Deputy Commissioner of Taxation v TMPL Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1034 of 2009

AND: TMPL PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 064 227 505

JUDGE: PERRAM J DATE OF ORDER: 8 December 2011 WHERE MADE: SYDNEY

1. Section 446B of the Corporations Act 2001 (Cth) and regulation 5.3A.07 of the Corporations Regulations 2001 (Cth) apply to the first defendant, TMPL Pty Ltd, in a manner such that the special resolution deemed to be passed under those provisions be taken to be one resolving that the first defendant apply to be wound up by the Court. 2. The deed of company arrangement between the first and second defendants dated 7 August 2009 be terminated. 3. The first defendant be wound up by the Court. 4. Mr Max Donnelly be appointed as liquidator of the first defendant. 5. The liquidator file with the Chambers of Perram J a letter recording the conclusion of a funding agreement with the plaintiff as to the winding up by 5pm on 15 December 2011. 6. The second defendant pay the plaintiff's costs of the proceedings. 7. If Order 5 is not complied with by 5pm on 15 December 2011, revoke Orders 1-6 and in lieu thereof order that the plaintiff's application be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1034 of 2009

AND: TMPL PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 064 227 505

JUDGE: PERRAM J DATE: 8 DECEMBER 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT I Introduction [1] II Mr Triguboff and his companies [14] III The Film Pitch Black [15] IV Questionable Transactions [73] (a) The Callable Converting Redeemable Notes [74] (b) The payment by TMPL to its shareholders of dividends of $1,900,000 and $600,000 [101] (c) The TSAL facility agreement [102] (d) The sale by TMPL of a debt owed to it by TSAL to TSAL Asia [105] (e) Dealings with Art & Australia Pty Ltd [107] (f) Charges granted by TMPL [120] (g) The payment by TMPL to TSAL of an administration fee of $267,657.77 [123] (h) The payment by TMPL of $1,500,000 to TSAL Asia on 4 June 2009 [124] (i) Artwork sales [125] (j) Retrospective related-party accounting changes [127] (k) Assets excluded from the deed fund [130] V Relief [132]

I Introduction 1 The question in this case is whether a deed of company arrangement should be set aside and arises as follows: The plaintiff is the Deputy Commissioner of Taxation (the 'Deputy Commissioner') who is a creditor of the first defendant, TMPL Pty Ltd ('TMPL'), which is subject to a deed of company arrangement. The Deputy Commissioner's status as a creditor arises from the fact of his having issued to TMPL notices of assessment which as at the date when it was resolved to enter into the deed (5 August 2009) totalled, with penalties and the general interest charge, the not insubstantial sum of $19,551,033.77. TMPL had previously disputed its liability to pay almost all of this sum and to that end had lodged objections with the Commissioner of Taxation (the 'Commissioner'). Those objections were disallowed between 15 and 17 June 2009. Very shortly afterwards on 1 July 2009, the sole director of TMPL resolved that the second defendants - the accountants Mr de Vries and Mr Solomons - should be appointed as the company's administrators. The power of the director so to resolve arose when he was of the opinion that the company was 'insolvent, or is likely to become insolvent at some future time' (s 436A Corporations Act 2001 (Cth)). The Deputy Commissioner's practical capacity to enforce the notices of assessment was thereafter retarded for during the administration of a company neither a proceeding nor an enforcement procedure against it may be begun without the leave of the Court (ss 440D(1), 440F Corporations Act). 2 The process of administration is a reconstruction procedure which, in part, replaced the former process of official management. Its enlivenment can lead to one of three results: the company may execute a deed of company arrangement; it may be wound up; or the administration may be terminated (s 439C Corporations Act). The execution of a deed of company arrangement should not be mistaken as being analogous to the execution of any other kind of deed. It may only be executed following a resolution of creditors that it should be so executed at a meeting convened under s 439A. Once passed it is the company which is bound to execute the deed and, once executed, the deed binds, to use the language of s 444D(1), 'all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i)' (which is a date not later than when the administration began). It is this last feature of a deed of company arrangement which marks it out as being fundamentally different to an ordinary deed for the effect of s 444D(1) is to bind even those creditors who voted against it. What may be achieved under such a deed includes the extinguishment of creditors' pre-existing rights and their replacement with new rights so that the aim of reconstruction may be achieved. Critically, a deed of company arrangement may provide that a debt is released by its operation (s 444H). 3 Those features of a deed of company arrangement create the potential for creditors to have opposing views on the desirability of its execution. By placing the future of the company in the hands of the creditors and arming those same creditors with the ability to restructure each of their rights as against the company there will, on some occasions, be creditors who do rather better than others. This is an anticipated consequence of Pt 5.3A of the Corporations Act. 4 The issue then of how the creditors of a company might resolve that a deed of company arrangement be executed becomes of significance. In the simplest case, such a resolution will be passed ordinarily on the voices (reg 5.6.19 Corporations Regulations 2001 (Cth)) but - and it is this singular fact which gives rise to the present litigation - where a poll is demanded the effect of reg 5.6.21 is to give to the Chairperson of the meeting a casting vote where a majority of the creditors by number are in favour of entry into the deed but a majority of creditors by value are against it (or vice-versa). 5 In the present case, following some initial adjournments, the meeting of creditors at which the deed of company arrangement was considered took place on 5 August 2009 just over a month after the sole director had resolved to appoint the administrators. The administrators were required by law to give notice of the meeting to the creditors in various ways and were required to include with that notice a report by them about TMPL's business, property, affairs and financial circumstances (s 439A(4)(a)) and this was done. That report proposed the execution by TMPL of a deed of company arrangement. One important feature was a proposal that TMPL's sole director - a Mr Michael Triguboff - would fund from his own pocket the pursuit by TMPL of two litigious endeavours. The first consisted of proceedings in the Supreme Court of New South Wales by TMPL against Universal City Studios Inc ('Universal') to recover distribution fees and related sums said to have been due to it as a result of the release of the sci-fi action thriller Pitch Black; the second was the pursuit by TMPL before the Administrative Appeals Tribunal (the 'Tribunal') of a review of the Deputy Commissioner's disallowance of TMPL's objections to the assessments which had been issued to it. As to the first suit, the report noted that the recoveries from Universal 'may be as high as $15,000,000 gross (not including recovery costs, tax, penalties and interest)'. As to the suit against the taxation authorities, obviously enough if the review proceedings were entirely successful this would have the effect of reducing the size of the pool of unsecured creditors by the $19,551,033.77 owed to the Deputy Commissioner on 5 August 2009. The deed proposed that the net proceeds of the Supreme Court proceedings would be paid into a fund. In addition there was also to be paid into the same fund all amounts received by the company pursuant to some instruments known as 'Callable Converting Redeemable Note Deeds' which were dated 15 August 2008 and 3 October 2008 together with some other minor assets. Of these deeds it will be necessary to say more later. The unsecured creditors would then share in this fund in proportion to the size of their respective debts. 6 A number of scenarios were considered by the administrators in their report ranging from pessimistic to optimistic and under which, correspondingly, the unsecured creditors were thought likely to receive dividends from the pool varying between one and 100 cents in the dollar. The Deputy Commissioner was not disposed to agree to this proposed arrangement. However, the six other unsecured creditors who voted at the meeting were. Those creditors and the amounts they were owed were as follows: Johnson Winter & Slattery $10,000 TSAL Asia Pty Ltd $277,030.26 Nicole Anne Royan $2,950 Newcombe and Co Pty Ltd $3,300 Michael Triguboff $10,000 David Russell QC $550.00

7 Apart from Ms Royan and Mr Russell QC, all of these creditors have on-going connexions to Mr Triguboff. Johnson Winter & Slattery had acted for TMPL and continues to act for it in the review proceedings. Additionally, they continue to act for other companies under Mr Triguboff's control. TSAL Asia Pty Ltd is controlled by Mr Triguboff (as I explain later in these reasons). Newcombe and Co Pty Ltd are the tax agents for a number of Mr Triguboff's companies. 8 The total nominal value of the debts owed to these six creditors was $330,830.26 which was approximately 1.5% of the total nominal value of the debts owed to all creditors. The Deputy Commissioner, on the other hand, with his debt of $19,551,033.77 held 98.5% of the nominal value of the debts of all creditors. At the meeting the creditors resolved on the voices that the deed should be adopted but the Deputy Commissioner's representative called for a poll. On that poll, the motion could be 'carried' only if a majority of creditors by number and value voted in its favour (reg 5.6.21(2) Corporations Regulations): in this case, the other creditors were in the majority by number in voting for the motion but the Deputy Commissioner was overwhelmingly in the majority by value in voting against it so that the motion was not 'carried'. A motion which was not 'carried' was not - perhaps contrary to ordinary English usage - the same as a motion which was 'not carried'. Under reg 5.6.21, the motion would be 'not carried' only if a majority of creditors by number and value voted against it (reg 5.6.21(3)): in this case, the Deputy Commissioner was in the majority by value in voting against it but the other creditors were in the majority by number in voting for it so that the motion was not 'not carried' either. The motion was therefore neither 'carried' nor 'not carried', a stalemate whose eventuality was foreseen by reg 5.6.21(4) which provided in such a case for a casting vote by the Chairperson of the meeting. The Chairperson of the meeting was Mr De Vries and he cast his vote in favour of the deed's adoption. 9 The consequence of the deed's adoption is that the Deputy Commissioner is now confined to receiving a dividend from the pool of assets collected by the deed administrators; in practical terms, the net proceeds of the Supreme Court litigation and the proceeds of the Callable Converting Redeemable Note Deeds dated 15 August 2008 and 3 October 2008. The Deputy Commissioner is unpersuaded as to the value of either. 10 TMPL's taxation liabilities arise from two separate and distinct sources. The first arises from TMPL's entry on 30 June 2000 into a very complicated arrangement which ostensibly appeared to be an investment in the film Pitch Black. As a result of the transactions resulting from that arrangement TMPL claimed deductions of $10,350,000 in the tax years 2000-2002 although the amount of money it had outlaid was only $1,830,000. Following an audit, conducted between March 2006 and November 2008, of the tax affairs of Mr Triguboff and various companies controlled by him including TMPL the Australian Taxation Office ('ATO') concluded that the investment was a scheme to which either of s 82KL or the provisions of Part IVA of the Income Tax Assessment Act 1936 (Cth) applied. Fresh notices of assessment were issued for the years 2000, 2001 and 2002. With interest and penalties the tax due on 1 July 2009 was $9,497,434.21. Objections to these assessments were lodged but were unsuccessful. There is presently on foot in the Tribunal an application by TMPL to review these assessments. It might be noted that the imposition of the penalties reflected the Commissioner's assessment that the position of TMPL was not arguable. 11 Unrelated to the Pitch Black issue the ATO also considered that a settlement entered into between TMPL and the investment bank Lazard Frères (for whom Mr Triguboff had formerly worked) was liable to capital gains tax. I shall refer to this compendiously as the Lazard Frères issue. Fresh notices of assessment were issued for the years 2003 and 2005 totalling $5,645,294. Although this was liable to the general interest charge, the Commissioner accepted that TMPL's position in relation to the Lazard Frères assessments was arguable so that no penalty was imposed. As at 1 July 2009 the total tax and interest arising from the Lazard Frères issue was $10,011,396.51. 12 In the broad, the Deputy Commissioner contends that the report to creditors was misleading or suffered from material omissions in a number of regards. Further, he suspects that in the face of the audit process leading to the notices of assessment issued by the Deputy Commissioner Mr Triguboff migrated TMPL's assets elsewhere and that the deed of company arrangement serves only to prevent what the Deputy Commissioner refers to as 'liquidation scrutiny'. Accordingly, the practical outcome he seeks is to have this Court set aside the deed of company arrangement under ss 445D, 447A or 600B of the Corporations Act. If that occurs a liquidator will be appointed. There are various legal routes by which that outcome may be achieved but I will postpone discussion of them until the facts have been explained. 13 For the reasons which follow the submissions of the Deputy Commissioner should be accepted.

II Mr Triguboff and his companies 14 Mr Triguboff is the sole director of TMPL. Both the report to creditors and a company extract from September 2009 show that of the issued share capital of 100 shares 99 are held by Mr Triguboff and one by his wife, Eleonora. Other documents in evidence described an entity named 'Triguboff Ltd Partnership' as owning 100% of the shares in TMPL. This, however, is immaterial as the documents also revealed the holdings in Triguboff Ltd Partnership to be 99% to Mr Triguboff and 1% to his wife. A discretionary trust of which Mr Triguboff is both a Trustee and the 'Adviser' holds the share capital of another entity, TSAL Pty Ltd ('TSAL'). Mr Triguboff is the sole director of TSAL. TSAL in turn owns 492 of the 500 shares on issue in another entity, TSAL Asia Pty Ltd ('TSAL Asia'). The remaining eight shares are held by TMPL. TSAL Asia has only one director and that is Mr Triguboff. MIR Asia Pty Ltd ('MIR Asia') is owned as to 73.54% by TSAL Asia and has three directors, one of which is Mr Triguboff. It will be seen therefore that TMPL, TSAL, TSAL Asia and MIR Asia are all entities under the control of Mr Triguboff. The evidence in this case disclosed a large number of sole director's resolutions which disclosed TMPL, TSAL and TSAL Asia doing business with each other. On no view are any of these arms length transactions.

