In the matter of Bluenergy Group Limited (subject to a Deed of Company Arrangement) (administrator appointed) [2015] NSWSC 977

Whether Keybridge was a creditor at the time of Mr Rathner's appointment and was entitled to enforce an administrator as a means of enforcing its security

1. I will approach the issues in the proceedings in a somewhat different order than that adopted in the pleading, since it seems to me to be convenient to address issues relating to the validity of Mr Rathner's appointment before turning to issues of discretionary relief which will, strictly, not arise if Mr Rather was not validly appointed. It is first necessary to address the question whether Keybridge was a creditor of the Company at the time of Mr Rathner's appointment and during the Second Administration; an associated issue whether Keybridge was entitled to appoint an administrator, by reason of the preservation of Keybridge's rights as secured creditor under s 444D(2)(a) of the Corporations Act; and overlapping issues as to the construction of cl 3.2 of the DOCA and s 444D of the Corporations Act together, since similar arguments were put by Counsel in respect of aspects of those issues. The parties' submissions were complex and comprehensive, and I will do my best to summarise them below, without necessarily doing justice to their subtlety and complexity. There was also a significant degree of overlap between submissions as to different issues, particularly in respect of issues relating to the construction of the DOCA and s 447D of the Corporations Act.
2. Keybridge's ability to appoint an administrator turned on whether it met the requirements of s 436C of the Corporations Act, which in turn depended on whether it was entitled to enforce its security over the whole or substantially all of the Company's assets, and potentially also on whether it was a creditor of the Company at that time. The Deed Administrators plead that Mr Rathner's appointment as administrator of the Company was not valid, by reason that Keybridge was not a person entitled to enforce a security interest in the whole or substantially the whole of the Company's property within the meaning of s 436C of the Corporations Act when he was appointed, because it was not a "secured creditor" within the meaning of s 51E of the Corporations Act and was not in a position to enforce its security interest because its debt had been extinguished by the DOCA (APOC [18A]). Keybridge responded that it had abstained from voting in favour of the creditors' resolution in respect of the DOCA at the second creditors' meeting and that s 444D(1) of the Corporations Act did not apply to it or its security interest, and that it could enforce its security against the Company unless the Court orders otherwise.

Whether Keybridge is bound by the DOCA

1. The first issue, which is now not controversial, is whether Keybridge is bound by the DOCA. Clause 3.1(a) of the DOCA provides that: "This Arrangement binds all persons having a Claim against the Company to the extent of such a Claim." The term "Claim" is in turn defined in the DOCA as: "A debt owing by, or a claim subsisting against the Company whether present or future, certain or contingent, ascertained or sounding only in damages, being debts or claims arising on or before the Appointment Date, including without limitation any claim arising under a Convertible Note."
2. Mr Potts, who appears for Keybridge, accepted that Keybridge fell within the expression "all creditors" in s 444D(1) of the Corporations Act and is bound by the DOCA by virtue of that subsection, so far as claims arising on or before the Appointment Date (as defined in the DOCA) are concerned, and subject to s 444D(2) of the Corporations Act to which I will refer below. Mr Potts also accepted that any claims in the nature of an action for debt or damages under Keybridge's loan agreement, including for interest accruing after that date, would be claims against the Company arising on or before Appointment Date (as defined). The primary issue in dispute was not therefore whether the DOCA bound Keybridge but whether, on its proper construction, it extinguished Keybridge's debt, and the effect of cl 3.1(b) of the DOCA and s 444D of the Corporations Act, to which I refer below, in preserving Keybridge's debt or its security interest or both.

The construction of cll 3.1(b) and 3.2 of the DOCA

1. The next issue is the construction of cll 3.1(b) and 3.2 of the DOCA, which deal with the release of claims and the position of secured creditors. Clause 3.1(b) of the DOCA provides that: "This Arrangement does not prevent a Secured Creditor from realising or otherwise dealing with it's [sic] or their security, except to the extent that those Secured Creditors have: (i) Voted in favour of the resolution approving this Deed; or (ii) Otherwise released their security. The term "Secured Creditor" is defined to include, relevantly, First State and Keybridge, as well as several other entities, "subject to each of the above entities establishing their Security Interest".
2. Clause 3.2 of the DOCA in turn provides that: "On and from the Commencing Date, this Arrangement fully and irrevocably releases and discharges the Company from all Claims." The term "Commencing Date" is defined as the date of the DOCA. Clause 3.3 provides that, as from the Commencing Date, a person having a Claim will not, inter alia, begin or continue with any Enforcement Process (as defined) in relation to the Company's property, except with the leave of the Court and in accordance with such terms as a Court imposes. That release and discharge may be pleaded as a bar to any claim brought against the Company (cl 3.4).
3. Mr Wood, who appeared for the Deed Administrators, submitted that the release under cl 3.2 of the DOCA applied to money claims against the Company, including those arising in the future, notwithstanding cl 3.1(b) of the DOCA, and that Keybridge could not enforce its security against property of the Company or appoint an administrator under s 436C of the Corporations Act because it had no debt. In oral submissions, Mr Wood also submitted that cl 3.2 of the DOCA provides a release of all claims, and that (as I noted above) the term "claim" is defined in the DOCA so as to include future and contingent claims (T77); and submitted that cl 3.2, which releases such claims, is not subject to cl 3.1(b) of the DOCA, and cannot be read down by the reference to preservation of the rights of secured creditors to exercise their security interest in cl 3.1(b) of the DOCA. Mr Wood also submitted that, in order to appoint an administrator, Keybridge had to be entitled to enforce its security against the whole or substantially the whole of the Company's property and it was not entitled to enforce that security because it did not have a debt. When asked, in oral submissions, whether there was any situation in which cl 3.1(b) of the DOCA could preserve the right to enforce a security, on that construction, Mr Wood initially gave the somewhat implausible example that the clause might apply if the Company was recapitalised, Keybridge then entered a further loan agreement with it and then lent money under that further loan agreement. In reply, Mr Wood identified the further possibility, albeit also of relatively narrow application, that cl 3.1(b) of the DOCA could preserve the position of a secured creditor that had a separate property right, for example under retention of title arrangements, that did not depend on any underlying debt.
4. I do not accept Mr Wood's submission, at least in its broadest form. As I will note below, it seems to me that cl 3.1(b) of the DOCA has wider effect than the Deed Administrators would give it, corresponding to the effect of s 444D(2) of the Corporations Act, so as to preserve Keybridge's right to realise or otherwise deal with its security, in respect of its proprietary interest in the secured property, to the extent of its debt and the secured assets that were available at the date that debt would otherwise be released under cl 3.2 of the DOCA. That is a broader effect than the Deed Administrators recognise, although narrower than Mr Rathner and Keybridge would give to that clause.
5. Mr Evans, who appeared for Mr Rathner, in turn submitted that the terms of the DOCA are subordinated to s 444D(2) of the Corporations Act (to which I will refer below) so that whether Keybridge may claim as a creditor in the Second Administration depends upon the scope of the section. It does not seem to me that proposition assists with the construction of cll 3.1(b) and 3.2 of the DOCA, although I accept that the DOCA could not extinguish a right of enforcement on the part of Keybridge that s 444D of the Corporations Act expressly preserves. Mr Evans also submitted that, if Keybridge's debt is extinguished by cl 3.2 of the DOCA, then its rights to realise or otherwise deal with the security against property of the Company would be lost upon execution of the DOCA and s 444D(2) of the Act would have no work to perform. I do not accept that submission, which does not seem to me to follow from the construction of that section or the reading given to that section in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95; (2015) 106 ACSR 79 ("Australian Gypsum"), to which I refer below. For the reasons that I will address below, it seems to me that cl 3.1(b) of the DOCA and s 444D(2) of the Corporations Act can preserve Keybridge's rights to realise or otherwise deal with its security, in respect of its proprietary interest in the secured property and to the extent that its debt was provable and secured assets were available at the date that debt would otherwise be released under the DOCA, without requiring that that debt be preserved into the future or for other purposes. An alternative view (although I recognise that it finds no support in the reasoning of the majority in Australian Gypsum) is that the statutory preservation of that right to realise or otherwise deal with that security could operate independently of an underlying debt, so that a secured creditor's rights to realise or deal with its security were preserved even if the underlying debt was released by a deed of company arrangement.
6. Mr Potts, for Keybridge, in turn submitted that the release contained in cl 3.2 of the DOCA, read with the other provisions of the DOCA, did not operate to release the debt owed to Keybridge. He drew attention to the fact that cl 3.1(b) of the DOCA refers to "security" whereas cl 1.1 of the DOCA includes a definition of the term "Security Interest", which is defined as: "any mortgage, charge, line or pledge as security for the payment or repayment of a monetary obligation or the observance of any other obligation." The term "Security Interest" is in turn used in the definition of "Secured Creditor" and in cl 8.6 of the DOCA which provides for the Deed Administrators to use their reasonable endeavours to procure releases from the Secured Creditors (as defined) of their Security Interest. Mr Potts submitted that the use of the term "security" in cl 3.1(b) of the DOCA must be taken to have been intended to mean something other than "Security Interest" (as defined); that term means something wider than the instrument by which a party's "security" arises; and that term refers to each Secured Creditor's interest as conferred by their relevant "Security Interest" (as defined) in the Company's property. I do not accept that submission, which has the difficulties that, first, the terms "security" and "Security Interest" seem to me to be used to the same effect in the DOCA, which is imperfect but hardly unusual drafting; and, second, cl 3.1(b) of the DOCA seems to be directed to the right of enforcement arising under a particular security instrument, not to a broader concept such as an interest as mortgagee or chargee, which would not in itself necessarily confer particular rights of enforcement. Mr Potts also submitted that cl 8.6 of the DOCA contemplates that the Secured Creditors (as defined) will continue to have the benefit of their Security Interests (as defined), since otherwise there would be no need for the Deed Administrators to use reasonable endeavours to procure releases from them. I do not accept that submission, where that clause may simply have been included for more abundant caution or because the parties had not fully anticipated the operation of the relevant provisions.
7. Mr Potts in turn submits that cl 3.1(b) of the DOCA preserves Keybridge's right to realise, or deal with, its interest in the Company's present and future property and, if the underlying secured debt must be taken to continue to exist to permit that realisation or dealing, then cl 3.1(b) has the effect of preserving the underlying debt to the extent necessary to permit that realisation or dealing. I also do not accept that submission. It seems to me that cl 3.1(b) of the DOCA, like s 444D(2) of the Corporations Act which is in broadly similar form, preserves a secured creditor's ability to realise or deal with its security, corresponding to its proprietary rights as a secured creditor, at the time the release of its debt under the DOCA would otherwise take effect. Even if cl 3.1(b) of the DOCA notionally preserved that secured creditor's underlying debt in a limited sense, it seems to me that it would do so only to the extent necessary to permit the secured creditor to realise or otherwise deal with its security as it existed immediately prior to the release of the debt under the DOCA. I reach that result for the reasons I set out below in addressing a similar issue in respect of s 444D(2) of the Corporations Act.
8. Accordingly, it seems to me that, as a matter of construction, cl 3.2 of the DOCA extinguished Keybridge's debt, subject to the preservation of its ability to realise or deal with its security, in respect of its proprietary interest in the secured property and to the extent that its debt was provable and secured assets were available at the date that its debt would otherwise be released under the DOCA. It will be necessary to deal with whether that release is limited by s 444D(2) of the Corporations Act below.

