In the matter of Bosnjak Holdings Pty Ltd; Fexuto Pty Ltd v Lombe

5623/05 IN THE MATTER OF BOSNJAK HOLDINGS PTY LTD; FEXUTO PTY LTD V DAVID JOHN FRANK LOMBE & ORS JUDGMENT 1 HIS HONOUR: This is an application by the administrator of 13 companies under deeds of company arrangement for an order under s 447A(1) of the Corporations Act 2001 (Cth), which will have the effect that after ASIC is notified that the deeds have been fully effectuated, the companies will automatically pass into members' voluntary winding up without any special resolutions of members, and the applicant and his partner will be appointed liquidators of the companies. 2 The applicant, Mr Lombe, is the deed administrator of the 3rd to 15th defendants, companies comprising the Westbus group, each of which is subject to a separate though substantially identical deed of company arrangement. The Westbus group for many years operated private bus services in parts of western and north-western Sydney, as well as parts of the Hunter Valley in New South Wales. When the companies went into voluntary administration in January 2005, Westbus was the largest private bus business in New South Wales. 3 The third defendant, BHPL, is the holding company of the other 12 companies. In three cases it holds 100% of the subsidiary company's shares. In six other cases it has a majority holding (ranging from 55.55% to 99.99%) and there are minority shareholders. The remaining three companies are held by three of the subsidiary entities, one being a 100% holding and the other two being holdings of about 99.9%. 4 BHPL has three shareholders, National Bus Company Pty Ltd ("NBC") as to four-sevenths, the plaintiff Fexuto Pty Ltd as to two-sevenths, and Bosnjak Group Pty Ltd ("Bosnjak Group") as to one-seventh. 5 During the voluntary administration NBC proposed a deed of company arrangement and the creditors resolved in August 2005 that each of the 13 companies should execute a deed substantially as proposed. BHPL's deed is in evidence. The other deeds are substantially the same and they are interdependent. The deeds of company arrangement 6 Under the terms of the deeds, the Available Property of each of the companies (that is, the property of each of the companies including surplus cash and net proceeds of realisation of sale assets, subject to the claims of secured creditors, owners and lessors) was to be pooled into a single Deed Fund (clause 8), for distribution in the following order of priority (clause 9.3): "(a) Firstly, payment of each Administration Liability and the Administrators' Remuneration; (b) Secondly, payment of the Priority Claims on a pari passu basis, other than Administration Liabilities and Administrators' Remuneration; (c) Thirdly, payment of a distribution on a pari passu basis to the Trade Creditors to a collective maximum amount of $4 million; (d) Fourthly, payment of a distribution on a pari passu basis to the External Creditors to a collective maximum amount of $1 million; (e) Fifthly, payment of a distribution on a pari passu basis to the Admitted Group Creditors, including, without limitation the NBC Debt, and External Creditors to the extent that their Claims have not been satisfied in full in accordance with clause 9.3; and (f) Sixthly, any surplus funds are to be paid to BHPL." 7 The capitalised words are, of course, terms defined by the deed. It is unnecessary for present purposes to trace through the definitions, except to note that the definitions require the claims of creditors to be admitted to proof before they can rank for a distribution. It is significant that each deed provides that surplus funds are to be paid to BHPL. The deed makes no provision for the distribution of that surplus to BHPL's shareholders. The administration of the companies under the deeds 8 Two other Westbus group companies, which were not insolvent and did not have administrators appointed to them, agreed to contribute their respective assets to the Deed Fund. One of those companies, incorporated in the United Kingdom, is now under members' voluntary liquidation there, and BHPL was the sole beneficial shareholder of the other company (Glenorie Bus Co Pty Ltd) before it was deregistered in March 2009. Mr Lombe intends to seek reinstatement of the registration of Glenorie because he believes it will have some cash available for distribution to BHPL. 9 After an extensive sale process that continued over six months, in August 2005 agreements were executed for the sale of the assets and undertaking of the Westbus group as well as those of Glenorie and the UK company, for a net consideration of approximately $110 million. The sale was completed on 30 September 2005 and the net proceeds of sale were paid into the Deed Fund. Additionally during the administration period, the deed administrators settled, on confidential terms, some long-running litigation to which BHPL was a party, resulting in additional funds been realised and added to the Deed Fund. 10 NBC lodged a proof of debt in the deed administration, claiming a sum of about $91.59 million, comprising the principal of a loan it claimed to have made to BHPL pursuant to an agreement made in April 2000, plus interest. In November 2005 the deed administrators admitted the NBC proof in full, and then Fexuto commenced the proceedings in which the present application has been brought, appealing against that decision under s 1321 of the Corporations Act. Subsequently amendments were made, by leave, to Fexuto's statement of claim, introducing allegations of oppression by NBC and its parent company and joining additional defendants, including the present and former directors of BHPL and Fexuto. 