III The Film Pitch Black 15 It is useful to begin with the events surrounding the film Pitch Black. According to an information memorandum distributed prior to 30 June 2000 the film Pitch Black was 'an exciting, visceral film with dazzling special effects and a highly kinetic directional style'. The producer of Pitch Black was Universal City Studios Productions Inc, a company based in Universal City, California. For the balance of these reasons I will refer to this entity as the 'Producer'. The film was produced in Australia. It was released in the United States on 18 February 2000. According to a report prepared for Mr Triguboff on 22 November 2000 Pitch Black had opened in 1,832 screens in the United States and when its theatrical run had ended in June 2000 it had grossed US$39,200,000 at the box office. 16 A proposal to invest in Pitch Black seems to have come to the attention of Mr Harry Triguboff, Mr Triguboff's uncle and the guiding mind behind Meriton Apartments Pty Ltd. Mr Harry Triguboff did not proceed with the investment. The evidence suggested three possible reasons for this course. The first was that on 2 March 2000 he received a report from a box office consultant known as Numbat Films Pty Ltd which opined that 'although Pitch Black is a good film and won't be a box office disaster it is unlikely to be a break-out success…'. The second, which was conveyed by Mr De Vries in his affidavit in these proceedings was that 'Harry Triguboff did not like the film'. In a note by Johnson Winter & Slattery titled 'Background to investment in "Pitch Black"' the third reason was proffered: during the negotiations, Universal had reduced the guaranteed minimum income of the investment, which Mr Harry Triguboff considered to be reneging on the original offer and reflecting on Universal's 'credibility and trustworthiness'. 17 In any event, regardless of the reasons for Meriton Apartment Pty Ltd's exit, the proposal then appears to have passed to Mr Harry Triguboff's nephew, Mr Triguboff. On 28 June 2000, two days before the end of the financial year, Mr Richard Gelski, a partner of Blake Dawson Waldron, sent Mr Triguboff a copy of an information memorandum for an investment in Pitch Black. It was entitled 'Australian Film Pitch Black offer to sell to Australian Investors Pre 30 June 2000'. The key elements of the proposal were set out on p 2. They included, pertinently, the fact that equity investments totalling up to $14,200,000 were sought; that debt financing of 80% was available; that 'equity invested is recouped even if the film is not a commercial success'; and that 'Division 10B deductions [were] available' which ranged from $7,000,000 for a 20% equity investment and up to $35,000,000 for a 100% equity investment. 18 The information memorandum contemplated a series of complex transactions being entered into by 30 June 2000 which was only two days after Mr Triguboff received it. These unfortunately were not executed in time. But not all was lost for on 30 June 2000 the Producer, TMPL and three other companies (to which it will be necessary to return) executed a 'Heads of Agreement'. Clause 2 of that agreement consummated the transactions at a high level of generality and cl 3 bound all parties later to execute 'Long Form Documents'. 19 This intricate transaction worked as follows. TMPL lent $1,830,000 to a wholly owned and specially incorporated subsidiary known as Pitch Black Films Pty Ltd. I shall refer, in the present context, to TMPL as the 'Investor Parent' and Pitch Black Films Pty Ltd as the 'Investor'. Having been lent the $1,830,000 by the Investor Parent the Investor then borrowed from Citibank N.A. ('Citibank') the further sum of $8,520,000. This occurred on 21 July 2000. The loan was at a fixed rate of 8%, although, for reasons which will become later apparent, that rate had no commercial significance. Repayments were required under the facility in accordance with the following table: Instalment Payment Interest Principal Relevant Principal Outstanding Date Instalment (after payment Of Relevant Instalment) 30 June 2001 $681,600 $8,520,000 $681,600 $8,520,000 30 June 2002 $681,600 $8,520,000 $681,600 $8,520,000 30 June 2003 $681,600 $8,520,000 $681,600 $8,520,000 30 June 2004 $681,600 $8,520,000 $681,600 $8,520,000 30 June 2005 $681,600 $8,520,000 $1,000,000 $8,201,600 30 June 2006 $656,128 $8,201,600 $2,723,600 $6,134,128

20 Armed then with the Investor Parent's loan of $1,830,000 and Citibank's loan of $8,520,000, the Investor purchased from the Producer a 15% interest in the copyright in Pitch Black together with one set of the negatives of the film in return for the promise to pay $10,350,000 (that is, the sum of the two loans). This money was apparently advanced on 21 July 2000 pursuant to the Heads of Agreement which had been executed on 30 June 2000. Although where the $8,520,000 actually went is not absolutely clear it seems likely that it was advanced at the direction of the Producer to the film's promoter (of which more below). Having secured this asset, the Investor immediately entered into a distribution agreement also dated 21 July 2000 (the 'Distribution Deed'). The two parties to it were the Investor and Universal, which I shall presently call the 'Distributor'. Under the deed the Distributor modestly promised to 'use its reasonable endeavours to promote and distribute the Film in all media, throughout the entire universe'. The 'Film' was defined as Pitch Black. It also promised to procure an initial release on at least 1,300 screens in the US and to spend $10,000,000 on promoting the film prior to its release in the US. This was a light burden indeed for the film had not only already been launched in the US but in fact had finished its theatrical run altogether by June 2000. Meriton Apartments Pty Ltd had been informed on 2 June 2000 that the initial advertising expenditure together with prints in the US had been US$17,000,000-$20,000,000. Further, as already noted the film had, in fact, opened in 1,832 cinemas during the previous February. 21 In any event, the Investor granted the Distributor an exclusive licence so to distribute the film in all media 'in perpetuity'. In return the Distributor promised to pay the Investor an amount of money calculated in accordance with a specified formula of which it will be necessary to say more later. For present purposes, it is to be observed that one possible outcome might have been that the Distributor might not have become obliged to pay the Investor anything. This would have left the Investor in the precarious position of being obliged to meet the repayments due to Citibank, in accordance with the above table, but with no ready means to satisfy those obligations. 22 The answer to this conundrum lay in a series of complex contractual arrangements which operated as follows: (a) a company called Shooting Star Pty Ltd, which I will call the 'Promoter', promised the Investor that it would meet all of the Investor's obligations to Citibank under a deed known as the 'Minimum Income Deed'; that is, it promised to make the payments of interest due by the Investor to Citibank; (b) the Promoter then guaranteed the obligations that the Investor had under the loan agreement with Citibank. Those obligations consisted, inter alia, of: (i) the obligation to pay the amounts of interest and principal set out in the table above; and (ii) the obligation to repay the outstanding principal of $6,134,128 which would be due on 30 June 2006 (which appears as the last entry in that table); (c) the guarantee was supported by the deposit of the guaranteed amount into an account with Citibank. The amount guaranteed was subject to an indemnity given by the Investor secured by a fixed and floating charge on the Investor's assets; (d) The amount deposited by the Promoter was $8,520,000 which is the same amount borrowed by the Investor from Citibank and which formed part of the $10,350,000 advanced to the Producer. Whether this $8,520,000 is the same money - implying that it was paid by direction to the Promoter by the Investor - is not presently clear although if it was not there is no ready way to understand where the Promoter obtained the $8,520,000 from. In any event, this question does not presently call for resolution; (e) the Promoter placed the $8,520,000 on deposit at 8% with Citibank, that is, at the same rate which the Investor was paying Citibank on its loan of $8,520,000; (f) the consequence, as a matter of formality, was that all of the Investor's obligations to Citibank - including the final repayment of principal - could be acquitted from the deposit held by Citibank in the Promoter's name, without any party having to do anything. If the Investor did not make any of the payments required this would allow Citibank to call on the Promoter under the guarantee and, thereupon, to take the amount in question from the deposit. In effect, each payment due by the Investor on its $8,520,000 8% loan would be met by deductions from the Promoter's $8,520,000 8% deposit and this included not only interest but the final payment of principal. If no party took any step Citibank would incrementally transfer the contents of the Promoter's deposit account to repay and discharge in its entirety the Investor's loan account; (g) the Promoter's payments to Citbank pursuant to its guarantee, however, gave rise to a right in the Promoter to be subrogated to Citibank's rights against the Investor. In relation to the interest payments due during the six year life of the facility the Promoter's subrogation rights against the Investor were fully set-off against its own obligations to the Investor under the Minimum Income Deed; (h) this was not so, however, in relation to the final repayment of principal of $6,134,128; (i) in relation to that right the Promoter had an enforceable subrogated right to recover $6,134,128 from the Investor; (j) subject to one matter, the Promoter was obliged to the Producer to pursue that right and repay any sum so recovered to the Producer. This does not prove, but rather tends to suggest, that the Promoter had originally received the $8,520,000 from the Producer; (k) the one exception was this: the Investor Parent could exercise a put option which, in its ultimate form, permitted the Investor Parent to require the Promoter to purchase all of the shares in the Investor for $1,000; (l) if the put option were exercised the Promoter was obliged to cause the Investor to reassign the copyright in Pitch Black to the Producer. Importantly, in that circumstance the Promoter was not placed under a positive obligation to pay the $8,520,000 to the Producer (as it was if the put option were not exercised). 23 All of this came to pass. The Investor borrowed $1,830,000 from the Investor Parent and $8,520,000 from Citibank. It paid the combined total, $10,350,000, to the Producer in return for a 15% interest in the copyright in Pitch Black. The Promoter deposited the same sum with Citibank and, using that deposit as security, guaranteed the Investor's obligations to Citibank. The whole of the Investor's obligations under its $8,520,000 loan was discharged by the Promoter's $8,520,000 leaving nothing but the Promoter's rights of subrogation against the Investor, which, apart from the final principal payment, were set off against the Promoter's obligations under the Minimum Income Deed. On the exercise of the put option the Promoter became the owner of the Investor and those rights were not pursued there being instead a reconveyance to the Producer of the 15% interest in the copyright. Subsequently, in circumstances to which I shall return, the shares in the Investor were returned to the Investor Parent. 24 It is the Deputy Commissioner's position that the $8,520,000 loan is a device and that it merely travelled around a loop contributing no part of the purchase price paid to the Producer. I do not have to resolve that issue for present purposes. Mr Gelski of Blake Dawson Waldron, in a letter of advice of 19 July 2000 thought that the Investor was 'entitled to a minimum return under the Minimum Income Deed, which, if reinvested at a reasonable rate of return, will exceed the interest payable to Citibank'. Further, he recorded that 'it is anticipated, and there are significant prospects, that such variable income will be derived'. Since Mr Gelski had all of the relevant transaction documents the route by which he arrived at that opinion remains opaque to me; still more the place from which TMPL's anticipation of the stream of income derived. These, however, are matters for the Tribunal and I pass them by. 25 These matters do, however, become significant when one comes to ask how large the Investor's investment of capital in Pitch Black actually was. Certainly it involved the amount of $1,830,000 which had been advanced to it by the Investor Parent by way of loan capital. On its face the purchase price also included the $8,520,000 of loan capital advanced by Citibank. If that were correct then the capital invested was $10,350,000. On the other hand, if the structure involving Citibank, the Investor and the Promoter was merely a confection around which the sum of $8,520,000 glided without ever forming part of the purchase price then this would rather suggest that the true capital investment in Pitch Black was only $1,830,000. 26 Why does this matter? Ordinarily, it is not possible to claim a deduction for capital expenditure. In the case, however, of the Australian film industry a different position was formerly brought about by Division 10B of Part III of the Income Tax Assessment Act 1936. It provided that the owner of a 'unit of industrial property' that related to copyright in an Australian film could claim a deduction if it had used the unit for the generation of assessable income: s 124L. The deduction consisted of the residual value of the unit of industrial property divided by the number of years of its effective life: s 124M. The effect of s 124UA was that the effective life was usually 2 years. What was an Australian film? The answer is that it was one certified to be such by the Minister pursuant to s 124K(1). In this case, a delegate of the Minister certified that Pitch Black was Australian on 23 November 1998. 27 Assuming, therefore, that everything ran to plan and that the interest in the copyright was a 'unit of industrial property' used for income generating purposes (an issue which it will be for the Tribunal to resolve) then s 124M would permit its residual value to be deducted over two years. On the evident basis that this was so, the Investor claimed two deductions of $5,175,000 in the income years 2000 and 2001 (that is, half of $10,350,000 in each year). Since the Investor did not earn any other assessable income in those years this generated losses in both years of $5,175,000. Although the consolidation provisions in Pt 3.90 of the Income Tax Assessment Act 1997 (Cth) had not yet come into force nevertheless it was possible at that time for a parent which owned 100% of the share capital of a subsidiary to take advantage of those loses which the Investor Parent, TMPL, in due course did. Accordingly, TMPL utilised the Investor's losses of $5,175,000 in the 2000 and 2001 year to reduce its assessable income and the amount of tax it had to pay across the years 2000-2002. 28 Of course, if the true consideration paid for this transaction was only $1,830,000 the appropriate claim by the Investor would have been $915,000 in each of 2000 and 2001. The Deputy Commissioner, however, does not accept that to be so either. He contends that the grant to the Distributor of the exclusive right to distribute and exploit the film meant that the Investor was not the owner of a unit of industrial property for Division 10B purposes. He has a number of other complaints about it, too, which I need not set out but one of which is that this was not an income generating venture at all but in contradistinction a scheme entered into only to generate Division 10B deductions. I will return to these matters below when I come to consider the merits, from the creditors' perspective, of TMPL's current attempts to persuade the Tribunal that it is entitled to claim the benefit of the Investor's two deductions of $5,175,000 in two separate income years in circumstances where it apparently only outlaid $1,830,000. 29 Little mention has yet been made of the Distribution Deed but, in a sense, it lies at the heart of any argument about the commercial realities of these arrangements for it tells one the profit mechanisms at work. Under that deed, the Investor was entitled to 1.5% of 'Net Proceeds' but only after 'First Breakeven'. 'First Breakeven' was defined in the Exhibit to the Second Schedule of the deed, as was 'Net Proceeds'. The two were interrelated. The First Breakeven was the initial point at which Net Proceeds would become payable. 'Net Proceeds' was defined in cl A9(b) as, in substance, a residue after the deduction by the Distributor of various fees and charges. That immediately raises the question of what the deduction was taken from and here the answer was given by cl A2 which erected the concept of 'Accountable Gross'. This was defined, in effect, to be the worldwide receipts of certain kinds derived by the Distributor from the distribution of Pitch Black less a 30% distribution fee. From that figure the deed then contemplated various further deductions. These were: (1) distribution expenses relating to the cost of distributing the film (such as advertising, printing, royalty payments etc); (2) an administrative fee of 22.5% of the distribution expenses; (3) participation payments, being any payment which the Distributor was contractually obliged to pay to persons which were based on a percentage of net proceeds (i.e. persons who were being paid a share of the film); (4) 37.5% of the cost of producing the film. 30 Prior to acquiring the Investor's 15% interest in Pitch Black TMPL was given financial forecasts by the National Australia Bank ('NAB'). These were included in a bundle of documents described by Mr de Vries as 'due diligence material provided to [the Investor] by Universal's promoter, the National Australia Bank relating to [the Investor's] investment in the film Pitch Black'. The bundle was located at pp 466-544 of Exhibit ADV-1 to Mr de Vries' affidavit. At pp 517 of that bundle there is a worked example of what the First Breakeven might be. It assumed distribution expenses of $45,110,000, participation payments of $12,840,000 and production costs of $33,600,000. Based on those assumptions it calculated the First Breakeven in the following way: Distribution Fee (30% of accountable gross) $58,500,000 Distribution Expenses $45,110,000 Administration expenses (22.5% of distribution expenses) $10,149,750 Participations $12,840,000 37.5% of Production costs $12,600,000 Total Deductions $139,199,750