The scope of s 444D(2) of the Corporations Act

1. I now turn to the effect of s 444D(2) of the Corporations Act, which was addressed by the parties in considerable detail. The parties' submissions as to the scope of s 444D(2) of the Corporations Act also canvassed, to some extent, issues as to the construction of cll 3.1(b) and 3.2 of the DOCA to which I have referred above, and also devoted attention to the impact of earlier decisions dealing with leased property and the decisions at first instance in Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2014] WASC 89; (2014) 283 FLR 471, and on appeal in Australian Gypsum.
2. Section 444D of the Corporations Act provides, relevantly, that: "(1) The deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i). (2) Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security interest, except so far as: (a) the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the Court orders under subsection 444F(2). (3) Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as: (a) the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the Court orders under subsection 444F(4). (3A) Subsection (3) does not apply in relation to an owner or lessor of PPSA retention of title property of the company."
3. As the majority noted in Australian Gypsum, the language of s 444D(2) is similar to that of s 471C of the Corporations Act, in respect of a liquidation, which provides that nothing in s 471A (suspending officers' powers during a winding up) or s 471B (staying proceedings and suspending enforcement process) "affects a secured creditor's right to realise or otherwise deal with the security interest". In Re Asiatic Electric Co Pty Ltd (in liq) [1970] 2 NSWR 612 at 614, Street J observed that s 291(2) of the Companies Act 1961 (NSW), a predecessor of that section, preserved a secured creditor's property right under its security, and that decision was noted with apparent approval by the majority in Australian Gypsum at [209]. In Hamilton v National Australia Bank Ltd (1996) 66 FCR 12; 19 ACSR 647, Lehane J similarly observed (at 31) that: "… It is evident that the exception in s 444D(2) to the binding effect of a deed on a secured creditor … is directed towards the exercise of proprietary and contractual rights and powers that the secured creditor has under its security in relation to the property which it affects. … In other words, where the provisions speak of realising or otherwise dealing with a secured creditors' security, they are referring to steps that the creditor may take without assistance from the Court." In Australian Gypsum, the majority similarly emphasised (at [203]) that a secured creditor of a company has both a proprietary right, being a right of action against the company's property over which the security was granted, and a personal right against the company.
4. It should also be noted that s 444D(2), dealing with the preservation of rights of a secured creditor, and s 444D(3), dealing with the preservation of rights of an owner or lessor of property (other than PPSA retention of title property), are in similar form, and they were also in similar form prior to the Personal Property Securities (Corporations and Other Amendments) Act 2010 ("Amending Act"). That matter is of present relevance because there is authority that claims for future rent may be extinguished by a deed of company arrangement, although the right to take extra-curial action is preserved by s 444D(3) of the Act: Lam Soon Australia Pty Ltd (administrator appointed) v Molit (No 55) Pty Ltd (1996) 70 FCR 34; Henaford v Strathfield Group Ltd [2009] NSWSC 539; (2009) 72 ACSR 240. Those authorities, on which Mr Wood relies, provide some support for the Deed Administrators' position and the approach adopted in Australian Gypsum, which I will address below.
5. In Lam Soon Australia Pty Ltd (administrator appointed) v Molit (No 55) Pty Ltd above, the Court of Appeal of the Supreme Court of South Australia referred to ss 444D(2)-(3) and s 444F of the Corporations Law as they then stood and noted that those sections treated secured creditors, owners and lessors similarly. Their Honours emphasised (at 41) the practical and commercial similarities between the situation of a mortgagee of property of a company and that of the owner or lessor of property of which the company has possession or use, noted that the claim of a financier for the principal sum lent and its claim for interest would be provable in a liquidation, and treated a claim for rent payable in future under a lease as analogous in character. Their Honours also noted (at 42) that: "The [Corporations] Law clearly contemplates that the holder of a bill of sale and a lessor are to be treated similarly, and we can see no particular unfairness in that. Mortgagee and lessor are both protected by their ability to exercise their extra curial rights and remedies in relation to the property."
6. In Henaford v Strathfield Group Ltd above, White J considered the question whether a lessor's claim to future instalments of rent had been extinguished by a deed of company arrangement entered into by the lessee, where the lessee did not vote in favour of the proposed deed of company arrangement. His Honour noted (at [19]) that s 444D(3) of the Corporations Act was concerned to preserve an owner's or lessor's right to take extra-curial action in relation to the property, such as by re-entering possession for non-payment of rent, and that construction of the subsection gave it a harmonious relationship with s 444D(2) which preserved a secured creditor's right to deal with secured property. That observation necessarily implied that s 444D(2) similarly preserved the secured creditors' right to take extra-curial action in relation to the secured property. His Honour construed (at [31]) a corresponding provision in the deed of company arrangement in the same manner, as indicating there was "no restriction on the right of an owner or lessor to take extra-curial action in relation to the property such as by re-entry for non-payment of rent".
7. Mr Evans seeks to distinguish those decisions on the basis that they deal with the ongoing rights of owners and lessors of property to receive future rent, rather than with future interest in respect of a loan, and distinguishes the rights of a secured creditor and the rights of an owner or lessor of property (T95). That distinction is, however, inconsistent with the similarity in the drafting of the relevant sections and the emphasis in these cases on the similarities in the position of a secured creditor and lessor of property. Mr Potts also seeks to distinguish the authorities as to s 444D(3) from those as to s 444D(2), to the extent that s 444D(3) involves different language, by reference to the preservation of the right that an owner or lessor of property has in relation to the property. There is, plainly, a difference in the language of the provisions, but it seems to me that, as Mr Potts rightly accepted, the sections are related provisions (T143) and I would go further to understand them as having parallel operation, as the earlier case law has done.
8. The present form of s 444D of the Act and several defined terms used in it were introduced by the Amending Act, which commenced on 30 January 2012. As Mr Potts points out, s 444D(2) as amended by the Amending Act uses the term "security interest", as defined in s 51A of the Corporations Act, in place of the term "security", which had previously not been defined in the Act (T10). The term "security interest" is defined in s 51A as meaning a PPSA security interest (as defined in s 51) or a charge (in turn defined in s 9 as a charge within the general law meaning of a charge, mortgages and agreements to create a charge or mortgage, whether on demand or otherwise), lien or pledge. The term "PPSA security interest" is defined, relevantly, in s 51 of the Corporations Act as a security interest within the meaning of the PPSA and to which the PPSA applies. Section 12 of the PPSA in turn defines a "security interest", by a general definition, as "an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation" and by examples of common forms of security, provided they secure payment or performance of an obligation. It does not seem to me that that concept is different, in substance, and at least for the purposes of s 444D of the Corporations Act, from the concept of "security" at general law as a security is a right to resort to a property or fund to assure payment: Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 341; Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2014] WASC 89; (2014) 283 FLR 471 at [26].
9. Mr Evans in turn submits that the definition of "security interest" in s 12 of the PPSA, as adopted in s 51A of the Corporations Act, defines that interest as one that "secures payment or performance of an obligation" and he relies (T90) on that section to submit that a security interest cannot exist without the relevant obligation and, if the repayment requirement in respect of the debt is destroyed, then the security interest must be destroyed because it is no longer a PPSA security interest. He submits that proposition is consistent with the reasoning of the majority in Australian Gypsum at [227], to which I will refer below, which treats the right of enforcement as co-existent with the payment obligation (T91). Mr Potts also refers to s 12 of the PPSA and develops a similar submission to Mr Evans by reference to the terms "secured party" and "secured creditor" as defined in ss 51B and 51E of the Act. Mr Potts submits that s 444D(2) (as amended) uses the term "secured creditor" introduced by the Amending Act, which requires that a person be both a creditor of the corporation and a party to which a debt is owing that is secured by a "security interest", as defined. Mr Potts submits that, for s 444D(2) to have effect, the debt that is secured must therefore be preserved, because otherwise a person would not be a "secured creditor" to which s 444D(2) could apply, but only a "secured party" outside the scope of s 444D(2).
10. That submission is, in a sense, the converse of Mr Wood's submission that Keybridge it is not a secured creditor once its debt is released by the DOCA. However, it seems to me that s 444D(2) of the Corporations Act does not have that result, but also does not have the result for which Mr Potts contends. It can be given a sensible operation, consistent with its terms, on the basis that it is directed to the position of a party which is a secured creditor, immediately prior to any release effected by the relevant DOCA. On that view, the section applies to that person, notwithstanding that it then ceases to become a secured creditor, by reason of the release of its debt by a deed of company arrangement, so as to preserve the rights that it would then have had to enforce or otherwise deal with the security against the assets that were then subject to it. To put that proposition another way, it seems to me that s 444D(2) can have effect to preserve the relevant "security interest" if, at the point at which a secured creditor's right to realise or deal with a security would otherwise be impaired by a release under a deed of company arrangement unless preserved, that party has a debt that is the subject of such a security, so as to be a "secured creditor" for the purposes of that section. With the greatest of respect for the subtlety of Mr Evans' and Mr Potts' submissions, it does not seem to me that the definition of "secured creditor" in s 51E of the Act or s 444D(2) of the Act require that the relevant debt be preserved indefinitely into the future or for all purposes, so as to give effect to s 444D(2) of the Act.
