DSG Holdings Australia Pty Ltd v Helenic Pty Ltd

Headnote A majority of the creditors of Retail Adventures Pty Ltd (RAPL) resolved in September 2013 that the company enter into a deed of company arrangement under Pt 5.3A of the Corporations Act 2001 (Cth). The resolution passed by reason of the votes of related creditors, being the parent companies of RAPL (DSG and Bicheno). Two unrelated creditors who had voted against the resolution successfully applied to the Supreme Court to set it aside under s 600A of the Corporations Act. The Court also ordered that RAPL be wound up. Those orders were stayed until 3 February 2014 while DSG and Bicheno brought an appeal. On 3 February, the appeal was set down for an expedited hearing on 7 March. The administrators and unrelated creditors said that the stay of the winding up orders should only be extended on condition that security granted to RAPL by DSG and Bicheno also be extended, and that the $5.5 million due to be contributed to the deed fund by those companies and certain directors and former directors be paid into court. DSG and Bicheno did not seek to extend the stay, and RAPL went into liquidation. Accordingly, DSG and Bicheno required leave to proceed with their appeal pursuant to s 471B of the Corporations Act and s 101(2)(n) of the Supreme Court Act 1970 (NSW), and an order under s 482 of the Corporations Act terminating the winding up. Because the time within which the proposed deed of company arrangement could be implemented had passed, DSG and Bicheno also required an exercise of the Court's discretion under s 447A of the Corporations Act to support changes to the proposal in order to revive it. An undertaking was proffered in relation to the payment of the $5.5 million contribution to the deed fund, but no explanation was offered for the about-face in relation to that contribution or the willingness to allow the winding up of RAPL to commence. The Court held, refusing leave to proceed with the appeal:

1. While it is not necessary to demonstrate an absence of prejudice to the creditors or the orderly winding up of the company in order to obtain leave to proceed under s 471B, the inability on the part of DSG and Bicheno to do so tells against the grant of leave: [45]-[49], [52], [55]-[57] Ogilvie-Grant v East (1983) 7 ACLR 669, Vagrand Pty Ltd (In liq) v Fielding (1993) 41 FCR 550, referred to Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, Re A J Benjamin (in liq) and the Companies Act (1969) 90 WN (Pt 1) (NSW) 107, applied
2. Any explanation for the change of stance by DSG and Bicheno in relation to the provision of the $5.5 million deed contribution and the winding up of RAPL would be a matter relevant to the grant of leave. Conversely, unexplained delay tells against the grant of leave: [50]-[51] Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; 34 ACSR 391, Khoury v Zambena Pty Ltd [1999] NSWCA 402; 217 ALR 527, referred to
3. A further factor telling against the terminating of the winding up under s 482 is the considered opinion of RAPL's administrators that RAPL engaged in insolvent trading over a lengthy period of time. The better view is that s 482(2A) applies, so that the Court is required to have regard to, amongst other things, the administrator's report containing those opinions; even if that view is wrong, those opinions are nonetheless relevant to the discretionary decision to terminate a winding up: [58]-[61] R v Khazaal [2012] HCA 26; 246 CLR 601, Trustees of the Sydney Grammar School v Winch [2013] NSWCA 37; 83 NSWLR 80, Re Data Homes Pty Ltd and the Companies Act (1972) 2 NSWLR 22, Promoseven Pty Ltd v Prime Project Development (Cairns) Pty Ltd (Subject to a Deed of Company Arrangement) [2013] QCA 405, applied
4. Although it is appropriate to proceed on the basis that an exercise of power under s 447A was capable of authorising the course DSG and Bicheno seek, the real differences between the proposal voted on and the deed which they would now have RAPL execute tell against the exercise of discretion under s 447A, and for that indirect reason (because without the s 447A orders, the appeal would have no utility), against the grant of leave: [63]-[67]
5. If there were a clear case of appellable error on the face of the reasons of the primary judge, that would strongly favour the grant of leave: [68]
6. The jurisdictional finding pursuant to s 600A(1) is reviewable in accordance with the principles reflected in Warren v Coombes (1979) 142 CLR 531, while review of the exercise of discretionary power pursuant to s 600A(2) is subject to the principles in House v The King (1936) 55 CLR 499. The appeal proceeded on the basis that appellate intervention was restricted to review of discretionary decisions, although if Warren v Coombes applied, the outcome and essential reasoning would remain the same: [83]-[86] Barrick Australia Ltd v Williams [2009] NSWCA 275; 74 NSWLR 733, Foley v Ellis [2008] NSWCA 288, Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254, applied Singer v Berghouse (1994) 181 CLR 201, Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41, DAO v R [2011] NSWCCA 63; 81 NSWLR 568, Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656, Cornelius v Global Medical Solutions Pty Ltd [2014] NSWCA 65, referred to
7. The following propositions apply to application of s 600A: (a) In relation to s 600A(1)(c)(ii), there may be prejudice to the interests of the class of creditors who voted against the resolution but which falls short of unreasonable prejudice, in which event the curial power to override the decision of the meeting will not be enlivened: [87] Ravenswood Resort Pty Ltd (in liq) v Kammal [2006] WASCA 217; 60 ACSR 507, followed Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; 34 ACSR 391, approved (b) The onus lies upon the applicant to make out the elements of s 600A: [88] Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544, Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612, TNT Building Trades Pty Limited v Benelong Developments Pty Limited (administrators appointed) [2012] NSWSC 766; 91 ACSR 17, approved (c) The provision applies to creditors who were creditors when the resolution was passed: [89] Hoath v Comcen Pty Ltd [2005] NSWSC 477; 53 ACSR 708, approved (d) The section focusses on the "interests of creditors", which is to be construed as identical in substance to the "creditors' interests" referred to in ss 438A and 439A: [90] (e) "The interests of creditors" falls to be construed in such a way as would best promote the express object of Pt 5.3A; s 435A is to be construed harmoniously with other related provisions in the Act: [91]-[92] (f) It is the interests of creditors as creditors to which regard must be had: [93]-[98] Federal Commissioner of Taxation v Wellnora Pty Ltd [2007] FCA 1234; 163 FCR 232, approved Doorbar v Alltime Securities Ltd [1996] 1 WLR 456, Sea Voyager Maritime Inc v Bielecki [1999] 1 All ER 628, followed Elfic Ltd v Macks [2001] QCA 219; [2003] 2 Qd R 125, M&G Oyster Supplies Pty Ltd v Nonchalont Pty Ltd (admin apptd) (1995) 19 ACSR 27, Re Octaviar Ltd (No 8) [2009] QSC 202; 73 ACSR 139, Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612, BM2008 Pty Ltd (in liq) [2010] VSC 337, Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; 34 ACSR 391, Raja v Rubin [2000] Ch 274, referred to (g) Examination of prejudice is not necessarily limited to a comparison of the expected returns under the proposed deed of company arrangement as opposed to winding up. While there will be cases where differentiation between creditors requires the statutory analysis under s 600A(1)(c)(ii) to involve a process of weighing and balancing many competing, and indeed incommensurate, considerations, a lengthy, wide-ranging examination is not called for in every case. There will be cases, of which the present is one, where the financial disadvantage to the creditors voting against the proposal is so substantial, and certain, that it amounts to prejudice which is unreasonable: [99]-[103], [109]-[112] Re Cancol Ltd [1996] 1 BCLC 100, IRC v Wimbledon Football Club Ltd [2005] 1 BCLC 66, Khoury v Zambena Pty Ltd [1999] NSWCA 402; 217 ALR 527, Grocon Constructions Pty Ltd v Kimberley Securities Ltd (admins apptd) [2009] NSWSC 541; 72 ACSR 305, referred to Ravenswood Resort Pty Ltd (in liq) v Kammal [2006] WASCA 217; 60 ACSR 507, considered In relation to s 600A(1)(c)(i), Leeming and Meagher JJA held, Bergin CJ in Eq not deciding:
8. Leeming and Meagher JJA, Bergin CJ in Eq not deciding: s 600A(1)(c)(i) does not require an analysis of the conflicting interests of a creditor who is also a potential defendant to a claim by the liquidator; the question focusses simply on the interest all creditors have in recovering the money they are owed by the company: [132]-[140] Grocon Constructions Pty Ltd v Kimberley Securities Ltd (admins apptd) [2009] NSWSC 541; 72 ACSR 305, Wood v Laser Holdings Ltd (1996) 19 ACSR 245, In the matter of Bevillesta Pty Ltd (In Voluntary Administration) [2011] NSWSC 417; 84 ACSR 215, Young v Sherman [2001] NSWSC 1020; 40 ACSR 12, referred to Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2011] FCA 178; 82 ACSR 300, doubted

Judgment 1MEAGHER JA: I have had the advantage of reading in draft the judgment of Leeming JA. My reasons for joining in the orders made on 7 March 2014 are the same as those of his Honour. 2LEEMING JA: The applicants challenge the decision of the primary judge to set aside, pursuant to s 600A of the Corporations Act 2001 (Cth), a creditors' resolution to the effect that the third respondent Retail Adventures Pty Ltd (RAPL) execute a deed of company arrangement. That section gives power to set aside a resolution where the Court is satisfied that the votes of particular related creditors were decisive to its being passed, and that the passing of the resolution (s 600A(1)(c)): "(i) is contrary to the interests of the creditors as a whole ...; or (ii) has prejudiced, or is reasonably likely to prejudice, the interests of the creditors who voted against the proposed resolution ... to an extent that is unreasonable having regard to: (A) the benefits resulting to the related creditor, or to some or all of the related creditors, from the resolution ...; and (B) the nature of the relationship between the related creditor and the company ... or of the respective relationships between the related creditors and the company ... ; and (C) any other relevant matter." 3Over six days in November 2013 the primary judge heard an expedited trial raising many more issues than were argued on appeal, and delivered judgment, promptly, on 23 December 2013. His Honour rejected the submission that the resolution was contrary to the interests of creditors as a whole, but found that there was unreasonable prejudice to the interests of the minority of creditors who voted against it. Having set the resolution aside, he ordered that RAPL be wound up. 4The application for leave to appeal was also expedited. Full argument, both on leave and the appeal, was heard on 7 March 2014, following which the Court refused leave, and, to the extent necessary, dismissed the appeal. These are my reasons for participating in those orders.