31 Mr Triguboff, prior to causing the Investor to invest in Pitch Black, conducted detailed financial modelling for the film's revenues. On 13 August 2007 the Investor's solicitors forwarded to the Commissioner a document entitled 'Michael Triguboff PB Films Pty Ltd Background to Investment in Pitch Black'. At p 3 that memorandum said: MT [scil: Mr Michael Triguboff] , who is experienced in financial modelling himself, conducted his own analysis, using more conservative assumptions, principally in relation to the non-US multiplier, choosing the most conservative multiplier suggested by Kagan World Media. MT also did not factor in any re-investment assumptions, which is more conservative than the NAB assumptions. In all cases, MT assumed US box office receipts of US$40 million. 32 The more conservative multiplier was two, which meant that on assumed US box office receipts of US$40,000,000 Mr Triguboff assumed total worldwide receipts of $120,000,000. Under the Distribution Deed on its most straightforward reading, there then needed to be at least the following deductions: (a) the distribution fee of 30%, i.e., $36,000,000; (b) the Distributor's expenses in the US, which were known to Mr Triguboff to be US$20,000,000 (that is, the amount already spent); (c) the 22.5% administration fee on those expenses of $4,500,000; and (d) 37.5% of the production costs of the film which, according to due diligence materials provided to Mr Triguboff were $33,6000,000, that is, $12,600,000. 33 Leaving aside any question of distribution costs outside the US on the payment of participation fees (that is, payments to those who had agreed to be paid out of total box office receipts) the 'Net Proceeds' could have been no more than $120,000,000 less the sum of (a) to (d), that is, $46,900,000. Of that amount, the Investor was entitled to 1.5% which was $703,500. 34 In the memorandum of 13 August 2007 the solicitors went on to say: The results of MT's calculations in the following scenarios were as follows: (a) If the debt were repaid from projected guaranteed and variable returns, a pre-tax profit would have been made, based on US box office receipts of US $40 million provided by Richard Reiner, as shown in the spreadsheet prepared by NAB… Assuming $120 million in film revenues, which in fact was realised… the investor would make a 28% return on equity pre-tax after debt repayment. This scenario ignores the investor returns from future cycles. (b) If the Put Option (which was an insurance policy only, to protect against 'disaster') were exercised and the Division 10B tax deductions were available and variable income was not realised, a net loss of $1.3 million would result; (c) If the Put Option were exercised and Division 10B tax deductions were not available and variable income was realised - a net profit of $1.8 million would result. 35 It is difficult - I have found impossible - to square those statements with the terms of the Distribution Deed which are arithmetically antithetical to them. Making heroic assumptions about the expenses involved the deed produces no more that $703,500 'in perpetuity'. 36 It is not useful to spend too much time, however, on investigating what went wrong in these estimates. Instead, two things should be noted. First, there is no evidence that at any time in the period 30 June 2000 to 26 September 2006 (when the put option was exercised) there was any payment by the Distributor to the Investor in accordance with the Distribution Deed. Secondly, consistent with the remarks above TMPL now actively asserts as part of its case against the Distributor in the Supreme Court that the terms of the Distribution Deed meant that it could never make any money out of its original investment in Pitch Black. Part of its case in this Court is that its claim in those proceedings, being New South Wales Supreme Court proceedings No 28503 of 2010 - Pitch Black Films Pty Ltd v Universal City Studios Inc - is a real case which is potentially worth up to $15,000,000. In paragraph 30 of the amended statement of claim filed in those proceedings it is alleged that: … there was not even a reasonable prospect that the Film would earn a multiple of 1.6 times US domestic box office on from foreign theatrical release, nor that net income from the Film for the purposes of the Distribution Deed would meet even the First Breakeven point as defined nor that any profit at all would accrue to the Plaintiff under the Distribution Deed at all. 37 This is certainly contrary to the conclusions drawn from Mr Triguboff's extensive due diligence process. In the Supreme Court proceedings, the Investor now identifies the 22.5% administration fee charged on the distribution expenses as the principal vice of the arrangement. TMPL does not claim that either it or the Investor were not told about the fee, a Himalayan contention given not only that it appears in the central formula of the Distribution Deed but also because of Mr Triguboff's extensive assertions about the care with which his due diligence process was carried out. Instead it is now suggested that the Investor was told that 22.5% fee was 'consistent with industry practice' when in truth it was not. But this makes no sense. Whether the 22.5% fee was consistent with industry practice has no impact upon whether the Distribution Deed would produce any income for what matters is the size of the fee: 22.5% is 22.5% regardless of whether it is industry practice or not. 38 It is also alleged that the Distributor failed to inform the Investor that a 22.5% fee 'could cause an otherwise profitable film to suffer a loss' or that Pitch Black would not reach the First Breakeven point. In order for this case to succeed it will be necessary for TMPL to repel the suggestion that Mr Triguboff was fully aware of the effect of the 22.5% fee and did not rely upon the Distributor for his economic analysis. Since he has committed himself in writing to the Commissioner to the proposition that he is an experienced financial modeller who had conducted his own analysis of the investment in Pitch Black this may not necessarily be easy. 39 In any event, the Investor now seeks to have the deed rewritten pursuant to s 87(2)(b) of the Competition and Consumer Act 2010 (Cth) to remove the 22.5% fee. It then seeks an accounting under the deed. Finally it claims damages for the misrepresentation including, importantly, all the money paid under the Heads of Agreement and the interest paid on the loan from Citibank. This, of course is the $10,350,000 paid to the Producer, interest paid under the Citibank loan, totalling $4,064,128, together with all other transaction costs. It will be seen that this totals around $15,000,000. The idea that the Investor might recover the $8,520,000 borrowed from Citibank or the interest thereon given the non-recourse nature of the loan is beset with difficulty. 40 The Deputy Commissioner claims that information about the film Pitch Black was either false or misleading when contained in the report to creditors; was omitted from the report to creditors; or otherwise that other grounds in ss 445D or 600B of the Corporations Act apply given the facts set out above. In their report to creditors the administrators dealt with the Pitch Black matter in three locations in the following terms. The first was in these terms: [The Investor] was incorporated in June 2000 as a wholly owned subsidiary of TMPL to invest in a film, Pitch Black ("Film"). Further statutory information can be found in section 2.2. The investment proposal was introduced by the National Australia Bank Limited ("NAB") and partially financed by Citibank Limited. The Film was an "Australian film" as defined in Division 10B of Part III of the Income Tax Assessment Act 1936 ("1936 Act") and I am advised that the necessary and sufficient documentation and certification was issued by the relevant Minister. TMPL was advised that it could gain favourable tax treatment under section 124 of the 1936 Act for its investment in the Film. In stating this, the administrators do not purport to waive any legal professional privilege of the Company that may attach to any advice received from its legal advisers. In fact, the Film was more successful than originally anticipated and generated more that USD120 million in revenues. However, Universal City Studios Inc. ("Universal") has asserted that the costs of producing and distributing the Film were greater than originally forecast, and consequently no profits were received by [the Investor]. There is an action pending against Universal and possibly others to recover the disputed profits. This chose in action will form part of the Deed of Company Arrangement ("DOCA") and will be discussed later in section 6. Under the DOCA, Mr Triguboff will fund the action against Universal and others. The Australian Tax Office ("ATO") has assessed TMPL on the basis that the investment in the Film was a scheme to avoid paying tax under Part IVA of the 1936 Act. TMPL's lawyers, Johnson Winter & Slattery ("JWS"), have vigorously challenged this determination to date. 41 Pausing there, what was contemplated was a suit by the Investor, that is to say, Pitch Black Films Pty Ltd. And, indeed, the party bringing the proceedings in the Supreme Court is the Investor and not the parent, TMPL. The unaudited management accounts as at 30 June 2009 listed as an intangible asset of TMPL's an amount of $4,051,231.64 being the amount of the original loan made to the Investor by TMPL together with interest. The notes to those accounts recorded: Note 5: Intangible Assets The value of the loan to PB Films Pty Ltd at cost is $4,051,231.64. The recoverability is based on the fact that PB Films' only asset is a right to recover unpaid film royalties. However, after reviewing the documentation regarding the investment in the film "Pitch Black", the possible unpaid royalty recoveries may be as high as $15,000,000 gross (not including recovery costs, tax, penalties and interest). Universal Studios has been reluctant to account to TMPL and to disclose the necessary figures for the takings to substantiate potential returns. This point was further expanded upon by a note to the net asset table: Note 1: Sundry Debtors Market Value Realisable Value $ $ PB Films Pty Ltd 4,051,232 0 Australian Taxation Office 181,973 181,973 Total Sundry Debtors 4,233,205 181,973