11. Mr Potts also relies on s 19 of the PPSA, which provides that a secured party's interest in after-acquired property will attach at the moment of acquisition by the grantor. Mr Potts submits that, at least following the introduction of the PPSA, Keybridge's right to any after-acquired property under its security is in the nature of a proprietary right and would be preserved under s 444D(2): see L Meehan, "Circulating security interests under the Personal Property Securities Act 2009 (Cth) compared to floating charges" (2011) 22 JPFLP 322; E L G Tyler et al, Fisher & Lightwood's Law of Mortgage, (3rd Australian ed 2014, LexisNexis Butterworths) at [5.35]. While I recognise that s 19 of the PPSA may alter the nature of a secured party's interest in after-acquired property, at least for some purposes, I am not persuaded that it undermines the continuing validity or utility of a distinction between the personal rights of a creditor in its debt, as potentially extinguished by a release of that debt in a deed of company arrangement and s 444D(1) of the Act, and a proprietary interest of a security holder preserved by s 444D(2) of the Act, in respect of the debt and the secured assets that would be available to the secured creditor when that release took effect. I am reinforced in that view by the inconsistency between the position for which Mr Rathner and Keybridge contend and the purposes of Pt 5.3A of the Act, as recognised in Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883; (2003) 47 ACSR 391 and Australian Gypsum, which I address further below.
12. I now turn to the decisions at first instance and on appeal in Australian Gypsum, which are of considerable significance for the issues in this case. At first instance in Australian Gypsum, the plaintiffs advanced a similar submission to that which is now put by Mr Rathner and Keybridge, namely that a secured debt could not be separated or excluded from the relevant security and the security could not be realised without making and proving a claim for the debt, so that debt must be preserved if the security is preserved by s 444D(2) of the Act. Le Miere J (at [29]) held that s 444D(2) had the effect that the security holder could enforce its security, but that the section did not preserve ongoing obligations outside the security which might ripen into future monetary liabilities, and the relevant rights "were confined to the present claims the plaintiffs then had against the defendant at that time".
13. On appeal in Australian Gypsum, the appellants similarly argued (at [167]) that the general scheme of Pt 5.3A of the Corporations Act was to preserve secured creditors' rights, a proposition that was also put by Mr Potts in this case, and that unambiguous words were needed to take away property rights. Buss JA (in dissent) noted, and I accept, that the intent of the relevant statutory provisions must be determined by reference to the statutory text, and not from any prior assumptions to the desirable reach or operation of those provisions. His Honour held (at [85]) that the evident purpose of s 444D(2), in the context of s 444D(1), s 444H and Pt 5.3A generally, was to preserve a secured creditor's right to realise or otherwise deal with its security in accordance with any applicable agreement or instrument and any applicable statutory provisions, other than as provided in s 444D(2). His Honour also observed (at [87]) that the concept of "realising or otherwise dealing with" a security within the scope of s 444D(2) included taking action to enforce a right to possession of the property or a right to exercise a power of sale of the property under any applicable agreement, instrument or statutory provision. Buss JA also observed (at [92]) that: "There is no foundation in the text of Pt 5.3A for circumscribing or limiting the nature or extent of the debts, claims or other obligations which a secured creditor may recover or seek to recover (either during the subsistence of the deed or after the deed has been terminated) by realising or otherwise dealing with the security (either during the subsistence of the deed or after the deed has been terminated) in accordance with the exemption in s 444D(2)." His Honour also held (at [96]) that, notwithstanding any release under a deed of company arrangement in respect of claims against the company arising on or before the day specified in the deed and notwithstanding s 444H, the effect of s 444D(2) was that a secured creditor's claims remained secured by its security and: "The secured creditor may realise or otherwise deal with the security, either during the subsistence of the deed or after the deed has been terminated, except as provided in pars (a) and (b) of s 444D(2)." His Honour also observed (at [97]) that the section did not expressly or impliedly circumscribe or limit the ambit of a secured creditor's security or its secured obligations. That proposition is broadly consistent with the position adopted by Mr Rathner and Keybridge in this case.
14. On the other hand, the majority in the Court of Appeal in Australian Gypsum held that future or contingent claims of a secured creditor which had not voted in favour of a deed of company arrangement, including claims that had not crystallised at the time of that deed of company arrangement, were extinguished by it. The majority (at [167]ff) considered the structure of Pt 5.3A in some detail. They referred (at [171]) to the Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth), which introduced Pt 5.3A into the Corporations Act, and specifically to the introduction of s 444D in the Corporations Act. The majority also referred (at [187]) to the significance of the will of the majority of creditors voting at a creditors' meeting in an administration, as well as (at [203]) to the distinction between the proprietary and personal rights of a secured creditor to which I referred above.
15. Section 444D(2) of the Corporations Act also has some similarity to s 151(3) of the Bankruptcy Act 1966 (Cth), to which the majority also referred in Australian Gypsum, although the latter is more elaborate than s 444D(2) so far as it expressly deems a secured debt, or part of a secured debt, not to have been released by a discharge of the bankrupt for the purposes of enabling the secured creditor to realise or deal with his or her security. In Australian Gypsum, the majority noted (at [215]) that the effect of s 151(3) of the Bankruptcy Act was that: "Generally speaking, after discharge there is no prospect of any continuing claim on the assets of the rehabilitated bankrupt in relation to provable debts, but unpaid secured creditors who could always have realised their security to satisfy their provable debts, are treated or deemed as having those debts still in existence (despite the release) solely for the purpose of enabling them to continue to exercise their property rights."
16. The majority in Australian Gypsum also noted (at [218]) that: "The purpose of giving the insolvent a 'fresh start' is also implicit in the statutory scheme in Pt 5.3A of the Act concerning the administration of a company's affairs with a view to executing a deed of company arrangement." Their Honours referred in this respect to the observation of Barrett J in Blacktown City Council v Macarthur Telecommunications Pty Ltd above at [19] that: "Examination of Pt 5.3A as a whole shows that there are several purposes which together contribute to the widely stated object. The provisions imposing the various moratoriums show that there is a purpose of allowing time for unpressured but reasonably prompt consideration of possible reconstruction possibilities. The provisions as to creditors' meetings and creditor decision making, including those concerning deeds of company arrangement, show that there is a purpose of allowing reconstruction possibilities to be pursued in such a way that, if creditors so desire, a legacy of debt may be left behind and winding up, which would normally be the product of an intolerable debt burden, may be avoided. Implicit in that, of course, is the proposition that the company will thereby be permitted to return to the mainstream of commercial life. Another purpose is that, if the company is not capable of returning to the mainstream of commercial life, there will be some better outcome for creditors than that available in an immediate winding up".
17. Their Honours also noted (at [225]) that the legislature had recognised that a deed of company arrangement may, but need not necessarily, release all provable claims. The majority also observed at [227] that: "The realisation of (or otherwise dealing with) a security involves exercising a right of action against the property of the company. The right to take action against the property of the company is, however, only exercisable where there exists a payment obligation of the company for the satisfaction of which the right may be exercised." The majority held (at [232]-[234]) that claims against a guarantor in respect of goods supplied in the future on credit, after the date specified in the deed of company arrangement were released by the deed of company arrangement.
18. Mr Wood relies on Australian Gypsum and particularly emphasises the Court of Appeal's observation (at [227]) that the right of a secured creditor to take action against the company's property is only exercisable where there exists a payment obligation for the satisfaction of which the right may be exercised. He submits that, where Keybridge has (he submits) no debt, Keybridge cannot enforce its security interest against the whole or substantially the whole of the Company's property and did not have the power to appoint an administrator. I do not accept that submission, for reasons that will emerge below. The conclusion that s 444D(2) preserves a secured creditor's ability to "realise" or "otherwise deal" with its security, within the limits that I will note below, gives practical effect to the relevant provisions. As Mr Evans pointed out, if the right of a creditor to realise or deal with its security, including by appointing a receiver of the company, could be defeated by the entry into a deed of company arrangement that provided for the release of debts, although the secured creditor did not vote for it, then secured creditors would very likely be driven to earlier appointment of receivers in a manner that would plainly not promote the purposes of Pt 5.3A of the Corporations Act.
19. Mr Evans in turn submits that the Deed Administrators misconstrue the judgments in Australian Gypsum. He points out, correctly, that that case involved the question of the application of s 444D(2) of the Corporations Act to a creditor (Australian Gypsum) that claimed the benefit of a fixed charge provided by the debtor company (Dalesun) as guarantor of the debts of a third party (Newglen), where the guarantee and charge predated Dalesun's administration and deed of company arrangement, and the debts were claimed to be secured by the charge were incurred after the deed of company arrangement had been effected. Mr Evans submits that, in that context, the reasoning of the majority and its emphasis on a "fresh start" is limited to potential future liabilities arising out of present obligations. Mr Evans confirmed in oral submissions that Mr Rathner reads Australian Gypsum as having the effect that s 444D(2) of the Corporations Act operates differently in respect of presently enforceable claims from contingent claims, such that the former remain in existence and the latter do not (T94). Mr Evans also pointed to a hypothetical situation, in respect of the mortgage over a company's property, where the principal attracted interest, and the company was placed in administration followed by a deed of company administration, and submitted that it must be the case that the mortgagee would be entitled to receive interest on its principal debt up to the date of the payment of the debt on a sale of the property. It seems to me that that analogy largely restates the issue, rather than indicating anything as to its resolution.
20. Mr Evans also submitted, by reference to the observations of the majority in Australian Gypsum (at [227]) that it would be difficult to argue that Keybridge was in a position where it was entitled to realise or otherwise deal with its security if its debt had been extinguished (T98). Mr Evans in turn drew from that proposition that, so as to give effect to the saving provision in s 444D(2), Keybridge's debt could not have been extinguished. It does not seem to me that that result follows, so far as s 444D(2) could be read as preserving Keybridge's property right under its security, or as notionally preserving its existing debt to the extent necessary to preserve the right to enforce its security over that debt and assets then secured, without extending further to future or contingent debt or to after-acquired assets of the Company.