Factual background 5All issued shares in RAPL are owned by the fifth respondent Retail Adventures Holdings Pty Ltd (in liquidation) (Holdings). All issued shares in Holdings are owned by the first applicant DSG Holdings Australia Pty Ltd (DSG). All issued shares in DSG are owned by the second applicant Bicheno Investments Pty Ltd (Bicheno), and are assets of the Jan Cameron Trust. Ms Jan Cameron was at all material times a director of RAPL, Holdings, DSG and Bicheno; there were other directors from time to time, including Ms Penny Moss. 6On 23 March 2009, RAPL purchased a group of companies which operated various discount retail stores, trading under the names "Crazy Clarks", "Go-Lo Discount Stores", "Sam's Warehouse" and "Chickenfeed". Although trading under different names, it was not disputed that RAPL should be regarded as operating a single business. By 26 October 2012, RAPL operated some 268 retail stores across Australia, and two distribution centres and a head office. All RAPL's premises were leased. RAPL employed approximately 5000 staff. 7RAPL's business operated at a sustained loss. It made operating losses (before allowing for interest, tax and depreciation) every month from July 2011 until October 2012 when external management took control, save for November and December 2011. Between May 2010 and May 2012, Bicheno provided advances to RAPL (through a series of loans from Bicheno to DSG to Holdings to RAPL) of some $77.49 million. Prior to 1 July 2011, Bicheno had advanced (via DSG and Holdings) some $49.77 million, apparently on an unsecured basis. On 1 July 2011, it appears that that indebtedness was purportedly secured in priority to all other unsecured obligations of RAPL. This $49.77 million is the "secured debt" referred to below in connection with the sale of business agreement and the potential claims by the liquidators.

Administration of RAPL and Holdings 8On 26 October 2012, administrators were appointed to RAPL pursuant to s 436A of the Corporations Act by its then sole director Ms Cameron. The administrators were the fourth respondents Messrs Vaughan Strawbridge, John Greig and David Lombe (Administrators). On 7 November 2012, the Administrators were also appointed administrators to Holdings, again by its sole director Ms Cameron. In circumstances detailed below, the Administrators became Liquidators of RAPL and Holdings. 9Importantly for the purposes of the appeal, the Administrators caused the business operated by RAPL to be transferred to DSG. That occurred in two steps. First, on the day of their appointment, DSG was granted a licence to operate the business of RAPL, which ultimately extended to 240 of RAPL's stores (the Administrators disclaimed the leases of the remaining 28 stores and closed them). Secondly, on 11 February 2013, the Administrators caused RAPL to sell the business as a going concern to DSG. The purchase price was $58.9 million, subject to some adjustments including in relation to funds advanced to the Administrators to pay employees' entitlements. DSG was obliged to make offers of employment to existing employees, or to pay the termination entitlements of employees who were not offered employment. The purchase price was set off against the secured debt owed by RAPL. The agreement provided for a further payment to be made by DSG in certain circumstances where RAPL's secured debt was determined not to be secured. The agreement required DSG to grant RAPL first-ranking security for its obligation to make any such payment (and also certain other employee-related payments). That security, comprising a charge over all of DSG's assets, and including a negative pledge in relation to encumbrance and disposal, was to remain in place until the "Release Date" as defined in the sale agreement, ultimately being no later than 30 June 2014. 10A condition precedent of the sale agreement was that the time for convening the creditors' meeting required by s 439A be extended. (The convening period had already been extended once by the Federal Court of Australia on 14 November 2012 so that instead of expiring on 26 November 2012 pursuant to s 439A(5) it expired on 26 February 2013, principally to allow the business to trade over Christmas and the Administrators to continue their efforts to sell the business as a going concern or enter into a deed of company arrangement: Strawbridge, in the matter of Retail Adventures Pty Limited (Administrators Appointed) v Retail Adventures Pty Limited (Administrators Appointed) [2012] FCA 1286.) The required extension for a further six months was granted on 20 February 2013 over the opposition of the first respondent (Helenic) and some thirty other unsecured creditors: Strawbridge (Administrator) v Retail Holdings Pty Ltd (Administrators Appointed), In the matter of Retail Adventures Holdings Pty Ltd (Administrators Appointed) [2013] FCA 151. The purpose of making completion of the sale agreement conditional on the extension was stated to be to give time for DSG to negotiate with lessors to assign the leases. 11The sale to DSG was completed on 13 March 2013. 12On 18 July 2013, DSG wrote to creditors anticipating a proposal for a deed of company arrangement, and a written proposal for a deed of company arrangement was made to the Administrators by Bicheno on 7 August 2013. On 19 August 2013 the Administrators published their report pursuant to s 439A, recommending winding up. On 2 September 2013, the creditors of RAPL and Holdings in separate, but concurrent, meetings resolved that each company enter into a deed. It is necessary to address each of these three matters in more detail.

(a) DSG's and Bicheno's proposal 13DSG's circular to creditors dated 18 July 2013 put forward a range of liquidation outcomes ranging from 9.04c in the dollar to 2.57c in the dollar (much lower figures than later put forward by the Administrators in the s 439A report), and stated that the 6c in the dollar generated by the deed of company arrangement was in the middle of that range. It added that there were two further advantages: that there would not be claims made against suppliers to recover preferences, and that there would be a faster distribution. 14The proposed deed of company arrangement was just that: a proposal, as opposed to a draft deed, although no separate complaint was made on that ground; cf Kirwan v Cresvale Far East Ltd (in liq) [2002] NSWCA 395; 44 ACSR 21 at [382]. In its written form, it comprised appendix C to the s 439A report. Its salient provisions are reproduced in the annexure to these reasons. It provided that there would be a single deed pursuant to which the non-related creditors of both RAPL and Holdings would claim against a single fund. Two of the Administrators would continue as Deed Administrators. The fund comprised RAPL's and Holdings' existing bank deposits, together with: "a contribution from Bicheno, DSG, Jan Cameron, Penny Moss and Bruce Irvine (Contributing Related Creditors) of $5,500,000 (Contribution) which is to be made by 31 January 2014 or such other date as the Deed Administrators may agree (Contribution Date)" (cl 3.2(b)). 15Clause 5.3 provided that the Contributing Related Creditors would be released from any and all claims arising prior to the commencement of the administrations upon payment of the Contribution. Clause 7.2 was in these terms: "If the Deed Contribution is not made on the Contribution Date the Deed will fail. The Deed Administrators will not be entitled to take formal steps to recover the Contribution from the Contributing Related Creditors." 16If read in isolation, the words "is to be made" in cl 3.2(b) are capable of imposing enforceable obligations: Doyalson Wyee RSL Club Ltd v Liquor Administration Board of NSW [2007] NSWSC 910 at [27]. However, even though the proposal is not itself contractual, it needs to be read as a whole. When regard is had to the second sentence of cl 7.2, it is plain that the proposal did not contemplate creating an enforceable obligation or an accrued right surviving termination. Accordingly, the Administrators' s 439A report emphasised that there was no obligation upon the Contributing Related Creditors to pay $5.5 million ("effectively optional at the contributors' discretion"). No party disputed this on the appeal. 17The absence of an obligation to contribute $5.5 million to the fund gave rise to what the primary judge regarded as "an unsatisfactory element of uncertainty": what was the meaning of "the Deed will fail"? Competing submissions were made when the appeal was heard as to whether the inevitable consequence would be a winding up of RAPL and Holdings, or whether there could be circumstances in which the board reassumed control (because the proposed deed specified circumstances in which it was to terminate but did not provide that the company was thereupon to be wound up: see the reasoning in Yeshiva Properties No 1 Pty Ltd [2011] NSWSC 25 at [8]-[11]). 18The primary judge considered that it was probable that if the $5.5 million were not paid, the deed would be terminated and RAPL would not go into liquidation, although it would remain insolvent and would readily be wound up, but with a delay in the commencement of the relation back period: at [52]-[53]. It will be necessary to return to the reasoning leading to that conclusion, which is central to proposed ground 2.

(b) The Administrators' s 439A report to creditors 19Section 438A required the Administrators to investigate RAPL's "business, property, affairs and financial circumstances" and to form an opinion about whether it would be in the creditors' interests for RAPL to execute a deed of company arrangement, or for the administration to end, or for RAPL to be wound up (the same obligations extended to Holdings). Section 439A required the Administrators to convene a meeting of creditors and to distribute to those creditors a report concerning the investigation and their opinion. 20The Administrators were of the view that RAPL should be wound up, and that it was not in the interests of creditors to resolve that RAPL enter into a deed of company arrangement. The reasoning turned upon a likely return of some 6c in the dollar to unrelated creditors if DSG's and Bicheno's proposed deed of company arrangement were entered into, as opposed to a range of 20-45c in the dollar in a winding up. 21The calculations underlying an estimated return of a little over 6c in the dollar if creditors voted in favour of the deed of company arrangement were and are uncontroversial. In contrast, the estimated returns on a winding up were highly controversial at the trial and (albeit to a lesser extent) on appeal. 22The essential reasoning supporting the Administrators' calculations commenced with their identifying 1 July 2011 as a date on which in their view a case could be made for RAPL being insolvent. That view was supported by a variety of conventional analyses and considerations, including (the following are not exhaustive) (a) poor liquidity ratios, amounting to an inability to meet current liabilities in the ordinary course of business, (b) EBITDA trading losses every month save for November and December 2011, (c) net negative asset positions for every month since April 2011 on both external and internal reports and forecasts, (d) increasing ageing creditors, (e) what the Administrators described as "an extraordinary volume of creditor complaints and demands in relation to overdue accounts" during the period from 1 July 2011, (f) guarantees totalling $15,000,000 provided by Bicheno to four major suppliers, and (g) agreement with the Australian Taxation Office prior to July 2011 to delay payment of tax liabilities. The latter caused the Administrators to conclude that "RAPL was extremely cash constrained even in the period before July 2011". 23If RAPL were insolvent from 1 July 2011, then the Administrators considered that there were three large assets available to unsecured creditors. The first was a claim against the directors and holding companies for insolvent trading, which the Administrators valued at in excess of $48 million. They allowed for a likely recovery of between $19 million and $31 million in light of the uncertainties of the litigation. The second was a claim that $49.77 million of the $77.49 million lent ultimately from Bicheno to RAPL secured by the charge granted by RAPL on 1 July 2011 was unsecured. The third was preference claims pursuant to s 588FE of the Corporations Act against suppliers in excess of $50 million, as to which the Administrators allowed for a likely recovery of between $22 million and $32 million. Both the high and low return estimates allowed for legal fees of $5 million for pursuing these three matters. 24At the trial, there was a sustained attack upon the opinions in the s 439A report. That attack failed. Ultimately, DSG and Bicheno placed no reliance on the expert evidence they had adduced with a view to undermining the Administrators' opinions, and provided no other support for the estimates of likely recovery on liquidation in the DSG circular. The primary judge formed the view, after observing Mr Strawbridge in the witness box, that he had a: "high level of confidence as to the validity of the investigations and analysis carried out by the Administrators [in a position paper prepared prior to the s 439A report], and the strength of the opinions that they have stated in the Creditors Report as to the period over which there is a strong claim that RAPL traded while it was insolvent": at [98].