The amount owing from PB Films Pty Ltd is a debt. PB Films' only asset is the right to recover unpaid film royalties. PB Films has no liabilities, so that in turn the loan could be repaid and the net balance of film royalties, if and when received, could be paid as dividends to the Company. It must be noted that expensive legal action must be commenced in order to recover and/or ascertain the amount which may be recovered. The director has agreed to fund legal action as part of the Deed in order to quantify and recover the actual amount believed to be owed. 42 The Deputy Commissioner is critical of these statements. He begins by noting that the deed fund contemplated by the deed of company arrangement did not include the shares in the Investor. Consequently, even if the Investor were successful in the proceedings against the Distributor there was no mechanism by which TMPL could compel the declaration of dividend adverted to in the passage just set out. 43 To understand TMPL's answer to this conundrum there must be a retracing of steps. The original Division 10B scheme had contemplated that TMPL could exercise a put option and require the Promoter to buy the Investor from it and this was done on 26 September 2006. That assignment made impossible, of course, any assertion that TMPL could stand to gain by litigation commenced by the Investor for, apart from its status as a creditor, TMPL had no on-going connexion with the company. It appears, however, that TMPL, the Promoter and the Investor thereafter agreed upon a call option under which the Promoter would reconvey the Investor to TMPL and this option appears to have been exercised on 20 December 2007. There was also executed an 'Entitlements Agreement' between the Investor, TMPL and the Promoter. Under cl 3.1 of that agreement the Investor and Promoter were obliged to pay TMPL the 'Entitlements' upon the receipt of such by them. 'Entitlements' was defined to include 'any amount as at the Completion Date accrued but unpaid to [the Investor] under the Distribution Deed or otherwise from a Universal Entity…'. That being so, I do not think that the Deputy Commissioner's complaint is sound for this provision gave TMPL a right to whatever was recovered from the Distributor. 44 The Deputy Commissioner submitted that the deed administrators could not rely upon the Entitlements Agreement because they did not know of it until after the deed of company arrangement had been executed. I accept the factual correctness of this contention but I do not think it matters. Insofar as the complaint is that the report to creditors was misleading because it failed to draw attention to the inability of the deed administrators to procure the benefit of any litigation by the Investor, it is not made out. The Investor could be compelled. 45 The Deputy Commissioner submits that the report to creditors is inadequate because the factual and legal bases for the claim were not stated in the report and because there was no consideration in it of the strength or otherwise of Universal's defences. Thus the Deputy Commissioner complained that the administrators had not reviewed any of the transaction documents or any financial statements of the Investor or taken any independent advice about the claims. 46 Although understandable, I do not think that this criticism is warranted. The administrators did not express the opinion that the claim was worth $15,000,000. Instead they formulated three scenarios: the pessimistic, the less pessimistic and the optimistic. Under the optimistic scenario it is true that they assumed a recovery of $15,000,000 but under the pessimistic they assumed a zero return and under the less pessimistic, $6,000,000. If there were cause to think that they preferred one scenario over another some reason might appear to criticise their analysis. But this was not their position: 'There are a number of different feasible scenario permutations that could have been discussed. However, I have attempted to present the three scenarios that portray the likely cases, without placing any value judgements on the likeliness of each scenario'. Thus, so it seems to me, the administrators were not suggesting that the claim was worth $15,000,000. In expressing their agnosticism about the suit's merits the administrators were not being remiss. They explicitly stated there were difficulties in assessing the various scenarios: The claim and recoveries have not commenced against Universal Studios in respect to the Pitch Black film. I have reviewed the files and there is more information required to formulate an opinion regarding the recoverability of this claim. 47 Once that is appreciated, a number of the Deputy Commissioner's other complaints fall away. It was not remiss of the administrators not to address themselves to the limitation defences which might be available or to the subtleties attending the difference between an action on a deed (the Distribution Deed) or under statute. Nor are they to be blamed for not considering the possibility of a security for costs application in a suit which had not yet been commenced. It is true that they could have addressed their minds to the due diligence materials forwarded by Mr Triguboff. They could have inspected the voluminous transaction documents, called for the financial statements of the Investor or for the correspondence (or, more pertinently, the lack of correspondence) between the Investor and the Distributor about the revenues generated by the film. Further, I accept that had those matters been attended to a reasonable response to them would have been a view that the proceedings were wholly lacking in merit. 48 I do not think, however, that the task which the administrators had set themselves called for those inquiries. Confronted with limited time and limited resources it was reasonable for them to adopt a posture where they did not seek to assess the value of the proceedings but merely to consider a range of values from $0-$15,000,000: cf Deputy Commissioner of Taxation v Pddam Pty Ltd (1996) 19 ACSR 498 at 510 per Heerey J; Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139 at 145-146 per Cohen J. In that regard, it is worth keeping in mind that an administrator is not a liquidator. In those circumstances, I do not think that the administrators' treatment of the Pitch Black litigation was misleading or even inaccurate. 49 In saying that, I accept the Deputy Commissioner's submissions about the very many difficulties confronting the suit; the contractual defences available to the Distributor on the claim under the deed; the limitation defence plainly available in relation to the trade practices claim; the conclusive nature of the Distributor's statements as to the film's revenues; the striking failure of TMPL to complain about the absence of the revenue for six years and until such time as the ATO had decided to audit the affair (I discount the subsequent self-serving letters referring to undocumented prior complaints). To that one might reasonably add grave difficulties in claiming the recovery of the $8,520,000 loan when that loan had been fully requited by the Promoter; the corresponding difficulties in claiming the interest on the same; and the future difficulties for Mr Triguboff in explaining how he did not understand the operation of the Distribution Deed. All of these matters together provide good reasons to doubt whether the Supreme Court proceedings contain any substance at all. But, for the reasons I have given, I do not think that the administrators were obliged to go into all of that detail. They expressed no view themselves instead merely pointing out that more information was needed to do so. 50 There were four further complaints made by the Deputy Commissioner about the administrators' report. The first relates to the failure of the administrators to refer to the fact that the proceeds of the Investor's litigation would themselves be subject to taxation either as income or in the nature of a capital gain. Standing back from the situation as a whole this is a difficult conclusion to avoid; part of the proceedings is, in effect, to compel the Distributor to disgorge revenues which should have been paid either directly pursuant to the Distribution Deed or by rewriting that deed under the Competition and Consumer Act and then claiming on account. 51 The defendants made no submission about this. I would be inclined to accept, therefore, that any money recovered by the Investor which included an amount recovered by way of an account under the Distribution Deed will constitute assessable income of the Investor. On the other hand, the Investor's claims for the recovery of the sums it alleges to have been paid under the Heads of Agreement (for example, the loan from TMPL) will be on the capital account. In any event, the Investor will come under income tax obligations including both ordinary income and perhaps some statutory income in the form of capital gains. Quite apart from these, any payment by the Investor to TMPL of the proceeds of the litigation will also have taxation consequences which will turn on the nature of the sum paid by the Investor to TMPL under cl 3.1 of the Entitlements Agreement. This directs attention to the consideration given by TMPL to the Investor for that promise. That consideration was specified in cl 2 and consisted of two elements: (a) the execution by TMPL of the put option under which the Promoter had ultimately been obliged to acquire the Investor; and (b) 'the mutual agreements set out in [the Entitlements Agreement]'. As to (a) the put option was, it seems, executed on the same day and it is capable of being seen as some consideration. As to (b), the Entitlements Agreement does not appear to involve any promises by TMPL except to the extent that it agreed to indemnify the Investor and the Promoter in relation to any claims arising out of the Entitlements Agreement. In any event, one view may be that any payment by the Investor to TMPL under the Entitlements Agreement would be a capital gains tax event consisting, leaving aside questions of indexation, of the differences between the adjusted cost bases of the promises TMPL made (to exercise the put option; to indemnify against future claims) and the money received. 52 The report to creditors said, at note 5 to the unaudited management accounts, that 'the possible unpaid royalty recoveries may be as high as $15,000,000 gross (not including recovery costs, tax, penalties and interest)'. The words in brackets are a significant carve out. It is not obvious what the penalties and interest might relate to because, ex hypothesi, the tax on these monies would only fall due when received by TMPL. On the other hand, to say that the question of tax had been left out of consideration when assessing the $15,000,000 is a very large caveat. I do not think, in light of the disclosure contained in the bracketed phrase above, that the failure to consider taxation effects rendered the report to creditors misleading. However, I do consider that it was a material omission within the meaning of s 445D(1)(c) of the Corporations Act. That provision authorises the Court to terminate a deed of company arrangement when 'there was an omission from [a report to creditors] and the omission can reasonably be expected to have been material' to the creditors in deciding whether to vote in favour of the deed. In my opinion, in circumstances where the proceeds of this litigation were being put forward as the mainstay of the deed fund it was incumbent upon the administrators to give some thought to the question of how any such proceeds would be available after tax, even if only in a cursory way. 53 The second matter the Deputy Commissioner relied upon related to the administrators' treatment of Mr Triguboff's undertaking to meet the costs of both the proceedings in the New South Wales Supreme Court and also those before the Tribunal. 54 The deed of company arrangement provided by cl 8.1 that, if required by the administrators to do so, Mr Triguboff 'shall enter into a funding agreement with the Deed Administrators on terms satisfactory to both the Director [Mr Triguboff] and the Deed Administrators, pursuant to which [Mr Triguboff] shall bear and pay the legal costs and other expenses to be incurred by the Deed Administrators' in pursing both cases. 55 This clause did not bind Mr Triguboff because the terms of the deed bound him as a creditor under s 444D(1) only 'so far as concerns claims arising' on or before the commencement of the administration. This promise did not bear that character because it did not relate to any such claim: Lehman Brothers Holdings Inc v City of Swan (2010) 240 CLR 509 at 526-527 [50]-[52] per French CJ, Gummow, Hayne and Kiefel JJ. In any event, even if it had, the requirement that the terms be satisfactory to Mr Triguboff meant that it was not practically susceptible to enforcement. 56 The administrators described this obligation in their report to creditors in two different places this way: (a) 'Under the [deed of company arrangement], Mr Triguboff will fund the action against Universal and others'; (b) 'If required by the Deed Administrators, the Director shall enter into a funding agreement with the Deed Administrators on terms satisfactory to both the Director and the Deed Administrators, pursuant to which the Director shall bear and pay the legal costs and other expenses to be incurred by the Deed Administrators and/or the Company in pursing the action and claim specified in paragraph 10 and 11.' 57 The first is wrong and appears in the main body of the report; the second is accurate but appears in the detailed description of the deed's terms towards the end of the report. Taken together - and given the greater primacy of the first paragraph in the principal body of the report - it was misleading to suggest that Mr Triguboff had agreed to fund the litigation. The paucity of his promise is born out by the terms of the funding arrangement eventually executed on 28 January 2011, by cll 2.1 and 2.2 of which Mr Triguboff and a related company promised that: 2.1 The Lender may from time to time in its absolute discretion make the Loan Advances to TMPL and PB Films solely for the purpose of funding the Pitch Black Proceedings and the AAT Proceedings. 2.2 The Borrowers acknowledge and agree that there is no requirement for the Lender to make any Loan Advance. 58 Clause 2.2 of the funding agreement is contrary to cl 8.1 of the deed of company arrangement; it reveals the truth of the arrangement that Mr Triguboff had proposed to fund the litigation when it suited him and not otherwise. Mr de Vries accepted under cross-examination that his funding would not continue if the deed of company arrangement was terminated. This appears to reflect the commercial realities of the situation. 59 In any event, the report to creditors was misleading because it did suggest, erroneously, that Mr Triguboff had agreed to fund the litigation. A power in the Court to terminate the deed is therefore enlivened both under ss 445D(1)(a) and (b) of the Corporations Act. 60 The third point raised by the Deputy Commissioner concerned a garnishee notice which had been issued by the Commissioner to the Investor on 30 June 2009 (although dated 26 June 2009). The notice was issued under s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth). It required the Investor to pay to the Commissioner any money it owed to TMPL up to the amount of tax owed by TMPL to the Commissioner being at that date the sum of $19,481,702.33. By this stage, it had not yet become known that TMPL's right to obtain the proceeds to the Supreme Court litigation depended on the Entitlements Agreement which gave TMPL the right to obtain that money from the Investor but this is not material to the legal operation of the notice. 61 There is no dispute that the report to creditors made no reference to the garnishee notice. Where the substantial asset put forward to constitute the deed fund consisted of a right under the Entitlements Agreement against the Investor it was both misleading and also a material omission not to refer to the fact that that money, if recovered, was now charged to the Commissioner. The notice went to the very point of the deed of company arrangement which was rendered futile by it. 62 Against this the defendants submitted first, that the creditors were aware of the garnishee notice because the Deputy Commissioner's representative so informed them at the reconvened meeting on 5 August 2009. I accept that this is true but it does not affect whether the report to creditors was misleading by reason of its failure to advert to the garnishee notice. As Campbell J observed in Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (2005) 226 ALR 510 at 540 [147] the language of ss 445D(1)(a) and (b) 'looks at an objective quality of the information, not at whether anyone was actually misled'. The same objective approach applies in relation to material omission under s 445D(1)(c): Bidald at 544 [166]; Commissioner of Taxation v Comcorp Australia Ltd (1996) 70 FCR 356 at 385 per Carr J; Re Cufari; Ex parte Commissioner of Taxation v Huppatz (1992) 34 FCR 544 at 549 per von Doussa J. 63 The second argument was the garnishee notice could 'hardly be said to be a material matter to a majority of the creditors since at least 98.5% of any moneys recovered from Universal …. - whether those moneys are paid into the Deed Fund or directly to the [Deputy Commissioner] under the notices - will be distributed to the [Deputy Commissioner]. In a similar vein, Mr de Vries thought that the garnishee notices would reduce the size of the Deputy Commissioner's claim 'thereby increasing the dividend to be returned to all other unsecured creditors'. 64 The Deputy Commissioner countered this by submitting that whilst it was true that the debt owed to him would be reduced by the amount recovered under the garnishee notice it was also true that the amount remaining in the deed fund would also be reduced. The consequence, according to the Deputy Commissioner, would be that the amounts in the fund would be shared 'in proportion to their respective debts'. To make good this point the Deputy Commissioner proffered a numerical example: Suppose there are two creditors, ATO and C2, for 1000 and 50 respectively. Suppose that a company in liquidation owns a debt of 90 owed by D1, on whom [a] garnishee notice was served before liquidation, and other assets of 10. ATO collects the 90 owed by D1 and is left with a debt of 910. The remaining assets of the company (10) are split between ATO and C2 in proportions of 910:50. But for the garnishee notice, assets of 100 would be split in proportions of 1000:50. 100 x 50/1000 = 5 which exceeds 10 x 50/910 = 50/91. 65 There are two problems with this. First, the ratio in the last line is incorrect; if the ATO and C2 have claims of 1000 and 50 respectively the proportions are 1000:1050 and 50:1050 not 1000:50. This error is not material to the example's operation, however. Secondly, and more importantly, the Deputy Commissioner assumes that by proving that his proposition is true for the values he nominates (a tax debt of 1000, other creditors of 50, assets of 100 including a third party debt of 90) he proves the proposition for which he contends generally. But the logic of that is unacceptable: one does not, for example, prove that all even numbers are divisible by five simply by proving that 10 has that quality. The Deputy Commissioner did not attempt proof either of the general proposition or of the particular concrete examples generated by real world possibilities thrown up in this case. That said, neither did the defendants. In fact, the questions thrown up by this issue are not arithmetically straightforward. No doubt the diminution of the Deputy Commissioner's claim by the amount of money secured under the garnishee notice is favourable to the other unsecured creditors in the sense that the gross size of the Deputy Commissioner's debt is reduced but it is also true that the pool of assets in the fund is decreased at the same time. Ultimately the issue is whether the amount by which the other unsecured creditors' claims are proportionately increased is outflanked by the corresponding reduction in the size of the pool. The solution to that problem requires an exposition beyond the legitimate scope of these reasons. Accordingly, the matter is to be resolved by reference to the onus of proof. In this case, it was for the defendants to make good their point that no prejudice resulted and this has not been proved. The report was misleading. 66 For completeness, I reject the defendants' further argument that the garnishee notice only impacted on the $4,051,231 owed by the Investor to TMPL for the reason that it ignores the operation of the Entitlements Agreement. 67 The fourth and last matter relating directly to the Pitch Black investment concerned the merits of the challenge in the Tribunal by TMPL to the notices of assessment issued to it by the Deputy Commissioner. Three separate places in the report to creditors are material to this issue. The first is at p 8 and appears under the heading 'The TMPL receipt of Payments' which dealt, not with the Pitch Black investment, but instead with the Lazard Frères assessments. It is true that there appears under that heading the statement 'The ATO has admitted that TMPL's position is "reasonably arguable"' but it is just as clear that this does not relate to the tax treatment of the Pitch Black investment. 68 The same cannot be said of the second which is at p 21. On this page under a note headed 'Contingent Liabilities' the administrators listed the book value of the tax debt which at the date of the report was $19,481,702. They went on to say: The ATO assessment has been classified in the [director's report as to affairs] as a contingent liability as the director believes that the assessment is incorrect. This view is based on legal advice. The ATO itself has recognised that the central issue upon which a majority of the assessment is based is "reasonably arguable". 69 The reference to the 'majority of the assessment' is strictly accurate. The Lazard Frères debt represented 51% of the total due. However, in context this was misleading. In respect of nearly $10,000,000 of the face value of the assessments the Deputy Commissioner had expressed no such view. 70 The third reference was on p 22 of the report to creditors, where the administrators had said: TMPL has vigorously contested the ATO's assessment of the Pitch Black film claim and the compensation claim, and lodged an objection with the ATO that was unsuccessful. This is not the forum to discuss the merits of the claim or TMPL's objection, however, I wish to advise creditors that the [deed of company arrangement] provides for the Company to undertake a challenge under the appeal provisions of the Income Tax Assement [sic] Act 1936 to the Administrative Affairs Tribunal [sic] ("AAT")/Federal Court and that the director will fund the action on behalf of TMPL… It must be noted that after reviewing the ATO and company's documentation and correspondence there is common ground with the view that the issue is "reasonably arguable". 71 Again, where the Deputy Commissioner had expressed no such view in relation to the Pitch Black assessments, the statement that 'there is common ground with the view that the issue is "reasonably arguable"' was misleading. 72 Against this the defendants mustered a further submission that the failure to specify to which of the tax returns the 'reasonably arguable' statement was to be applied was not a material matter. This was because it was known how the creditors in fact would have voted had the matter been known and this was that they would have approved the deed in any event. That argument, however, overlooks the objective nature of the test under s 445D. The fact is that the report tended to convey that TMPL's position on the Pitch Black investment was one which the Deputy Commissioner accepted to be reasonable. Given that this was precisely not the Deputy Commissioner's position, this was misleading. I conclude, therefore, that the Court's power to terminate the deed under ss 445D(1)(a) and (b) is also enlivened.