11 After a process of mediation and further without prejudice discussions, the parties agreed to settle the proceedings on confidential terms. A settlement deed has been executed by each of the parties to the proceedings and also by Bosnjak Group Pty Ltd, which is not a party to the proceedings but, as noted above, is a shareholder in BHPL. There will need to be some consent orders made by the court, including an order for the proceedings to be dismissed with no order as to costs. 12 Mr Lombe is the sole remaining administrator under the deeds, as the other administrator, one of his partners at Deloitte Touche Tohmatsu, has retired from the firm. In consequence of the settlement of the proceedings, Mr Lombe has been able to pay in full all remaining admitted claims of creditors submitted pursuant to the deeds, including the NBC proof. Realisations of assets have been sufficient to enable him to pay statutory interest on admitted claims. According to the calculations of Mr Lombe's staff, set out in a document entitled "Summary of Estimated Return to Shareholders as at 2 June 2009", the balance of the deed fund as at that date was about $13.48 million, and after all remaining liabilities of the deed companies have been paid, the estimated return representing shareholders' equity will be an amount of approximately $13 million ("Surplus"). Mr Lombe's opinion is that when the deeds are fully effectuated, all 13 deed companies will be solvent. 13 BHPL's shareholders have informed Mr Lombe's solicitors that they want the Surplus to be distributed to them at the earliest practicable opportunity. As a result of the implementation of the confidential deed of settlement, the remaining shareholders of BHPL will be NBC as to six-sevenths and Bosnjak Group Pty Ltd as to one-seventh. One of the terms of the settlement deed, disclosed to the court by Mr Lombe, is a provision to the effect that, in addition to applying for the making of consent orders, Mr Lombe would make an application to the court for orders under s 447A of the kind now sought. The termination provisions of the deeds 14 The respective deeds of company arrangement make provisions for their termination, including termination by the administrators lodging a notice. Clause 13.1 says that all Claims against the Company are discharged upon receipt by the Admitted Creditors of their Entitlements. Clause 15.8(a) says that upon the occurrence of clause 13.1, the Administrators may certify to that effect in writing and lodge with ASIC a notice of termination of the deed in the form of Schedule 2. Schedule 2 is a Notice of Performance by which the administrators certify that the deed has been "wholly effectuated". The date upon which the Administrators lodge that notice under clause 15.8 is the "Termination Date" as defined in the deed, and according to clause 15.1 the deed terminates on the Termination Date. 15 Those provisions of the deed are in substance underwritten by provisions of the Corporations Act, s 445C(c). I note that s 445FA, which together with Form 5056 is generally similar in effect to clause 15.8 and Schedule 2 to the deed, was introduced by the Corporations Amendment (Insolvency) Act 2007, but it does not apply in a case where the voluntary administration leading to the execution of a deed of company arrangement occurred in 2005: s 1483(5). 16 According to the evidence, the time is approaching when it will be appropriate for Mr Lombe, as the sole remaining administrator, to give notice to ASIC under clause 15.8 in respect of each deed, bringing the deed to an end, and arguably he may come to be under a duty to do so. The need for an automatic transition from administration to winding up 17 If the proposed orders were not made, Mr Lombe would give Notices of Performance terminating the deeds and then each of the 13 deed companies would be returned to their respective directors - in the case of BHPL, with a very substantial liquid asset. It would be open to the shareholders of BHPL to requisition a general meeting of members of that company to pass a special resolution for voluntary winding up under s 491(1) and for the appointment of liquidators, and to cause that company to requisition general meetings of the members of the other 12 deed companies for the passage of equivalent resolutions. Some of the subsidiaries are not wholly owned and, although the minority shareholders appear to be related parties of various kinds, they would have to be given the opportunity to participate in the process. Consequently the steps to be taken would have to involve either physical meetings or (subject to the constitutional provisions of each company) a substantial shuffling of paper in the form of "flying" minutes of resolutions. Securing special resolutions for winding up the 13 companies would therefore involve a certain amount of cost and some delay. 