3,254,099.86 secured by mortgages over the Epping Development and which was of no apparent benefit to TFM. 27. Further, at some point presently unknown to the Plaintiff, each of TFM and KRI entered into loan agreements and/or borrowed money from TDH such that, as at about 30 June 2020: a. TFM owed $3,254,099.86 to TDH; and b. KRI owed $2,376,808.43 to TDH, and with no apparent benefit to TFM or KRI. 193 Decon, effectively, contends that the loans from TDH are related-party transactions, uncommercial transactions, or unreasonable director-related transactions. The Administrators' position is that circumstances referred to at [26] of the POC were addressed in the TFM Report and the circumstances referred to at [27] of the POC were addressed in the KRI Report. The Administrators' view is that: (a) TDH and TFM are indeed related parties; (b) the advances made from TDH to TFM appear to have begun in June 2015 and were initially on an informal basis without the benefit of any documentation or formal agreement between TDH and TFM (but being recorded in accounting entries); (c) the advances made from TDH to KRI appear to have begun in December 2017 and were initially on an informal basis without the benefit of any documentation or formal agreement between TDH and TFM (but being recorded in accounting entries); (d) in respect of TFM: (i) on or about 18 October 2019, TDH and TFM entered into a loan and related security agreement which addressed past and future borrowings (the TFM-TDH Loan); (ii) the facility offered by TDH to TFM pursuant to the TFM-TDH Loan was on an 'as requested' basis capped at the 'principal sum'; (iii) the 'principal sum' at the time of entering the agreement was in the amount of $11,891,313.44; (iv) a ledger containing the dates of the various advances made by TDH to TFM up to the date of the Loan is set out at Sch 2 to the Loan; (v) the Administrators have seen payment receipts which corroborate the account which appears at Sch 2 of the TFM-TDH Loan; (e) in respect of KRI: (i) on or about 18 October 2019, TDH and KRI entered into a loan and related security agreement which addressed past and future borrowings (the KRI-TDH Loan); (ii) the facility offered by TDH to KRI pursuant to the Loan was on an 'as requested' basis capped at the 'principal sum'; (iii) the 'principal sum' at the time of entering the agreement [was] in the amount of $2,756,103.16; (iv) a ledger containing the dates of the various advances made by TDH to KRI up to the date of the Loan is set out at Sch 2 to the Loan; (v) the Administrators have seen payment receipts which corroborate the account which appears at Sch 2 of the KRI-TDH Loan; (f) from the Administrators' investigations, the purpose of the related party borrowing by TFM and KRI was to provide working capital for use in the Epping Development, namely, to meet the ongoing holding costs, ongoing interest charges under various other loan arrangements and the costs of ongoing litigation and solicitor fees; (g) the TFM Report discloses that the dealings between TDH and TFM may give rise to: (i) an unfair preference claim to the value of $277,231; and (ii) an uncommercial transaction claim in the circumstances described in this way in the TFM Report: The granting of the security to TDH may be classified as an uncommercial transaction only in so far as it secures any amount greater than $830,282.99 plus interest at 15%. Notwithstanding this, should TDH's claim be limited to $830,282 plus GST, I have calculated in section 8.8 of this report that there is estimated to be a deficiency to ALLPAAP creditors. (h) a similar disclosure appears in the KRI Report: (i) a related-party voidable transaction claim pursuant to s 588FE(4) of the Corporations Act with a potential value of $69,856.62; (ii) an uncommercial transaction claim qualified in the KRI Report in the following way: The granting of the security to TDH may be classified as an uncommercial transaction only in so far as it secures any amount greater than $10,000 plus interest at 15%. However, my review has revealed that although the 22 apartments remain unsold, all of these properties are subject to a mortgage held by a financier, which has priority over the TDH security. Accordingly, I do not consider that TDH will derive any benefit from being granted the security. 194 In respect of what, if any, effect a setting aside of the grant of a security interest to TDH over the eight relevant apartments would have, it is unlikely, in the Administrators' submission which I accept, that this would improve the return to unsecured creditors in either a DOCA or liquidation scenario and could potentially worsen the position because: (a) TDH would be entitled to prove for its debt (whether secured or unsecured) in a liquidation scenario - a circumstance which does not arise under the DOCAs; (b) under the DOCAs, should TDH prevail in establishing a security interest over the eight properties the subject of Decon's caveat claim then unsecured creditors stand to benefit from 50% of the net realised proceeds of those properties - a circumstance which does not arise under a liquidation scenario; and (c) in any event, if either TDH or Decon prevail in respect of the caveat contest between them, there will be no funds flowing to unsecured creditors as other ALLPAAP security interest holders who have suffered a deficit on their security will be the next in the priority waterfall to recover ahead of ordinary unsecured creditors. 195 It is difficult to see how any further investigation or interrogation of the transaction concerning TDH presents any realistic prospect of a better return to creditors in a winding up scenario than what is presented by the DOCAs. Potential recoveries against TDH were brought to the attention of the voting creditors prior to the second meeting of creditors and the creditors voted in the way that they did in any event. 70 Under the heading "Findings on the relief sought by Decon", his Honour continued: 196 I have discussed the question of onus above (at [125]). It is not incumbent on an administrator to prove the sufficiency of their report. In cases such as the present, an estimated comparison between the outcome of the DOCA and the likely outcome of a liquidation is relevant to the exercise of the Court's discretion. This comparison requires analysis of the position of the company as at the time of the making of the application. 197 In circumstances where no contrary analysis has been presented as to the return to creditors on a liquidation as opposed to the return under the DOCAs, and given the explanations provided by the Administrators, it is difficult to be satisfied that Decon is entitled to relief. However valid its suspicions as to transactions may be, it is most important to also consider the likely benefits of liquidation to creditors. 198 Decon also complains of the omission of information with reference to s 445D(1)(c) of the Corporations Act. Decon maintains in substance that certain matters were either not sufficiently investigated or omitted from the Creditors' Reports. 199 Bearing in mind throughout the need for Administrators to provide a timely and practical service, I consider that the Creditors' Reports provide a sufficient degree of detail of the funding arrangements made available by the TFM DOCA and the KRI DOCA for the Company to pursue the cross-claim. In any event, this potential recovery was immaterial to the Administrators' recommendation. Injustice - s 445D(1)(e) 200 For the reasons set out above, contrary to [92(c)] of the POC, there is no injustice caused by creditors voting in favour of the TFM DOCA and the KRI DOCA instead of electing to further investigate and potentially pursue speculative causes of action which face uncertainties and difficulties in terms of their funding, prospects of success, and prospects of enforcement and recovery. 201 None of these matters was hidden or concealed from the creditors of either TFM or KRI and, indeed, formed the basis of the Administrators' recommendations expressed in the Creditors' Reports in the first instance. Oppressive or unfairly prejudicial, or unfairly discriminatory against - s 445D(1)(f)(i) ... 204 In terms of unfair discrimination, none of the concerns surrounding different treatment of the dissenting creditors which arise where a DOCA attempts to deviate from the usual pari passu distribution to creditors of the same class, arises in the present case. Contrary to the interests of the creditors of the company as a whole - s 445D(1)(f)(ii) 205 It follows that for these reasons, and particularly in respect of [s 445D(1)(f)(ii)], contrary to [92(e)] of the POC, the TFM DOCA and the KRI DOCA are not contrary to the interests of the creditors of the company as a whole. The Administrators' well-founded position is that the unsecured creditors are likely to receive a higher return under the DOCA than if the company proceeds to a liquidation. Commercial morality - s 445D(1)(g) 206 In relation to [92(f)(i)] of the POC, the circumstances concerning the investigation of the 'relevant transactions' are dealt with above (at [160]-[195]). The Administrators' position is that there is no obvious basis for the provisions of s 445D(1)(g) to be invoked. I accept this contention for the reasons stated in relation to each of the transactions that Decon seeks to impugn.