IV Questionable Transactions 73 The Deputy Commissioner submits that in the face of the audits of TMPL and Mr Triguboff's affairs a number of transactions took place which left TMPL unable to meet is obligations to the Deputy Commissioner. If a winding up were to occur these would justify, so the argument runs, detailed scrutiny by a liquidator with the possibility that assets might be returned to the liquidator's hands and TMPL's taxation obligations met. The deed of company arrangement was to be seen, in that context, as a device shielding Mr Triguboff's interests from that species of just scrutiny. There are a large number of these transactions which it is necessary to deal with seriatim.

(a) The Callable Converting Redeemable Notes 74 According to the report to creditors TMPL held callable converting redeemable notes ('CCRNs') in MIR Asia with a face value of $4,817,762. As has already been noted, MIR Asia was a company controlled by TSAL Asia which was controlled by Mr Triguboff. It was not an independent company in any way. The report to creditors described the notes in these terms: The Callable Convertible [sic] Redeemable Notes (CCRN) are recorded as having a book value of $4,817,761.57. Furthermore, I have reviewed the CCRN Deed and have determined that these securities are: 1. not redeemable until the conversion date, 3 October 2016; 2. not assignable, and 3. MIR Asia is not required to pay interest until it is profitable. and as such the CCRN notes [sic] have no realisable value as at 30 June 2009. I have reviewed the unaudited financial statements of MIR Asia for the financial year ending 2008 which supports this view. 75 The nature of the CCRNs is opaque. Although later in their report the administrators were able to bring themselves to the surprising conclusion that entry into a CCRN was not an uncommercial transaction this was for two reasons. First, independent third parties had entered into similar transactions 'on the same terms and conditions'; secondly, because the CCRNs were 'consistent with TMPL's normal business/investment dealings'. I do not find either of these propositions compelling. The best one could say about 'independent' third party transactions is that MIR Asia (and some other companies associated with Mr Triguboff) had issued something called a 'CCRN' to nominated individuals but these appeared to be employees of those companies and there was no evidence as to the terms upon which they were issued. As a source of information to provide confidence in the orthodoxy of the CCRNs this is distinctly underwhelming. In any event, the consistent habit of a company of entering into uncommercial transactions does not thereby deprive those transactions of that quality, more so when all parties are closely related. 76 The ATO's interest in the affairs of TMPL began as early as 30 March 2006 when it notified both Mr Triguboff and TMPL of its intention to subject them to an audit of their taxation affairs. By 7 December 2007 the ATO had produced a position paper in relation to its proposed tax treatment of TMPL's investment in Pitch Black. On 11 June 2008, the ATO notified TMPL that additional tax and penalties would be assessed totalling $5,351,709.27. On 19 December 2007, a position paper was produced by the ATO in relation to its proposed treatment of the Lazard Frères issue. On 17 November 2008 a letter was issued by the ATO informing TMPL that additional tax was to be assessed arising out of the Lazard Frères settlement totalling $5,645,294. The Deputy Commissioner's basic point is that following the commencement of the audit process TMPL appears to have reduced its realisable assets by about $11,000,000. 77 How then did TMPL come to invest in the CCRNs? The terms of a resolution by the sole director of TMPL, Mr Triguboff, of 5 May 2008 throw some light on the matter. By that day, the audit process had been in train for more than two years. Five months earlier, in its position paper, the ATO had indicated that it thought that the Pitch Black investment had been a scheme to which, inter alia, Part IVA applied. A few weeks after 5 May 2008, assessments would be issued accordingly. The minute of this resolution recorded that TSAL owed TMPL a sum in excess of $3,500,000. The precise wording was this: 'WHEREAS the Company has proposed and TSAL Asia Pty Ltd has agreed that the purchase consideration be provided by way of assignment of $3,500,000 of the unsecured debt outstanding by TSAL Pty Ltd to the Company.' 78 According to Mr Triguboff's resolution of 5 May 2008 what occurred had two elements: (a) TMPL would purchase six CCRNs from TSAL Asia for $3,500,000; (b) the purchase price would be acquitted by TMPL assigning its unsecured debt owed by TSAL to TSAL Asia. 79 Both of these steps require expansion. As to step (a), which were the CCRNs which were held by TSAL Asia? According to Mr Triguboff there were six as follows: 6 December 2006 $400,000 19 February 2007 $800,000 8 June 2007 $800,000 7 August 2007 $500,000 23 August 2007 $500,000 4 October 2007 $500,000 Total $3,500,000

80 The issuer of the notes was apparently MIR Asia. The administrators put into evidence several 'CCRN' deeds involving TMPL, TSAL Asia and MIR Asia, although it was not apparent that all of those six CCRNs had been issued under them: (i) a deed between TSAL Asia and MIR Asia dated 28 March 2007 entitled 'Callable Converting Redeemable Note Deed' providing for a loan of up to $4,000,000 by TSAL Asia to MIR Asia on certain terms; (ii) a deed between TSAL Asia and MIR Asia dated 12 February 2008 entitled 'Callable Converting Redeemable Note Deed' under which TSAL Asia agreed to lend up to $3,315,200 to MIR Asia; (iii) a deed between TMPL and MIR Asia dated 15 August 2008 entitled 'Callable Converting Redeemable Note Deed' providing for a loan of up to $2,200,000 by TMPL to MIR Asia on certain terms with effect from 1 July 2008; (iv) a deed between TMPL and MIR Asia dated 3 October 2008 entitled 'Callable Converting Redeemable Note Deed' providing for a loan of up to $828,800 by TMPL to MIR Asia on certain terms. 81 I propose to assume that the terms of the CCRNs issued by MIR Asia to TSAL Asia and acquired by TMPL for $3,500,000 of unsecured debt are on similar terms to (i) and (ii). Indeed, the deed in (i) was expressed to have a retroactive date of 20 April 2006 and the deed in (ii) of 23 August 2007 so it appears some $2,200,000 of the CCRNs may be covered by them (by reference to the table in paragraph [79]). 82 Making that assumption the terms are extraordinary. To begin, as a matter of nomenclature there are no 'notes' as such. It is the deed which appears to constitute the note. More importantly the CCRN deed has these features: (a) the money advanced is not repayable until eight years after each advance; (b) interest was not payable unless MIR Asia was obliged to pay income tax and then only one year after it had in fact paid tax. If it was payable it was due at 8% per annum; (c) the MIR Asia board (of which Mr Triguboff was a member) did not have to pay interest if it determined there was not sufficient cash to do so or its payment would render it insolvent; (d) on the other hand, at the expiry of eight years after each relevant advance MIR Asia was obliged to pay TSAL Asia the face value (defined to be the amount due under the deed) together with the 'Conversion Amount' which was defined to mean 'the amount which when added to the other amounts paid or repaid to TSAL Asia by MIR Asia pursuant to this Deed ensures that TSAL Asia's internal rate of return over the term of the MIR Asia CCRN is 20% per annum'. Pausing there, although no interest might be payable during the life of the note this would simply increase the amount of the 'Conversion Amount' which was payable after eight years; (e) most importantly, TSAL Asia had the right to convert the amount owing to it by MIR Asia into equity at any time; and (f) this right was expressed to be personal to TSAL Asia and not susceptible to assignment. 83 Thus were the terms upon which TSAL Asia was owed $3,500,000 by MIR Asia (with the relevant eight year expiry period falling eight years after the respective dates of the six advances). It was these gossamer rights which were then assigned by TSAL Asia to TMPL. Of course, the right to convert the amount owing to it remained personal to TSAL Asia so that the situation is that whilst TMPL is entitled to the returns under the CCRN deed TSAL Asia retains the right, at any time, to convert TMPL's debt to equity. Under the sole director's resolution of 5 May 2008, TSAL Asia agreed to use this right of conversion as directed by TMPL. 84 It is to be remembered that TMPL 'purchased' these CCRNs from TSAL Asia by assigning to it $3,500,000 owed to it by TSAL. Pausing there, one view of affairs might be that TMPL has exchanged $3,500,000 of regular debt owed to it by TSAL for $3,500,000 of highly deferred convertible debt owed by MIR Asia with the added feature that the debt was convertible at the instance of TSAL Asia. It is on just such a view that the Deputy Commissioner premises his argument that this transaction appears to be something warranting investigation by a liquidator. 85 The defendants, however, submit that this is not how matters should be viewed at all. Instead, they submit that the purchase price was made up of '"deemed advances" arising by way of assignment, the consideration for which was a corresponding reduction in unsecured interest-free loans owing to TMPL by related entities'. That raises, at once, the terms upon which TSAL owed money to TMPL. On 15 January 2008 TMPL and TSAL executed a 'facility agreement' which rendered all money advanced (whether beforehand or in the future) to TSAL interest free and not repayable for eight years. 86 I do not think that this answers the Deputy Commissioner's objection for two reasons. First, even under the facility agreement TMPL was not subject to the possibility of having the debt owed to it by TSAL converted into equity at any time by TSAL Asia. Secondly, as the Deputy Commissioner correctly observes, the execution of the facility agreement within one month of the issue of the position papers looks itself distinctly uncommercial. 87 Having acquired the $3,500,000 MIR Asia CCRN on 5 May 2008, TMPL thereafter lent to MIR Asia a further $2,072,000 on the terms, apparently, of similar CCRN arrangements. These CCRNs were issued directly to TMPL (not through TSAL Asia) and, I assume, on the terms of the deeds in (iii) and (iv) at [80] above. The advances were as follows: 10 July 2008 $414,400 28 July 2008 $414,400 13 August 2008 $414,400 7 October 2008 $414,400