(c) The creditors' voting at the meetings of RAPL and Holdings 25The meetings of the creditors of RAPL and Holdings took place concurrently on 2 September 2013. There was a dispute at trial as to the precise voting, but his Honour observed that nothing turned on this, and no challenge was made to the findings made, which may be expressed as follows. 26Overall, 606 creditors voted debt with a total value of $46,052,678 in favour of the resolution, while 122 creditors voted $36,490,655 of debt against the resolution. In accordance with a direction from the Federal Court: Strawbridge, in the matter of Retail Adventures Pty Ltd (Administrators Appointed) v Retail Adventures Pty Ltd (Administrators Appointed) [2013] FCA 891; 95 ACSR 121, Holdings did not vote. 27DSG and Bicheno voted some $34,986,958 of parent company debt in favour of the resolution. If the related party votes of DSG and Bicheno had been disregarded, the result would have been that 122 creditors voted $36,490,655 against the resolution, with 604 creditors voting $11,065,720 in its favour. Those 604 creditors comprised 545 employee creditors voting $2,575,675, 52 trade creditors voting $8,132,066, and 7 landlord creditors voting $357,977. 28Uncontroversial evidence permits a slightly more refined analysis of the voting in three respects. First, Mr Damien Hodgkinson, who identified himself to the meeting as "the restructuring adviser working with Discount Superstores Group on the restructuring of Retail Adventures" held 48 proxies and voted $40,330,561 in favour of the resolution (which is to say, all save just less than $6,000,000 of the debt voted in its favour). Mr Hodgkinson had not merely voted the $26,986,958 of DSG debt and the $8,000,000 of Bicheno debt, but also some $5,343,603 of debt from unrelated creditors. Most of those unrelated creditors for whom Mr Hodgkinson held proxies must have been trade creditors (for the non related-creditor debt was either employees or trade creditors or landlords; almost all of the employees voted by DSG proxy and the landlord debt voted in favour of the resolution was only $357,977). 29Secondly, of the 604 creditors who voted in favour of the resolution, 545 were employees who were, within a month, to cease being creditors pursuant to the terms of the sale of business, of whom 499 had used the DSG proxy form to cast their votes. 30Thirdly, 112 of the 167 trade creditors voted $23,835,992 of debt against the resolution (with 3 abstentions), and 39 of the 48 landlord creditors voted $9,124,383 of debt against the resolution (with 2 abstentions). 31The voting of Holdings' creditors is much more straightforward. DSG voted in excess of $100,000,000 in favour of Holdings executing a deed of company arrangement, while 15 small creditors voted a total of just less than $5,000,000 against the resolution. The chairman exercised his casting vote in favour of the resolution. 32Proceedings were commenced shortly thereafter by two creditors (including Helenic), and a trial took place between 12 and 20 November 2013.

The judgment of the primary judge 33By judgment delivered on 23 December 2013, the primary judge set aside the resolution that RAPL execute a deed of company arrangement, and ordered that RAPL be wound up: [2013] NSWSC 1973. His Honour rejected the submission that the resolution was contrary to the interests of creditors as a whole; this is the subject of Helenic's notice of contention. His Honour found at [177]-[178] that there was prejudice within the meaning of s 600A(1)(c)(ii): "The resolution passed by the creditors of RAPL on 2 September 2013 prejudiced, or was reasonably likely to prejudice, the creditors who voted against it, because if the $5.5 million Contribution is paid into the Deed Fund, the dividend under the deed of company arrangement will be about 6 cents in the dollar, whereas, if the creditors had resolved to wind up the company, it is highly probable that the creditors would have received a substantially higher dividend. That conclusion is supported, in the manner that I have considered above, not only by the contents of the Creditors Report, but also by the effect of the forensic attack on that report. It is also supported by the analysis of the Dividend Estimate made by DSG that I have examined above. In making that finding I have not been able to determine any particular amount that the unsecured creditors of RAPL will be likely to receive on a winding up of the company, and the finding acknowledges the uncertainties that are inherent in the process of investigation, analysis and judgment performed by the Administrators." 34His Honour also found that the possibility that the $5.5 million might not be paid also prejudiced creditors, because of the possibility of the deferral of the relation back period: at [181]. His Honour thereafter (at [184]-[198]) addressed the question whether the prejudice was unreasonable, and concluded that it was. In so doing, his Honour referred to subparagraph (A) of s 600A(1)(c)(ii) (at [184]), and said that it was not necessary for him to rely on the criteria in subparagraphs (B) and (C) (at [202]).

Events following judgment 35Immediately following the delivery of judgment, DSG made an application for a stay of those orders. The primary judge, over the opposition of the Administrators, granted a stay until 5pm on 27 December 2013. A further stay was applied for, and granted, again over the opposition of the Administrators, until 5pm on 3 February 2014, on terms inter alia that expedition be sought and the matter brought before the Court of Appeal on the first day of the 2014 term. Orders were made pursuant to s 600D suspending the obligation upon RAPL to execute a deed of company arrangement. 36The consequence of those orders was that the creditors' resolution remained on foot, but no deed was executed and so the voluntary administration of RAPL continued, as did the moratorium on the rights of secured creditors and landlords effected by ss 440B and 440D. However, although those dates were extended under the regime, the proposal on which creditors had voted on 2 September was not ambulatory, and could only be varied by agreement. Clause 7.2 still provided that if the $5.5 million deed contribution was not made by 31 January 2014, "the Deed will fail". 37At the end of January there was correspondence between the solicitors concerning an extension of the stay. By letter dated 30 January 2014, the Administrators' solicitors sought confirmation that the $5.5 million would be paid into court "in order to quarantine and preserve those funds for the duration of any appeal". DSG's solicitor responded the following day that "our clients no longer press the application for a further stay." They said that they would not pursue their application for expedition. No mention was made of the $5.5 million, and it was not (nor has it ever been) paid into court or placed into a controlled moneys account. 38On 3 February 2014, the matter came before Tobias AJA. Helenic sought expedition of the appeal, given that there continued to be a challenge to the order winding up RAPL. His Honour granted expedition and made directions which saw the proceedings heard and determined on 7 March 2014. Helenic and the Administrators made it clear that if a further stay was granted, it should be on terms that there be a further extension to the Release Date. After being given an opportunity over the luncheon adjournment to seek instructions, counsel for DSG advised that her instructions were not to press for a stay. 39It was transparently clear to all parties that at 5pm on 3 February 2014, the order for the winding up of RAPL and the appointment of the Administrators as Liquidators became effective. Their counsel had said (transcript, 3 February 2014, p 4): "If there's no stay, at 5 o'clock today my clients become the liquidators and they will then proceed to take the necessary steps now the company is in liquidation." 40What was flagged in court on 3 February 2014 occurred. The Administrators assumed office as Liquidators. They made appropriate notification to ASIC. They sent a letter to all creditors of RAPL dated 4 February 2014 advising that the winding up order had taken effect and that "DSG have advised they will not be pursuing a further stay of the liquidation", although adding that DSG had brought an appeal which was expected to be heard in early March 2014. The letter said that Mr Strawbridge would be seeking to convene a meeting of creditors in the near future. 41Also on 4 February 2014, all landlords of premises leased by RAPL were advised that the administration moratorium had come to an end, so that landlords were no longer prevented from taking steps to recover possession of leased premises. The Liquidators further stated: "Neither the Liquidators nor the Administrators will be liable for rent and outgoings in respect of any period after the end of the Administration." and "All claims against [RAPL] for breaches of existing leases (including any breaches after 3 February 2014) will rank as unsecured claims in the liquidation." 42By letter dated 24 February 2014, creditors were advised that a meeting of creditors of the company would be held on Tuesday 11 March 2014 (that is, two working days after the appeal was heard). The letter advised that an update of events would be provided, approval of the Administrators' remuneration would be sought, and a committee of inspection would be nominated. Provision was made for the submitting of proof of debt forms and proxies prior to the meeting. 43On 5 March 2014 (two days before the proceedings were listed to be heard), the solicitors for DSG and Bicheno wrote stating that they were instructed that Ms Cameron "will provide an undertaking to the Court that she will ensure that payment of $5.5 million is made, within 7 days of the undertaking, into a controlled monies account with an irrevocable direction to [the solicitors] that the sum be applied in payment of the contribution required under the DOCA." The form of that undertaking was provided shortly before the appeal was heard. 44Mr Newlinds SC for Helenic pointed to a series of deficiencies in the undertaking. It was not signed, it did not name the solicitor and it did not specify the controlled monies account. Wilful breach of an undertaking to the Court sounds in contempt: AMIEU v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 111-112, and there should be no difficulty in identifying the solicitor and/or client who may in that event be charged and prosecuted. However, the difficulties faced by the appellants in their belated reliance on this undertaking (which in any event falls short of actual payment into Court) are more substantive.

The consequences of RAPL's winding up 45There is no evidence about it, but it is likely that some landlords - a large majority of whom voted against the deed of company arrangement - have acted upon the letter dated 4 February 2014, and taken steps to recover possession. They were not able to do so until then because of the statutory moratorium: s 440B. The Liquidators' letter was in substance an invitation for them to do so. The Court was not taken to any up to date evidence as to the extent to which DSG had completed negotiations with RAPL's landlords (there was evidence at trial that there were continuing negotiations with the landlords of 89 stores and the head office and Queensland distribution centre). 46It is possible that creditors (perhaps, especially, creditors fearing a preference claim against them) may have taken steps to their detriment on the basis of what was conveyed to them on 4 February 2014. It is established on the evidence that the liquidators have "dealt with various telephone and email inquiries from creditors, particularly landlord creditors" and "engaged in numerous discussions with the DSG staff concerning leasing issues". The content of those dealings and discussions is unknown, as is whether any agreements have been reached. Nor is it known whether the liquidators have exercised powers pursuant to their appointment, including compulsive powers to obtain documents. 47The further detail as to what has happened was not the subject of evidence on the application for leave by DSG and Bicheno. The foregoing is derived largely from an affidavit served by the Liquidators opposing the grant of leave, affirmed on 3 March 2014 and thus predating the change of stance by DSG. That affidavit states that instructions have been provided to Herbert Smith Freehills in relation to correspondence with substantial preference creditors and ongoing landlord creditors and the preparation and commencement of the s 588FE claim and public examinations pursuant to ss 596A and 596B. 48It is certain that the Liquidators will have incurred costs attracting priority pursuant to s 556. What those costs have been was unquantified on the evidence, but they are likely to have been substantial. The remuneration report circulated to creditors on 24 February 2014 disclosed that in excess of $1.1 million had been incurred by the Administrators in the 16 weeks from 11 August to 30 November 2013. It would come as no surprise to me if the more recent costs (including the irrecoverable costs of the litigation) of the Administrators and Liquidators in the subsequent three months were in the same order of magnitude. 49Other things being equal, an additional $2 million of expenses incurred would reduce the distribution to unsecured creditors under the proposed deed from 6c to around 4c in the dollar. 50Finally, there has been no explanation for the about-face, between 3 February and 5 March 2014, which has led to RAPL being placed into liquidation and its creditors advised accordingly. For example, it is easy to see that DSG, Bicheno and Ms Cameron and the other contributing related creditors might have wished to have reviewed the trading figures in the lead-up to Christmas before choosing to contribute $5.5 million. It is also possible that for reasons outside the control of DSG, Bicheno and Ms Cameron, there was a delay in obtaining funds. Any explanation for the change of stance would be a matter relevant to the grant of leave. Conversely, unexplained delay tells against the grant of leave: cf Deputy Commissioner of Taxation v Portinex Pty Ltd (subject to deed of company arrangement) [2000] NSWSC 99; 34 ACSR 391 at [77]; Khoury v Zambena Pty Ltd [1999] NSWCA 402; 217 ALR 527 at [81] and [113]. 51The Court has no explanation at all for the about-face, which has taken place in a relatively short period. In those circumstances, the Court should proceed on the basis that DSG, Bicheno and ultimately Ms Cameron saw it as in their self-interest to let RAPL be wound up rather than contribute the $5.5 million on 3 February, but in their interest to make that contribution and set aside the winding up order four weeks later. The immediate consequence of their decision is that DSG and Bicheno now need to obtain leave in order to bring their appeal, and the grant of leave must have regard not merely to the interests of the parties to the proceedings, but also to the hundreds of third parties not before the Court who are or may be impacted by the change of status of RAPL. 52There is considerable scope for confusion, detracting from the orderly winding up of RAPL. That was well illustrated by the fact that creditors were to meet, approve expenses and appoint a committee on the strength of the unstayed winding up orders less than a week after the change of stance. It is highly likely that creditors' and third parties' expectations have been impacted by the steps taken by the Liquidators following 3 February 2014. It is quite possible that at least some creditors have made different provisions in their financial statements. The evidence does not permit an assessment of the extent of the prejudice and whether it is readily remediable.