21. Mr Evans also submits that s 444D(2) of the Corporations Act does not cease to benefit a secured creditor during the period of a deed of company arrangement, or even after the deed of company arrangement has been terminated. He submits that there are "Excluded Assets" under the DOCA that are not to be made available to unsecured creditors of the Company and that it would be an extraordinary result if, after the DOCA had been effected, and control of the Company's assets returned to the Company, then a secured creditor would no longer have rights in respect of those assets. The proper construction of the section cannot, of course, be determined by a subjective assessment of the most attractive result in a particular case. In any event, for the reasons I have indicated, it seems to me that Keybridge did retain the right to realise or deal with its security within the scope of s 444D(2), after the DOCA had been executed. It is not necessary to determine, in this case, whether that right would have continued after the DOCA had been fully effected, as Mr Evans submits, since that situation does not arise in this case. It should also be noted that it may seem an equally odd result if, as Mr Rathner and Keybridge contend, after a reconstruction had been successfully completed and a company restored to solvency and the mainstream of commercial life, a secured creditor whose debts had been extinguished by a deed of company arrangement months or years before could then appoint an administrator to that company. However, it may be the oddity of that result could be addressed by the Court's power to remove an administrator appointed in that situation, including under s 447A of the Corporations Act.
22. I now turn to Keybridge's submissions as to Australian Gypsum and other issues in respect of s 444D(2) of the Act. Mr Potts, like Mr Evans, seeks to distinguish Australian Gypsum on the basis that the Court of Appeal was there dealing with the position whether contingent liabilities under a guarantee were provable under a DOCA, rather than with a "presently ascertainable and enforceable debt" covered by a general security deed extending to all present and future property of the company. Mr Potts also seeks to distinguish that decision on the basis that the Court of Appeal was there concerned with the form of the Corporations Act prior to the commencement of the Amending Act, and points to the amendment of that section and the relevant definitions to which I have addressed above. The analysis of those sections above indicates that they do not bring about a significant change in the operation of the section, for present purposes, and it does not seem to me that Australian Gypsum can be distinguished on that basis.
23. Mr Potts also goes further than Mr Evans to submit that, if Australian Gypsum is applicable, it is clearly wrong and should not be followed. Mr Potts' primary criticism of the reasoning of the majority in Australian Gypsum is that it paid insufficient regard to the statutory wording of s 444D(2), so far as it provided that s 444D(1) of the Corporations Act did not prevent a secured creditor realising or otherwise dealing with its security (T137). Mr Potts also criticises the majority's reasoning in Australian Gypsum so far as their Honours drew analogies between the operation of Pt 5.3A of the Act and bankruptcy law and, he submits, the majority reasoned from assumptions as to what Pt 5.3A of the Corporations Act was seeking to achieve, and also criticises the reliance on the concept of a "fresh start" and the decision in Blacktown City Council v Macarthur Telecommunications Pty Ltd above in their Honour's reasoning (T138). It seems to me that, to extent the majority in Australian Gypsum had regard to the purposes of Pt 5.3A of the Act, the identification of those purposes was drawn from s 435A of the Act and the structure of that Part, as they have been recognised in the case law since the introduction of that Part, and not from any assumption not founded in the terms of the statute.
24. Mr Potts also submits that the majority decision in Australian Gypsum pays insufficient regard to the words "realising or otherwise dealing with" in s 444D(2) of the Act and that, where Keybridge's security interest is over present and future property of the Company, that decision would not preserve Keybridge's security interest but "destroy" it, or at least a significant part of it, converting a security interest over all present and after-acquired property to a security interest over present property existing at the date at which the deed of company arrangement takes effect. It seems to me that Mr Potts is correct that the reasoning in Australian Gypsum would preserve the right to enforce a security interest over present property existing at the date of any release of the underlying debt under a deed of company arrangement, to the extent of the secured creditor's proprietary interest under the security, as distinct from its personal interest under its debt. However, I do not accept that that approach is inconsistent with the language "realising or otherwise dealing with" the relevant security interest, or destroys the relevant security interest, where it preserves the right to realise or deal with that interest to the extent that it exists at that date. The contrary view that a secured creditor's rights to after-acquired property should be preserved indefinitely into the future seems to me to have the substantial practical difficulties to which I will refer below.
25. Mr Potts accepted that I should follow the decision of an appellate Court of another State unless I were convinced that it were plainly wrong: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [135]. The approach adopted in those cases reflects the importance of avoiding inconsistency in the development of the general law, as recognised by Dixon J in Wright v Wright (1948) 77 CLR 191 at 210, and has been confirmed by the High Court in CAL No 14 Pty Ltd v Motor Accidents Insurance Board (2009) 239 CLR 390 at [50]; see also M Leeming, "Farah and its progeny: comity among intermediate appellate courts" (2015) 12 JR 165 at 177. It seems to me that the majority's reasoning in Australian Gypsum is applicable to the present facts, so far as it turns on the nature of a secured creditor's interest and the purposes and structure of Pt 5.3A of the Act, although it dealt with the earlier form of s 444D(2) of the Act and different facts. The submission made by Mr Potts might have supported a different view from that taken by the majority in Australian Gypsum, if that decision did not exist, and Buss JA in Australian Gypsum did take a different view from the majority in that case. Those propositions do not, however, seem to me to demonstrate that the majority view in Australian Gypsum is plainly wrong or that I should not follow it as a first instance judge dealing with legislation with national application.
26. Mr Potts also submits that s 444D(2) preserves a secured creditor's secured debt which gives rise to a security interest, to the extent necessary to permit any realisation or dealing with any present or future property securing that debt, and that debt is not released for that purpose despite the terms of the DOCA or s 444H of the Corporations Act. Alternatively, Mr Potts submits that, even if the underlying secured debt is released by the combined effect of the DOCA and s 444H, s 444D(2) operates so as to preserve a secured creditor's right to realise or otherwise deal with its security interest, even against after-acquired property not held at the date of the DOCA but acquired subsequent to it, and notwithstanding the terms of the release, for any debt owing at the relevant date under the DOCA. Mr Potts also submits that s 444D(2) preserves what is necessary for the secured creditor to realise or otherwise deal with the "security interest" in whatever form the security interest takes and, where the security interest extends to not only present but future property, it preserves the relevant debt to the extent necessary to enable the secured creditor to realise its "secured interest" in future property.
27. I do not accept these submissions. It seems to me that s 444D(2) of the Corporations Act can be given effect, in accordance with its terms, by preserving the secured creditor's property right in its security interest, in respect of the property to which it was capable of attaching at the date a release under a deed of company arrangement would take effect, without recognising a preservation of rights over after-acquired property extending indefinitely into a company's future. The former reading of the section is broadly consistent with the fact that the amount of a secured creditor's claim would be determined at a point in time in a liquidation or deed of company arrangement, to the extent that future debts or claims that are not due and payable at the relevant date are still provable under s 553 of the Corporations Act and under a deed of company arrangement reflecting the same structure. The latter reading of the section seems to me to be inconsistent with the reasoning in Australian Gypsum, and also with any practical prospect of rehabilitation of a company, or a "fresh start" in the language of Australian Gypsum. The existence of a continuing security extending indefinitely into the future over a company's after-acquired property, and notwithstanding that a deed of company arrangement had provided for the release of the secured creditor's debt, would place a very significant practical obstacle in the way of any future operation of a company that emerged after a deed of company arrangement, including potentially preventing its obtaining new secured finance without the cooperation of its former secured creditor.
28. Mr Potts in turn referred to a general principle recognised by French CJ and Crennan J in Akiba v Commonwealth of Australia (2013) 250 CLR 209 at [24] that a statute ought not to be construed as extinguishing common law property rights unless no other construction is reasonably open. I recognise that principle. However, it seems to me that Pt 5.3A of the Corporations Act, is, in part, directed to resolving competing rights of creditors of a company in circumstances that its assets are likely to be insufficient to discharge those rights in full, and that general principle provides limited assistance in dealing with the specific issues raised in this case. Mr Potts also submits that the Plaintiffs cannot achieve a practical discharge of Keybridge's secured interest through a release in the DOCA and s 444H of the Corporations Act, where Pt 5.3A does not contemplate such a termination by direct means such as s 444F(2), which permits only restraint over a secured creditor's right to enforce or otherwise deal with its security interest. I also do not accept that submission. It seems to me that s 444D(1) contemplates the possibility that the debt of all creditors, including a secured creditor, will be released, and the only right that is preserved is the right to realise or otherwise deal with the security under s 444D(2) of the Corporations Act.
29. For the reasons set out above, it seems to me that Keybridge's debt was extinguished by cl 3.2 of the DOCA, although its rights to realise or otherwise deal with its security, in the sense noted above, were preserved by cl 3.1(b) of the DOCA and s 444D(2) of the Corporations Act. It follows that Keybridge was not a creditor of the Company at the time it appointed Mr Rathner as its administrator and is not a creditor in the Second Administration. The Deed Administrators seek a declaration, order or direction under ss 447A or 447D(2) of the Corporations Act, or in the Court's equitable jurisdiction, that Keybridge is not a creditor in the Second Administration of the Company and is not entitled to vote at any meeting of creditors in that administration. A declaration to that effect should be made given the findings that I have reached as to this issue. In the alternative, the Deed Administrators seek a declaration, order or direction under ss 447A or s 447D(2) of the Corporations Act, or in the Court's equitable jurisdiction, that the debt secured by a charge over the Company's assets in favour of Keybridge was released by cl 3.2 of the DOCA. A declaration to that effect should also be made given the findings that I have reached above.