88 It will be recalled that TMPL paid for the first tranche of CCRNs by assigning a $3,500,000 debt owed to it by TSAL to the vendor (TSAL Asia). It appears that after that TSAL still owed TMPL $5,942,659.90. The first three payments set out above were achieved (apparently) by TSAL advancing those sums to MIR Asia thereby reducing its debt to TMPL. The fourth payment appears to have been brought about by a loan from TSAL to TMPL. Mr de Vries says that this loan was secured and there is indeed a reference to that in the general ledger. Regardless of how one approaches the transaction of 7 October 2008 there are troubling issues surrounding these arrangements. Leaving to one side the highly artificial (and poorly documented) nature of the transactions themselves it is difficult to understand what was being sought to be achieved by these 'investments'. The administrators in their report put it this way: There has been a long history of the CCRNs being used as a funding mechanism for fund management companies by the Company and related companies, dating back to 2003. During the period 2003 to 2006, CCRNs were issued by MIR Investment Management Pty Limited of which TMPL/TSAL invested a total amount of $4,075,000. Between March and December 2007 a total (including interest compounded at 20% pa) of $6,051,535 was repaid. The MIR Asian management companies were launched in 2006 and CCRNs totalling $12,475,520 were issued to TMPL/TSAL and as of 30 June 2009, principal of $7,269,613 and interest of $2,783,385 has been repaid by the CCRN issuing entities. This indicates that the investment in the CCRNs is of a commercial nature and principal and interest has been returned in the past. The CCRNS have been considered an attractive investment opportunity by third parties who have invested pari passu with TMPL or TSAL in the past in MIR. Similar instruments have been used by other fund manager boutiques in Australia and elsewhere. The Company was repaid $535,756.69 principal and interest of the CCRNs from MIR Asia in June 2009. The remaining CCRNs are owned by the Company as well as unrelated investors on a pari passu basis. In the current financial crisis, MIR Asia advises it has neither the intention nor the ability to repay any of the CCRNs prior to the conversion date. 89 The CCRNs issued by MIR Investment Management Pty Ltd (a company of which Mr Triguboff is the sole director and in respect of which TMPL owns over 70% of the share capital) do not seem material to assessing the merits of CCRNs issued by MIR Asia. The statement '[t]his indicates that the investment in the CCRNs is of a commercial nature and principal and interest has been returned in the past' overlooks this fact. I have been unable to discern any element of commercial regularity about these transactions at all. On their face, they appear to be transactions designed to frustrate creditors. 90 It is, however, true that MIR Asia did indeed repay $535,756.69 of TMPL's outstanding principal and interest on the CCRNs in June 2009. This was done after Mr Triguboff caused MIR Investment Management Pty Ltd to lend MIR Asia $3,000,000 partially to redeem the CCRNs. It is worth noting that there is no evidence that the conditions precedent for the payment of interest - the paying of tax by MIR Asia - had been met so it is not at once obvious why MIR Asia did this. The fact that this 'redemption' occurred by means of a loan strongly undercuts the notion that it provided any sound reason to regard the CCRNs as being commercial in nature. 91 By the time Mr de Vries came to explain this transaction in his affidavit (as opposed to the report) his rationale for it had shifted somewhat: Based on the above, the Joint Administrators formed the view (as set out in the Creditors Report) that TMPL's investments in CCRNs (which did not involve any physical exchange of cash) were of a commercial nature. In my view, by reason of the transactions described above, TMPL had effectively managed to reduce its secured indebtedness, and had converted an unsecured zero interest eight year term loan to TSAL in the amount of more than $5.94 million into essentially a 20% interest bearing loan to MIR Asia. 92 There are three things wrong with this statement. First, the transactions under which TMPL's 'secured' indebtedness was reduced had nothing to do with the CCRN transactions. The secured debt reduction occurred this way: as at 19 February 2009 TMPL was indebted to TSAL Asia in the sum of $4,018,476.49 which was (apparently) secured. At the same time TMPL was owed $4,047,000 by TSAL and $385,097 by another entity, Art & Australia Pty Ltd (of which more later). TMPL assigned its interest in these loans to TSAL Asia in reduction of its secured indebtedness. The CCRNs had nothing to do with this transaction. 93 Secondly, if by the expression 'unsecured zero interest eight year term loan to TSAL' Mr de Vries meant the original debt owed by TSAL to TMPL of $4,047,000 (at 19 February 2009) the short fact is that on no view was it converted to debt owed by MIR Asia under the CCRN. The CCRNs were purchased in the three ways I have indicated (that is, as to the first $3,500,000 on 5 May 2008 by assigning to TSAL Asia the debt which TSAL owed to TMPL in return for the CCRNs; as to the second, in three tranches of $414,400 by TSAL reducing its indebtedness to TMPL on 10 July 2008, 28 July 2008 and 13 August 2008; as to the final tranche on 7 October 2008 by a loan from TSAL to TMPL on that date). 94 Thirdly, the proposition that the CCRNs were interest bearing at 20% is wrong. They were no such thing unless and until MIR Asia paid tax. Further, it was at all times convertible to equity. 95 I do not propose to waste any more time pondering how Mr de Vries was able to swear such a statement. It will be sufficient unto the day to observe that the case for scrutiny of the CCRN transactions is made good. 96 The Court's power to terminate the deed of company arrangement is not enlivened because it forms the view that irregular transactions may have occurred. But in my opinion there is more than a slight chance that CCRN transactions will turn out to be, at least, uncommercial transactions. They warrant scrutiny by a liquidator, more so where one is left with the distinct impression the TMPL has, in effect, been depleted of the money advanced to MIR Asia in the face of an audit, two adverse position papers and, from June 2008, adverse taxation assessments. If the matter is viewed that way then the effect of the deed of company arrangement is to prevent any liquidation scrutiny of the CCRN transactions. The powers in s 445D(1) of the Corporations Act include a capacity in the Court to terminate a deed where effect cannot be given to a deed 'without injustice'. That power has been held to be sufficiently enlivened where a deed has the effect of denying proper liquidation scrutiny: Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (2001) 37 ACSR 394 at 431 [191] per Austin J; followed Mondello Farms Pty Ltd v Annatom Pty Ltd (subject to a deed of company arrangement) (2007) 64 ACSR 91 at 109 [112] per Layton J. 97 One possible view of what has occurred in this case is that TMPL has engaged in tax avoidance by means of 'investing' in Pitch Black and when detected doing so has sought to close TMPL down thereby depriving the revenue of a substantial amount of tax which remains unpaid. There may be other interpretations available but it is sufficient for present purposes that the Deputy Commissioner's contention is by no means farfetched. 98 It will follow that the dealings with the CCRNs provide a sufficient basis to enliven the power to terminate the deed under s 445D(1)(e). This makes it strictly unnecessary to deal with the remaining matters but for completeness I will indicate, lest the matter goes further, my view on them. 99 I accept the Deputy Commissioner's argument that the report to creditors was misleading and contained a material omission because it failed to advert to the fact that the proceeds of the CCRNs which were to be put in the deed fund (those under the deeds dated 15 August 2008 and 3 October 2008 only) were convertible at the instigation of TMPL (not the deed administrators) so that Mr Triguboff could ensure that no money was ever paid by MIR Asia to the deed administrators. I also accept that the report to creditors was misleading in that it did not adequately disclose that that MIR Asia, TSAL, TSAL Asia, TMPL and Mr Triguboff were related parties; omitted the material fact that TSAL Asia retained the right to convert the first tranche of CCRNs; and that MIR Asia had received a garnishee notice from the ATO thereby rendering any return of the CCRNs highly unlikely. I reject the defendants' arguments that the garnishee notice was invalid and I accept, for the reasons I have already given in relation to the garnishee notice issued to Pitch Black Films Pty Ltd, that the Deputy Commissioner has proven that the omission of the garnishee notice was one which was material. On the other hand I accept that if all of these matters had been disclosed it is unlikely that the vote at the meeting would have been different. However, I would nevertheless have exercised the power to terminate the deed because the matters disclosed warrant investigation. 100 I turn then, albeit briefly, to the question of dividends.

(b) The payment by TMPL to its shareholders of dividends of $1,900,000 and $600,000 101 There appears to be no dispute but that a dividend of $1,900,000 was paid by TMPL to Triguboff Ltd Partnership (the partners of which are Mr and Mrs Triguboff) on 31 August 2007 by way of book entry. If the deed of company arrangement is terminated the relation-back day will be 1 July 2009 (s 513C Corporations Act). Because Mr and Mrs Triguboff are 'related entities' if the payment of this dividend turns out to be an insolvent transaction then it will be voidable as it will fall within the four year period specified in s 588FE(4)(c) of the Corporations Act. To be an insolvent transaction it will need ultimately to be shown that TMPL either was insolvent at the time the payment was made or that it became insolvent as a result: s 588FC. The defendants submitted that TMPL was not insolvent at that time but that, so it seems to me, is a question which should be investigated by a liquidator. The obligation of TMPL to pay tax was a contingent obligation which did not await the issue of notices of assessment: Federal Commissioner of Taxation v H (2010) 188 FCR 440 at 448 [38]-[40] (FC) per the Court. It is quite possible that TMPL will be found to have owed all of the tax for which the Deputy Commissioner contends. Leaving aside penalties, the tax arising from the Pitch Black assessments would be $3,234,712.50 and from the Lazard Frères assessments $5,645,295, that is to say, a total tax debt of over $8 million. The unaudited management accounts in the report to creditors suggested as at 30 June 2007 that TMPL had net assets of about $17 million. On the material before me, I am not presently persuaded of the accuracy of these reports. In my opinion there is a real question as to whether TMPL was solvent at the time of the $1,900,000 dividend payment. It is a matter requiring investigation; to the extent that the deed hinders this it operates unjustly. It should be terminated to allow investigation. A further dividend payment of $600,000 was made by book entry on 30 July 2008. The same reasoning is applicable.

(c) The TSAL facility agreement 102 The facility agreements between TMPL and TSAL have been mentioned already above at [85]. Between these two entities, two agreements were entered into on identical terms on 15 January 2008; one for loans from TMPL to TSAL and one for loans from TSAL to TMPL. The effect of those facility agreements was to render the inter-company loans between TSAL and TMPL non-repayable for eight years. If effective, the facility agreement between TMPL (as lender) and TSAL (as borrower) may provide some basis for arguing that converting the TSAL debt into debt owed by MIR Asia under the CCRNs was not uncommercial - notwithstanding the fact that the CCRN debt was not repayable for eight years - because the TSAL debt had a similar quality. That may well be so (although the TSAL debt was not convertible to equity as the CCRN debt was) but, as the Deputy Commissioner correctly submitted, it is difficult to see what TMPL received by agreeing on 15 January 2008 that TSAL did not have to repay any of its debt for eight years. In my opinion, this transaction also clearly warrants investigation. 103 The facility agreements between TMPL and TSAL dated 15 January 2008 were entered into one month after the ATO's two position papers had been issued. In evidence there was also a prior facility agreement between TSAL (as lender) and TMPL (as borrower) executed in September 2004. There was not tendered any evidence of funds advanced under that agreement. In any event even if monies had been advanced under that agreement, the repetition of an uncommercial practice does not dilute its uncommercial nature. To my mind this agreement does not bear on the scrutiny deserving of the 2008 agreements and transactions under them. 104 The Deputy Commissioner further submitted that the omission of any reference to the facility agreements in the report to creditors was material so that the Court's power under s 445D(1)(c) was enlivened. In my view this should be accepted. The failure to discuss the existence or terms of the facility agreements between TMPL and TSAL and whether the transactions under them were uncommercial was a material omission.