Four discretionary obstacles faced by DSG and Bicheno 53Sections 447A, 471B, 482 of the Corporations Act and s 101(2)(n) of the Supreme Court Act 1970 (NSW) stand in the way of DSG and Bicheno successfully setting aside the orders made by the primary judge. The impact of the latter three is a direct consequence of the conscious decision not to seek a further stay pending appeal on 3 February 2014, and it is convenient to deal with them first before turning to s 447A.

(a) Section 471B 54Section 471B relevantly provides that a person cannot begin or proceed with a proceeding in a court against a company being wound up in insolvency. That section did not apply before 3 February 2014, but it did apply thereafter. After 3 February 2014, leave was required to proceed with the appeal previously instituted as of right: Distinctive FX 9 Pty Ltd v Statewide Developments Pty Ltd [2012] NSWCA 393 at [13]. That approach has been followed in this Court thereafter: see Cassegrain v Gerard Cassegrain & Co Pty Ltd (in liq) [2012] NSWCA 435 at [31]; Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 at [3]. DSG and Bicheno did not suggest that leave was not required, and so there is no occasion to consider whether and the extent to which that section might not apply (see for example the "defensive proceedings" considered in light of the authorities by White J in Dealquip Australia Pty Ltd v 33 Electra Pty Ltd (No 2) [2013] NSWSC 1382; 31 ACLC 13-049 at [17]-[21] and by S Maiden, "Is leave of court required to appeal against a decision in favour of a company in voluntary administration or liquidation?" (2012) 20 Insolv LJ 96). 55As McPherson J explained in Ogilvie-Grant v East (1983) 7 ACLR 669 at 671-672, the requirement for leave was a consequence of the fact that winding up before Judicature legislation was an administration conducted in chancery. The cases are largely directed to the choice between ordinary litigation and the more streamlined procedure of a proof of debt: see the review by Wilcox, Burchett and Beazley JJ in Vagrand Pty Ltd (In liq) v Fielding (1993) 41 FCR 550 at 553-557, which is not significant in the present case. 56However, the effective supervision by the Courts in accordance with the legislation governing a winding up is an important consideration: Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646 at 649-650. Relevantly for present purposes, Street J had regard to "the interests of a regular and orderly winding up" and "the interests of the creditors as a general body" in granting leave in Re A J Benjamin (in liq) and the Companies Act (1969) 90 WN (Pt 1) (NSW) 107 at 110. He said (at 109-110): "Responsibility for satisfying the rights of creditors is placed upon the liquidator. If the grant of this leave could be seen to be likely to lead to attempts on the part of the applicant to reopen anything already done in the winding up, then it is probable that if leave were to be granted it would be hedged about with conditions. Leave is not to be withheld simply and solely as a punishment: the primary consideration is the enabling of an orderly winding up. If no prejudice, procedural or substantive, will flow to those having interests in the winding up, an applicant has strong case for gaining the leave he seeks. The wide power of the court to impose conditions will ordinarily be exercised to prevent the risk of prejudice." 57While it is not necessary to demonstrate an absence of prejudice to the creditors or the orderly winding up of the company in order to obtain leave, the inability on the part of DSG and Bicheno to do so tells against the grant of leave.

(b) Section 482 58Secondly, DSG and Bicheno apply to this Court to exercise power under s 482 to terminate the winding up. Once again, their application is necessary only because of the decision made on 3 February 2014 not to extend the existing stay of the orders made by the primary judge. 59There is a question whether s 482(2A) applies. That subsection requires the Court to have regard to a range of material, if the "application is made in relation to a company subject to a deed of company arrangement". That material includes any report given to the court by an administrator of the company that contains an allegation that an officer of the company has engaged in misconduct. 60I think that the better view is that the subsection does apply. The question is whether DSG's and Bicheno's application is made "in relation to" a company subject to a deed of company arrangement. Here, RAPL was, from 2 September 2013 until 3 February 2014 bound not to act inconsistently with the proposal (s 444C, see further below), and the point of the application is for RAPL to execute a deed of company arrangement. Since s 482 is only available "during the winding up of a company" and since the purpose is for the Court acting in the broader public interest to have regard to, inter alia, allegations that officers have engaged in misconduct, there is no good textual or contextual reason to treat the "relational term" in s 482(2A) narrowly: see R v Khazaal [2012] HCA 26; 246 CLR 601 at [31]; Trustees of the Sydney Grammar School v Winch [2013] NSWCA 37; 83 NSWLR 80 at [159]-[160]. But even if I were wrong and it were not mandatory to have regard to the s 439A report and other documents by reason of s 482(2A), the opinions of the Administrators in that report and Mr Strawbridge's testimony before the primary judge are undoubtedly relevant to the discretionary decision to terminate the winding up. It would be wrong to put them to one side. Mason JA described (by reference to earlier decisions) the relevance of broader public interest considerations in Re Data Homes Pty Ltd (in liq) and the Companies Act [1972] 2 NSWLR 22 at 26-27 to the discretion to stay a winding up order; the same considerations may be seen in the reasons of Morrison JA, with whom Holmes and Fraser JJA agreed, in Promoseven Pty Ltd v Prime Project Development (Cairns) Pty Ltd (Subject to a Deed of Company Arrangement) [2013] QCA 405 at [83]. 61On the view that I take, it is not necessary to go further than to say that a further factor telling against the terminating of the winding up is the considered opinion of the Administrators, now tested in cross-examination, that RAPL engaged in insolvent trading over a lengthy period of time.

(c) Section 101(2)(n) 62Leave is also required by reason of s 101(2)(n) of the Supreme Court Act, because DSG and Bicheno challenge an order of the Court in the Equity Division for the winding up of RAPL. That provision was inserted in 1995 (by the Courts Legislation Further Amendment Act 1995 (NSW)). It is narrower than s 471B, and in the circumstances of this case, if leave were granted under ss 471B and 482, there would be no separate reason to refuse leave under s 101(2)(n). Accordingly, it may be put to one side.

(d) Section 447A 63The fourth discretionary hurdle facing DSG and Bicheno is not a consequence of permitting RAPL to be wound up in February 2014, but follows from the fact that Bicheno put to creditors a proposal with a limited window of time for $5.5 million to be contributed. As was recognised by the amended notice of appeal, it is now no longer enough to set aside the orders of the primary judge. DSG's proposal as formulated in August 2013 has lapsed. 64Accordingly, DSG and Bicheno seek orders under s 447A that the time for RAPL and Holdings to execute the deed of company arrangement be extended until seven days after judgment was delivered, and for the payment of the $5.5 million to be extended to a date two days after the execution of the deed. 65Section 447A gives a very large power, although it is not without limits: see Correa v Whittingham [2013] NSWCA 263 at [2]-[8], [97]-[105] and [304]. It was not suggested that s 447A was unavailable to support the changes to the proposal required in order to revive the proposal in the event that the appeal was allowed. 66Although it is appropriate to proceed on the basis that an exercise of power under s 447A was capable of authorising the course which DSG and Bicheno seek, whether that would be an appropriate exercise of discretion is a separate and large question. There are real differences between the proposal voted on, and the deed which DSG and Bicheno would have RAPL execute.

1. A majority of creditors voted in favour of an early contingent 6c distribution. The contingency has evaporated, but there will now be a delay in the order of six months; it is not easy to assess the extent to which that would have influenced the voting.
2. Nor will 6c be the distribution, having regard to the additional costs which have been incurred in the last six months (the size of which is unquantified). DSG and Bicheno recognised this, and said that a term of relief could be imposed for them to "top up" the pool. However, no undertaking to do so was proffered. The amounts involved are not small and reluctance on the part of DSG and Bicheno and those standing behind them to commit to doing so is understandable. Without intending any criticism, in the particular circumstances of these proceedings, it is not possible to be confident that if DSG and Bicheno and other contributing creditors were required to contribute an additional amount of $1 million or $2 million or more, that would occur.
3. Probably more important still is the changed electorate. The vast majority of employees who voted in favour of the deed of company arrangement (who comprised the large majority in number - although not in quantum of debt - of those voting in favour) are no longer creditors of RAPL and will not be bound in any meaningful way by the deed. In the exercise of discretion under s 447A, heightened regard should be had to the fact that in the absence of employee votes, a majority of creditors opposed the resolution, and the casting vote of the Administrators would have been exercised consistently with their opinion favouring a winding up.
4. Finally, the opinions expressed by the Administrators have now been tested in cross-examination and found to be sound. The contrary opinions advocated by DSG and Bicheno have been discredited. It is to be recalled that there was a divergence of expert opinion at the meeting, and it may be that some creditors were swayed by doubts as to the robustness of the views in the s 439A report, or by the persuasiveness of the now discredited competing scenario advanced by DSG and Bicheno. Once again, it is no small thing to exercise power under s 447A to permit a different deed to be executed from that voted on at the meeting in circumstances where the information on which the body of creditors voted has materially changed. 67All of those reasons tell against the exercise of discretion under s 447A, and for that indirect reason, against the grant of leave. For only if the Court were minded to exercise the s 447A discretion would the appeal have any utility. 68All of that said, if there were a clear case of appellable error on the face of the reasons of the primary judge, that would strongly favour the grant of leave. Accordingly, I turn to s 600A and the proposed grounds of appeal which contend for error in its application by the primary judge.