Whether the appointment of an administrator amounts to realising or otherwise dealing with a secured interest for the purposes of s 444D

1. The conclusions that I have reached above do not necessarily resolve the question whether Keybridge could appoint an administrator under s 436C of the Corporations Act, which depends not on, or at least not only on, whether it was a creditor at the time of the appointment but on whether it was a person entitled to enforce its security over the whole or substantially the whole of the Company's assets at that time.
2. I have held above that s 444D(2) of the Corporations Act preserves a secured creditor's right to "realise" or "otherwise deal" with its security interest, corresponding to its proprietary rights under its security, and in respect of the debt and secured assets that exist when a release of that debt under a deed of company arrangement would take effect. That section will preserve the secured creditor's ability to appoint an administrator under s 436C of the Corporations Act if it can be said that either the appointment of an administrator itself amounts to realising or otherwise dealing with the security interest, or if it can be said that the preservation of the right to "realise" or "otherwise deal" with the security interest in turn preserves the right to "enforce" that security interest for the purposes of s 436C of the Corporations Act.
3. Mr Evans submits that the appointment of an administrator by Keybridge under s 436C of the Corporations Act was the exercise of a power of a holder of a security interest that did not require the intervention or assistance of a Court, and therefore amounted to "otherwise dealing with" the security interest for the purposes of s 444D(2) of the Corporations Act, within the construction of that term given in J & B Records Ltd v Brashs Pty Ltd (1995) 36 NSWLR 172; Hamilton v National Australia Bank Ltd above; Australian Gypsum at [100], [204]. I do not accept that submission. The right to appoint an administrator (as distinct from, for example, a receiver to assets) is not a power conferred on the holder of the security interest by the terms of the security, but instead a right conferred by statute on a person who has the relevant character. Although the appointment of an administrator under s 436C depends on a creditor's status as secured creditor, it does not either realise or deal with the security, which is unaffected by that appointment, and the case law has long recognised that the appointment of an administrator is an alternative to the realisation or dealing with the security, such that the latter may never occur. In oral submissions, Mr Potts also fairly drew attention to the decision in Photios v Cussen & Senatore (in their capacity as joint administrators of Beechworth Land Estates Pty Ltd) (administrators appointed) [2015] NSWSC 336 at [44], where Robb J noted, with reference to authority, that: "The appointment, by the holder of a security interest issued by a company, of administrators of the company under s 436C is not an act of enforcement of the security, or an act in aid of the realisation of that security. The appointment of an administrator by a secured creditor is a step which may often result in the creditor's right under the security never being enforced at all. … The requirement that the security interest be enforceable is, for the purposes of s 436C a trigger for the entitlement to appoint the administrator under s 436C, and not part of the process of enforcing the securities" It follows that s 444D(2), so far as it preserves a right to realise the security, does not directly preserve the right to appoint an administrator, because it is not an act in realising or otherwise dealing with the security.
4. However, the fact that s 444D(2) preserves the ability to deal with or realise the security would be enough to preserve the entitlement to appoint an administrator, arising under s 436C of the Act, unless the preservation of the ability to "realise" or "deal with" the security does not preserve the ability to "enforce" it against the whole or substantially the whole of the Company's property so as to satisfy the requirement for the appointment of an administrator under s 436C of the Corporations Act. The term "enforce" is defined in s 9 of the Corporations Act and that definition seems to me to be applicable to s 436C of the Act, so far as that section identifies the step that initiates an administration. I can see no distinction of substance between, on the one hand, realising or dealing with a security and, on the other hand, enforcing the security in this context. It follows that where, as I have held above, s 444D(2) preserves the right to realise the security interest, albeit limited in the manner noted above, then it also preserves the right to appoint an administrator under s 436C of the Corporations Act.
5. I therefore reach the result that, although Keybridge was no longer a creditor at the time it appointed Mr Rathner as administrator to the Company, its right to realise or otherwise deal with its security in respect of the debt that had existed prior to the release under the DOCA was preserved by s 444D(2) of the Corporations Act and it was entitled to appoint an administrator notwithstanding the execution of the DOCA, just as it would have been entitled to appoint a receiver over the assets then subject to its security, notwithstanding the execution of the DOCA. The Deed Administrators seek a declaration under s 447C or a direction under s 447D of the Corporations Act that the purported appointment of Mr Rathner, by Keybridge, as administrator of the Company was not valid. For the reasons noted above, that declaration should not be made. However, that result, as will be seen, provides little reason for that administrator to be left in place, where Keybridge was not a creditor in the Second Administration and the only creditor in that administration seeks his removal.