18 Moreover, there would have to be a declaration of solvency and statement of affairs by the directors of each company under s 494(1), if the winding up were to be a members' voluntary winding up, as Mr Lombe desires. 19 A declaration of solvency and statement of affairs by the directors would be required before the date upon which the notices of meeting for the resolution to wind up each company were sent out. Since the deeds have had the effect that the assets of the subsidiary companies have been realised and paid into a pooled fund, and the Surplus is required to go to BHPL, presumably preparation of declarations of solvency and statements of affairs for the 12 subsidiary companies would be very easy. The preparation of a statement of affairs for BHPL should also not be difficult given the work that Mr Lombe and his staff have done. It seems to me that the main problems with statements of affairs and declarations of solvency are that they are required to be documents of the directors, and they appear to be a pointless exercise. 20 The directors of the 13 companies, whose identities are not revealed by the evidence, have not been in control of them from early 2005. If BHPL were to be returned to its directors they would have control of the Surplus, if only for a short period of time while the declarations of solvency and statement of affairs, and the special resolutions for winding up, were adopted. That could be done on an abbreviated timetable but there would be costs involved in preparation of documents, as well as some delay and, I think inevitably, some short time in which the Surplus was under the control of the directors. And one would have to wonder whether there was any point in going through such a paperwork exercise, in circumstances where the companies have been through a period of deed administration and all that remains to happen is for the surplus arising out of that process to be distributed to those entitled to it. 21 The destination of the Surplus is a matter addressed by the confidential deed of settlement, in the sense that the deed of settlement requires the present application to be made, which will have the effect that BHPL will receive the Surplus and then automatically go into a members voluntary winding up, whereupon the surplus will be distributed to NBC and Bosnjak Group as the sole contributories in proportion to their shareholdings. The fact that the confidential deed of settlement makes provision for the present application indicates that this outcome is a material consideration in the negotiated settlement. 22 It seems to me highly desirable, in the context of what is evidently a complex negotiated settlement, that the court should do what it can to facilitate the negotiated outcome and not to leave that outcome in any way at risk. A procedure which involves placing assets under the control of the directors rather than keeping them under the control of the administrators and liquidators might at least theoretically create some risk. For that reason, and also because the paperwork exercise that I have described seems to me pointless as well as costly and time-consuming, I have decided that there is a strong case for the court to exercise whatever powers are available to it to cause these 13 companies to move automatically into winding up, subject to the control of liquidators rather than directors, as soon as the deeds are terminated. The form of order 23 Mr Lombe seeks, ex parte, an order under s 447A(1) of the Corporations Act 2001 (Cth) to the effect that as soon as he notifies ASIC that the respective deeds of company arrangement have been fully effectuated, each of the 13 companies will move immediately into voluntary winding up. As he said in his affidavit, the proposed orders are intended to have the effect of dispensing with the formal requirements under Part 5.5 of the Corporations Act in relation to a members' voluntary winding up, and therefore to avoid the unnecessary delay and costs that would be involved in returning the control of the BHPL companies to their respective directors simply for the purpose of having those directors satisfy the requirements of Part 5.5 so that the companies could go into voluntary winding up. 24 Mr Lombe's interlocutory process sought the following: "An order pursuant to section 447A(1) of the Corporations Act (Cth) ( Act ) that Part 5.3A of the Act is to operate, in relation to each of the 3 rd to 15 th defendants ( Companies ), as if sections 445FA and 446B provided that:

(a) upon the applicant Deed Administrator, Mr Lombe certifying and filing a notice with ASIC under section 445FA(1)(c) that the respective deed of company arrangement for each of the Companies has been fully effectuated; then (b) the members of each of the Companies shall be taken to have passed a special resolution under section 491(1) that the company be wound-up voluntarily under Division 2 of Part 5.5 of the Act and David John Frank Lombe and Simon Cathro of Deloitte Touche Tohmatsu be appointed joint and several liquidators of the Companies." 25 After the initial hearing of the application, I encountered some difficulties with the form of words used in the interlocutory process by which the application was made. One problem was, as I have noted, that s 445FA does not apply to this case and therefore it is not appropriate to purport to amend its operation. Fortunately it is unnecessary to do so because of the provisions, generally to the same effect, in clause 15.8 and Schedule 2. Another problem was that the proposed orders did not address any consequential matters, such as the requirement of s 494 for a declaration of solvency and statement of affairs. Evidently the drafter took the view that if there was a deemed special resolution under s 491(1) that the company be wound up voluntarily under Division 2 of Part 5.5, which relates to a members' voluntary winding up, it would be implied that there was a deemed declaration of solvency and statement of affairs satisfying s 494, for otherwise the winding up could not be under Division 2 having regard to the definition of "members' voluntary winding up" in s 9. It seemed to me that in the interests of clarity, reliance should not be placed on this rather tortuous implication and it would be better to address s 494 directly. I noted that reg 5.3A.07 applied in circumstances close to the present case and it appeared to address consequential matters comprehensively, and I wanted to know why Mr Lombe's objective could not be achieved by simple modification of that regulation. 26 I therefore I invited counsel for Mr Lombe back to court to see whether a more satisfactory wording could be settled. That was achieved at supplementary hearings on 17 and 18 June 2009 (the hearing on 18 June being required to allow counsel, at his request, to address a further matter about the form of orders). In the result, it is proposed that the court should make an order under s 447A(1) to the effect that Part 5.3A is to operate in relation to each of the 13 companies as if reg 5.3A.07 applied in a modified way. The effect of such an order needs to be explained. 27 Section 446A makes provisions for transition from voluntary administration or administration under a deed of company arrangement to a creditors' voluntary winding up (sometimes called a "deemed creditors' voluntary winding up"). The most obvious circumstance is where the company is in voluntary administration and the creditors, having considered the administrators' report, resolve under s 439C(c) that the company be wound up (typically because no proposal for a deed of company arrangement has emerged or there is a proposal judged by the creditors to be unsatisfactory). Section 446A(2)(a) and (b) say that in such circumstances the company is taken to have passed at a specified time a special resolution under s 491 that the company be wound up voluntarily, and to have done so without a declaration of solvency having been made and lodged under s 494. The absence of a declaration of solvency means that the deemed voluntary winding up will be a creditors' rather than a members' voluntary winding up, having regard to the definition of "members' voluntary winding up" in s 9. The section goes on to make other consequential modifications clarifying the extent to which the winding up provisions of Part 5.5, such as s 497 and s 482, are applicable to the deemed winding up that the section creates. 28 Section 446B(1) allows the regulations to prescribe cases where a company under administration or a company that has executed a deed of company arrangement (as in this case) is taken to have passed a special resolution under s 491 that the company be wound up voluntarily. A special resolution under s 491 may initiate a members' voluntary winding up or a creditors' voluntary winding up depending upon whether it is preceded by a declaration of solvency under s 494. Consequently s 446B(1) authorises regulations that prescribe either kind of "deemed" voluntary winding up. 29 Section 446B permits regulations to be made that will cause a "deemed voluntary winding up" to occur in circumstances other than those specified in s 446A. Section 446B(2) specifically authorises the regulations to provide for Part 5.5 to apply with prescribed modifications, and under s 446B(3) it is made expressly clear that the regulations may provide for the matters of "adaptation" of Part 5.5 that are addressed in s 446A(2)-(7). 