Decon's application to amend its notice of appeal 71 At the hearing of the appeal, Decon sought leave to rely on an amended notice of appeal, recognising that it needed such leave to permit it to make a submission its counsel had already articulated in its written appeal submissions, and not made below, to the effect that the DOCAs are unfairly prejudicial to or unfairly discriminatory against Decon, in light of the proper construction of clause 8.1(e) of each of the DOCAs. As Decon's lawyers put it in a letter to the lawyers for the deed administrators exhibited to an affidavit of Mr Timothy Coleman affirmed 1 November 2021 enclosing the draft amended notice of appeal, the purpose of doing so was to "make corrections and refinements in respect of matters raised in its submissions". 72 It was agreed that the court would deal with the application to amend the notice of appeal in these reasons, and also with the admissibility of one of the affidavits in opposition to it, namely the affidavit of Mr Mark Faraday affirmed 9 November 2021, to which reference is made below. 73 Decon sought to amend its notice of appeal by adding to [5] of the notice of appeal dated 19 February 2021 the following underlined words: 5. Further, the primary judge: … c. should have found that each of the TFM DOCA and KRI DOCA were contrary to the commercial morality by reason of: … (iii) the unfair and prejudicial effect of each of the TFM DOCA and KRI DOCA upon Decon's judgment debt against each of TFM and KRI, (each and collectively) and, on that basis, should be set aside under section 445(1)(g) of the Act. 74 That proposed amendment is curiously worded because it does not, on its face, speak to the contention sought to be made. But the parties seemed to accept, by the time of the hearing, that if the amendment were permitted, it was wide enough to bring in that contention, namely that clause 8.1(e) of the DOCAs has the effect that while they remain in force, Decon cannot exercise any right of set off in respect of its judgment debt under s 553C of the Act that it otherwise would have been entitled to on a winding up, and that that state of affairs is unfairly prejudicial to or unfairly discriminatory against it, within the meaning of s 445D(1)(f)(i). 75 As we say, that submission was not made below. 76 Clause 8.1(e) of the DOCAs provides: 8. Moratorium 8.1 Restrictions Subject to clause 8.2, while this Deed remains in force, no Creditor in relation to its Claims, and no Officer or Member, may: … (e) exercise any right of set off or defence, cross claim or cross action to which that Creditor would have been entitled had the Company been wound up on the Appointment Date; … (g) take any action whatsoever to seek to recover any part of its Claim; or (h) otherwise enforce any right it may have or acquire against the Company, and for the purposes of this clause 8, property of the Company includes property used or occupied by, or in the possession of, the Company. 77 Section 553C of the Act provides: 553C Insolvent companies - mutual credit and set‑off (1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and (b) the sum due from the one party is to be set off against any sum due from the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be. (2) A person is not entitled under this section to claim the benefit of a set‑off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent. 78 Decon's case below was that each of the DOCAs extinguished Decon's judgment debt against TFM and KRI (replacing it with a claim on a limited fund), while simultaneously providing for the pursuit (by way of funded litigation) against Decon of cross-claims said to be valued up to $17 million. The primary judge held (J [131]) that this did not constitute prejudice necessary to engage s 445D(1)(f)(i) because there was no suggestion that the same could not be done under a liquidation. 79 Decon contended that the primary judge erred in that regard, because he "overlooked the operation of s 553C of the Act, according to which the same result could not be obtained under a liquidation". The submission was put as follows: Section 553C provides for set-off between the mutual debts or other dealings between an insolvent company in liquidation and a person seeking to have a debt or claim admitted against that company. The object of the section is to avoid the injustice of a liquidator insisting upon 100 cents in the dollar upon the whole of the debt owed to the insolvent company while at the same time insisting that the company's debtor be satisfied with a dividend of some few cents in the dollar on the whole of the company's debt: see Gye v McIntyre [1991] HCA 60; (1991) 171 CLR 609 at 618-9 per the Court. In a liquidation, therefore, if a liquidator chooses to pursue Decon in respect of the cross-claim propounded in each of the reports to creditors Decon would be able to raise for its benefit the full $6,355,352.46 (plus costs) value of its judgment debt as a set-off against that cross-claim. The same result does not prevail under the DOCAs. Section 553C is a "Prescribed Provision" within the meaning of s 444A(5) of the Act as contained in Schedule 8A of the Corporations Regulations 2001 (Cth). Clause 1.8 of each company's DOCAs provides that such "Prescribed Provisions shall apply to this Deed except as added to, modified or varied or as may be otherwise inconsistent with the terms of this Deed". The identical terms of each company's DOCA … are inconsistent with the application of s 553C. In particular: (a) clause 8.1(e) provides that Decon cannot, while the DOCA remains in force, exercise any right of set-off which it would otherwise have been entitled to on a winding-up, and there is no exception for it do so with the leave of the Court (his Honour overlooked this clause at J[142]); (b) clause 16.1 provides that Decon must accept its rights and entitlements in the DOCA in substitution for all claims it otherwise has against TFM and KRI; (c) clause 16.9 provides that the DOCA may be pleaded by TFM and KRI as an absolute bar and defence in respect of such Claim (defined to include any debt payable) to the extent that their liability has been released and discharged; and (d) clause 25.1 provides that the DOCA remains in force until a number of decisions have been made (including as to the prospects of the proceedings against Decon) and other events have occurred, including the full distribution of the fund. The effect of these provisions is that Decon cannot raise its judgment debt as a set-off against the claims brought against it by TFM and KRI in the litigation funded through the DOCAs and is limited to a dividend of a few cents in the dollar on the whole that debt [sic]. At the same time, TFM and KRI are free to claim 100 cents in the dollar in respect of the claims they are pursuing against Decon and without any reduction by way of set-off by Decon. That is not the situation that would prevail in a winding-up by operation of s 553C and, indeed, is precisely the kind of injustice that the section is designed to prevent. That is an unfair prejudice and the DOCAs ought to have been set aside on that basis. 80 The deed administrators opposed the granting of leave to amend the notice of appeal, because they say the point sought to be made was neither pleaded nor argued below, and that it is flawed as a matter of the proper construction of clause 8.1(e), in any event. 81 The deed administrators also contended that clause 8.1(e) on its proper construction does not have the effect of preventing Decon from pleading a set off against any cross-claim brought against it, nor does it exclude the operation of s 553C and, further, that any court considering any damages under a cross-claim would be entitled to adjust those damages by setting off the amount due to Decon. 82 The deed administrators also sought to read an affidavit of Mr Mark Faraday affirmed 9 November 2021, in which he annexed a copy of a deed poll executed on 8 November 2021 between TFM and KRI, the substance of which was that those companies, by clause 3 of the deed poll, "each agree and acknowledge that, if in any action they separately or jointly commence or have commenced against any Creditor, that Creditor, by way of defence, pleads a right of set-off in such action, they will not rely on the DOCAs to contend that the Creditor is barred from claiming a right of set-off". 83 Mr Giles submitted that the plea in [81] of the POC that the DOCAs provided for the extinguishment of "Relevant Transactions" was somehow relevant, but those transactions were not defined to include Decon's judgment debt. Mr Giles also submitted that the absence of any reference to s 553C was "not to the point". 84 In our view, the application to amend the notice of appeal should be refused because: (1) the contention that the DOCAs excluded the operation of s 553C as a ground for unfair discrimination of the appellant was not pleaded below - the pleaded case concerned the funding of the cross-claim, not the exclusion of the operation of s 553C; (2) the contentions now raised about s 553C and clause 8.1(e) of the DOCAs were not put below; (3) the deed administrators conducted the case below on the basis that Decon's rights to a set off were not affected by the DOCAs; (4) Decon should not be allowed to raise, for the first time on appeal, a construction of the DOCAs which leads to a basis for alleging that the operation of the DOCAs unfairly discriminates against it because, as Mr DL Cook SC (appearing for the deed administrators) submitted, had the issue been pleaded: the possibility of amending the DOCAs, to the extent that Decon's construction was correct, could have been explored; the question of the correct construction could have been debated and determined at the hearing before the primary judge on the basis of the evidence below; his Honour might have considered whether lesser relief than the termination of the DOCAs was sufficient to address the concern; and undertakings could have been proffered as to how the DOCAs would operate. 85 Mr Giles, in his oral address, submitted that he had "drawn" clause 8.1 to the primary judge's attention. The only reference to it which he could identify, however, was in his opening oral address, when in providing an overview of the terms of the DOCAs, he said that "8.1 is the big moratorium which, in effect, prevents enforcement". Mr Giles sought to contend that the fact that later oral submissions which addressed the operation of s 553C did not refer to clause 8.1 was not to the point, because they were made in response to submissions made by counsel for the deed administrators, who had framed the debate as being about "the effect of clause 12" (which the deed administrators contended below incorporated s 553C) rather than clause 8. In our view, how counsel for the deed administrators may have "framed" the submissions about s 553C does not address the simple fact that counsel for Decon made no submission whatsoever about the impact of clause 8.1 on the operation of s 553C. 86 But in any event, the granting of leave would be inutile because TFM and KRI have by the terms of the deed poll, set out at [82] above, agreed that if clause 8.1(e) of the DOCAs is to be construed in the manner contended for by Decon then they will not rely on the DOCAs to contend that the companies are barred from claiming a right of set off. 87 Counsel for the deed administrators did not explain the precise basis upon which it was contended that the evidence about the deed poll should be allowed, but it seems to us that it should go into evidence because (contrary to the view that we have formed) were the amendment to be permitted, and assuming for the sake of the argument that the evidence of the deed poll would amount to fresh evidence, then it would go to a point that was overlooked at trial; which if not overlooked could have been addressed; and would render an issue (the proper construction of clause 8(1)(e) of the DOCAs) moot. In those circumstances it would be in the interests of justice that it be admitted into evidence. See s 27 of the Federal Court of Australia Act 1976 (Cth) which provides that the court has a discretion to receive further evidence on appeal. 88 For those reasons, we would refuse Decon's application to amend its notice of appeal by adding proposed paragraph 5(c)(iii). 89 In those circumstances, it is not necessary to have any regard to the affidavit upon which the deed administrators sought to rely annexing the deed poll, referred to in [82] above. 90 Decon also sought to amend its notice of appeal by adding paragraph 5(c)(ii) in these terms: (ii) the manner in which the business, property, affairs and financial circumstances of each of TFM and KRI were treated as interchangeable and the same as one another and with those of their parent company, Tasman Development Holdings Pty Limited and other related entities; 91 Paragraph 5(a) of the notice of appeal contended that the primary judge: a. erred when applying section 445D(1) of the Act in treating the business, property, affairs and financial circumstances of each of TFM and KRI as interchangeable and the same as one another and with those of their parent company, Tasman Development Holdings Pty Limited and other related entities (Primary Judgment at [128], [130], [175], and [179]-[180]); … 92 Mr Cook opposed the granting of leave to amend by adding paragraph 5(c)(ii), on the basis that it introduced "a totally new point", but in any event, went "nowhere" in circumstances where the companies are not to continue trading. It seems to us, however, that the amendment, to which very little attention was given during the hearing, is really only a mirror image of the ground in paragraph 5(a). For that reason, that amendment will be allowed. 93 Decon also sought to make a typographical amendment to paragraph 5(c)(i) by deleting a reference to ground 2(b) and substituting 3(b). That amendment was not opposed and will be allowed.