Whether the Second Administration should be terminated under s 447A of the Corporations Act

1. The Deed Administrators also seek an order under s 447A of the Corporations Act that Pt 5.3A of the Corporations Act operates such that the Second Administration of the Company be terminated. The case law indicates that a second administrator may be appointed although a deed of company arrangement is in place, leaving open the possibility that the court may then terminate that second administration: Beatty v Brashs Pty Ltd (1998) 26 ACSR 685. The view expressed in that decision that a deed administrator and administrator can be appointed at the same time was followed in Re Rugs Galore Australia Pty Ltd [1999] VSC 250 where Gillard J noted (at [73]) that any competition between two deeds of company arrangement that arose from two deeds administration could be overcome by suitable orders.
2. Section 447A of the Corporations Act is widely expressed, providing, relevantly, that: "The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company." In Brash Holdings Ltd (admin apptd) v Katile Pty Ltd [1996] 1 VR 24; (1994) 13 ACSR 504 at 507, the Full Court of the Supreme Court of Victoria noted that that section: "evidently proceeds on the view that Pt 5.3A is inadequate in the provision which it otherwise makes for the new form of administration and that it is therefore necessary to enable gaps in the [P]art to be filled by the exercise by the court of wide powers to make such orders as it thinks appropriate about how the [P]art is to operate in relation to a particular company." In Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270 at [17]-[18], the plurality of the High Court noted that: "The power is not cast in terms of a power to make orders to cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Pt 5.3A. Its operation is not confined to such cases. Nor is there anything on the face of s 447A(1) that suggests that it should be read down. In particular, the words of the provision are wide enough to confer power to make orders which will have effect in the future but which are occasioned by something that has been done (or not done) under the other provisions of Pt 5.3A before application is made under s 447A(1). … [T]he orders contemplated in the examples go beyond a curial determination of what is the effect of existing provisions of the Part on a particular company in the circumstances that may be established in a proceeding; the orders contemplated are orders that alter how the Part is to operate in relation to a particular company, not how the Part does operate in relation to that company."
3. The Deed Administrators plead that Mr Rathner's appointment by Keybridge is inconsistent with the scheme and purpose of Pt 5.3A of the Corporations Act because his appointment cannot lead to an outcome that improves the likely return to creditors as required under s 435A of the Corporations Act; the creditors, by number and value, decided that the DOCA should be carried into effect, and the Second Administration has the effect of frustrating or preventing that outcome; and Keybridge's claim is extinguished by the DOCA such that Keybridge is not entitled to vote in the Second Administration (APOC [32]). Keybridge takes issue with that allegation (POD [32]).
4. The Deed Administrators also plead that the Company was solvent, when the DOCA was executed, since all claims have been released under cl 3.2 of the DOCA; it was not continuing to trade, and ceased trading prior to the commencement of the First Administration (which Keybridge admits); and the only debts being incurred are by the Deed Administrators, which are subject to the indemnity in the Deed Fund (APOC [34]). Mr Topp also expresses the view, in his affidavit evidence, that the Company was solvent at the time the DOCA was executed on 18 August 2014, by reason of the release provided under cl 3.2 of the DOCA, on the basis that (as I held above) that release extended to Keybridge's claims, and that the only further liabilities incurred since that date are the priority debts of the administrators, as to which they have an indemnity against the Administration Fund under the DOCA; minor administration fees incurred with the share registry which the Deed Proponents have undertaken to pay; and Mr Rathner's fees, if he has an entitlement to charge them, which are subject to an indemnity of $50,000 from Keybridge (Topp 4.5.15 [26]-[27]).
5. Mr Wood submits that the appointment of Mr Rathner is inconsistent with the scheme and purpose of Pt 5.3A, because Mr Rathner's proposed course of action (as set out in Ex P2) cannot lead to an outcome that is likely to improve the return of creditors, because any party seeking to undertake a further reconstruction would need to dilute existing shareholders or transfer the shares away from those shareholders (T81). By contrast, Mr Wood submits, if the Second Administration is terminated and the DOCA carried into effect, then the Company has the opportunity to recapitalise and restore its listing on ASX, with the prospects that its shares regain their value. Mr Wood also submits that the appointment of Mr Rathner as administrator has frustrated the deed administrators' power to implement the DOCA, so far as he has previously relied on the suspension of the power of company officers while an administrator is in office (T82).
6. Mr Wood also submits that the fact that there was a majority in value and in number in favour of the DOCA, and the nature of the action taken by Keybridge to prevent the DOCA being carried into effect, supports the relief sought. That submission turns on the question whether the appointment of Mr Rathner as administrator in fact prevented the DOCA being carried into effect. Mr Wood also submits that the Court may more readily remove an administrator appointed, where a DOCA is in place, where Pt 5.3A of the Corporations Act does not expressly contemplate that there could exist parallel deeds of company arrangement in respect of the same company, or a liquidation of the company and a deed of company arrangement at the same time, or that both administrators could be appointed as liquidators of the same company.
7. Mr Evans, in submissions for Mr Rathner, frankly acknowledges the disadvantage at least to First State involved in Keybridge's approach, submitting that: "There was no action of Keybridge … which led to First State undertaking these obligations by voting in favour of and its related entities executing the [DOCA]. That may have been a significant commercial error on the part of First State … because on Mr Rathner's and Keybridge's case by doing so those acts caused [sic] First State to lose its rights as a first ranking secured creditor and allowed Keybridge the opportunity to take commercial advantage of that position (T89)."
8. However, Mr Evans submits that there is no basis for the Deed Administrator's claim that the DOCA cannot be effected by reason of the administration, and that it is not clear why the Deed Administrators could not have required the performance of the DOCA against the Deed Proponents, so as to complete the constitution of the Deed Fund and its distribution. Mr Evans points out that the whole of the payments required to be made by the Deed Proponents under cl 4.4 of the DOCA have been received and the shares in the Company required to be issued under the DOCA have been issued to the Deed Proponents and that other matters under the DOCA are in the Deed Administrators' control. Mr Evans also submits that is not a requirement of the DOCA that the Company's suspension from listing on ASX be lifted. Mr Evans also put in closing oral submissions that there was nothing in the deed proposal which required, as a condition of its acceptance, or the Deed Proponents undertaking their obligations under it, that there be a successful recapitalisation or a successful relisting of the Company (T88). Mr Potts also relies on the absence of express provisions dealing with the detail of the recapitalisation (I interpolate, implicitly excluding those provisions which provide for creditors to take shares issued on a recapitalisation) and contrasts the position with the deed of company arrangement considered by the Court in Re Mirabela Nickel Ltd [2014] NSWSC 836.
9. It seems to me that these submissions, with respect, verge on the unreal. It does not seem to me that the DOCA can be read in isolation from the commercial purpose that was sought to be achieved by the Deed Proponents and by the Company's creditors which voted in favour of it, as it emerges from the information provided to creditors and the terms of the DOCA. Those matters indicate that the Deed Proponents entered that arrangement with a view to achieving the reconstruction of the Company, and the Company's creditors voted for that arrangement in circumstances that the DOCA provided for the issue of shares to them on a successful reconstruction. The issue of shares to creditors on that reconstruction could not occur if that reconstruction could not now proceed, by reason that Mr Rathner formulated a competing deed of company arrangement that undertakes such a reconstruction, for the benefit only of Keybridge (if, contrary to my view, it were now a creditor of the Company) and the former administrators.
10. It seems to me that the result that Mr Rathner and Keybridge propound is prejudicial to the Deed Proponents and creditors who voted in favour of the deed of company arrangement. That result also seems to me to involve a wider prejudice. In the ordinary course, proponents of a deed of company arrangement and creditors who vote in favour of it will no doubt take their respective positions on the basis of an assumption, reasonably made, that the implementation of a deed of company arrangement will not ordinarily be disrupted by the appointment of a second administrator, leaving their debts extinguished under the earlier deed of company arrangement without their receiving the benefits contemplated by that deed of company arrangement. A rational deed proponent, and a creditor considering a deed of company arrangement, would potentially take a very different view if it had to allow for a risk, in every deed of company arrangement, that its debts could be extinguished without its receiving the benefit of that deed, if any secured creditor that had not voted in favour of the deed could subsequently appoint an administrator, so as to take advantage of the extinction of debts in the earlier deed of company administration and divert any remaining assets of the company to itself. That is, in substance, what Keybridge sought to do, as Mr Rathner's analysis of the economic benefits of that course in his advice to Keybridge (Ex P2) made clear. It seems to me that that course does not advance the purposes of Pt 5.3A of the Corporations Act in the present case, and has the capacity, if adopted more widely, to increase the risk involved in implementation of deeds of company arrangement for deed proponents and creditors generally, and thereby increase the risk that companies are placed in liquidation rather than reconstructed, and reduce the prospect that the objectives of Pt 5.3A of the Corporations Act will be achieved.
11. Mr Rathner also submits that: "The objects and purposes of Part 5.3 A, as set out in section 435A of the Act, may well be achieved through the second administration. The removal of [the Company's] liability to its (probably sole) secured creditor, Keybridge, and its (probably sole) unsecured creditors, the deed administrators are likely to be achieved through any further deed of company arrangement, such that [the Company) can now get the "fresh start" of removing all of its creditors prior to 9 April 2014, and continue in existence as a trading corporation, listed on the ASX." I do not accept that submission. First, it has no regard to the fact that any such benefit is achieved at the cost of the Deed Proponents and the creditors who voted in favour of the DOCA. Second, it has no regard to the increased risk in the implementation of deeds of company arrangement, if the course adopted by Keybridge were generally open to secured creditors which did not vote in favour of a deed of company arrangement.
12. Mr Potts responds to the application under s 447A for the termination of Mr Rathner's appointment by submitting, first, by reference to Beatty v Brashs Pty Ltd above, that there is nothing in Pt 5.3A of the Corporations Act that prohibits a company already subject to a deed of company arrangement being placed into administration for a second time. I accept that submission, but it does not address the difficulties with the course taken by Keybridge to which I have referred above. Second, Mr Potts relies on cl 8.6 of the DOCA, to which I have referred above, and the provision that the Deed Administrators would use reasonable endeavours to secure the release of secured creditors' security interests, for the proposition that the Deed Proponents, the Deed Administrators and creditors who voted in the DOCA must be taken to have known that Keybridge would still be at liberty to take actions to enforce its security. I do not accept that submission. As I noted above, that clause may simply have been included for more abundant caution or because the parties had not fully anticipated the operation of the relevant provisions; and, second, it seems to me that there was no reason for creditors to anticipate that Keybridge would take the step which it has taken as distinct from, for example, appointing a receiver over the Excluded Assets. It could hardly be suggested that the appointment of an administrator, where a deed administrator is already in office and a deed of company arrangement has been partly executed, is a commonplace occurrence. Mr Potts also points out that the Plaintiffs did not seek an order under s 444F(2) of the Corporations Act restraining Keybridge from enforcing its security interest. I give little weight to that matter, where parties may have good reasons for refraining from litigation, most obviously the wish to preserve scarce funds in a deed administration. It might equally be noted that Keybridge had taken no step to challenge the deed of company arrangement, prior to seeking to appoint an administrator in a manner that would, as I have held, frustrate its intended operation.
13. In the present case, the appointment of Mr Rathner as administrator caused immediate difficulties for the implementation of the DOCA. Mr Rathner then took the position that, because the Deed Administrators were officers of the Company, they could not exercise their functions under the DOCA, by reason of s 437C of the Corporations Act, although he subsequently qualified that position in the course of these proceedings, when he indicated that he was willing to allow the DOCA continue in accordance with its terms, a position that he had not previously adopted in those broad terms. That development seems to me to be too late to have any real impact in mitigating the difficulties which had arisen from the Second Administration. I have also held above that Keybridge was not a creditor at the time it appointed Mr Rathner and is not a creditor in the Second Administration. Although I have held that Keybridge had the ability to appoint Mr Rathner as administrator, the Second Administration should be terminated, because the only identified creditors in that administration, the former administrators, oppose its continuance and no benefit can come from its continuance over that opposition.
14. It seems to me that an order should be made terminating the Second Administration under s 447A of the Corporations Act, because its continuance would be inconsistent with the purposes of Pt 5.3A of the Corporations Act both in the particular circumstances and for the wider reasons I noted above, and because there is no utility in it where Keybridge is not a creditor in it and the former administrators, who may be the only creditor in it, oppose its continuance.