30 Regulation 5.3A.07 was made pursuant to s 446B(1). It is appropriate to set out the terms of the regulation in full: "(1) For subsection 446B(1) of the Act, a company that has executed a deed of company arrangement is taken to have passed a special resolution under section 491 that the company be wound up voluntarily: (a) if the Court at a particular time makes an order under section 445D of the Act terminating the deed of company arrangement; or (b) if the deed of company arrangement specifies circumstances in which the deed is to terminate and the company is to be wound up - if those circumstances exist at a particular time. (2) The company is taken to have passed the special resolution: (a) at the time mentioned in paragraph (1)(a) or (b), as the case may be; and (b) without a declaration having been made and lodged under section 494 of the Act. (3) Section 497 of the Act is taken to have been complied with in relation to the winding up. (4) [repealed] (5) The liquidator must: (a) within 5 business days after the day on which the company is taken to have passed the resolution, lodge a written notice in the prescribed form stating that the company is taken because of this regulation to have passed such a resolution and specifying that day; and (b) cause a notice of that kind to be published, within 15 business days after that date: (i)) in a national newspaper; or (ii) in each State or Territory in which the company has its registered office or carries on business, in a daily newspaper that circulates generally in that jurisdiction. (6) Section 482 of the Act applies in relation to the winding up as if it were a winding up in insolvency or by the Court. (7) An application under section 482 of the Act as applying because of subregulation (6) may be made: (a) despite subsection 499(4) of the Act, by the company pursuant to a resolution of the board; or (b) by the liquidator; or (c) by a creditor; or (d) by a contributory." 31 For the purposes of reg 5.3A.07(1)(b), each of the 13 companies is a company that has executed a deed of company arrangement that specifies circumstances in which the deed is to terminate. Relevantly the circumstances specified in the deeds in this case relate to the deed administrator lodging a notice with ASIC that the deed is wholly effectuated, pursuant to the provisions of the deed (clauses 15.8(a), 13.1, 15.1, Schedule 2 and the definition of "Termination Date", as outlined above). According to those provisions, the deeds terminate, upon the occurrence of clause 13.1, when the administrator certifies to that effect in writing and lodges the Notice of Performance with ASIC. The time of termination is the time of lodgement of the notice. 32 However, although the deeds in the present case say that on the happening of certain other terminating events the company is immediately placed into liquidation (see clauses 15.2 and 15.3), they do not provide for liquidation in the event that the deeds are terminated by lodging a Notice of Performance with ASIC. Therefore reg 5.3A.07 in its present form does not apply to the deeds, because the deeds do not specify circumstances in which, after lodgement of a Notice of Performance, the company is to be wound up. 33 That obstacle to the application of reg 5.3A.07 could be overcome if the court were able to make an order to the effect that the regulation would operate as if the words "and the company is to be wound up" were removed. In that event reg 5.3A.07 would apply to the 13 companies in the present case as soon as Mr Lombe lodged a Notice of Performance with ASIC, and from that time, by force of the regulation, the company would have been taken to have passed a special resolution under s 491 that the company be wound up voluntarily. Counsel for Mr Lombe submits that the court has the power to make such an order under s 447A. Members' voluntary winding up 34 Regulation 5.3A.07(2)(b) provides that the deemed special resolution for winding up is taken to have been made without a declaration of solvency under s 494. The winding up would therefore be a creditors' voluntary winding up. That would be disadvantageous in the present case for several reasons. First, generally, in a creditors' voluntary winding up the liquidator's administration of the company is under the supervision of the creditors rather than the members. For example, s 497 requires that there be a meeting of creditors, which may decide to appoint a committee of inspection. It is evidently assumed that the creditors are interested in discharging their function because the company owes them money. But in the present case the companies will be solvent and it is unlikely that, once Mr Lombe lodges his Notice of Performance, there will be any creditors at all, apart from the liquidators in respect of their fees and disbursements. In a members' winding up it is the members rather than the creditors who generally supervise the liquidators' discharge of their duties (thus, the liquidators' report is required by s 495(5) to be tabled at a meeting of members). The two shareholders of BHPL obviously have a strong interest in doing so. These considerations point to the conclusion that the deemed winding up to be achieved in the present case should be a members' rather than a creditors' voluntary winding up. 35 Secondly, more specifically, if the winding up of the companies proceeds as a creditors' voluntary winding up there may be an issue as to the fixing or approval of the liquidators' remuneration. Section 499(3) says that remuneration is to be fixed by the committee of inspection, if there is one, or otherwise by resolution of creditors. If the winding up proceeds as a members' winding up then the power to fix remuneration lies in the company in general meeting under s 495(1). Since only BHPL will have any assets, it may be sufficient in the present case for the liquidators' remuneration to be approved by that company alone, thereby avoiding the paper shuffling that would arise if resolutions of 13 companies were required. 