The Objects of Parts 5.3A and 5.3B of the Corporations Act compared
48 Although not strictly relevant to the present application, the Company relied expressly at the hearing of the interlocutory application on its written submissions before the Registrar on the hearing of its application pursuant to s 453Q(1), on 2 June 2023, for an adjournment of the DCT's application to wind up the Company.
49 The Company contended that, having regard to the purpose and objectives of Pt 5.3B, as compared with Pt 5.3A, the threshold test by which the Court is satisfied that it is in the interests of a company's creditors for a company to continue under restructuring rather than be wound up is a lesser standard of satisfaction than required under Pt 5.3A. It submitted that because the intent under Pt 5.3B is to provide for a restructuring process that allows a company to retain control while developing a plan, it does not demand that the process must achieve the objectives set out in s 435A - maximising the chances of the company continuing in existence - and so does not demand the extensive investigations and report to creditors to substantiate such outcome.
50 The Company submitted that, in considering whether there is sufficient evidence to be satisfied as to the interests of creditors under s 453Q for the restructuring to continue, the Court should have due regard to the allowing the restructuring process to play out and to address the evidence of a company as to interests of creditors in light of the more circumscribed investigative process of Pt 5.3B. Consequently, the authorities concerned with the cognate provision in Pt 5.3A, s 440A, ought not necessarily be applied mutatis mutandis.
51 The Object of Pt 5.3B can be contrasted with its equivalent in Pt 5.3A, which provides in s 435A:
Object of this Part
The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) 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.
(Emphasis added.)
52 It is apparent that the Object of Pt 5.3B is significantly more modest than that of Part 5.3A. The latter is concerned with attempting to save the company; the former is simply concerned with providing the opportunity for a restructuring plan to be put to the creditors.
53 There has been considerable judicial consideration of s 435A. In particular, in Mighty River International Ltd v Hughes [2018] HCA 38; 265 CLR 480 at [7], Kiefel CJ and Edelman J observed:
This object is pursued by an intended flexibility or, put another way, by a wide variety of different possible deeds of company arrangement. These possibilities include extinguishing or varying debts and imposing moratoria on claims. As Finkelstein J observed in Commonwealth v Rocklea Spinning Mills Pty Ltd, "Pt 5.3A assumes that it might often be necessary to extinguish by composition or bar certain claims". Similarly, in the Explanatory Memorandum to the Bill that introduced what became Pt 5.3A, it was suggested that a deed of company arrangement may commonly provide for "some form of compromise of debts, such as repayment of debts by delayed instalments". Consistently with this object, Pt 5.3A creates a structured, sequential process for the creation and duration of a deed of company arrangement.
(Footnotes omitted.)
54 Their Honours, at [35], "put to one side" the "difficulties" with a submission that the Object of Pt 5.3A can be treated as a condition of validity independently of the provisions of the Part before continuing:
… the operation of the Deed aims to fulfil the object of the Part by maximising the chance of Mesa Minerals' survival or otherwise providing a better return to creditors than would result from its immediate winding up. In the s 439A report and the supplementary report that preceded the Deed, the Administrators opined that it was not in the interests of creditors that Mesa Minerals be wound up. Even if an approved variation to the Deed caused all Mesa Minerals' assets to be sold to realise its debts, this would be preferable to winding up Mesa Minerals because, as the Master explained, the valuable listed shell would be preserved.
55 The authorities concerned with s 440A which regulates the winding up of a company establish that it is for the person seeking the adjournment to satisfy the Court that in the circumstances of the particular case, it is in interests of the company's creditors for it to continue under administration rather than be wound up: TCS Management Pty Ltd v CTTI Solutions Pty Ltd [2001] NSWSC 830 at [18]; Australian Securities and Investments Commission, in the matter of Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) v Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) [2009] FCA 269; 71 ACSR 81 at [26]. Such interests are those interests as creditors, not "interests arising from family relationships, friendships or emotional attachments": Deputy Commissioner of Taxation v Alternative Business Solutions (Aust) Pty Ltd (Administrators Appointed) [2006] FCA 400 at [9]; In the matter of Cresco Opus Fund No 4 Pty Limited (Administrator Appointed) [2019] NSWSC 941 at [29].
56 The Company referred to Re DST Project Management and Construction Pty Ltd [2021] VSC 108, a case in which a submission as to the relevance of the difference between the Object clauses in Pts 5.3A and 5.3B had been urged, and in which the Judicial Registrar had acknowledged, at [30], "there is some force in this argument". However, in the context of that application, "where the proposed return to creditors under the restructuring far exceeds that available on a best-case scenario liquidation", he declined to determine whether any lesser standard should be applied. By contrast, in Re Dessco Pty Ltd [2021] VSC 94, a different Judicial Registrar held, at [43], that "the 'best interests of creditors' test under s 453Q is analogous to the test under s 440A" of the Corporations Act, albeit it does not appear the argument mounted in Re DST had been put. He observed, however, at [42], that the assessment of whether creditors could receive a better return by way of payment of their debts from administration rather than from liquidation "is made more difficult because until a restructuring plan is developed it is difficult to ascertain the likely return to creditors if the company is allowed to restructure".
57 There is some difficulty with the Company's contention that s 453Q should be construed and applied differently from s 440A. First, as a matter of ordinary principles of construction, the section should be construed so as to give the same meaning to the same words as used in another section: Craig Williamson Pty Ltd v Barrowcliff [1915] VLR 450; 21 ALR 349 at 452. Had the Parliament intended there to be a different standard from that in s 440A, by which the Court would be satisfied that an application for an adjournment of an application to wind up company if the company is in restructuring, rather than under administration, it would have been simple enough for the Parliament to say so. To the contrary, the Parliament has chosen to adopt the exact same wording in s 453Q, preserving the sole test of satisfaction as being "in the interests if company's creditors" for the restructuring to continue rather than be wound up.
58 Secondly to the extent that it is appropriate to have regard to the Object of Pt 5.3B in interpreting s 453Q, it is concerned with adjourning an application for an order to wind up a company if the company is under restructuring. Thus, the "restructuring process", the provision for which is the very Object of Pt 5.3B has already been achieved. There seems therefore little need to have recourse to s452A in order to construe s 453Q.
59 For these reasons, it seems unlikely that there is any compelling basis to contend that the Court should take a different approach to deciding whether or not to grant an adjournment under s 453Q from that which applies in relation to s 440A. In both respects, the Court's concern must be its state of satisfaction as to whether continuing under restructuring or under administration is in the interests of the company's creditors.
60 Nevertheless, it is undesirable that I reach any firm view on the arguments put by the Company in circumstances where there was no contradictor and the point was moot by the time this application came before me, the adjournment having already been granted.
I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.