(a) Background and context of the legislative scheme 69Part 5.3A implemented the "new voluntary procedure for insolvent companies which integrated the procedures for the voluntary winding up of a company and for a scheme of arrangement" which had been proposed in the Australian Law Reform Commission's General Insolvency Inquiry DP 32 (1987) and ALRC 45 (1988) at [54]; the latter is commonly known as the Harmer Report. It drew from approaches taken overseas, including in the United Kingdom (see Harmer Report at [53]). In particular, there is similarity of structure and statutory language with the provisions of the Insolvency Act 1986 (UK). 70In In the matter of Bevillesta Pty Ltd (In Voluntary Administration) [2011] NSWSC 417; 84 ACSR 215 at [50], Bergin CJ in Eq referred to the aim of the new procedure, as articulated in the Harmer Report, as being that it would be capable of swift implementation, as uncomplicated and inexpensive as possible and flexible, providing alternative forms of dealing with the financial affairs of the company. As Cohen J put it in Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139 at 145: "The intention was ... to provide a more expeditious and less expensive way of assisting those creditors and members than under the greater formality of a winding up or of the entry into a scheme of arrangement." 71The essence of the new procedure is the vesting of control over the company in an independent investigator for a short moratorium period during which creditors' remedies are restricted while the administrator investigates and reports to creditors. Creditors then meet and vote on a resolution for one of the three "normal outcomes" of administration identified in s 435C(2): that the company no longer be subject to administration, or that it execute a deed of company arrangement, or that it be wound up. 72Section 600A was introduced by the Corporate Law Reform Act 1992 (Cth) as part of the regime protecting minorities who are bound by deeds of company arrangement. The Harmer Report (at [580]) considered options for "preventing [insider or related person] creditors from exercising an unfair influence over a meeting of creditors". The report rejected any "cap" on the voting power of such creditors in favour of what it described as giving "a court an express (but discretionary) power to set aside a resolution where there is a fair inference that the votes of related person creditors have significantly influenced the result and prejudiced non-related creditors." In response to a submission that the grounds of challenge would be uncertain, it was stated (at [582]) that "[t]he Commission anticipates that the court would receive some guidance from the cases dealing with schemes of arrangement." 73A resolution in favour of a deed of company arrangement resembles a creditors' scheme of arrangement, in that all creditors - even those voting against it - are bound. However, unlike a scheme of arrangement, court approval is not required before a deed of company arrangement becomes effective. This is the "chief difference" between statutory compositions and arrangements in bankruptcy: Lehman Brothers Holdings Inc v City of Swan [2010] HCA 11; 240 CLR 509 at [32]. Instead, the mere carriage of a resolution has legal effect, subject to successful application being made to a court to set it aside. Upon the resolution being carried, the administrator is required to bring into existence and execute a deed (ss 444A and 444B) which binds all creditors, even those voting against it (s 444D), who may not act inconsistently with the deed even before it is executed (s 444C). 74Whether a resolution is carried turns on the Corporations Regulations 2001 (Cth). Subject to a poll being demanded (reg 5.6.19), it is carried if a bare majority of debt and a bare majority of creditors vote in its favour, and it is not carried if bare majorities of debt and creditors vote against it: reg 5.6.21(2) and (3). In the event that a majority of creditors vote one way and a majority of debt is voted the other way, the chairman of the meeting has a casting vote: reg 5.6.21(4). 75The resolution was carried at the creditors' meeting of RAPL because of the swamping effect of the employees as individuals and of the related party debt of DSG and Bicheno. 76The scheme of the Act contemplates a role for the court to review the conduct of majorities of creditors. The Harmer Report stated (at [113]) that: "It is anticipated that the interests of particular classes of creditors will be protected by the provision allowing for avoidance of a deed, which would be exercised if the interests of a group of creditors have been overborne by the creditors as a whole. The class rules developed in relation to schemes of arrangement will necessarily be required to be considered when meetings are convened." 77What was there anticipated by the Harmer Report was not squarely implemented. A creditors' scheme of arrangement may require meetings of separate classes of members, so that they can "consult together with a view to their common interest", as Bowen LJ put it in connection with the creditors' scheme in Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 at 583. Where the rights and entitlements of creditors, viewed in the totality of the scheme's context, are so dissimilar as to make it impossible for them to consult together with a view to their common interest, then a separate class may be required: Re Hills Motorway Ltd [2002] NSWSC 897; 43 ACSR 101 at [12]. 78However, Pt 5.3A of the Corporations Act mandates that there will be a single meeting of creditors, voting on the new uncomplicated and inexpensive procedure of a deed of company arrangement. In Lehman the joint judgment said at [30]: "Neither the Act nor the Regulations require division of creditors into classes. Instead, protection for the position of individual creditors, or groups of creditors, is provided by ss 445D and 600A of the Act. Section 445D gives the Court power to terminate a deed in various circumstances, including, in particular (s 445D(1)(f)), where the deed is oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more creditors of the company, or is contrary to the interests of creditors as a whole. Section 600A gives the Court power to set aside a resolution passed at a creditors' meeting if the resolution would not have passed but for votes cast by creditors which are related entities of the subject company, and if the passing of the resolution is contrary to the interests of the creditors as a whole, or is likely to unreasonably prejudice the interests of the defeated creditors." 79There is an important consequence flowing from the fact that the principles governing class definitions in schemes do not apply. It was well put by David Richards J, of the comparable English legislation, in Re T&N Ltd [2004] EWHC 2361 (Ch); [2005] 2 BCLC 488 at [81]: "The crucial difference with a [creditors' voluntary arrangement as opposed to a scheme] is that there is just one meeting of creditors, so that necessarily means that there may be sub-groups who would constitute separate classes for a scheme." 80That is to say, the premise of the new procedure is that creditors will be able to meet and vote on their common interest in the company executing a deed of company arrangement or being wound up, subject to the protections given by s 600A (and s 445D). This informs the construction to be given to "interests of creditors" in this context, as considered further below. 81In short, s 600A is part of the protection given to creditors who are disadvantaged by a deed of company arrangement (cf Young v Sherman [2001] NSWSC 1020; 40 ACSR 12 at [73]). The legislation contemplates that a related entity may vote decisively on certain specified matters (resolutions to wind up a company, or to execute a deed of company arrangement, or other votes under Pt 5.3A) together with other creditors. The effect is that a discretion is conferred upon the Court to set aside the outcome, or require a further vote, perhaps under different conditions. That reflects a legislative recognition that the reasons for the voting of related entities may diverge from those of other creditors, in a way that should be subjected to curial oversight. However, the fate of the company and its creditors insofar as it is determined by the deed of company arrangement is determined by those creditors voting in a single group, even though those same creditors would, if they were asked to approve a scheme of arrangement, meet and vote in separate meetings. 82In Lehman the joint judgment said at [31] and [33]: "The provisions may be understood as proceeding from two related premises. First, judgment about what is to happen to the subject company, and, in particular, the judgment about the commercial worth of any proposal for a deed of company arrangement, is committed to the body of all creditors. Secondly, for the making of that decision, it is neither necessary nor appropriate to divide creditors into separate classes. The only substantial qualifications to the generality of these propositions are provided by the conferral on the Court of powers under ss 445D and 600A. ... [I]t is important to approach Pt 5.3A of the Act recognising that the adoption of a deed of company arrangement by majority affects the rights of dissentients. It is also important to recognise that the rights of dissentients against the company in question (and the rights of all others bound by the deed) are modified, even replaced, by the rights they have under the deed. But these are effects common to all forms of statutory arrangement and compromise. And such statutory arrangements have been a common feature of both personal and corporate insolvency legislation for a very long time."

(b) The structure of s 600A and the consequences for an appeal 83Section 600A has not been amended since it was enacted more than 20 years ago. The discretionary power conferred by s 600A(2) to set aside the resolution, or to order that the resolution be put to a vote at another creditors' meeting, including on terms that the related creditors are not entitled to vote, is only available if the Court is satisfied of the three matters in s 600A(1). The first two of those matters are that one or more creditors that are related to the company have contributed to an outcome on a vote which would have not occurred had their votes been disregarded: s 600A(1)(a) and (b). It was at all times common ground that DSG and Bicheno were related creditors and that if their votes had been disregarded, the resolution on 2 September 2013 would have failed. The argument at first instance and in this Court turned upon the third precondition, in s 600A(1)(c), to the availability of power under s 600A(2). 84Section 600A(2) thereby confers a discretionary power upon the Court, only if the Court is first satisfied of either of the two matters in s 600A(1)(c). The first step involves an evaluative exercise of broadly worded language: "contrary to the interests of the creditors as a whole" and "unreasonable prejudice to the interests of creditors". The second step involves the exercise of a discretion. 85The state of satisfaction in s 600A(1) is jurisdictional, for in its absence there is no power available under s 600A(2); Barrick Australia Ltd v Williams [2009] NSWCA 275; 74 NSWLR 733 at [26]. Although that state of satisfaction involves the making of multi-faceted value judgments, it is a question of objective fact: cf Singer v Berghouse (1994) 181 CLR 201 at 211. Strictly speaking, it is not discretionary - either the Court is satisfied, or it is not: Foley v Ellis [2008] NSWCA 288 at [3]; Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254 at [29]. 86These considerations inform what is required when an appeal by way of rehearing is brought from the exercise of power under s 600A(2). Very little attention was given to this in submissions in this Court, nor did the reasoning of the primary judge disclose separate consideration of the s 600A(2) discretion. Strictly, it might be thought that the jurisdictional finding pursuant to s 600A(1) is reviewable in accordance with the principles reflected in Warren v Coombes (1979) 142 CLR 531, while review of the exercise of discretionary power pursuant to s 600A(2) is subject to the principles in House v The King (1936) 55 CLR 499. However, here as elsewhere, it is unlikely that anything will turn on this (see eg Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41 at [40]). The amended notice of appeal was drafted and the hearing proceeded on the basis that appellate intervention was restricted to review of discretionary decisions, because of the obvious link with the discretionary power conferred by s 600A(2): see DAO v R [2011] NSWCCA 63; 81 NSWLR 568 at [93]; Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656 at [6] and [42] and Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [22]. I will proceed on that basis, although it will be clear from what follows that if Warren v Coombes applied, the outcome and essential reasoning would remain the same.