36 In the present case Mr Lombe has provided affidavit evidence that is substantially more informative and detailed than a declaration of solvency and statement of affairs under s 494. Having provided a detailed schedule setting out estimates of value of the assets and liabilities of the Westbus group, he has made an estimate of the amount that will be available for distribution to the contributories of BHPL in winding up, and he has given his expert opinion that upon the deeds of company arrangement being fully effectuated, the deed companies will be solvent. 37 Having regard to these considerations, I am persuaded that there is a strong case for making appropriate orders to ensure that the winding up of the 13 companies by a deemed special resolution under reg 5.3A.07 is in each case a members' rather than a creditors' voluntary winding up. If s 447A(1) is available (a matter considered below), then the most convenient way of achieving the stated objective would be to use that section to amend reg 5.3A.07(2)(b) to say that the company is taken to have passed a special resolution for voluntary winding up with, rather than without, a declaration of solvency. Additionally, for the purposes of clarity it would be appropriate to delete reg 5.3A.07(3), which deems a provision that applies only to a creditors' voluntary winding up, namely s 497, to have been complied with. Counsel for Mr Lombe submits that the court has the power under s 447A(1) to make such orders. Appropriateness of an ex parte application 38 In response to some concerns of mine, at the first supplementary hearing counsel for Mr Lombe adduced evidence showing that although some of the 13 deed companies have minority shareholders, those shareholders (or in some cases the beneficiaries of the shares) are other deed companies, or in a few cases other parties to the present proceedings. There are no "outside" minority shareholders. There are only two deed companies with a minority shareholding in excess of the 25% that could block a special resolution for winding up, and in the case of one of those companies the minority shareholder is another deed company wholly owned by BHPL, while in the other case BHPL is the beneficial owner of the minority holding. 39 Ex P2 is evidence of the consent of all of the parties to these proceedings to Mr Lombe's application for orders under s 447A that would have the effect that the deed companies would automatically pass into members' voluntary liquidation when he lodges a notice with ASIC. The consents are expressed in the language of the application. While the application seeks orders worded in a manner that I regard as inappropriate, I will make orders having substantially the same effect. 40 In these circumstances I have reached the conclusion that all parties who might be affected by the making of orders are aware of the application and consent to it, and to the substance of the orders I shall make. Indeed, at the second supplementary hearing the second and 18th defendants were represented and informed the court that they supported the making of the orders proposed, provided that a members' rather than a creditors' voluntary winding up was achieved. The court's power to make the proposed order 41 The relevant parts of s 447A are as follows: "(1) The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company. (2) For example, if the Court is satisfied that the administration of a company should end: (a) because the company is solvent; or (b) because provisions of this Part are being abused; or (c) for some other reason; the Court may order under subsection (1) that the administration is to end. (3) An order may be made subject to conditions." Subsection (4) makes it clear that an application for an order under s 447A may be made, in the case of a company that has executed a deed of company arrangement, by the deed's administrator. 