The grounds of appeal 94 The grounds of appeal as amended in accordance with the ruling above were as follows: In respect of the First Respondent (TFM) 1. The primary judge: a. erred in not finding ([J] at [118], [196]-[199]): i. that information about TFM's business, property, affairs or financial circumstances that was false or misleading, and could reasonably be expected to have been material to creditors of TFM in deciding whether to vote in favour of the resolution that it execute a deed of company arrangement ("the TFM DOCA"), was given to those creditors within the meaning of section 445D(1)(a) of [the Act]; and/or ii. that there was an omission from the second report to creditors of TFM that could reasonably be expected to have been material to such creditors in so deciding within the meaning of section 445D(1)(c) of the Act; and b. should have found that such false or misleading information was given to creditors, and/or that there was such an omission from the second report to creditors, being in respect of each of: i. Decon's judgment debt against TFM and TFM's alleged cross-claim against Decon ([J] at [158]-[159]); ii. the CLG Share Agreement ([J] at [160]-[164]); iii. the Shanghai Yilian Loan ([J] at [173]-[176]); iv. the Weili Jia Loan ([J] at [179]-[180]); … vii. payments to and for the benefit of, and the entry into secured loan agreements with, TFM's parent company, [TDH] ([J] at [193]-[195]); and viii. likely breaches of directors' duties and fiduciary duties by TFM's former director, Mr Yihao "Eric" Zhang (including claims for breaches of directors' duties). 2. Further, the primary judge: a. erred in failing to apply the correct test under section 445D(1) of the Act in respect of the interests of creditors, namely, whether there was a not unrealistic prospect that there may be a return to TFM's creditors on a winding up that is better than under the [TFM] DOCA ([J] at [119]-[125], [133]-[134], [197], and [205]). b. erred in not finding that the TFM DOCA was contrary to the interests of TFM's creditors as a whole under section 445D(1) of the Act and/or within the meaning of [s] 445D(1)(f)(ii) of the Act ([J] at [197] and [205]); and c. should have found that the TFM DOCA was contrary to the interests of TFM's creditors as a whole under section 445D(1) of the Act and/or within the meaning of [s] 445D(1)(f)(ii) of the Act on the basis that, owing to the matters listed in Ground 1(b) above (each and collectively) there was a not unrealistic prospect that there may be a return to TFM's creditors on a winding up that is better than under the TFM DOCA. In respect of the Second Respondent (KRI) 3. [Relevantly the same as [1] above.] 4. [Relevantly the same as [2] above.] In respect of both Respondents 5. Further, the primary judge: a. erred when applying section 445D(1) of the Act in treating the business, property, affairs and financial circumstances of each of TFM and KRI as interchangeable and the same as one another and with those of their parent company, [TDH] and other related entities ([J] at [128], [130], [175], and [179]-[180]); b. erred in not finding that each of the TFM DOCA and KRI DOCA were contrary to the commercial morality; and c. should have found that each of the TFM DOCA and KRI DOCA were contrary to the commercial morality by reason of: (i) the matters listed in Grounds 1(b) and 3(b) above; (ii) the manner in which the business, property, affairs and financial circumstances of each of TFM and KRI were treated as interchangeable and the same as one another and with those of their parent company, [TDH] and other related entities, (each and collectively) and, on that basis, should be set aside under section 445D(1)(g) of the Act. 6. Further, the primary judge: a. erred in not finding ([J] at [133] and [204]): i. that each of the TFM DOCA and KRI DOCA are oppressive or unfairly prejudicial to, or unfairly discriminatory against, Decon and its related-company, Vanella Pty Ltd, within the meaning of section 445D(1)(f)(i) of the Act; and/or ii. that each of the resolutions passing the TFM DOCA and KRI DOCA were prejudicial, or reasonably likely to prejudice, Decon and Vanella Pty Ltd (being the creditors who voted against the resolutions) to an extent that is unreasonable within the mean[ing] of section 75-41 of Schedule 2 of the Act. b. should have found: i. that … each of the TFM DOCA and KRI DOCA are oppressive or unfairly prejudicial to, or unfairly discriminatory against, Decon and its related-company, Vanella Pty Ltd and, on that basis, should be set aside under section 445D(1)(f)(i) of the Act; and/or ii. that each of the resolutions of second creditors meetings which passed the TFM DOCA and KRI DOCA were prejudicial, or reasonably likely to prejudice, Decon and Vanella Pty Ltd (being the creditors who voted against the resolutions) to an extent that is unreasonable, and, on that basis, should be set aside under section 75-41 of Schedule 2 of the Act. 95 The only substantive submission that Decon sought to make on appeal in respect of the contention that the DOCAs operated in an unfairly prejudicial and discriminatory way upon Decon within the meaning of s 445D(1)(f)(i) (ground 6) was the submission in respect of which leave to amend was required (set out at [79] above). Because that application has been refused, it follows that it is not necessary further to consider ground 6. 96 In his oral address, Mr Giles made it clear that "while it is true that the debate was more wide ranging before … the trial judge", "the way we put this case is a cascading series of characterisations in effect of the same base points". 97 Taking the submissions of both parties with respect to each of the (grouped) grounds of appeal in turn:

Decon's submissions - Contrary to creditors' interests as a whole - s 445D(1)(f)(ii) (grounds 2 and 4) 98 Decon submitted that the primary judge "erred with respect to the analysis" of the four transactions summarised above in making the finding that regardless of suspicions surrounding transactions to which TFM and KRI were parties (J [197]), the deed administrators' "well-founded position" was that unsecured creditors were likely to receive a higher return under the DOCAs than in liquidation, and so s 445D(1)(f)(ii) was not engaged (J [205]). 99 Taking the four transactions in turn:

Shanghai Yilian Loan 100 Shanghai Yilian became a secured creditor in November 2018 when TFM and KRI guaranteed and provided securities, being mortgages over apartments in the Epping Development, for a loan between it and Tasman Funds. The purpose of the transaction was to provide Shanghai Yilian with "additional comfort" in respect of its dealings with Tasman Funds. 101 In his oral address, Mr Giles referred in particular to the terms of a loan agreement between Shanghai Yilian as lender, Tasman Funds as borrower, Mr Eric Zhang as "individual guarantor" and TFM and KRI as "corporate guarantors". The recitals to that agreement recorded as follows: A Borrower and Lender entered into a cooperation deed on 18 September 2015 ("Cooperation Deed"). B Lender advanced AUD$ 11,700,000.00 ("Invested Amount") to the Borrower on about 1 October 2015 under the Cooperation Deed. C Under the Cooperation Deed, Lender is entitled to receive a fixed net return at 20% per annum over the Invested Amount ("Fixed Return"). D According to the terms of the Cooperation Deed, the Invested Amount and Fixed Return shall become due and payable on 31 December 2017. E On 15 February 2018, Borrower has made a partial repayment of AUD$ 4,980,000 towards the Invested Amount to Lender. The balance of the Invested Amount and the full Fixed Return remained outstanding. F On 3 April 2018, Borrower has made a further partial repayment of AUD$6,720,000 towards the Invested Amount to Lender. The Fixed Return remained outstanding. G On 7 August 2018, a supplemental deed was entered into between the Lender, the Borrower, and TFM Epping Land Pty Ltd (ACN 605 600 253) and the Individual Guarantor ("Supplemental Deed"). The Lender consents that the Borrower shall repay all the outstanding amount plus further interest in accordance with the Supplemental Deed. TFM Epping Land Pty Ltd (ACN 605 600 253) and the Individual Guarantor agree to guarantee the Borrower's obligations under the Supplemental Deed. … 102 Apparently, nobody could locate a copy of the supplemental deed referred to in recital G. Mr Giles submitted, however, that "[t]he point is TFM … that is, the recital G document, whatever its content may be, on its face is giving a benefit to Tasman Funds, with no benefit to itself". He put "[t]he short point … made at trial" this way: The short point we made at trial is that both the transaction may be liable to be set aside - now, that may not have taken us very far, given a foreign plaintiff - sorry, a foreign lender, and there's some lack of clarity of what had been paid. But the securities were liable to be set aside, which does take us a significant distance, the reason being, as we have said, this appears to be an uncommercial director-related transaction. And in any event, Mr Zhang, in causing the companies to give a guarantee and security for the benefit of Tasman Funds, was in breach of duty, and one has both the equitable and the statutory remedy. 103 Mr Giles submitted that the primary judge erred at J [174] and [175] when he held that: 174 The Administrators' view remains that whatever the mechanism of borrowing, TFM's secured obligation arises from the purchase of the land used for the Epping Development in which TFM and KRI had a 'direct and material financial interest'. 175 The difficulty, in my view, with the complaints raised by Decon is that, in circumstances where the $11.7 million borrowed by Tasman Funds was for the benefit of TFM and KRI acquiring the land the subject of the Epping Development, it is difficult to see how a failure of Tasman Funds to pay off that debt is something that TFM or KRI could ignore where Tasman Funds could and would, presumably, turn to TFM and KRI for recoupment as the parties who benefitted from the advance of those funds in the first instance. It is difficult to see, particularly having regard to the dates of the transactions, how any further investigation or interrogation of the transactions concerning Shanghai Yilian presents any realistic prospect of a better return to creditors in a winding up scenario than what is presented by the DOCAs. 104 Mr Giles put Decon's submission this way in his oral address: For reasons I've identified, in our submission 175 is in error. The preamble in 174, that is, the preamble for the finding in paragraph 175 might be of importance in that whatever the mechanisms of the borrowing it carries with it an assumption that there was a borrowing, that is, by TFM. But the fact is or our short point is that contrary to that which his Honour has held in 175 there is no - well, first of all, even if it be accepted that Tasman Funds may have some claim against TFM and KRI that doesn't justify the securities, and it doesn't on its face justify giving a guarantee to Shanghai Yilian. It's not justified at a commercial level which is explained, and in any event the assumption that that last submission proceeds on is one which is overly generous to the companies because it was not shown why Tasman Funds had a claim against the companies, bearing in mind the corporate structure adopted and that no loan or the like or even payment directly to their benefit was established. So just pausing there, in our submission his Honour was in error to reject our contention that the securities in the liquidation were defeasible and that there was a prima facie case against Mr Zhang in the liquidation. 105 Decon submitted that "[o]n its face, the transaction was of no benefit to the companies and prima facie voidable by (at least) sections 588FB, 588FC, 588FDA, and 588FE(3) or (4)" of the Act. Further, it submitted that "insofar as its purpose was to provide comfort in respect of arrangements between Shanghai Yilian and Tasman Funds (a company of which Eric Zhang is and was the sole shareholder and director), the transaction may also be a related-party transaction or an unreasonable director-related transaction within the meaning of section 588FDA insofar as Tasman Funds was a 'close associate' of Eric Zhang". 106 As Mr Giles conceded, Decon failed at trial to prove that three of the four transactions were or could have been insolvent transactions within the meaning of s 588FC of the Act. The one exception was the Shanghai Yilian Loan. As Mr Giles put it: "[t]rue that be, but in our submission that is no answer to either the 588FDA analysis or for that matter that the transaction was a breach of duty by Mr Zhang as a director of the corporations". 107 Decon submitted that the primary judge erred in accepting the deed administrators' submission and holding (at J [175]) that there was no sufficient basis to impugn the Shanghai Yilian Loan because it was "difficult to see how a failure of Tasman Funds to pay off [its debt to Shanghai Yilian] is something that TFM or KRI could ignore where Tasman Funds could and would, presumably, turn to TFM and KRI for recoupment as the parties who benefitted from the advance of those funds". Decon contended that that reasoning was erroneous because: (1) the legal basis of any possible recoupment by Tasman Funds against TFM and KRI was, and remains, unidentified; (2) to treat the companies in that way is "inconsistent with the fundamental principle that each company had a distinct legal personality with separate creditors, a principle not displaced by the fact that the companies were part of a 'group'", citing Walker v Wimborne (1976) 137 CLR 1 at 6-7 (Mason J, Barwick CJ agreeing) for the proposition that "[e]ach company within a group is a separate legal entity, and its affairs must be exercised according to 'its interests and its interests alone' because to do otherwise risks prejudicing the interests of creditors in the event of insolvency"; (3) the Shanghai Yilian Loan and associated securities arose after the completion of the Epping Development, "so it is difficult to see how they were in either company's (or the unsecured creditors') interests"; and (4) setting aside security for a loan of $1.4 million over real property owned by the companies would necessarily benefit unsecured creditors.