Whether orders should be made under s 444F of the Corporations Act in respect of Keybridge's security

1. The Deed Administrators seek an order under s 444F(2) of the Corporations Act restraining Keybridge from realising or otherwise dealing with its security interest. An order under s 444F(2) deals with a secured creditor's exercise of proprietary and contractual rights that are in the nature of self-help or extra-curial enforcement or recovery procedures, which the creditor may exercise without the court's assistance: J & B Records Ltd v Brashs Pty Ltd above at 181-182; Hamilton v National Australia Bank Ltd above at ACSR 666. In Australian Gypsum (at [103]) Buss JA also noted that an order by the Court under s 444F(2) could not extinguish or discharge a secured creditor's security, as distinct from restraining the creditor from realising or otherwise dealing with it, except as permitted by the Court. Under s 444F(3) of the Act, the Court may only make such an order if it is satisfied that the creditor's realising or dealing with the security interest would have a material adverse effect on achieving the purposes of the deed of company arrangement and the creditor's interest would be adequately protected having regard to the terms of the deed, the terms of the order and any other relevant matter.
2. Mr Potts points out that, as the authorities to which I have referred indicate, s 444F(2) permits a restraint on a secured creditor realising or otherwise dealing with its security interest rather than a removal of that security interest. Mr Potts also submits that the factual basis of the relief sought by the Deed Administrators under s 444F of the Act is pleaded in paragraphs 26 - 31 of the Plaintiffs' APOC. Paragraph 28 pleads that the "Excluded Assets" are subject to First State's security interest, which has priority over Keybridge's security interest. Mr Potts point out, and I accept, that is not the case, given the terms of cl 3.1(b) of the DOCA and the fact that First State voted in favour of it. As I noted above, Keybridge now accepts, as pleaded in APOC [29], that Keybridge's security interest does not operate over contributions to the DOCA made by the Deed Proponents under cl 4.4 of the DOCA. Paragraph 31 alleges that, in the premises of paragraphs 28 and 29, if the Deed Administrators transfer all of the assets of the Company, other than the contributions under cl 4.4 of the DOCA, to Keybridge, Keybridge would be in as good, or a better position, than if it retained its security. Given the findings I have reached above, I am satisfied that the appointment of Mr Rathner under s 436C of the Corporations Act was an act to realise or otherwise deal with Keybridge's security interest. For the reasons noted above, that appointment had a material adverse effect on achieving the purpose of the DOCA. Where Keybridge's security interest is limited in the manner I have noted, and does not extend to future acquired property, then I accept it would be in as good a position if the Excluded Assets are transferred to it as if it retained its security.
3. However, I do not consider that an order under s 444F(2) of the Act restraining Keybridge from exercising its rights under the security is justified, where there is no obvious reason that Keybridge should not, if so advised, be entitled to appoint a receiver over the Excluded Assets. I proceed on the basis that there is no real likelihood that Keybridge would be so imprudent as to seek to take steps to reappoint Mr Rathner as administrator, or appoint another administrator, after the termination of the Second Administration, or that Mr Rathner or another administrator would be so imprudent as to accept such an appointment. It does not seem to me that there is any need to make an order under s 444F(2) of the Act to avoid that result. If such an appointment were to occur, the Court's powers under s 447A of the Corporations Act would be sufficient to address that position. Accordingly, I do not consider it necessary or appropriate to make an order under s 444F(2) of the Act restraining Keybridge from realising or otherwise dealing with its security.
4. The Deed Administrators also seek orders under s 444F(2), 447A or 1324 of the Corporations Act or in the Court's inherent or equitable jurisdiction that Keybridge register a financing change statement on the Personal Property Securities Register with effect that it releases its security interest granted by the Company. Mr Wood submits that, if the Court makes orders under s 444F, gives leave under s 437C or finds there is no debt owed to Keybridge, it should order that Keybridge lodge a financial change statement. No statutory basis for such an order was identified. Mr Potts submits, and I accept, that the Court has no power under s 444F(2) of the Act to make that order. That section is limited, as I have noted above, to preventing a secured creditor from realising or otherwise dealing with its security interest, and does not authorise the destruction of that security interest. It is not apparent to me that such an order is necessary to advance the purposes of Pt 5.3A of the Act, so as to authorise the making of that order under s 447A of the Act. It does not seem to me that s 1324 of the Act applies, where a relevant contravention of the Act has not been established. As Mr Potts points out, no basis for the exercise of any wider equitable jurisdiction to destroy Keybridge's security interest, such as it is, has been established. Accordingly, I will not make such an order.