42 The general scope of the court's power to make an order under s 447A(1) was laid down by the Full High Court of Australia (Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ) in Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270. The issue in that case was whether the court could make an order altering the times fixed by s 439A within which the second meeting of creditors of a company in voluntary administration must be held, and it was held that the section was wide enough to permit such an order to be made. The court emphasised (at 280) that the section permits an order to be made to alter how Part 5.3A is to operate in relation to a particular company in particular circumstances, not how the Part does operate in relation to the company. That creates no difficulty in the present case, as the order sought by Mr Lombe will take effect only when, in the future, he takes steps that terminate the deeds. 43 It might be argued that s 447A is not available to make orders which will take effect only when the companies in question cease to be companies in administration under Part 5.3A. The order sought by Mr Lombe will not operate until he lodges a notice with ASIC having the effect of terminating the deed in respect of each of the companies, under the provisions of the deed itself and also s 445C(c). However, in Australasian Memory the Full High Court said that s 447A may be used when the subject company has been under administration, but by the operation of the provisions of Part 5.3A the administration has come to an end (at 282). Here what is proposed is to make an order having the effect of altering, prospectively, the operation of a regulation made under Part 5.3A, which governs the status of companies at the moment when they pass across from Part 5.3A to Part 5.5. That transition is an essential component of Part 5.3A. 44 I was referred to my decision in Gibbons v LibertyOne Ltd (in liq) [2002] NSWSC 274; (2002) 167 FLR 310. In that case a company had been in voluntary administration and then moved into a creditors' voluntary winding up by virtue of a decision of its creditors and the operation of s 446A. Section 446A, like reg 5.3A.07, deems a special resolution to have been passed for voluntary winding up under s 491 and then specifies the extent to which Part 5.5 applies or is modified in its application to the winding up. The liquidator successfully applied for an order under s 447A having the effect of exonerating him from a requirement of s 508 to convene a meeting of members of the company in liquidation. I took the view that an order could be made modifying for the future how Part 5.3A, in particular s 446A, would operate, by altering the adjustments to Part 5.5 that were prescribed for a company transitioning from administration to winding up. 45 The present case, is in a sense, easier than the Gibbons case, because there the transition from administration to winding up had occurred some time before the application was made, whereas here the companies are still in administration under deeds of company arrangement and their status will not change until Mr Lombe lodges his Notice of Performance with ASIC, at which time he wishes to have the court's order take effect. It seems to me clear that an order modifying the way reg 5.3A.07 is to operate when that event occurs is an order authorised by s 447A(1). 46 I was referred to another decision of mine, Chief Commissioner of State Revenue v Rafferty's Resort Management Pty Ltd (in liq) [2008] NSWSC 452; (2008) 217 FLR 230. In that case I expressed the opinion, obiter, that s 447A(1) does not authorise the court to make a winding up order in any circumstances, because a winding up order cannot be characterised as an order about how Part 5.3A is to operate in relation to a company under administration, even though it has the incidental effect of bringing the administration to an end (at [233]). I held that an order determining the s 513C day under Part 5.6, and therefore affecting the relation back period within which liquidators of the company could challenge voidable transactions, could not be characterised as an order about how Part 5.3A (as opposed to Part 5.6) is to operate in relation to the companies concerned, even though the order would have the effect that the administration of the company would be taken to have commenced on a certain day (at 237). 47 Here the companies are in administration under deeds of company arrangement and the order sought by Mr Lombe will affect what happens to them immediately after the administration is terminated. The proposed order, like a winding up order, would have the effect of putting the companies into liquidation. But the proposed order is not to be a winding up order, which must necessarily be based on some grounds, but rather it is a modification of the statutory regime established by Part 5.3A, which purports to deal with the status of a company that moves out of administration, and which, for the most part, purports to cause the company to move into liquidation. It is apt to describe a modification of that regime to fit the circumstances of this case as an order about how Part 5.3A is to operate in relation to the companies, for the purposes of s 447A(1). 