(d) The sale by TMPL of a debt owed to it by TSAL to TSAL Asia 105 As at 19 February 2009 it appears that TSAL owed TMPL a book debt with a face value of $4,047,000. This was sold to TSAL Asia for $2,077,729, that is, a discount of $1,969,271 on or around 19 February 2009. The defendants submitted that it would be difficult for a liquidator to prove that TMPL was insolvent at that time; 'prohibitively difficult'. I do not agree for reasons I have already given. 106 The defendants further submitted that it would need to be shown that the sale was at an undervalue. The parties were in agreement that the purchase price reflected an annual discount rate of 10% on the face value of the debt over its remaining term. The Deputy Commissioner's point was that this generous discount rate only arose because of the ungenerous terms on which the TSAL debt was owed to TMPL by reason of the facility agreement. Since I accept that TMPL's entry into the facility agreement with TSAL is something warranting investigation it follows that this sale falls into the same position. If the facility agreement is avoided the propriety of the transaction will come into view. The defendants made an attempt to counter this by suggesting that there was an independent valuation of the debt at the price of $2,077,729. Certainly this was something to which Mr de Vries was willing to swear. However, the evidence disclosed only a letter from Macquarie Bank dated 16 March 2009 which does not say this. In the defendants' written submissions it was said that this same letter contained Macquarie Bank's opinion that an appropriate discount rate was 10%. It does not say that either.

(e) Dealings with Art & Australia Pty Ltd 107 Art & Australia Pty Limited ('Art & Australia') is a company controlled by Mr Triguboff and his wife (who was its sole director and holder of all of its issued ordinary shares). There are three transactions which the Deputy Commissioner submits warrant investigation. The first is the advance by TMPL of $731,881 allegedly after 1 July 2007 and thereafter its conversion by TMPL into non-voting, non-dividend earning equity in Art & Australia. The second is the lending by TMPL of further advances totalling $385,097 between April 2008 and 27 January 2009 apparently under a facility agreement on the same terms as those discussed above, that is, interest free and not repayable for a number of years. The third is the sale by TMPL of that same debt to TSAL Asia for $188,181. 108 The Deputy Commissioner submits that these may well be uncommercial transactions which might be voidable at the suit of a liquidator. There is no question but that as at 30 June 2007 Art & Australia was, without Mr Triguboff's support, in a perilous financial position having a deficiency of assets over liabilities of some $594,776.20. This was funded by loans from Mrs Triguboff and a company called Triguboff Services and Administration Pty Ltd. 109 As to the first debt of $731,881, the records of TMPL are not consistent with it having been incurred before 1 July 2007. The financial statements for Art & Australia for the financial years ended 30 June 2008 show that by 30 June 2007 Art & Australia had two lenders, neither of which was TMPL. 110 Against that must be weighed a letter from Mr Laszlo Moysa who is the accountant for Art & Australia. Mr Moysa, who also prepared the financial statements, wrote to the 'The Directors, TMPL Pty Limited' on 15 January 2008 in the following terms: As the Accountants for Art & Australia Pty Ltd we confirm the following details of borrowings by Art & Australia Pty Ltd from TMPL Pty Limited: Opening balance 1/7/2006 $265,677.37 Additional Advance 10/10/2006 $100,000.00 Additional Advance 24/11/2006 $ 50,000.00 Additional Advance 11/12/2006 $100,000.00 Payment for catalogue 15/12/2006 $ 14,454.00 Capitalised interest for the year $ 24,849.45 Closing balance as at 30/6/2007 $554,980.82

111 It is true that the financial statements for Art & Australia do record a loan of $554,980.82 as at 30 June 2007. The difficulty is that the creditor is listed as Triguboff Services and Administration Pty Ltd, not TMPL. Triguboff Services and Administration Pty Ltd is the name under which TSAL was registered until 17 August 2004. It is tempting to reconcile the financial statement with Mr Moysa's letter by inferring that the reference to Triguboff Services and Administration Pty Ltd is an error and that TMPL was intended or to infer that this loan was subject to some sole director's resolution for assignment to TMPL. The difficulty with taking that course is that the financial statements for TMPL do not make any reference to a loan owed by Art & Australia; nor is there any resolution in evidence assigning the debt to TMPL. In those circumstances I propose to treat the financial statements as reliable and to discount Mr Moysa's letter. There is an additional reason to take that course. Mr Moysa's letter is inconsistent with a document prepared by Mr Triguboff on 7 April 2008. On that day the records of TMPL say this (bearing in mind the date of Mr Moysa's letter of 15 January 2008): The director noted that the Company had in place a Facility Agreement pursuant to which it made funding available from time to time to Art & Australia Pty Limited (ACN 103 767 228). Further, that currently Art & Australia Pty Limited was indebted to TMPL Pty Limited in the amount of $731,881.00. 112 Even assuming that the loan was interest bearing it is difficult to understand how $554,980.82 became $731,881 in four months. The only possible explanations for this anomaly are: (a) that the $554,980.82 debt is an error (as suggested by the financial statements); or (b) that it did indeed exist but has been supplemented by a further advance of $176,900.18 (being the difference between $731,881 and $554,980.82). I was not taken to any evidence to support the existence of such an advance, in particular, the defendants did not point to TMPL's general ledger for the period between 15 January 2008 and 7 April 2008 where one might expect such an advance to be recorded. In those circumstances, I conclude that TMPL advanced $731,881 to Art & Australia sometime after 30 June 2007 but before 7 April 2008. 113 It was on that day, according to Mr Triguboff's minute, that the $731,881 debt was converted into 731,881 "C" class shares which carried no right to receive any notice of members' meetings, to attend and vote, to the payment of a dividend or to a share of surplus assets. On those facts it appears that TMPL advanced $731,881 to a company controlled by Mrs Triguboff which had no capacity to repay the loan; that it received the ATO's position in December 2007; and that it thereafter converted its debt to equity. The effect of this was to prevent any possibility of Art & Australia being wound up by TMPL should it itself fall into the hands of a liquidator. It is not necessarily obvious that the antecedent advance was itself an uncommercial transaction. It may be possible eventually to argue that the advance was reasonable so long as Mr Triguboff decided to support Art & Australia. However, I do not need to determine that. It will suffice to observe that the conversion of the debt to equity appears to be a device to limit the consequences of a winding up of TMPL. 114 The general ledger of TMPL for financial year 2008/2009 reveals that after the conversion had occurred on 7 April 2008 TMPL continued to advance funds to Art & Australia: Opening Balance $182,297.61 25 July 2008 Loan - A & A (Buzo Catering) $1,600 3 November 2008 Loan to Art & Australia $50,000 8 January 2008 Moet Hennessy $1,199.70 27 January 2009 Loan - Art & Australia $150,000 Total $385,097.31

115 Of course, the opening balance of $182,297.61 must have been incurred after 7 April 2008 but before 1 July 2008. All of the other loans occurred after TMPL had received notices of assessment from the Deputy Commissioner. Plainly the advance of loan funds to a related party with no capacity to repay may well be uncommercial transactions. 116 Thereafter, on 19 February 2009, TMPL sold this debt to TSAL Asia for $188,181. This was done on the basis that the debt had a maturity of seven years and six months and that a discount rate of 10% would be applied. The minute of the meeting at which this was recorded also records the execution by Art & Australia and TMPL of their 'facility agreement' on 15 January 2008. As I have previously remarked that kind of agreement is itself, prima facie, uncommercial. Here its effect is more serious for it puts in a more negative light the advances. 117 The Deputy Commissioner submitted that the discount rate applied was very high and this was itself a matter warranting investigation. The discount rate nominated was 10% and the minutes stated that the value of the debt had been independently established. The only such material of that kind is the letter from Macquarie Bank of 16 March 2009 which does not value the debt. In those circumstances this may well be an uncommercial transaction. Further, it is difficult not to see how potential questions about breaches by Mr Triguboff of his duties as a director do not also arise. 118 The administrators dealt with the position of Art & Australia in these terms in the report to creditors: Shares in unlisted companies comprise Art & Australia Pty Ltd ("A&A") shares acquired in the 2008 financial year with a book value of $731,881 and no realisable value as at 30 June 2009. Originally this amount was a loan to A&A made in 2003 and progressively increased to fund A&A's trading loss each year. As A&A had no capacity to pay this loan, it was converted to equity in 2008. I have reviewed the unaudited financial statements of A&A for the financial year ending 2008 which supports this view. 119 This was inadequate. It made no reference to the advances which occurred after the debt-equity conversion. The description of the nature of the debt was wrong. The report failed to discuss whether these transactions might have been uncommercial; whether Mr Triguboff might have breached his duties as a director; or how such a large discount was justified.

(f) Charges granted by TMPL 120 Not all of TMPL's creditors were companies associated with Mr Triguboff. The ANZ Bank had previously advanced TMPL a secured bill facility of $5,000,000. On 14 April 2008, Mr Triguboff moved to pay this creditor out. This was done by advancing $5,000,000 in actual cash from TSAL to TMPL and then utilising that advance to pay down the ANZ facility. TSAL's advance to TMPL was, however, secured by a fixed and floating charge dated 14 April 2008. 121 The Deputy Commissioner contends that there were reasonable grounds to investigate whether this charge was an uncommercial transaction or a preference. The defendants, on the other hand, submit that TMPL simply replaced one secured creditor with another and this could not be uncommercial. This submission should be accepted on the facts of this transaction. The property subject to the ANZ charge was not available to the unsecured creditors so there was no diminution in their position by exchanging it for a charge in favour of TSAL. As Finkelstein J (with whom Wilcox and Sackville JJ agreed) observed in Wily v St George Partnership Banking Ltd (1999) 84 FLR 423 at 436 [58]: 'Any payment out of property that is not available to meet the debts due to the other creditors can not confer a preference in favour the payee.' That was in the context of a payment rather than the grant of a security but I do not see that any different principle should apply. That is not a transaction warranting scrutiny. 122 The Deputy Commissioner, however, also points to a second charge granted in favour of TSAL Asia on 10 February 2009. This occurred within six months of the relation-back day. Section 588FJ of the Corporations Act makes such charges void against the liquidator except to the extent, relevantly, that it secures 'an amount payable for… services to the company'. Mr de Vries swore, and I accept, that $150,000 was lent to TMPL by TSAL Asia to assist in the payment of its legal bills but that does not enliven that exemption - TSAL Asia did not provide any legal services to TMPL. The same observation may be made about the later advance for legal fees of $192,139.34 and further advance of $148,564 to help TMPL meet its GST obligations. Nothing was said on TMPL's behalf as to the operation of s 588FJ. I conclude, therefore, that there are reasonable grounds for a liquidator to investigate the giving of this charge.

(g) The payment by TMPL to TSAL of an administration fee of $267,657.77 123 The general ledger includes an entry on 30 July 2008 for the sum of $267,657.77 (together with GST) being 'Admin fee for TSAL saving TMPL penalty on sale of Cal[edonia]'. I was not taken to any evidence by the defendants which explained how this fee was due by TMPL to TSAL. An affidavit of Mr Ryckmans, the defendants' solicitor, attached a series of resolutions by Mr Triguboff about a transaction involving a 'Caledonia Trust' and an irrevocable offer document for 'Caledonia Interests' but none of these supported this fee. It would, in those circumstances, be reasonable for a liquidator to examine this transaction. For completeness, it is to be noted that no mention was made in the administrators' report of this transaction.

(h) The payment by TMPL of $1,500,000 to TSAL Asia on 4 June 2009 124 On 4 June 2009 TMPL resolved to repay $1,500,000 to TSAL Asia. The debt of $5,000,000 which TSAL had advanced to TMPL to permit it to discharge its ANZ bill facility and the associated charge granted on 14 April 2008 had been assigned to TSAL Asia on 18 December 2008. According to the general ledger, the amount of $1,500,000 paid on 4 June 2009 was applied as $1,020,000 to that debt and $480,000 was applied to the second TSAL Asia secured debt discussed at [122] above. It should be noted for completeness that these entries in the general ledger are dated 3 June 2009 and I take that to be an error. As to the amount of $1,020,000, whilst the charge remains in place I do not see how this is objectionable. If TMPL had been wound-up on 4 June 2009 the charge would have crystallised over the $1,500,000 which would thereafter not have been available to the unsecured creditors. This payment had no preferential effect. As to the second portion of the payment to the debt secured by charge dated 10 February 2009, there are reasonable grounds for a liquidator's investigation for the reasons given above.