Securities provided to TDH 108 Seven days after Decon obtained the judgment debt against the companies, TDH took security over TFM and KRI for previous advances as well as future ones. Decon contended that "[t]he probability that those securities will be set aside as related-party transactions under s 588FE(3), (4), or (6A), uncommercial transactions under s 588FB, or unreasonable director-related transactions under s 588FDA, is plain" and that the primary judge was wrong to rely on the deed administrators' analysis of the transactions in the reports to creditors (J [193]-[195]) because it "proceeded on the limited basis that only securities issued to TDH by the companies before the 'formalised' agreements were voidable J[193(g)-(h)] and that TDH would otherwise be entitled to prove for the whole of its debts (J[194(a)])". 109 Decon also contended that the primary judge ignored the fact that the deed administrators accepted below that if the securities obtained by Shanghai Yilian and TDH were avoided in a winding up then there would be a surplus to creditors in the order of $2.4 million and considerably more than the contribution by the deed proponent (TDH). Decon submitted that, in concluding that "no contrary analysis" had been presented about the return to creditors on liquidation (J [197]), his Honour overlooked a summary of relevant calculations contained in an appendix to Decon's closing submissions that showed "the very substantial benefit to creditors that would follow from setting aside these securities". 110 In his oral address, Mr Giles put Decon's submission with respect to the TDH loans as follows: Moving then to the last in time transaction which is also related to a security which is why we deal with it in this order, it's that referred to back … in [J] paragraph 75(f), and that is the giving of security what is described by his Honour, we think, "properly" as formalised loan arrangements. His Honour addressed that a little more fulsomely at paragraph 192 to 194 of the judgment … As Mr Ball reminds me, in fact, this transaction was entered into, as the earlier findings I've taken your Honours to, seven days after our client obtained a judgment for just over $6 million against … the companies. Now, again, our position or our submission for the reasons that we have identified is that whether through the prism of a breach of duty or 588FF or, indeed, because this is post the finding of likely insolvency, an uncommercial transaction, this so-called formalisation which is more accurately described as the grant of securities for an otherwise unsecured debt was defeasible in a liquidation. Now, his Honour considered that we were in error in that, adopting the administrator's submissions at paragraph 194 … but the problem with that finding, that is, that setting aside the security would not benefit unsecured creditors is that the administrators had … that is, Mr Melluish accepted that in cross-examination that that be wrong if one considered Shanghai Yilian's security to also be defeasible.

Weili Jia Loan 111 Weili Jia made unsecured advances to KRI in February 2018. In February 2019, TFM assumed KRI's debt with interest accruing at 24% per annum. Decon contended that this was prima facie an uncommercial transaction which, if set aside, would reduce the claims against TFM by over $4.3 million, and the primary judge was wrong to accept (at J [179(f)]) the deed administrators' contention that prima facie there was no wrongdoing where one company provided security for, or guaranteed, another's debts when operating in a corporate group, and particularly where they were engaged in a common endeavour (see [69] above). 112 Mr Giles put Decon's submission in the following terms: [J [179(f)]] is a proposition which, as a matter of corporate theory, is surprising. True it is that companies do provide guarantees for others. When one looks at it through the lens of an insolvency administration, one focuses clearly on why they do that. And in this circumstance, again, there is no explanation for why it is that TFM has assumed that liability. His Honour, disagreeing with us on that proposition, at paragraph 180 … found that it was difficult to identify any material error or see how any further investigation or interrogation of the transaction concerning Ms Jia presents any realistic prospect of a better return. In our submission, there are two errors in that paragraph: the first, which may be the minor premise, is that the focus is not on error by the administrators; and the second is that viewed through the lens of TFM, what one has is a then unexplained assumption of liability for slightly under A$5 million, with, on the evidence and the factual findings, a prima facie case against Mr Zhang.

CLG Share Agreement 113 This is another transaction in which Decon said in a liquidation "we say [we] would see at least a prima facie return": Now, the arithmetic is not precise because, under the deeds, TDH promised only to prove 50 per cent of the secured debt - or more accurately, to contribute 50 per cent of the secured debt on recovery. But nonetheless, where the return to creditors is only a couple of cents in the dollar up to five cents in the dollar, increasing the creditors by, as one says, a couple million dollars makes no arithmetic difference. So that is, on our assumptions, just touching on the securities, the return was - prima facie standard - we didn't prove this because it's prospective - better in a liquidation. 114 CLG paid $8.3 million to TFM in April 2018 to subscribe for shares in TFM but was repaid that money in October 2018 after the Epping Development was completed. The primary judge held that investigation of that transaction was unlikely to improve the return to unsecured creditors because there was nothing to suggest that the payment was for an improper purpose (J [160]). 115 Decon contended that "was not the relevant inquiry" and that the primary judge "should have directed attention to the prospects that an investigation might reveal, not an improper purpose, but contravention of the share capital reduction provisions set out in Part 2J.1 of the Act - ‍including the prejudicial effects of the payment on TFM's ability to pay its creditors". It was also contended that "[c]ausing an improper reduction of capital may also be a breach of directors' duties under s 180", citing DSHE Holdings Limited (in liq) v Abboud (No 3) [2021] NSWSC 673; (2021) 155 ACSR 1 at 114 [450]. 116 In his oral address, Mr Giles, having referred to some passages in which Mr Melluish was cross-examined, submitted that the share buyback was in substance suspicious, because no payment was actually made and: In order to buy back shares one requires a resolution of both the board and the company and, also, the state of mind to be formed that the share buyback will not materially prejudice the company's ability to pay its creditors. At that point, where the evidence lies is that Mr Zhang does not seem to have turned his mind to that question, lines 28 and 29, or at least there was no evidence of him doing so, and there's no evidence of board resolutions or any of the basic corporate formality not simply as a matter of formality but as a matter of the formality driving a consideration of the substance.

Overall approach 117 Decon also advanced two contentions about the "overall approach" of the primary judge to the issue of whether the DOCAs were contrary to creditors' interests as a whole. 118 First, it contended that "by focussing … upon whether the Administrators' position was 'well-founded'" (J [205]), the primary judge misdirected himself as to the relevant question and should have asked "whether the DOCAs were contrary to the interests of creditors of the company as a whole assessed in all relevant circumstances", citing Shafston Avenue Construction Pty Ltd v McCann [2020] FCAFC 85 at [91] (Farrell, Davies, and Moshinsky JJ). A relevant (although not decisive) circumstance in addressing that question, Decon submitted, was whether there was a not unrealistic prospect that there might be a better return to creditors on a winding up than under the DOCAs, citing Britax Childcare Pty Ltd v Infa Products Pty Ltd [2016] FCA 848; (2016) 115 ACSR 322 at 342 [93] (Burley J). It was contended that, in this case, the benefits to creditors in a liquidation included the prospects of unwinding the four transactions, and pursuing the companies' former director, Mr Eric Zhang, for breaches of directors' duties in circumstances where he was the sole director and shareholder of TDH, the DOCAs' proponent and litigation funder, and so may well be in a position to provide compensation. 119 Secondly, Decon contended that to the extent the primary judge did consider possible returns to creditors on a winding up, he did so without factoring in the prospect that the companies' actual date of insolvency was October 2018 - eight months earlier than the earliest date proposed by the deed administrators (June 2019). The primary judge held that there was no evidence to support the earlier date other than statements by the companies' former Senior Counsel and findings made by Stevenson J in earlier Supreme Court proceedings (J [122]). On appeal, Decon contended that what it called "[t]hat evidence", if correct, "would have implications for the propriety of a number of transactions: including the $8.3 million to CLG in October 2018, the Shanghai Yilian Loan and associated securities granted in November 2018 [and] the Weili Jia Loan in February 2019". Decon contended that the primary judge "set the bar so high as to require further analytical evidence of the date of insolvency to resolve the issue once and for all", which was not required under s 445D.