(c) The terms of s 600A(1) 87The following propositions flow directly from the terms of s 600A(1). First, there are two possibilities by which the passing of a resolution can engage the subsection: (i) that it is contrary to the interests of creditors as a whole, or (ii) that the prejudice or likely prejudice to the interests of creditor dissentients is unreasonable having regard to certain factors. It follows immediately that there may be prejudice to the interests of the class of creditors who voted against the resolution but which falls short of unreasonable prejudice. In that event the curial power to override the decision of the meeting will not be enlivened. As Martin CJ said in Ravenswood Resort Pty Ltd (in liq) v Kammal [2006] WASCA 217; 60 ACSR 507 at [27], mere prejudice to those voting against the resolution is not sufficient. The same point was made by Austin J in Portinex at [137]: "Pt 5.3A clearly contemplates that the wish of an individual creditor may be overridden, and permits related creditors to take part in the decision to do so, subject to s 600A." 88Secondly, the onus lies upon the applicant to make out the elements of s 600A: Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544 at 548; Bovis Lend Lease Pty Ltd v Wily [2003] NSWSC 467; 45 ACSR 612 at [308]; TNT Building Trades Pty Limited v Benelong Developments Pty Limited (administrators appointed) [2012] NSWSC 766; 91 ACSR 17 at [11]. 89Thirdly, the provision applies to creditors who were creditors when the resolution was passed. Barrett J regarded this as "plain" in Hoath v Comcen Pty Ltd [2005] NSWSC 477; 53 ACSR 708 at [18], and the primary judge agreed at [175]-[176]. As much was, rightly, common ground between the parties. (That said, as noted above, relevant to the exercise of discretion for which DSG and Bicheno apply under s 447A is the fact that the numerical majority of creditors who voted on 2 September 2013 are no longer, in 2014, creditors who will be bound by the varied proposal which DSG and Bicheno wish to have RAPL execute.) 90Fourthly, the section focusses on "the interests of the creditors". The "interests of the creditors" twice used in s 600A(1)(c) is to be construed as identical in substance to the "creditors' interests" required to be addressed in the opinions required by s 438A to be formed by an administrator, and the s 439A statement by an administrator to creditors. The purpose of that investigation and the report to creditors is to permit them to make an informed choice. Where (as will usually be the case) the company is found to be insolvent, the choice is likely to be between winding up or accepting a compromise on the basis of which the steps in the deed of company arrangement may be implemented. 91Fifthly, "the interests of creditors" falls to be construed in such a way as would best promote the express object of Pt 5.3A (the effect of s 5C(2) and (3) is that the purposive construction required by the form s 15AA of the Acts Interpretation Act 1901 (Cth) took prior to 27 June 2011 applies, but nothing material turns on the difference for present purposes). The express object of Pt 5.3A is contained in s 435A: "The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company." 92The section is to be construed harmoniously with other related provisions in the Act. In particular, a deed of company arrangement may be terminated pursuant to s 445D(1)(f) if it is "oppressive or unfairly prejudicial to, or unfairly discriminatory against, one or more [creditors of the company]" or "contrary to the interests of the creditors of the company as a whole". That section repeats the interests of the creditors as a whole, but introduces a category of oppression or unfair prejudice to or unfair discrimination against any particular creditor or group of creditors.

(d) The interests of creditors as creditors 93Sixthly, and consistently with all of the foregoing, and critical to the resolution of these proceedings, it has been said that it is the interests of creditors as creditors to which regard must be had. 94Lindgren J, whose views command great weight in a matter of this nature, said in Federal Commissioner of Taxation v Wellnora Pty Ltd [2007] FCA 1234; 163 FCR 232 at [211] (emphasis in original): "It is the interests of the company's creditors as creditors with which an administrator must be concerned. Accordingly, if it appeared to an administrator that a proposed DOCA would be in the interests of certain creditors in a different capacity, such as the capacity of directors, it would be impermissible for the administrator to support the proposed DOCA by reference to those interests." 95Lindgren J's statement of principle also reflects the legislative recognition that the creditors can and must vote in a single class, in contradistinction with what occurs in a creditors' scheme of arrangement. The uniting characteristic they share is the debt owed to them by the company. The only relevant interest they have at the meeting is the timing and magnitude and risk attending to their having some of their debts being repaid, and, in some cases, the desirability of continuing to provide goods or services to the company. 96Lindgren J's statement of principle is consistent with what was said in Elfic Ltd v Macks [2001] QCA 219; [2003] 2 Qd R 125 at [219] by Davies JA, with whom Cullinane J agreed: the interests of creditors as a whole were satisfied where "All are concerned to pursue the claims so long as there are reasonable prospects of a substantial nett return." It reflects the approach adopted by McLelland CJ in Eq in M&G Oyster Supplies Pty Ltd v Nonchalont Pty Ltd (admin apptd) (1995) 19 ACSR 27 at 31-32. It is also consistent with what was said in Re Octaviar Ltd (No 8) [2009] QSC 202; 73 ACSR 139 at [177], in the context of s 445D, where most of the votes in favour of a deed of company arrangement were by parties having an interest in avoiding an inquiry by a liquidator, of which McMurdo J said, "it detracts from the arguments for the DOCAs that a majority of creditors has made a commercial decision as to what is in the interests of creditors as creditors" (emphasis in original). That is how the phrase has been approached in decisions such as Bovis Lend Lease v Wily at [173]-[198] and [310] and [320], and (in respect of the same term in s 493A) in Re BM2008 Pty Ltd (in liq) [2010] VSC 337 at [19]. In Portinex at [89], Austin J said that where the only choice is between the proposed deed or liquidation, the question of unreasonable prejudice "seems to boil down to whether the creditors are better off with the proposed deed or liquidation, as there is no other alternative on the facts". 97The same position obtains in the United Kingdom. Section 6(1)(a) of the Insolvency Act 1986 permits an application to be made on the basis that "a voluntary arrangement ... unfairly prejudices the interests of a creditor ... of the company" (see s 1A, and Sch A1, para 38 in cases were a moratorium is in place). The language resembles that in s 600A, and as noted above the British provisions were referred to by the Harmer Committee (the similar structure and purpose of the English provisions may be seen in the description given by Peter Gibson LJ in Raja v Rubin [2000] Ch 274 at 283, although an English company voluntary arrangement requires the votes of 75% of creditors by value). 98It is well established that the "interests of a creditor" in the similarly worded s 262(1)(a) of the Insolvency Act (dealing with natural person debtors) mean the interests of a creditor as a creditor. That was common ground in the Court of Appeal in Doorbar v Alltime Securities Ltd [1996] 1 WLR 456 at 467 and applied in Sea Voyager Maritime Inc v Bielecki [1999] 1 All ER 628 at 642 ("[the unfair] prejudice must be to his interests as a creditor of the debtor and not in some other capacity"). The same proposition appears in E Bailey and H Groves, Corporate Insolvency Law and Practice (3rd ed 2007, LexisNexis Butterworths), p 282, in relation to s 6(1)(a). 99It does not follow from the foregoing that the examination of prejudice is limited to a comparison of the expected returns under the proposed deed of company arrangement as opposed to winding up. A trading outcome may be preferable for the creditors as a whole, which is something which would further the first purpose stated in s 435A. In order to achieve that outcome, it is well recognised that it may be necessary to permit some differentiation. In Re Cancol Ltd [1996] 1 BCLC 100 at 119, Knox J said there was no unfair prejudice in an arrangement which gave different creditors a differential outcome, in circumstances where the distinction appeared to be "a realistic and commercially sensible one". 100The position was summarised by Lightman J in IRC v Wimbledon Football Club Ltd [2005] 1 BCLC 66 at [18]: "[D]epending on the circumstances, differential treatment may be necessary to ensure fairness (see Cazaly Irving Holdings Ltd v Cancol Ltd [1996] BPIR 252 at 269-270 and Sea Voyager Maritime Inc v Bielecki [1999] 1 BCLC 133 at 148-149, 154, [1999] 1 All ER 628 at 642-643, 647); and (I would add) ... differential treatment may be necessary to secure the continuation of the company's business which underlies the arrangement: (consider Re Business City Express Ltd [1997] 2 BCLC 510)." 101That accords with the differently worded Australian requirement for "unreasonable prejudice", and is consistent with this Court's concern in Khoury v Zambena Pty Ltd at [74] with the absence of any "rational explanation for the different treatment of participating creditors" and the acknowledgement in [105] that "an arrangement under Part 5.3A may discriminate between creditors or classes of creditors; but nevertheless it ought to deal fairly with the interests of creditors of the insolvent company". 102There may be difficult cases where the risks and delay are large, but so too is the potential for a greater return. There may also be difficult cases where there is little to choose between a deed of company arrangement and winding up: Grocon Constructors Pty Ltd v Kimberley Securities Ltd (admins apptd) [2009] NSWSC 541; 72 ACSR 305 at [84]. However, most commonly difficulties will arise when regard is had to the divergent interests some but not all creditors have in continuing to maintain a trading relationship with the company. In such cases the qualitative analysis entailed by the statutory requirement of unreasonable prejudice may require a process of weighing and balancing many competing, and indeed incommensurate, considerations: cf Ravenswood at [28]-[30]. However, contrary to the tenor of the submissions of Bicheno and DSG, I would not read those paragraphs of Ravenswood to mean that a lengthy, wide-ranging examination is called for in every case under s 600A(1)(c)(ii). It cannot invariably be necessary to examine the consequences which the passage of the resolution would have on the other creditors, or the liquidator, or the public interest, although that is not to say that those matters are always foreign to the assessment of unreasonableness. But there will be cases, of which the present is one, where the financial disadvantage to the creditors voting against the proposal is so substantial, and certain, that it amounts to prejudice which is unreasonable. 103The short and decisive point is that this is not a case where any of those difficulties arise. RAPL will never again trade (its business having been sold to DSG), and the dividend from a winding up although less certain and more prolonged, is many multiples what would be received under the proposed deed of company arrangement. This is why there is nothing in the reasons of the primary judge sufficient to displace the matters referred to above which all tell against the grant of leave. I develop this below, in the course of addressing the various criticisms made of the application of s 600A by the primary judge to the facts of this case.