(i) Artwork sales 125 It appears that Mr and Mrs Triguboff have an extensive art collection which was held by TMPL. There are 99 pictures in the collection which include a Salvador Dali, several works by Picasso and a number of Bill Hensons. There is also a Rover Thomas work entitled 'Canning Stock Route' but Sotheby's Australia, who were asked to value the collection, advised, and Mr Triguboff appears to have accepted, that it is 'most likely a fake'. On 16 January 2009 Sotheby's valued the collection at $1,774,200. They also offered to sell it for Mr and Mrs Triguboff subject to a 10% commission and a charge of 1.5% for insurance. 126 So much is unexceptional. On 10 February 2009 TMPL resolved to sell this collection to TSAL Asia and to use the proceeds to reduce its secured indebtedness. The price selected was that advised by Sotheby's - $1,774,200 - but, and this is the curiosity, -TMPL agreed also to include in the sale price a deduction for Sotheby's 10% commission and its 1.5% for insurance fee which totalled $204,033. In circumstances where Sotheby's conducted no sale, charged no fee and insured no art it is difficult to understand why this was done. The effect is that the collection was sold at an 11.5% discount to the fair and reasonable valuation determined by Sotheby's. It is not to the point that if an auction sale had been conducted such disbursements would have been required to have been paid by TMPL for the short fact is that no such auction sale took place. There would be reasonable grounds for a liquidator to examine these transactions.

(j) Retrospective related-party accounting changes 127 On 6 December 2007 KPMG provided a report to Johnson Winter & Slattery. The first paragraph of the report recited its purpose as being 'to review the accounting entries made to reflect the adjustments between the original and restated financial statements of Triguboff Management Pty Ltd (TMPL) and Triguboff Services and Administration Pty Ltd (TSAL) for the years ended 30 June 2001 to 30 June 2006'. 128 I am not going to set out the detail of all of the transactions examined by the report but will instead note just one. It related to the original loan from TMPL to Pitch Black Films Pty Ltd of $1,830,000. Of this the report said: TMPL had a receivable of $1,830,000 from PB Films Pty Ltd at 30 June 2002. In the year ended 30 June 2003, TMPL incorrectly provided for an amount of $1,805,000 that reduced the loan to $25,000. There was no correcting entry in the original financial statements. 129 The report did not seek to verify the correctness of the reversals in question; rather, it was simply to verify the correctness of the accounting procedures given the correctness of the reversals as a premise. In the case of this transaction the effect appears to have been the reversal of an earlier $1,805,000 transaction. One of the Deputy Commissioner's observations about Pitch Black is that TMPL had treated the original loan as written off which was consistent with the apparent fact that Pitch Black Films Pty Ltd appeared to take no steps to enforce its rights against the Distributor and/or the Promoter for the life of the scheme. It is more than a little odd that in December 2007 there appears to be an attempt to reverse a position in the accounts of TMPL which, if left in place, was contradictory of the proposition that the Pitch Black investment was a genuine commercial endeavour. In my opinion, there are reasonable grounds for an investigation by a liquidator into whether those after-the-event reversals are sound.

(k) Assets excluded from the deed fund 130 The Deputy Commissioner contends that the assets described in the deed fund under the deed of company arrangement excludes: first, TMPL's "C" class shares in Art & Australia; secondly, general receivables including investments described as 'Champ Investments' or 'Champ Ventures' with a book value of $165,130; thirdly, the CCRNs in MIR Asia (as distinct from any monies which may be received pursuant to them); and, fourthly, any shares in Pitch Black Films Pty Ltd and debt due from it to TMPL. A further submission was made that the minority shareholding of TMPL in TSAL Asia is also excluded. The Deputy Commissioner submitted that the exclusion of these assets had the effect of making the deed of company arrangement contrary to the interests of the creditors as a whole, or oppressive or unfairly prejudicial to the Deputy Commissioner. No submissions were made on this issue by the defendants. 131 I accept that these assets are not included in the assets comprising the deed fund. However, the assets if included would add, in my opinion, no value to the deed fund. I have discussed above the nature of the shares in Art & Australia and that company's financial position. As to the 'Champ Investments' receivables, the report to creditors included a note to the unaudited management accounts in these terms: Receivables comprise Champ Ventures 5A & 5B which include committed capital of $250,000. Champ Ventures 5A & 5B have a book value of $165,130.44 as at 30 June 2009. It must be noted that the net realisable value of this short term investment as at 31 May 2009 is $84,238. 26. There is a further uncalled capital commitment of $31,250, leaving a net realisable value of $52,988.26. It should be noted an unpaid call of $1,624.98 is due on 27 July 2009. This was the only evidence on the 'Champ Investments' receivables and is insufficient to make any finding as to their exclusion from the deed fund. As to the CCRNs, given that the debts involved were convertible to equity upon the call of Mr Triguboff, their exclusion from the deed fund could give rise to no unfair prejudice. Finally, the exclusion of shares in and debt owing from Pitch Black Films Pty Ltd was not contrary to the interests of creditors given the existence of the Entitlements Agreement (and, in addition, the garnishee notice).

V Relief 132 The Deputy Commissioner pursued relief under ss 445D(1)(a), (b) and (c) all of which relate, in substance, to the misleading or deficient nature of the defendants' report to creditors. For the reasons I have already given this report was misleading and suffered from material omissions. By itself, however, I would not be minded to grant relief on the basis of these matters because the evidence discloses: first, that most of the creditors had in fact been aware of these issues at the creditors' meeting; and, secondly, that even armed with knowledge of all of the matters of which the Deputy Commissioner now complains none would have voted any differently. 133 However, I do accept that the Deputy Commissioner's contentions in relation to ss 445D(1)(e) and (g). Subsection (e) permits termination of a deed where its effect causes injustice; subsection (g) permits the Court to terminate 'for some other reason'. The latter provision may be available 'where the proposal for the [deed of company arrangement] has a fraudulent or wrongful purpose or the [deed of company arrangement] offers an unconscionable premium, contrary to public policy, as a bribe to creditors to support an arrangement under which the conduct of the directors will not be investigated': Fleet Broadband Holdings Pty Ltd v Paradox Digital Pty Ltd (2005) 228 ALR 598 at 609 [63] per Newnes M; Young v Sherman (2002) 170 FLR 86 at 104 [67] per Sheller JA and 109 [92] per Davies AJA. 134 In this case, the deed of company arrangement is a device by which Mr Triguboff and his associated companies are avoiding scrutiny of a number of highly questionable transactions the net result of which is to allow TMPL to walk away from a tax debt of $19,551,033.77 paying nothing. The public interest demands that what has been done with TMPL be brought out into the light. 135 The Deputy Commissioner also seeks relief under s 445D(1)(f): where the deed, a provision of it or an act or omission done or made under it would be oppressive or unfairly prejudicial to one or more creditors; or contrary to the interests of creditors as a whole. The Deputy Commissioner submits this is so for three reasons: first, unsecured creditors are denied the benefit of liquidation scrutiny; secondly, participating creditors are denied access to assets outside the deed fund; and thirdly, because the sole director would derive economic benefits from assets outside the deed fund and referable to the taxation losses of TMPL. 136 The first of the three grounds advanced by the Deputy Commissioner alone is sufficient. The deed of company arrangement denied the Deputy Commissioner the opportunity to have TMPL wound up and the opportunity for liquidation scrutiny of the transactions I have outlined above. The exercise by a liquidator of TMPL's rights against other persons (such as claims for breach of director's duties) or specific liquidation remedies was not able to be pursued. The Deputy Commissioner is denied access to assets on his debt of some $19,551,033.77 which may be recoverable in a winding up. Operating in this way, the effect of the deed is oppressive and unfairly prejudicial to the Deputy Commissioner and contrary to the interests of creditors as a whole: Cresvale at 432 [197]. 137 Further, Austin J stated in Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 176 FLR 453 at 476 [101] that unfair prejudice may be present where 'the administrator's investigations of a company's affairs fall short of the degree of care the creditor is entitled to expect'. In this case, where I have found the deed of company arrangement to be misleading and to omit material matters, unfair prejudice to the Deputy Commissioner is evident. 138 The Deputy Commissioner also put his case on the basis of s 600B of the Corporations Act which permits review of the Chairperson's casting vote. I do not need to resolve this issue in light of my conclusions under s 445D. However, it might be noted that it is enlivened where, as here, a resolution is passed at a meeting of creditors under Pt 5.3A and the applicant is a person who voted against the resolution. In such cases, the Court may 'by order set aside or vary the resolution'. The language of the provision shows that the discretion wide. Plainly enough it is to be exercised judicially and for the purpose of the statute. Had it been necessary I would have concluded that the same matters leading me to terminate the deed also justified a review of the Chairperson's casting vote. 139 I turn then to the appropriate orders. The effect of s 446B(1) of the Corporations Act and reg 5.3A.07 will be that on the termination of the deed TMPL will be deemed to have passed a resolution that it be wound up voluntarily. The effect of that is it will not be being wound up by the Court. The Deputy Commissioner submitted that having regard to the issues which would confront the liquidator this was not appropriate and invited me to exercise the power in s 447A which permits the Court 'to make such order as it thinks appropriate about how this Part [scil. Pt 5.3A] is to operate in relation to a particular company'. 140 The words 'how this Part is to operate in relation to a particular company' are delimitations on the power conferred by s 447A. It is not possible to deploy s 447A in the pursuit of some purpose or object alien to the ends of Pt 5.3A. That said, however, the power is a very broad one albeit not altogether without limit. It seems to me that s 447A must be sufficiently broad to resolve the issues arising from the termination of a deed of company arrangement in a case such as this. The course I propose to take is to order, pursuant to s 447A, that s 446B and reg 5.3A.07 apply to TMPL in a manner such that the special resolution which is deemed to be passed under those provisions is a special resolution resolving that TMPL apply to be wound up by the Court. I will then order that the deed of company arrangement be terminated pursuant to s 445D; that TMPL be wound up by the Court and that Mr Max Donnelly be appointed as liquidator This will have the effect of ensuring under s 513A that the winding up will be taken to have commenced on the s 513C day. 141 There are two remaining matters which should be noted. The defendants submitted that, as a matter of discretion, the Court should forebear from making what in substance was a winding up order because the tax debts in question were subject to review proceedings before the Tribunal. This submission encounters the difficulty thrown up by s 14ZZM of the Taxation Administration Act which operates so that the existence of a review proceeding does not affect the decision and 'any tax, additional tax or other amount may be recovered as if no review were pending'. It has been held that s 14ZZM prevents the raising of a review proceeding as an answer to a statutory demand: Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473. Left open in that case was the question of whether s 14ZZM could operate to prevent the raising of a review proceeding as a reason against the eventual making of a winding up order: see 497 [62] per Gummow A-CJ, Heydon, Crennan and Kiefel JJ. The Deputy Commissioner had made a concession in Broadbeach (described by the majority as 'an important concession' at 484 [13]) that the fact that a review was reasonably arguable was something which the Court might examine in considering whether to make a winding up order. Later in its reasons, in the course of explaining why the review proceedings were irrelevant in a statutory demand case, the majority said that they were relevant 'if at all' only at a later stage of winding up. 142 There may be interesting questions about this, but they do not arise in this case. It is to be recalled that the tax owed by TMPL includes an amount, as at 1 July 2009, of $9,497,434.21 in respect of the film Pitch Black. The general interest charge on that sum has continued to accrue. Although there are review proceedings pending in relation to those assessments for reasons which I have already given I regard the likelihood of TMPL succeeding in those review proceedings as being distinctly low. According to the administrators' report the only substantive assets of TMPL at 30 June 2009 consisted of the CCRNs, the shares in Art & Australia and the loan to Pitch Black Films Pty Ltd. The first two they assessed as being valueless and the third dependent upon the success of the litigation against Universal. Having examined that suit in the Supreme Court it seems to me that it is, in substance, without any value. That being so TMPL is plainly insolvent on a cash-flow and assets basis even leaving out of account the tax debt relating to Lazard Frères. 143 The second matter concerns the defendants' submission that no orders should be made because the Deputy Commissioner has not offered to fund the winding up. It is true that the Deputy Commissioner has not done so but this is because no application by the liquidator to him for funding has been made. It is perhaps regrettable that the procedures of the Deputy Commissioner do not allow him to consider these matters in a more formal way before a liquidator is appointed. This is not the first time this problem has been encountered. In Federal Commissioner of Taxation v Wellnora Pty Ltd (2007) 163 FCR 232 Lindgren J declined to set aside a deed of company arrangement because, amongst other things, the Commissioner had not offered to fund the winding up (at 280 [244]). In this case, Mr Zafiriou, the Director of the Debt Wickenby section of the ATO, has given evidence about the process of arranging for such funding. Its principal feature is that the application must be made by the liquidator which prevents such applications being determined in advance. Mr Zafiriou gives evidence that if such an application is made by the liquidator in this case it 'has a good prospect of being successful either in part or in full'. Unlike Wellnora, where there was no clear identification of the inquiries which the Commissioner had in mind, this case presents several avenues of obvious inquiry and one or more obvious targets for recovery actions. 144 What I propose to do, therefore, is this. TMPL should be wound up in the manner I have indicated. I will direct the liquidator to file with my chambers a letter recording the conclusion by him of an agreement with the Deputy Commissioner satisfactory to him in relation to the funding of the winding up within seven days. In the event this does not occur the orders I have made will be discharged under a self-executing order and the costs order I am about to make revoked and reversed. 145 In those circumstances, TMPL should be wound up in the manner I have indicated. The defendants are to pay the plaintiff's costs. I certify that the preceding one hundred and forty-five (145) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.