Deed administrators' submissions - Contrary to creditors' interests as a whole - s 445D(1)(f)(ii) (grounds 2 and 4) 120 The deed administrators contended that Decon did not argue below, and should not be permitted to argue on appeal, that by reason of these four transactions, the conclusion that the deed administrators reached that unsecured creditors were likely to achieve a higher return under the DOCAs than in liquidation was wrong. The deed administrators contended that "[a]s J [205] makes plain, the Primary Judge was deciding the matter on what was pleaded at POC [92(e)] which in turn picked up what was pleaded at POC [80(a)-(c)], which, in summary, was a contention that the unrelated creditors had been misled by the [creditors' reports] and denied an informed choice". 121 The deed administrators also contended that: … even assuming the errors were made out, it does not follow that the evaluative judgment as to whether, in all the circumstances, which included not only the four transactions but all the other matters available to the Primary Judge to form a view, the DOCAs were not contrary to the interests of creditors as a whole is one that should be disturbed on an appeal, and even less that the Primary Judge should have been satisfied that the contrary state of affairs existed. 122 But in any event, the deed administrators submitted that the errors relied on with respect to the four transactions are not made out. Taking each of them in turn:

Shanghai Yilian Loan 123 The deed administrators submitted that it is to be assumed that the primary judge was well aware that each of Tasman Funds, TFM and KRI were separate entities. They pointed to the fact that there was no dispute that Tasman Funds provided part of the purchase price for the Epping land through a loan from United Investment Australia Holdings Ltd and in turn from Shanghai Yilian. They also submitted that the primary judge's conclusion that it was difficult to see how Tasman Funds would not look to TFM or KRI to recoup the monies it had paid for them to acquire their asset, being the land, was correct. As the deed administrators put it in their written submissions: The Primary Judge's observations, repeated at J179 and (ii), were based upon commercial common sense and orthodox reasoning: it was unlikely that the funds were gifted by Tasman Funds such that TFM and KRI would need to repay those monies when called upon by Tasman Funds. True, his Honour did not spell that out, assuming the reader of his judgment to have a sufficient understanding of commercial dealings to understand the basis for the recoupment, but that does not indicate that his Honour failed to appreciate the distinct legal personalities of the companies, as suggested by the Appellant. And his Honour was not suggesting that the transaction could be defended on the basis that the Appellant now raises, as a straw argument, that the loan had some benefit for TFM and KRI as members in a group. Further, it should be remembered that the Shanghai [Yilian] Loan was relied upon by the Appellant to support the argument that the [creditors' report] was misleading. To the extent that it was said to be a Relevant Transaction it was only on the basis that the omission to discuss, investigate or otherwise analyse the transaction was misleading as an omission. It was not put below on the basis it is now put, namely, to satisfy s 445D(1)(f)(ii). This explains why the Primary Judge dismissed the transaction as he did at J[176]. (Footnotes omitted.)

Securities provided to TDH 124 The deed administrators submitted that Decon's argument about the securities provided to TDH was "obscure". The deed administrators also said that Decon's submission that the primary judge's agreement with their analysis "proceeded on the limited basis that only securities issued to TDH by the companies before the 'formalised' agreements were voidable … and that TDH would otherwise be entitled to prove for the whole of its debts …" was unclear and in any event went "nowhere". 125 As to Decon's contention that the primary judge was incorrect in concluding that no contrary analysis had been presented, because his Honour overlooked a summary attached to its closing submissions, the deed administrators said that was "an unhelpful distraction". They submitted that his Honour was referring to the estimated comparison between the outcome of the DOCA and the likely outcome of a liquidation, and the appendix to Decon's closing submissions was not that analysis. It was instead a calculation of the residual proceeds that would be available in the liquidation after undisputed secured creditors were paid from the sale of properties on the assumption that none of TDH, Shanghai Yilian or Decon were secured creditors.

Weili Jia Loan 126 The deed administrators contended that the primary judge correctly found that this transaction had been dealt with adequately in the creditors' reports (J [179]) because there was nothing wrong with TFM becoming a borrower and TDH becoming a guarantor for a debt incurred by KRI as a condition for extension of the repayment date of the facility, in circumstances where the companies were operating in a corporate group and engaged in a common endeavour (particularly where the Weili Jia Loan had been used to repay the Shanghai Yilian Loan, which in turn had been used to fund the purchase of land for the companies' benefit). Mr Cook said that Decon's complaints about this transaction (and the CLG Share Agreement) "go nowhere".

CLG Share Agreement 127 The deed administrators contended that the unchallenged findings of the primary judge (J [160]) that (i) the dealings with CLG gave rise to an obligation owed by TFM and KRI in circumstances where the shares could be redeemed at the option of CLG and (ii) it would be immaterial to creditors reading the creditors' reports whether that liability was characterised as a loan or an equity contribution, were dispositive of the pleaded complaint that the creditors' reports were misleading. 128 As to what is now argued, viz that an investigation may lead to a finding of a contravention of the share capital reduction provisions in Part 2 J.1 of the Act, the deed administrators submitted: That may be so, but the conclusion that such an investigation was unlikely to increase the return to creditors was not undermined by that possibility. Section 256D(2)(a) makes it plain that a contravention would not have affected the validity of the transaction. The proposition that there may have been a cause of action against the director for breach of s 180 was not pleaded as a Relevant Transaction. This explains why the Primary Judge could only comment at J[160] that, "while there may be some unanswered questions as to the process adopted which gave rise to this liability" it was not clear why further exploration of this issues was likely to be of greater benefit to creditors. That conclusion was plainly open to his Honour, particularly in light of his Honour's findings at J [125] as to the prospect of recovery against the directors. (Footnote omitted.)

Overall approach 129 The deed administrators made three submissions in response to Decon's complaints about the primary judge's "overall approach". 130 First, they contended that Decon's concession to the effect that it was not "decisive" that there might be a better return to creditors on a winding up, than under the DOCAs, had the consequence that grounds 2(c) and 4(a) and (c) must fail. 131 Secondly, the deed administrators submitted that it was "unfair" to say that the primary judge misdirected himself by focussing upon whether the deed administrators' position was "well-founded" because the focus of Decon's case below was on the creditors' reports being misleading and inadequate. That necessarily required the primary judge to address the question of whether the deed administrators' position, as reflected in the creditors' reports, was well-founded. 132 Thirdly, in relation to the date of insolvency point, the deed administrators submitted that the primary judge considered Decon's contention as to an earlier possible date of insolvency (J [73] and [75]), but concluded (J [122]) that because Decon had led no further evidence to support its asserted date of insolvency it was not "a fertile field of complaint", and that no appealable error was shown.

Decon's submissions - Commercial morality - s 445D(1)(g) (ground 5) 133 Decon contended that the primary judge's finding that there was "no obvious basis for the provisions of s 445D(1)(g) to be invoked" was incorrect because it "overlooked two significant features of the companies' affairs", namely: (1) TFM and KRI's affairs were conducted without regard to each company's separate legal personality, and the companies were instead treated as interchangeable with each other, their parent company, and others in the Tasman Group; and (2) there was a strong likelihood that a key (if not the main) purpose of the administration and DOCA proposals was to further the companies' numerous attempts to avoid paying the judgment debt, and the primary judge did not address Decon's case in that regard. 134 Decon also contended that the unfairly prejudicial and discriminatory effect of the DOCAs on Decon also provided a basis for a finding that the DOCAs are contrary to commercial morality. Further, it contended that the DOCAs "provide the companies with that which four Court decisions have previously denied them: an effectively permanent stay upon Decon's judgment debt (which is reduced to a cents-in-the-dollar claim against the DOCA funds) while the companies remain free to pursue their proposed cross-claims against Decon".

Deed administrators' submissions - Commercial morality - s 445D(1)(g) (ground 5) 135 As to the separate corporate personalities point, the deed administrators contended that the primary judge "could not be criticized for overlooking this matter when it was not relied upon in the POC as a basis for establishing this ground of commercial morality and when it was not the basis upon which the case was put in closing submissions … Error is not demonstrated by pointing to factors that may have been relevant to the value judgment his Honour reached when those factors were not advanced … to support the relevant finding". 136 As to Decon's contention that a key (if not the main) purpose of the administration and DOCA proposals was to avoid paying the judgment debt, the deed administrators contended that although it was pleaded as a matter going to commercial morality, the contention was not made in closing. In any event, the deed administrators said that the primary judge did not overlook the fact that Decon advanced that contention, citing J [74], [10], [12]-[13], [58], and [69].

Decon's submissions - False or misleading information or omissions - ss 445D(1)(a) and (c) (grounds 1 and 3) 137 The primary judge accepted that the creditors' reports contained errors (J [63], at [61] above). 138 Decon contended that the deed administrators did not adequately discuss whether the events and transactions the subject of those errors constituted breaches of directors' duties owed to each company in its own right or the compensation which might be recoverable from the companies' former director, Mr Eric Zhang. 139 In the case of the companies' alleged cross-claim against Decon, the primary judge dismissed Decon's complaint as to misleading information and omissions in the creditors' reports. His Honour held that there was "no difficulty in the approach taken" by the deed administrators insofar as they had not prejudged the prospects of the cross-claim, had noted that they were unaware of its prospects (and had not sighted any legal advice as to its merits), and expressed the view that litigation was an uncertain endeavour (J [159]). 140 Decon contended, however, that: In limiting himself, however, to an assessment of the [deed administrators'] conduct, his Honour overlooked important misleading features of how the cross-claim was communicated to creditors-which is the correct focus of s 445D(1)(a). While the [deed administrators] (properly) did not seek to overstate the prospects of the cross-claim succeeding in the absence of positive advice existing about it, the reports to creditors nevertheless failed to communicate important negative information that did exist about the cross-claim at the relevant time, including: (1) the fact that Stevenson J had been critical of aspects of the alleged cross-claim in earlier Supreme Court of NSW proceedings … and; (2) that previous Senior Counsel for the [companies] had said he was "totally mistaken" to suggest (as the reports to creditors did) that [the] value of the cross-claim might be millions of dollars above Decon's judgment debt [(J [51])] … 141 The written submission continued: Given the centrality of the companies' cross-claims to the DOCAs recommended by the [deed administrators], these are matters that can reasonably be expected to have been material to creditors in deciding to vote in favour of the DOCAs. That should have been the focus of the Primary Judge's inquiry, and not whether his Honour cavilled with the [deed administrators'] conduct. The same may be said about the companies' claims particularly against Eric Zhang and certain secured creditors. That information (already referred to above) was objectively important to the assessment of the proposed DOCAs because it allowed an assessment of the counter-factual of liquidation, but was not disclosed (variously at all or adequately).

Deed administrators' submissions - False or misleading information or omissions - ss 445D(1)(a) and (c) (grounds 1 and 3) 142 The deed administrators said that, on appeal, Decon "relegated to the tail end" the "centrepiece" of its case below. 143 The deed administrators submitted: Quite how a comment, without context, from counsel in argument for leave to appeal against a refusal of a stay of a claim under the [SOP Act] was important negative information to inform the creditors of the value of a cross-claim (which the Administrators had valued at nil) is difficult to fathom. However, the Primary Judge did not overlook this contention: at J[63], he dealt with the matter on the basis that it was an error in the Report not to state these matters. However, he concluded that the way that the cross-claim was treated in the Reports was not misleading: J[159] (Although pleaded, indirectly, the Appellant's opening submissions did not put the case on this basis nor did its closing submissions, making the complaint that his Honour overlooked this matter somewhat unfair). In any event, no basis for invalidating that evaluative judgment has been advanced by the Appellants. That too is an answer to the vague complaint at AS [31].