Ground 1 104The primary ground of appeal was that the primary judge erred in law by failing to apply s 600A correctly. There were two main errors alleged. The first was a failure to have regard to the mandatory matters in subparagraphs (B) and (C), and here DSG and Bicheno relied on his Honour's conclusion in [201] that the resolution be set aside, preceding his statement in [202] ("I have not found it necessary to rely upon the criteria in pars (B) or (C) of s 600A(1)(c)(ii)"). DSG and Bicheno submitted that consideration of (B) and (C) was mandatory, hence his Honour's reasoning disclosed error of principle. The second was that it was necessary to identify and analyse the various interests of creditors involved, in particular, those of the $11,000,000 worth of unrelated creditors who voted in favour of the resolution. In Mourant & Co Trustees Ltd v Sixty UK Ltd (in administration) [2010] EWHC 1890 (Ch); [2011] 1 BCLC 383 at [67], Henderson J referred to the "irreducible minimum below which the return in the [company voluntary arrangement] cannot go". His Lordship cited what David Richards J had said in Re T&N Ltd at [82]: "I find it very difficult to envisage a case where the court would sanction a scheme of arrangement, or not interfere with a [company voluntary arrangement], which was an alternative to a winding up but which was likely to result in creditors, or some of them, receiving less than they would in a winding up of the company, assuming that the return in a winding up would in reality be achieved an within an acceptable time-scale: see Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385." The same approach applies to s 600A(1)(c)(ii). 105The short answer to DSG's and Bicheno's first submission is that his Honour did have regard to (B) and (C), his Honour's disclaimer in [202] notwithstanding. The short answer to their second submission is that s 600A does not require the analysis for which they contend. I deal with each in turn. 106On a fair reading of his Honour's reasons, the first aspect of this ground is not made out. Candidly and appropriately, Mr Crutchfield SC for DSG and Bicheno accepted that his Honour's reasoning process did have regard to matters which could only fall within subparagraphs (B) or (C), notwithstanding what his Honour said at the outset of the analysis ("I first have regard to (A) ...": at [184]) and his conclusion at [202]. The concession was correct and appropriate, because there was extensive examination of the claim that the winding up of RAPL would be the catalyst for the collapse of DSG (at [188]-[193]). That issue most directly fell within subparagraph (B): it turned on the relationship between RAPL and its ultimate parents. Despite what his Honour said at [202], his Honour did in fact have regard to matters described in subparagraph (B). 107Similarly, there were matters in the analysis of the primary judge that could only fall within subparagraph (C). The primary judge found that many of the trade creditors had been "consciously discriminated against by the defendants on the basis of a commercial judgment as to whether their ongoing supply of products to DSG is necessary or desirable to its future operations" (at [196]). That reasoning, which on its face was an important contributing factor to the consideration by the primary judge, extends to the balance of [196] and [197]. It is inconsistent with his Honour ignoring matters other than those in subparagraph (A). 108DSG and Bicheno submitted that the business whose preservation was an object of s 435A included the business formerly run by RAPL, which they said was a "relevant matter" for the purposes of paragraph (C). The idea is that there was evidence of a real risk that DSG would be wound up following an order winding up RAPL and Holdings, and if so, the business which operated as "Crazy Clarks", "Go-Lo Discount Stores", "Sam's Warehouse" and "Chickenfeed" would or could cease. It is one thing where a deed of company arrangement itself involves the sale of a business to a purchaser; that falls squarely within the object contained in s 435A. However, the Administrators sold the business of RAPL in February 2013. The minority of stores not transferred were closed. That business was no longer the business of RAPL. Both s 435A(a) and (b) refer to "its business". It is not necessary for present purposes to determine whether ownership is essential, or whether merely operating a business is sufficient. By the time of the creditors' meeting on 2 September 2013, RAPL neither owned nor operated the business it had sold six months earlier. That is not to say that the fate of the business now owned and operated by DSG was necessarily irrelevant to the evaluation required by s 600A, but it was not a mandatory relevant consideration. 109As for the second aspect of this ground, once again the starting point is that his Honour did have regard, at least to an extent, to the nature of the creditors' interests. His Honour expressly said that he had not ignored the position of the unrelated creditors who voted in favour. It will be recalled that there were 604 unrelated creditors in favour altogether, voting some $11,000,000 of debt. His Honour accepted that the evidence established that 527 of those creditors were employees who did so in the expectation of imminent employment by DSG, and 499 gave a proxy to DSG: at [199]. 110For the balance, his Honour said at [199] that he accepted the defendants' submission that the evidence did not permit an examination in any depth of the motivation of the minorities of trade creditors (52 out of 167) and landlords (7 out of 48) who voted in favour. DSG and Bicheno disavowed any need to examine the subjective motivation of individual creditors. But they submitted that in order to determine whether the interests of creditors who voted against the resolution were prejudiced, it was necessary to identify those creditors and their interests. Further, they contended that in order to determine whether any such prejudice was unreasonable, it was necessary after having regard to the matters in subparagraphs (A), (B), and (C), to identify the interests of all creditors, including those who voted in favour of the resolution. It was said that there were 545 employees, 52 trade creditors and 7 landlords all of whom had interests which warranted protection. Finally, they said that his Honour should have placed weight on the impact the winding up of RAPL would or could have on DSG, and the fact that Holdings was also a creditor of RAPL, albeit one which abstained from the voting in accordance with the direction given by the Federal Court. 111DSG's and Bicheno's submissions presuppose a much more elaborate analysis than is required by s 600A. The interests of creditors are their interests as creditors. The fact that they may be liable to a liquidator on a preference claim, or an insolvent trading claim, is not to the point. 112In the present case, RAPL was never going to trade again in its life. The only relevant interest of creditors was the partial recovery of their debts. There were no collateral benefits to the creditors as creditors. His Honour made no error in regarding as determinative the much higher, and relatively likely, returns under a winding up than would occur under the deed of company arrangement.

Ground 2 113This ground amounted to an attack on the finding that if the $5.5 million contribution was not made, there was a realistic possibility that RAPL would not go into liquidation. An elaborate attack was made in the written submissions of the reasoning process which concluded with an acceptance that non-payment would lead to the termination of the deed without a deemed winding up resolution, in accordance with Yeshiva Properties No 1 Pty Ltd. 114His Honour expressly accepted that even so, RAPL would be insolvent and would readily be wound up: see at [53]. However, it is plain that his Honour remained concerned by the possibility that there might be a deferral of the commencement of the relation back period. 115I should acknowledge the force in the submissions of DSG and Bicheno in this respect. There is no basis in the evidence for believing that any of this complexity was inherent in Bicheno's proposal or, more importantly, in the understanding of the Administrators whose obligation it was to draft the deed. 116But if the primary judge made an error here, it is not an error which was determinative in 2013, and it is not an error which could arise in 2014. A fair reading of his Honour's reasons makes it plain that the driving reason for his being satisfied that there was unreasonable prejudice to the interests of dissentient creditors was simply the inadequacy of the distribution under the deed. His Honour referred to a "substantially higher dividend" at [177], "plainly too low by a significant margin" at [179], "$5.5 million is a substantially inadequate price for the release of the obligations of the related creditors" at [187], "too small an amount of money by a substantial margin" at [194]. His Honour was, with respect, correct to regard that disparity as dispositive. 117In those circumstances, there is no need to consider the Yeshiva Properties No 1 reasoning, and good reason not to. In light of the undertaking belatedly proffered, the need to consider it could not arise on the hearing of the application for leave to appeal. It only arose before the primary judge because the undertaking proffered on appeal was absent, and conspicuously so - elaborate undertakings falling short of an undertaking to pay the $5.5 million were proffered instead (see [54]-[64]). Moreover, it is invidious, after the event, to predict the terms of the deed which would have come into existence to implement what was after all only ever a proposal and a proposal which used "fail" and "terminate" in consecutive clauses, both under the heading "Termination of the DOCA". And, as indicated above, it was a relatively small element in his Honour's reasoning. 118In short, this point became entirely academic after 31 January 2014. Thereafter, the proposal "failed". It did so because of the deliberate decision on the part of DSG and Bicheno not to contribute the $5.5 million contemplated by the proposal, and to let RAPL be wound up. There is no sound reason to grant leave to re-agitate a question which has been superseded by events wholly attributable to DSG and Bicheno. 119DSG's and Bicheno's answer is to ask this Court to exercise its powers under s 447A to alter the terms of the proposal. But for the reasons given above when dealing with leave, there are good, independent reasons not to do so.

Ground 3 120This ground complains of a failure to consider adequately, or at all, the interests of the creditors, including employee creditors and unrelated creditors, who voted in favour of the resolution. This ground concededly overlaps with ground 1, and was treated as falling within ground 1 in written and oral submissions. It is not made out for the reasons earlier given.

Ground 4 121This ground complains of failing to place (i) any, or (ii) sufficient weight on the inherent uncertainty in respect of any return to creditors in the event RAPL was wound up. 122The first aspect of this ground fails to have regard to the reasons of the primary judge. It is plain that his Honour had regard to the obvious fact that the return to creditors depended upon success in litigation, which in turn depended upon funding, the risks of securing a finding of insolvency from 1 July 2011 and the solvency of the defendants (including any insurance), which were in his Honour's view appropriately discounted in the s 439A report. One example is his Honour's statement at [91] that "[i]t is significant that the high estimate was not the highest return calculated by the Administrators ... The Administrators therefore made an allowance of 12.96 cents [in the dollar] to allow a margin for risk." Another is his Honour's statement in [177] that "it is highly probable that the creditors would [receive in the winding up] a substantially higher dividend" (emphasis added). A third is his Honour's express acknowledgment in [178] of "the uncertainties that are inherent in the process of investigation, analysis and judgment performed by the Administrators". 123There is no substance in this ground to the extent that it complains of a failure to place any weight on the inherent uncertainty of returns based on successful litigation. A fair reading of his Honour's judgment reveals that he was well apprised of that uncertainty. 124To the extent that there is a complaint that insufficient weight was placed on the uncertainty of returns, it falls far short of establishing House v The King reviewable error. In any event, the submissions advanced on appeal overstate the position. There was clear evidence that IMF Australia Ltd was prepared to fund liquidators' examinations and a claim for insolvent trading, on terms that it would pay the liquidators' costs and any adverse costs order, but take 30% or 35% of any recovery. The letter of offer was conditional upon IMF being satisfied that the proposed defendants had capacity to meet a judgment and to seeing a budget of litigation costs. There is no reason to think that funding would not be available on those terms.

Ground 5 125Ground 5 was not pressed orally at all. It was in substance relegated to a (large) footnote within ground 1 of DSG's and Bicheno's written submissions. The ground was a complaint in relation to the way in which the primary judge had treated the extensive criticisms that were made of the Administrators' investigation at trial. Mr Crutchfield SC, who had not appeared below, said very properly that the heavy criticism of the Administrators was not pursued on appeal (transcript, p12 line 5), but the written submissions maintained that the criticisms of the Administrators' approach were relevant to whether a case for relief under s 600A had been made out. 126The short answer to this ground is that this is a highly unusual case. Part 5.3A is intended to provide for a speedy, and necessarily imprecise, examination by the administrators so as to permit creditors to have some material to inform their votes. Its speediness is mandated by the prejudice to creditors including secured creditors of the moratorium provisions. As the High Court observed, Pt 5.3A emphasises the need for prompt action in implementing its provisions, and prompt decisions by creditors about the fate of a company to which administrators are appointed: Lehman Brothers at [21]. However, this administration occupied the better part of a year, by reason of orders made by the Federal Court, and its results were shown to be robust, and clear-cut. Even if there was anything in the points raised by DSG's and Bicheno's written submissions, it could not come close to detracting from the vital difference: there was a high degree of confidence that creditors would receive between three and seven times the return from a winding up as opposed to the deed.