Whether the Excluded Assets should be transferred to Keybridge or otherwise realised under s 442C of the Corporations Act

1. The Deed Administrators seek an order under s 442C(2)(c) of the Corporations Act granting leave to dispose of the Excluded Assets, as defined in the DOCA, not including assets in the Deed Fund to Keybridge, if Keybridge expresses its interest in receiving those assets no later than one month from the date of the order, and to any other person, if Keybridge does not do so, and then to account to Keybridge for the proceeds of sale of those assets. Section 442C(3) of the Act provides that the Court may only give leave to the administrator to dispose of relevant property if it is satisfied that arrangements have been made to protect adequately the interests of the secured party. For example, in Osborne Computer Corporation Pty Ltd v Riddell (1995) 17 ACSR 606, Cohen J granted an administrator leave to sell goods which were subject to a retention of title clause, on condition that the costs of those goods was deposited to a separate account at the time of sale, to be paid to the supplier of those goods when the validity of the retention of title clause was determined. The grant of such leave may require that the court is satisfied not only that such arrangements have been made but that the disposition will not, or will not be likely to, prejudice the interests of other creditors or the company: Mentha v GE Capital Ltd (1997) 154 ALR 565; 27 ACSR 696 at 700-701.
2. As I noted above, the Deed Administrators plead, and Keybridge denies, that if the Plaintiffs transferred all of the Company's assets, but not the deed contributions made under cl 4.4 of the DOCA to Keybridge, it would be in as good or a better position as if it had retained its security (APOC [31], POD [31]). As I also noted above, where Keybridge's security interest is limited in the manner I have noted, and does not extend to future acquired property, then I accept it would be in as good a position if the Excluded Assets are transferred to it as if it retained its security.
3. Mr Wood submits that the Deed Administrators have power to dispose of the Excluded Assets under Sch 8A of the Regulations, incorporated by s 444A(5), reg 5.3A.06 and cl 12.6 of the DOCA. He submits, however, that they need leave to transfer the Excluded Assets to Keybridge under s 442C of the Corporations Act. Mr Wood submits that an order providing for Keybridge to receive the Excluded Assets adequately protect its interests, where it was entitled to those assets, but not the contributions to the Deed Fund which did not become the Company's property. Mr Potts submits that the Court would only be empowered to give the Plaintiffs that leave if Mr Rathner's appointment was terminated. I have held above that that appointment should be terminated. Mr Potts also submitted that Keybridge would not oppose the transmission of the relevant assets to it, if its security interest is otherwise undisturbed.
4. I am satisfied that leave should be granted to the Deed Administrators to transfer the Excluded Assets to Keybridge, or otherwise sell those assets and account to Keybridge for the proceeds, in the manner they propose. Section 442C(7) of the Act should be left to operate in accordance with its terms, such that any security interest in assets disposed of under the section will be extinguished. On the findings that I have reached above, those are all of the Company's assets subject to Keybridge's security interest.
5. The Deed Administrators also seek a further order, consequential on that order, under s 442C(7) of the Corporations Act, that any security interest in the Excluded Assets (again, not including any assets in the Deed Fund) within the meaning of the PPSA that are held by Keybridge is extinguished and "any purchaser of those assets free of any such security interest" [sic]. Quite apart from the lack of clarity in the order sought, I accept Mr Potts' submission that s 442C(7) of the Act operates of its own force in an appropriate case and no such order is required or is appropriate.
6. The Plaintiffs at one point made submissions that Keybridge should be prevented from appointing another administrator. Keybridge submitted that that relief had not been sought in the Amended Originating Process and should not be granted. As I noted above, I would not, in any event, assume that Keybridge would appoint a further administrator, after a Court had held that it was not a creditor of the Company and removed an existing administrator, or that an administrator would accept such an appointment, and the Court would have ample powers to deal with that situation were it to occur.

Keybridge's Interlocutory Process

1. By Interlocutory Process filed, by leave, on 11 June 2015, Keybridge seeks an order under s 447A of the Corporations Act: "That the provisions of Pt 5.3A and section 444D(2) of the Act be modified, or taken to operate in respect of, [the Company] and Keybridge so that, to the extent necessary to permit Keybridge to realise or otherwise deal with Keybridge's security interest in the present and future acquired assets of [the Company] on and from 18 August 2014 (being the Commencing Date as defined in the Deed of Company Arrangement made in relation to [the Company]) Keybridge's secured debt as at 9 April 2014 shall not be taken to be released or discharged to that extent and for that purpose."
2. The effect of Keybridge's Interlocutory Process is that if, contrary to Keybridge's submissions, its debt has been released so that it cannot be enforced through realising or dealing with future acquired property of the Company, Pt 5.3A and s 444D(2) should be modified, under s 447A of the Corporations Act, such that its debt is taken not to have been released to the extent necessary for it to realise or deal with its secured interest in any future property of Keybridge. Keybridge supports its claim for relief under s 447A of the Corporations Act on the basis that it was misled into providing a loan to the Company on the basis that it was to have a first ranking security interest in the present and future property of the Company (Ex P1, 326, cl 2.1(b)(iv), 357-358) and that, contrary to that position, First State's secured interest remained. Keybridge also refers to the Deed Administrators' criticism of the grant of security to First State, to which I referred above and to a suggestion by Mr Topp, at an earlier point, that the deed administrators might be required to approach the Court to gain an order for release, if one or more secured creditors fail to provide a release of their security (Ex P1, 760-761). Keybridge also submits that the material circulated to creditors in advance of the adjourned second meeting of creditors did not suggest that secured creditors' interests would be "destroyed" by the releases in the DOCA. The premise of that proposition does not seem to me to be established, since secured creditors' interests were not in fact destroyed by the releases in the DOCA, but were preserved as they then existed. Keybridge also refers to First State's attempts to remove Keybridge's registration from the PPSR, to which I have also referred above, although they seem to me to be of little relevance to the position of the Deed Administrators or other creditors of the Company.
3. Keybridge also submits that, had there been a timely assertion that its security interest had been "wiped out" by cl 3.2 of the DOCA, it could promptly have sought termination of the DOCA. As I have noted above, Keybridge's security interest has not been "wiped out" by cl 3.2 of the DOCA, although it has a more limited application than Keybridge would wish, and it would have been open to Keybridge to seek to terminate the DOCA, in any event, had it considered that the statutory basis for such a termination was available.
4. It does not seem to me that the matters to which Mr Potts refers, taken together or separately, suggest that any purpose of Pt 5.3A of the Corporations Act, as distinct from the interests of Keybridge, would be advanced by granting the relief sought. I have referred above to the practical difficulties that seem to me to arise generally from a preservation of a right of a secured creditor to future-acquired property, extending indefinitely into the future, after a company has executed a deed of company arrangement. In the present case, it seems to me that the rights which Keybridge seeks to assert would frustrate, or at least substantially impede, the reconstruction of the Company contemplated by the DOCA and any prospect that the Company's creditors will receive the issue of shares contemplated by it. I am not persuaded that I should make an order under s 447A of the kind sought by Keybridge.

Orders and costs

1. There should be declarations, which will bind the Company, the Deed Administrators, Mr Rathner and Keybridge, rather than orders or directions, that Keybridge's debt secured by its charge has been released by cl 3.2 of the DOCA and Keybridge is not a creditor in the Second Administration. Leave should be granted to the Deed Administrators to transfer the Excluded Assets to Keybridge, or otherwise sell those assets and account to Keybridge for the proceeds, in the manner they propose. The parties should bring in agreed short minutes of order to give effect to this judgment, and as to costs, within a period to be determined.

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: 29 July 2015