Appellate review under s 445D(1) 144 Section 445D involves a two stage process. The first stage is to determine whether one of the grounds referred to in sub-s (1) has been established and, if it has, the second stage is to decide whether to exercise the discretion to terminate the DOCA based on that ground. See Britax Childcare Pty Ltd v Infa Products Pty Ltd [2016] FCA 848; (2016) 115 ACSR 322 (Burley J) at 342 [90]; Shafston Avenue Construction Pty Ltd v McCann [2019] FCA 1426; (2019) 138 ACSR 299 at 336 [130] (Reeves J). In this case, as is tolerably clear from his Honour's reasons, he found that none of the s 445D(1) grounds relied upon by Decon was established, so he did not proceed to the second stage. 145 In determining whether it is satisfied of any of the criteria set out in s 445D(1), a court makes an objective evaluation of the relevant circumstances viewed as a whole. Accordingly, appellate review of a decision made under that provision is confined by the principles in House v The King (1936) 55 CLR 499 at 504-505 in respect of discretionary decisions, viz: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 146 As the Full Court said in Wilmar Sugar Australia Ltd v Mackay Sugar Ltd [2017] FCAFC 40; (2017) 345 ALR 174 at 189 [46] in the context of s 232 of the Act (oppressive conduct), "it is the character of the decision, involving as it does the weighing of potentially competing considerations and an overall contextual evaluation of the effect of the conduct, which requires the same approach to appeals as in [House v The King]". 147 As Mason CJ and Deane and McHugh JJ explained in Singer v Berghouse (1994) 181 CLR 201 at 212 (quoting Kirby P in Golosky v Golosky [1993] NSWCA 111) an appeal from a decision on a jurisdictional question of this type should be governed by the principles that regulate appeals from decisions made in the exercise of a discretion because: [u]nless appellate courts show restraint in disturbing the evaluative determinations of primary decision-makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be bought at the cost of diminishing the finality of litigation in a troublesome area and, sometimes at least, with a burden of costs upon the estate which should not be encouraged.