Ground 6 127Finally, complaint was made that the primary judge erred in finding that Ms Moss' evidence amounted to a "clear acceptance that RAPL was unable to pay its debts as and when they fell due over the whole of the period following 1 July 2011". 128There is nothing in this ground. It is not necessary to pause to examine the details of the evidence given by Ms Moss, and whether in truth it reflects merely an acknowledgment that the limited financial support provided by entities controlled by Ms Cameron would continue, or the unqualified conclusion expressed by the primary judge at [97] of his reasons. If the primary judge had made a finding of solvency or lack of solvency at any time, the position might be otherwise. But the primary judge expressly, and in the immediately following sentence of his reasons, said that it was "neither necessary nor appropriate that I attempt to make a finding concerning the solvency of RAPL at any times". 129A fair reading of his Honour's reasons is that there was a high degree of confidence in the viability and quantification of claims which could be brought by a liquidator of RAPL. That came about not from anything that Ms Moss said when giving evidence, but from the investigations, work papers, and conservative methodology and financial viability contained in, and underlying, the s 439A report, set out in detail at [98]-[102]. Contrary to DSG's and Bicheno's submissions, the conclusion as to whether Ms Moss accepted insolvency was not "fundamental" to the reasoning process. That comes as no surprise. The opinion, after the event, of a former director and financial controller, is much less probative than the actual financial circumstances as revealed by the contemporaneous documents. 130His Honour's reasons are to be read as proceeding on the basis that it was sufficient, in order to establish unreasonable prejudice, that there was a plausible basis for concluding that the Administrators' recommendation in favour of winding up was sound. That was the correct approach. 131Irrespective of anything Ms Moss said or denied, his Honour found, based on the expert evidence of Mr Strawbridge, tested extensively in cross-examination, and in the reasoning in the report, such a plausible basis. In those circumstances, there could be no material error in any conclusion as to what Ms Moss accepted or did not accept.

Notice of contention 132For those reasons, it is not necessary to address the notice of contention, which was to the effect that the primary judge had erred in not being satisfied that s 600A(1)(c)(i) was made out. However, the point is important and short and was fully argued; indeed it was at the forefront of the respondents' submissions. 133The primary judge said (at [149]) that the expression "contrary to the interests of the creditors as a whole" was challenging. The reason that his Honour was of that view is revealed by his example (also in [149]) that a "creditor may, for instance, also be a director at risk of being subject to an insolvent trading claim by a liquidator". 134I respectfully disagree. In my opinion an analysis of the conflicting interests of a creditor who is also a potential defendant is precisely the analysis which is not required by the section. 135The creditor who is also a potential defendant to a claim by the liquidator has two interests: one is his, her or its interest as a creditor, the other is the interest as a potential defendant. This is the sort of conflict which arises all the time when a deed proposal is contemplated. Its resolution for the purposes of s 600A(1)(c)(i) is clear. The question focusses simply on the interest all creditors have in recovering the money they are owed by the company. (It is addressed to all creditors, not only those voting against it, as Barrett J observed in Grocon at [75]; cf Wood v Laser Holdings Ltd (1996) 19 ACSR 245 at 269.) The interest they may have in avoiding being sued by the liquidator is outside the scope of the section. I respectfully agree with what Austin J said of this recurring situation in Young v Sherman at [106]: "Fundamentally, this was a case where the high-value creditor had a personal interest, as a potential defendant, which was in conflict with the interests of creditors as a whole to maximise their return in the insolvent administration of the company. In these circumstances, there is no case for me to intervene as regards the resolution to enter into the DOCA." 136DSG and Bicheno placed reliance on the passage from Dodds-Streeton J in Mediterranean Olives Financial Pty Ltd v Loaders Traders Pty Ltd (Subject to Deed of Company Arrangement) (No 2) [2011] FCA 178; 82 ACSR 300 at [190]: "Conflict between the interests of particular groups which together constitute the creditors of the company as a whole may further complicate the equation. 'The interests of the creditors as a whole' is, as Giles JA observed in Kirwan (in relation to the phrase 'for the benefit of the company as a whole'), a 'difficult phrase" and is 'not a satisfactory criterion when there is a conflict of interests. Deciding what is for the benefit of the company as a whole may require selection between competing interests...': at [124]". 137I would respectfully disagree with the translation of the well-acknowledged difficulties in the term "for the benefit of the company as a whole", to which Giles JA referred in Kirwan at [124], to s 600A(1)(c)(i). 138The interests of creditors as a whole as creditors will largely turn upon the comparable returns, and questions such as risk and delay. It is likely that in most cases, where the tight time limits in the Corporations Act are not extended, that the administrator's opinions will be qualified and perhaps even tentative. That may give rise to particular problems, as in Bevillesta at [56]. 139But this is a simple case. The sale of its business in February 2013 made it certain that RAPL would never trade again. It has many creditors - employees, landlords, suppliers, and lenders. Their interest as creditors is in being repaid - as quickly, and substantially, and as risklessly, as possible. Plainly in many cases there will be trade-offs that need to be made between speed, and amount, and risk, and it is plain that different creditors may place more or less weight to those competing aspects. But in the present case, it is plainly against the interests of creditors as a whole to resolve in favour of a deed which would see non-related creditors paid 6c in the dollar, when there was a strong basis for concluding that all creditors would be repaid, in a winding up, many multiples of that amount. 140The analysis is simple: a contingent payment of 6 cents in the dollar, with the contingency resolved one way or the other by 31 January 2014, or a more drawn out dividend, conservatively estimated as triple to seven times that amount, albeit with the chance that the dividend would be zero.

Conclusion 141The change in status of RAPL brought about by the conscious decision by DSG and Bicheno, coupled with the absence of any material error of law in the dispositive portions of his Honour's reasons, caused me to join in refusing leave and making the orders made on 7 March 2014. Even if I were wrong about that, the notice of contention is a further, independent reason telling against the grant of leave. 142On the view I take, the refusal of leave under s 471B and s 101(2)(n) was and is sufficient to resolve the entirety of DSG's and Bicheno's proceedings in this Court, because no order of any utility can be made without affecting the winding up order which took effect on 3 February 2014. 143Prima facie, costs should follow the event, although there may be considerations of which the Court is presently unaware. I would propose that the parties file a note of any orders which may be made by consent as to costs, failing which they are to file and serve short submissions, within fourteen days of today, as to the orders they propose and the reasons they should be made. 144BERGIN CJ in EQ: I agree with Leeming JA, except to the extent that the reasons deal with the Notice of Contention, with which it is unnecessary in the circumstances to deal.

Annexure: Extracts from DOCA proposal "Background to Proposal The proposer, [Bicheno] is the ultimate shareholder of [Holdings] and [RAPL] and wishes to propose a pooled deed of company arrangement (Deed). On the appointment of the voluntary administrators to RAPL, [DSG] licensed (and subsequently purchased) the business and assets of RAPL. DSG entered into a General Security Agreement (DSG Security) to secure certain of its obligations to RAPL under the agreement which governs the sale (Sale Agreement). All assets of [Holdings] and RAPL are ultimately subject to a General Security agreement in favour of Bicheno. [Holdings] does not have any assets. The only unrelated creditors of [Holdings] are claimants under guarantees of the obligations of RAPL. 1. Deed Administrators It is proposed that two of the Administrators of RAPL and [Holdings], Vaughan Strawbridge and David Lombe of Deloitte act as Deed Administrators of a single deed under which the non-related creditors of RAPL and [Holdings] will claim against a single deed fund. 2. Admissible Claims All debts or claims, whether present or future, actual or contingent the circumstances giving rise to which occurred on or before 26 October 2012 will be admissible under the Deed. Creditors with a claim against RAPL and also the benefit of a guarantee from [Holdings] in respect of the first mentioned claim will be treated as having one claim. 3. Property of Companies available to pay creditors' claims 3.1 The Deed Administrators will establish a single deed fund (Deed Fund) 3.2 The Deed Fund will comprise: (a) any cash held in the Administrators' bank accounts but for the avoidance of doubt excluding any term deposits supporting bank guarantees issued to creditors of RAPL; and (b) a contribution from Bicheno, DSG, Jan Cameron, Penny Moss and Bruce Irvine (Contributing Related Creditors) of $5,500,000 (Contribution) which is to be made by 31 January 2014 or such other date as the Deed Administrators may agree (Contribution Date). 4. Nature and Duration of the Moratorium The moratorium on claims by persons bound by the DOCA (Deed Creditors) will be that provided for by the Corporations Act (especially sections 444C, 444D and 444E) and will continue until the Deed has been terminated. 5. Extent to which the Company's debts are extinguished. 5.1 The claims of the Deed Creditors (other than the Contributing Related Creditors and [Holdings] (Related Creditors)) against the Companies will be extinguished on payment of the final dividend under the Deed. 5.2 The Related Creditors will not participate in the Deed Fund. 5.3 Upon payment of the Contribution, the Contributing Related Creditors will be released from any and all claims arising prior to the commencement of the respective administrations. ... 7. Termination of the DOCA 7.1 The circumstances in which the DOCA terminates; (a) When the Deed Administrators lodge a notice with ASIC that the deed has been fully effectuated; and (b) Otherwise, as provided for by the Corporations Act (especially sections 445D and 445F). 7.2 If the Deed Contribution is not made on the Contribution Date the Deed will fail. The Deed Administrators will not be entitled to take formal steps to recover the Contribution from the Contributing Related Creditors. 8. Order property referred to in paragraph 2 will be distributed among creditors bound by the Deed 8.1 Order of payment from the Deed Fund ... (d) Fourth - any unsecured creditors pari passu. ... 10. Miscellaneous 10.1 The Deed Administrators will not be responsible for the day-to-day management of the Companies and the suspension of the directors' powers will end on execution of the Deed. 10.2 The directors undertake to ensure that, until the Contribution Date, RAPL does not engage in any new business or other activity except as tenant under an existing lease. DSG will be responsible for all amounts payable under any such lease from the day after the second meeting of creditors (or if that meeting is adjourned from the day of the adjourned meeting). 10.3 The directors undertake to ensure that within 10 business days of the second meeting of creditors (or if that meeting is adjourned from the date of the adjourned meeting) RAPL pays any entitlement due to any employee of RAPL who does not receive or does not accept an offer from DSG of employment on the same or better terms as governed by their employment immediately prior to the second meeting of creditors."

Amendments 04 November 2014 - After 1 July 2011, the semi-colon has been replaced with a comma Amended paragraphs: 22 04 November 2014 - The word "of" has been inserted after "$5,343,603". Amended paragraphs: 28 04 November 2014 - In the fourth sentence, the word "and" has been inserted after "had taken effect". Amended paragraphs: 40 04 November 2014 - In the citation for Data Homes, the words "(in liq)" have been added after Pty Ltd. Amended paragraphs: 60 04 November 2014 - In the citation for Cornelius v Global Medical Solutions, the word "Australia" has been inserted before "Pty Ltd". Amended paragraphs: 86 04 November 2014 - A typographical error has been corrected. Amended paragraphs: 128 04 November 2014 - In the third paragraph, "general security agreement" has been replaced with "General Security agreement". Amended paragraphs: Annexure 04 November 2014 - Typographical errors have been corrected. Amended paragraphs: 122 04 November 2014 - In the citation for Grocon, the word "Constructions" has been changed to "Constructors". Amended paragraphs: 102 04 November 2014 - The spelling of "McLelland CJ in Eq" has been corrected. Amended paragraphs: 96 04 November 2014 - In the fourth sentence, the words "those of" have been inserted after "diverge from". Amended paragraphs: 81 04 November 2014 - In the final sentence, after "three months", the word "were" has been substituted for "was". Amended paragraphs: 48 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 November 2014