Contrary to creditors' interests as a whole (grounds 2 and 4) 148 Decon alleged by grounds 2 and 4 of its notice of appeal that the primary judge erred as a matter of principle in approaching the statutory task under s 445D through the prism of the wrong question. It was contended that his Honour erred in finding (at J [99]) that "the key question is whether the Administrators have adequately performed their statutory duty to investigate such that they have a sufficient basis to recommend a DOCA instead of liquidation" - and that the "key question" instead involves an assessment of each of the matters listed in ss 445D(1)(a)-‍(g) of the Act. 149 Relatedly, Decon contended that the primary judge's finding (J [119]) that TFM and KRI were single purpose companies for which there was no prospect of a return to trade (because the Epping Development had been completed) was therefore significant because it meant that "the practical benefits of a swift administration compared to liquidation were (and remain) illusory for those companies" and that "[t]he assessment of each of the relevant matters in section 445D should have been undertaken through that lens but, as his Honour's emphasis on the 'key question' demonstrates, was not". 150 We are unable to accept those submissions. It seems to us quite clear that, as the deed administrators submitted, the passage in his Honour's judgment where he used the expression "key question" was written in a prefatory sense to the analysis that then followed of the principles in decided cases. And in our view it is plain from the reasons that the primary judge understood that his first task under s 445D(1) was to determine whether he was satisfied as to any of the matters referred to in paragraphs (a) to (g). 151 In that regard, it is important to have regard to the structure of his Honour's reasons and that they be read as a whole. The passage in which the "key question" is referred to appeared under the rubric of an "Overview", and, as his Honour said, were part of "some general considerations" to which he wished to make reference "[b]efore dealing with the detail of the various facts and transactions raised by Decon" (J [98]). 152 That passage also appeared after the primary judge set out the terms of s 445D and each of the criteria in that provision relied on by Decon, together with a summary of Decon's contentions with respect to each of them (J [59]-[75]). 153 The primary judge then went on to cite a number of passages from the authorities concerning the principles applicable to the application of s 445D (with which Decon does not cavil) (J [99]-[111]). And under the heading "Application of principles in more detail" (J [132]ff), his Honour then recognised the relevance of the legislative objects set out in s 435A of the Act (relevantly that the object of Part 5.3A "is to provide for the business, property and affairs of an insolvent company to be administered in a way that … if it is not possible for the company or its business to continue in existence results in a better return for the company's creditors and members than would result from an immediate winding up of the company"). 154 Next, his Honour accurately recorded (J [136]) the substance of Decon's three complaints; and set out a number of factual matters relevant to whether such a better return would result, including that the deed administrators expressed no view about the strength and prospects of the companies' cross-claim (J [137]-[140]), that at the second meetings of creditors Decon (and Vannella) were admitted for the whole of their judgment debts (which presupposed that the cross-claim would fail) (J [141]), that TDH would not prove under the DOCAs for its admitted debt of $3,254,099 from TFM and $2,376,808 from KRI and that the deed administrators' "overall position is that, for the reasons analysed below, the matters raised by Decon have not caused them to alter their view … that the [DOCAs] will allow a greater return to TFM's and KRI's ordinary unsecured creditors compared to a liquidation" (J [146]) (emphasis added). 155 Further, at J [152], the primary judge expressly - and correctly - recognised the nature of the statutory task that he shortly thereafter turned to: I note that, as indicated in the discussion of the authorities above, Pt 5.3A does not proceed on the basis that the will of the majority creditor necessarily prevails. The authorities support the proposition that the scheme of Pt 5.3A of the Corporations Act does not permit the individual will of one creditor, even a creditor entitled to claim the most significant sum in the administration, to set aside the DOCA without first establishing that the conditions of one or other of the sub-paragraphs of s 445D(1) have been satisfied. 156 His Honour then proceeded to set out the detail of the transactions on which Decon relied to found its contention that they were insufficiently dealt with in the creditors' reports (relevantly for this appeal, the four transactions described above). For the various reasons he gave with respect to each of them, the primary judge held that Decon had failed to identify any material error in the creditors' reports or that any further investigation or interrogation of the transactions presented any realistic prospect of a better return to creditors in a winding up scenario than what was presented by the DOCAs (J [164], [175], [180], [195]). 157 In light of those and other findings, his Honour then proceeded to consider and apply the terms of the s 445D(1) criteria relied upon by Decon (injustice at J [200]-[201] - s 445D(1)(e); oppressive or unfairly prejudicial, or unfairly discriminatory against at J [202]-[204] - s 445D(1)(f)(i); contrary to the interests of the creditors of the company as a whole at J [205] - s 445D(1)(f)(ii); and commercial morality at J [206] - s 445D(1)(g)). 158 In summary, the primary judge made the following relevant evaluative judgments of the s 445D(1) criteria relied upon by Decon. 159 First, his Honour (J [118]) found that "in relation to the various errors or omissions in reports to creditors, taken individually or indeed cumulatively, I am not satisfied that they are, objectively viewed, sufficiently 'material' in the sense used in the legislation to the vote of the creditors. I was not persuaded that objectively viewed there were errors or omissions which might realistically have affected the outcome on the DOCA vote", citing Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd [2005] NSWSC 1235; (2005) 226 ALR 510 at 566-‍567 [292]-‍[294]. That is a finding under ss 445D(1)(c) and (d) of the Act. See too J [198]-[199]. 160 Secondly, his Honour found (J [131]) that "[a]s to oppression or prejudice, Decon would need to establish that any oppression or prejudice was unreasonable. It points to the terms of the DOCAs which provide for pursuit of the cross-claim against Decon. This does not constitute material prejudice in the sense explained by the authorities. There is no suggestion that this course could not be pursued under a liquidation. Decon has not been treated as a separate class of creditor against which adverse considerations would be applied". That is a finding under s 445D(1)(f)(i). 161 Thirdly, his Honour found (J [200]-[201]) that "there is no injustice caused by creditors voting in favour of the [DOCAs] instead of electing to further investigate and potentially pursue speculative causes of action which face uncertainties and difficulties in terms of their funding, prospects of success, and prospects of enforcement and recovery" and that "[n]one of these matters was hidden or concealed from the creditors of either TFM or KRI and, indeed, formed the basis of the Administrators' recommendations". That is a finding under s 445D(1)(e). 162 Fourthly, his Honour found (J [204]) that "[i]n terms of unfair discrimination, none of the concerns surrounding different treatment of the dissenting creditors which arise where a DOCA attempts to deviate from the usual pari passu distribution to creditors of the same class, arises in the present case". That is a finding under s 445D(1)(f)(i). 163 Fifthly, his Honour found (J [206]) that there was "no obvious basis" for the invocation of the commercial morality criterion. That is a finding under s 445D(1)(g) of the Act. 164 His Honour was also, if we may say so with respect, quite properly alive to the notion that whatever "suspicions" may attend the transactions about which Decon made complaint, they were to be weighed in the balance with the prospects of recovery. As his Honour explained (J [125]): … in this case the consideration for the Court is whether or not there are realistic prospects of a greater recovery under liquidation (and that the Administrators were in error in concluding otherwise) and whether Decon has discharged its onus of establishing that fact. I am not satisfied that it has. Generally speaking but importantly, there is some prospect of establishing some possible breaches, but there is little to no evidence as to the likely benefits of doing so in a recovery sense. That matter must be approached in a practical way guided by suitable expertise based on experience and qualifications. I am satisfied that the Administrators have approached the question in this manner. Relevant to the Administrators' recovery assessment was the understanding that the former director, Mr Eric Zhang, owns only one real property with an estimated value of between $1.6 million and $2.2 million however during cross-examination Mr Melluish conceded that the Administrators were not aware of the exact financial positions of Mr Eric Zhang or TDH. The current director, Mr Guoqiang Zhang was only appointed in April 2020 and would not be of interest in relation to transactions occurring prior to that time. In any event, he does not own real property in Australia. The former director does own shares in TDH. The value of those shares is quite unclear. Although Mr Melluish did ask for that information, he was not provided with it. He had no power of compulsion to obtain the information. 165 As the Full Court explained in Shafston Avenue Construction Pty Ltd v McCann [2020] FCAFC 85 at [91] (Farrell, Davies and Moshinsky JJ), where, as here, the appellants contended that the primary judge erred in finding that there was not a likely prospect of the relevant creditors receiving a better outcome in a liquidation: [w]hile it is right to say that the Court is not required to, in effect, prejudge the outcome of future proceedings and so an applicant is not required to prove a claim will succeed on the balance of probabilities, it is not sufficient merely to show there is some claim with a realistic prospect of success. It is not sufficient because the statutory test is not whether there exists a claim with a realistic prospect of success, but whether the DOCA is "contrary to the interests of creditors of the company as a whole" assessed in light of all relevant circumstances. If there is a realistic prospect of a better recovery on a liquidation this is plainly relevant, but it is not to be equated with the ultimate question posed by the provision. In particular, the mere existence of a realistic prospect of a better return does not take into account the following matters, which may be relevant: whether the possible "better return" is substantially better, or only a little better, than the return provided by the DOCA; how much longer the return may take to realise on a liquidation; and the nature of the risks to achieving that return in the particular case, such as the existence of specific defences to a claim, the risks in obtaining funding and uncertainties about foreign law. This list, of course, is not exhaustive. (Emphasis added.) 166 We should also deal here with Decon's contention that also arises under grounds 2 and 4 that "by focussing … upon whether the Administrators' position was 'well founded'", the primary judge misdirected himself as to the relevant question and should have asked whether the DOCAs were contrary to the interests of creditors of the company as a whole assessed in all relevant circumstances, and that a relevant circumstance in addressing that question was whether there was a not unrealistic prospect that there might be a better return to creditors on a winding up than under the DOCAs. See [118] above. 167 That contention must be rejected, because it is clear from his Honour's reasons that he did take into account that relevant circumstance, and thus did not misdirect himself. At J [119], for example, the primary judge observed that "[a]t all times for these single purpose companies, the fundamental issue for the Administrators was the likely comparative return to creditors by entry into the DOCA on the one hand or liquidation on the other". At J [125], the primary judge said "in this case the consideration for the Court is whether or not there are realistic prospects of a greater recovery under liquidation (and that the Administrators were in error in concluding otherwise) and whether Decon has discharged its onus of establishing that fact". And at J [196], he also said "[i]n cases such as the present, an estimated comparison between the outcome of the DOCA and the likely outcome of a liquidation is relevant to the exercise of the Court's discretion". 168 For those reasons, it is, in our view, clear that his Honour correctly understood the nature of the statutory task before him and that he did not err as a matter of principle, as Decon sought to contend. 169 Before turning to the other grounds of appeal in more detail, the deed administrators contended that it is not open on appeal for Decon to argue that by reason of the four identified transactions, the deed administrators' conclusion that unsecured creditors were likely to achieve a higher return under the DOCAs than in liquidation was wrong because it was contrary to the interests of the creditors of the companies as a whole. They said that was not the basis upon which Decon put its case below as to why s 445D(1)(f)(ii) was made out and it could not now make its case on that basis on appeal. 170 In that regard, the deed administrators relied on this well-known passage from Coulton v Holcombe (1986) 162 CLR 1 at 7 (Gibbs CJ, Wilson, Brennan, Deane and Dawson JJ): To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. 171 They also relied on what was said in University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 483 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ): It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so. 172 As the High Court explained in Coulton v Holcombe at 8, the following principles are of great importance to the public interest: (1) the finality of litigation; (2) the difficulty of inducing an appeal court to consider new facts; (3) the undesirability of encouraging tactical decisions not to present an issue at first instance and keeping it in reserve for appeal; and (4) the need for vigilance to avoid injustice to a party having to meet new facts and new issues of law for the first time at the appeal court. 173 We accept the deed administrators' submission that the proposition that by reason of the four transactions, the deed administrators' conclusion that unsecured creditors were likely to achieve a higher return under the DOCAs than in liquidation was wrong because it was contrary to the interests of the creditors of the companies as a whole within the meaning of s 445D(1)(f)(ii) was not pleaded or argued below. In a case such as this, if the point was not run below, that should be the end of the matter. 174 It is unnecessary to recite the details of the POC. It is clear from what the primary judge said at J [205] (see [70] above) that the only pleaded case that touched upon s 445D(1)(f)(ii) was [92(e)] of Decon's POC. That sub-paragraph contained a plea that the TFM DOCA should be terminated pursuant to s 445D because "the TFM DOCA is contrary to creditors of TFM as a whole within the meaning of section 445D(1)(f)(ii), having regard to the matters pleaded in paragraph 80(a) to (c) above". Paragraphs 80(a) to (c) in turn read as follows: The TFM DOCA Resolution was contrary to the interests of the unrelated creditors of TFM as a group (or a class of creditors as a group) because: a. the TFM DOCA Resolution was passed following the dissemination to the unrelated creditors of the TFM Report, which was materially misleading by reason of the matters pleaded above in paragraphs 44 to 56; b. the unrelated creditors were therefore denied an informed choice as to whether the TFM DOCA Resolution should pass and the TFM DOCA be executed; c. the unrelated creditors were also therefore denied an informed choice as to whether the Relevant Transactions and the matters pleaded above in paragraphs 44 to 56 should be the subject of examination (including by a liquidator) … 175 As that pleading makes clear, Decon's reliance on s 445D(1)(f)(ii) was limited to the allegation that the creditors' reports were misleading and insufficient. There was no pleaded allegation that, by reason of the four (or any) transactions relied upon, the deed administrators' conclusion that unsecured creditors were likely to receive a higher return under the DOCAs than in a liquidation was wrong. In those circumstances, in our view, Decon should not be permitted to make that contention on appeal. 176 But in any event, the complaints about the four transactions cannot succeed, because no House v The King type error was identified - and as with each of the other grounds contended for, Decon's complaint was instead impermissibly directed at debating the primary judge's evaluative judgments. 177 The Shanghai Yilian Loan case was the high point of Decon's contentions made on appeal about the transactions. The highest that the case was put was that "on its face, the transaction was of no benefit to the companies and prima facie voidable by (at least) sections 588FB, 588FC, 588FDA, and 588FE(3) or (4)" of the Act. The other point was that "insofar as its purpose was to provide comfort in respect of arrangements between Shanghai Yilian and Tasman Funds, the transaction may also be a related-party transaction or an unreasonable director-related transaction" within the meaning of s 588FDA. See [105] above. 178 Mr Cook pointed to myriad difficulties with Decon's claim that the deed administrators' failure to point out the need to investigate the Shanghai Yilian Loan meant that the creditors had been "duped" into approving the DOCAs, viz: (1) the transaction was outside the date of insolvency that the deed administrators had found - that is, the company was not insolvent in the view of the deed administrators at the time the transaction was entered into; (2) the only support for the notion that the date of insolvency might have been earlier was a speculative remark made by Stevenson J that the companies had acknowledged the judgment debt (see [23] above); (3) Decon's attempt to overcome the problem that the Shanghai Yilian Loan occurred before the date of insolvency by positing the possibility that it was an unreasonable director-related transaction "went nowhere" because it was a necessary element of the cause of action that "the payment, disposition or issue" be made to a director of the company, a close associate of a director, or a person on behalf of, or for the benefit of, such a person - here, the assumption by TFM or KRI of an obligation to repay a loan to Shanghai Yilian could not possibly involve a payment or disposition to Mr Eric Zhang; (4) in any event, a court would not set aside a loan between two wholly owned subsidiaries in circumstances where the holding company had borrowed money to assist and finance those subsidiaries; (5) Decon did not challenge the primary judge's factual finding (J [175]) that the $11.7 million borrowed by Tasman Funds was for the benefit of TFM and KRI acquiring the land upon which the Epping Development was built; (6) in any event, even assuming that some cause of action were open, his Honour was correct to find that it was unlikely that there would be any improvement to dividends; (7) the transaction was unlikely to have involved any breach of directors' duties by Mr Eric Zhang because, as Mr Cook put it, "what was wrong with Mr Zhang as a director … in order to obtain an extension of a significant loan that was utilised by the special purpose vehicles to acquire and develop the land from committing those companies to provide financial support for the extension of the loan?"; (8) even if it were a breach of directors' duties, Decon did not challenge on appeal the primary judge's finding that Mr Eric Zhang's assets were worth, at best, between $800,000 and $1 million; and (9) like all the transactions founded on a possible allegation of a breach of directors' duties against Mr Eric Zhang, "they keep coming to the dead end that even if they existed, if they are breaches of directors' duties, they go nowhere because there's no prospect of recovery". 179 Before turning to the second of the transactions, we should deal briefly with Decon's contention that to the extent the primary judge did consider possible returns to creditors on a winding up, he did so without factoring in the prospect that the actual date of insolvency was October 2018 and not June 2019. The primary judge (J [122]) described Decon's argument as relying "on statements made by the companies' then senior counsel to the Supreme Court and the Court of Appeal to the effect that, absent a stay of Decon's Judgment Debt obtained in 2019, the companies were insolvent. When read together with statements recorded by Stevenson J that the companies had acknowledged their debt to Decon 'as long ago as 11 October 2018', Decon says it is reasonably arguable that the companies were indeed insolvent from at least October 2018", not June 2019, which was the view formed by the deed administrators. His Honour found that "while it may be an arguable position", because Decon had led no further evidence to support its asserted date of insolvency, it was not "a fertile field of complaint". 180 In our view, the primary judge made no appealable error in so concluding. The finding was clearly open. 181 Turning now to the securities provided to TDH, Decon's contention in that regard was that it was "probable" that those securities would be set aside. See [108] above. 182 But, as Mr Cook submitted in his oral address, even accepting that to be so, it is "important to bear in mind that there's no suggestion that there's going to be any recovery from TDH as a result of pursuing … this particular transaction. The best that can be hoped for is that TDH gets relegated to being an unsecured creditor rather than a secured creditor". 183 Mr Cook further pointed out that because the DOCAs contemplate that if TDH succeeds in establishing its secured position, it will provide half of the secured proceeds that it recovers to the DOCA fund. Mr Cook also submitted that the making of informal loans by a holding company (TDH) to the companies, being special purpose vehicles, was "not an unusual circumstance", and that in circumstances where Decon had obtained its judgment debt against TFM, it made sense to have loan agreements formalised. 184 On the other hand, Mr Cook did agree with Mr Giles' submission that to the extent that TDH gave securities for past advances, the argument that that would constitute an unfair preference was "attractive". He stressed, however, that the power under s 588FF of the Act to set aside a preference in such circumstances would only operate to the extent that the security secured past advances. 185 In summary, Mr Cook submitted that there was "nothing peculiar about the primary judge not being overly impressed with the argument that the attack on the TDH securities would change the matter significantly for creditors", in particular in circumstances where even if the securities were set aside, TDH would still be an unsecured creditor for all of its claims. 186 Mr Cook also submitted that in determining whether the DOCAs were contrary to the interests of the creditors as a whole, it is also important to bear in mind that under the terms of the DOCAs: there's a $750,000 cash injection into the combined DOCAs. That's hard cash coming in, 750,000. TDH doesn't prove its claims. TDH will give 50 per cent of any secured claims it has in its contest. If there are recoveries under the cross-claim, those come in. And the said to be paltry dividend is premised on the cross-claim never succeeding and not $1 being available to set off the $6.5 million claim that the appellant has. If the appellant's claim is taken out, the dividend prospect increases dramatically for the other unsecured creditors. So the dividend at five cents, in the case of TFM, is a worse-case scenario. It assumes that the cross-claim is not brought or, if brought, is completely unsuccessful and not a single set-off appears in respect of a $6.5 million judgment. 187 These are all matters that the primary judge was well aware of. But it is not for an appeal court to make its own assessment of whether any particular criterion going to a state of satisfaction in s 445D(1) is, or is not, established. 188 The short point, for reasons explained above, is that in making the various findings with respect to the s 445D criteria relied on below by Decon, which the primary judge made in concluding not to terminate the DOCAs, his Honour made evaluative judgments as to the existence of one or more of the jurisdictional preconditions set out in s 445D of the Act. Such evaluative judgments about jurisdictional facts may only be set aside if a court on appeal is satisfied that a House v The King error has occurred. 189 As Mr Cook put it, whether DOCAs are contrary to the interests of creditors as a whole is a question "that creditors in these situations face every time a deed is put to them. The speculative proposition that transactions may be attacked, and they may be set aside and that recoveries may flow through from that, may yield a better result than grabbing the certain dividend under [a] deed of company arrangement. These creditors [in this case], including the Deputy Commissioner of Taxation, decided that they wanted the certainty rather than the speculative. The primary judge agreed with the administrator that that was the right decision, and the appellant now tells your Honours that your Honours should set aside that evaluative judgment that his Honour made because he engaged in error in reaching that decision". As the cases make clear, that is not the role of this court on appeal. 190 As to the other two transactions - the Weili Jia Loan and the CLG Share Agreement - Decon's case on appeal was that it "would see at least a prima facie return" in a liquidation. The main complaint about the former was that TFM's assumption of a liability of $4.98 million was "unexplained" and gave rise to a prima facie case against Mr Eric Zhang. As to the latter, the main complaint was that the "formalities" of the buyback had not been observed, including any consideration by the board as to whether the buyback would prejudice the company's ability to pay its creditors. That too was said to give rise to a prima facie case against Mr Eric Zhang. 191 But again, the primary judge formed a different view on the question whether any further investigation or interrogation of those two transactions presented any realistic prospect of better return to creditors in a winding up (J [177]-[180] in respect of the Weili Jia Loan and J [160]-‍[164] in respect of the CLG Share Agreement). The primary judge found that it was unlikely that Mr Eric Zhang owned material assets. His Honour found (J [125]) that even assuming some prospect of establishing possible breaches, "there is little to no evidence as to the likely benefits of doing so in a recovery sense". 192 There being no error of principle identified, the challenges to those findings must be rejected. 193 We should next deal with the question of whether, to use Mr Giles' expression, Mr Eric Zhang was "worth powder and shot". 194 The primary judge considered that it was relevant to the deed administrators' "recovery assessment" that, as they understood it, Mr Zhang "owns only one real property with an estimated value of between $1.6 million and $2.2 million", although during cross-examination Mr Melluish conceded that they were not aware of the exact financial positions of either Mr Zhang or TDH, and that although Mr Melluish had asked for that information, he was not given it. The primary judge also observed (J [125]-[126]) "on the topic of practical recovery … that Decon has expressed a willingness and ability to fund litigation which may be brought by a liquidator in respect of arguably voidable transactions, but in terms of substantial information relevant to capacity to fund such litigation, there are a few concrete details". 195 Mr Giles submitted that there was insufficient evidence for the deed administrators to form the view that Mr Zhang was not a person of means, because he had declined to tell the deed administrators of his actual asset position. Mr Giles also submitted that the analysis of the primary judge did not take into account that Mr Zhang and TDH were going to fund litigation, so presumably they had "at least many hundreds of thousands of dollars at their disposal and, in any event, that … it was at the proponent's feet, so to speak, that there was no further evidence, our learned friend, Mr Cook's, clients having asked and received no response. And then, of course, there is also the property referred to suggesting that there is at least a prospect". 196 In our view, the findings that the primary judge made about the prospect of recovery against Mr Zhang were plainly open to him.

Commercial morality (ground 5) 197 It only remains to deal with that part of ground 5 which contended that the primary judge erred when applying s 445D(1) of the Act in treating the business, property, affairs and financial circumstances of each of TFM and KRI as interchangeable and the same as one another and with those of TDH and other related entities (J [128], [130], [175], [179]-[180]). Decon contended that his Honour should have found that the DOCAs were contrary to commercial morality by reason of the manner in which the business, property, affairs and financial circumstances of each of TFM and KRI were so treated as interchangeable and the same as one another and with TDH and other related entities and, on that basis, should be set aside under s 445D(1)(g) of the Act (the termination "for some other reason" ground). 198 Very little was said about that contention at the hearing of the appeal. 199 Decon contended in its written submissions that the primary judge overlooked two significant features of the companies' affairs that go to the commercial morality ground - (i) he disregarded the separate corporate personalities of TFM and KRI and (ii) there was a strong likelihood that a key (if not the main) purpose of the companies' administration and the DOCA proposals was to avoid paying the judgment debt. 200 But, as the deed administrators correctly submitted, (i) was not relied upon in Decon's POC as a basis for establishing any commercial morality basis for terminating the DOCAs and it was not the basis upon which the case was put in Decon's closing submissions before the primary judge. And in relation to (ii), the case was never put that that purpose was a basis for setting aside the DOCAs as a matter of commercial morality. In any event, it is difficult to understand why a "disregard" by the companies of their "corporate personalities" could be of consequence in a case, like this one, where their single purpose (the Epping Development) is at an end.

False or misleading information or omissions (grounds 1 and 3) 201 Finally, Decon contended that the errors in the creditors' reports were matters that could reasonably be expected to have been material to creditors in deciding to vote in favour of the DOCAs, that that enquiry was the correct focus of s 455D(1)(a), and that the primary judge erred by instead incorrectly focussing on the deed administrators' conduct in concluding (J [159]) that there was "no difficulty in the approach" of the deed administrators. 202 Decon's two main complaints were that (i) the deed administrators did not adequately discuss whether the events and transactions the subject of those errors constituted breaches of directors' duties or the compensation which might be recoverable from Mr Eric Zhang and (ii) the creditors' reports failed to communicate important negative information about the cross-claim and its prospects. Decon submitted that the primary judge erred in focussing on whether he "cavilled with" the deed administrators' conduct, and instead should have asked whether these errors could reasonably be expected to have been material to creditors in deciding to vote in favour of the DOCAs. In Decon's case below, (i) was said to be relevant to an error in applying s 455D(1)(c), and (ii) relevant to s 455D(1)(a), but on appeal, the main focus of Decon's submissions were on s 455D(1)(a) and the analysis of the cross-claim in the creditors' reports. 203 Decon said very little about this contention during the hearing of the appeal, and, as the deed administrators submitted, what was the "centrepiece" of Decon's case below was instead relegated to "its tail end". 204 As the deed administrators correctly submitted, the primary judge considered Decon's contentions about ss 455D(1)(a) and (c) (J [63]), including its submission that the errors might "have affected the outcome of the vote on the DOCAs and therefore justify the exercise of the power in s 445D(1)(a)" (J [64]) (see [61] above). And his Honour clearly turned his mind to whether the alleged errors would affect the creditors' vote, finding at J [118] that: Speaking generally again, in relation to the various errors or omissions in reports to creditors, taken individually or indeed cumulatively, I am not satisfied that they are, objectively viewed, sufficiently 'material' in the sense used in the legislation to the vote of the creditors. I was not persuaded that objectively viewed there were errors or omissions which might realistically have affected the outcome on the DOCA vote … 205 It is plain, therefore, from that passage, that the learned primary judge, contrary to Decon's contention, did direct his mind to the correct question, namely whether the errors in the creditors' reports were matters that could reasonably be expected to be material to creditors in deciding to vote in favour of the DOCAs.

Disposition 206 For those reasons, the appeal is to be dismissed, with costs. I certify that the preceding two hundred and six (206) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Yates, O'Callaghan and Halley.

SCHEDULE OF PARTIES NSD 110 of 2021 Respondents Fourth Respondent: JOHN MELLUISH

Corporations Act 2001(Cth)ss 256B(1), 257A, 440D, 445D, 445D(1), 445D(1)(a), 445D(1)(c), 445D(1)(e), 445D(1)(f), 455D(1)(f)(i), 445D(1)(f)(ii), 445D(1)(g), 553C, 588FB, 588FC, 588FDA, 588FE(3), 588FE(4), 588FE(6A), 588FF, Schedule

At a glance

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Judgment (43 paragraphs)

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Legislation Cited (4)

Cases Cited (22)

Cited By (7)