48 For these reasons it seems to me that the court has the power under s 447A(1) to make an order altering the way in which Part 5.3A will in future operate on the companies, by altering the scope of reg 5.3A.07 so that it applies to the companies and causes them to pass immediately into a members' voluntary winding up. I have made plain earlier in these reasons for judgment that in my view there is a strong case for the court, in the exercise of its discretion, to use the power available to it to put the companies immediately and automatically into members' voluntary winding up as soon as Mr Lombe lodges a Notice of Performance with ASIC terminating the deeds. Appointment of liquidators 49 There is one final issue to be addressed. An important part of the application is that, when the companies pass from deed administration to voluntary winding up, the present administrator (to be assisted by one of his partners at Deloitte Touche Tohmatsu ) should become liquidator - otherwise it would be necessary for meetings to be convened for the appointment of a liquidator of each company and the paperwork sought to be avoided will creep back into the process. For reasons I shall explain, it will be necessary for the court to make a specific order for the appointment of liquidators, because as a result of the amendment to reg 5.3A.07 made after the enactment of the Corporations Amendment (Insolvency) Act 2007 (Cth), there is (apparently through oversight) no longer a provision deeming the administrator to become liquidator in the circumstances to which the regulation applies. 50 Prior to the 2007 amendments, s 499(1) provided, in the case of a creditors' voluntary winding up, that the company was required, and the creditors were permitted, at their respective meetings, to nominate a person to be the liquidator. If they nominated different persons, then the person nominated by the creditors was to be the liquidator, but if no one was nominated by the creditors, then the person nominated by the company was to be the liquidator. 51 As mentioned earlier, the most common case of transition from administration to voluntary winding up is under s 446A, typically when at the second meeting of creditors of a company in voluntary administration, the creditors resolve that the company be wound up. Prior to the 2007 amendments, s 446A(4) said that for the purposes of s 499(1), the company was taken to have nominated the administrator (in the common case) and the creditors were not taken to have nominated anyone. Consequently when a company passed from voluntary administration to a deemed creditors' voluntary winding up under s 446A, the administrator became the liquidator, and the creditors were not given an opportunity at their meeting to appoint anyone other than the administrator. 52 As explained in the Explanatory Memorandum for the Corporations Amendment (Insolvency) Bill 2007, para 4.204, amendments were proposed in the Bill because in some instances creditors might consider it desirable to have a different person act as liquidator, for example they might desire to have a different practitioner review the conduct of the administration itself or the pre-commencement conduct of the company. 53 Accordingly, the 2007 Act repealed s 446A(4), and replaced the old s 499 with a new s 499 which (in the common case: s 449(2A)) stated that the company's creditors may appoint a liquidator at the second meeting of creditors, but if they do not do so, then the default position is that they are taken to have appointed the administrator as liquidator. 54 Although the subsections of the new s 499 cover all of the cases addressed by s 446A, they do not address the circumstances covered by s 446B and reg 5.3A.07. Nor do the regulations. Before its amendment in 2007, reg 5.3A.07(4) said that for the purposes of the old s 499(1), the company was taken to have nominated the administrator of the deed of company arrangement to be liquidator and the creditors were taken not to have nominated anyone. That had the effect that only the administrator was nominated to be liquidator and under the old s 499(1) that person became the liquidator. 55 Paragraph (4) of reg 5.3A.07 was repealed in 2007 and, as noted earlier, s 499 was replaced. The result seems to be that where reg 5.3A.07 applies and there is an automatic transition from administration under a deed of company arrangement to voluntary liquidation, there is no "automatic" appointment of the administrator as liquidator and the matter must be dealt with ad hoc. I take this to be an oversight by the drafter of the 2007 amendments to the Corporations Regulations. In my opinion the regulation should provide that if reg 5.3A.07(1)(b) applies, the deed administrator is the liquidator. I can see no reason why creditors or members would want to avoid that outcome in the situation to which subparagraph (b) applies: that is, where the terms of the deed of company arrangement say that the deed is to come to an end and the company is to be wound up. 56 It seems to me appropriate to overcome the problem in the present case by using s 447A(1) to make a further amendment to how reg 5.3A.07 is to operate in relation to the 13 deed companies in this case, by reinserting a provision into the regulation that will have the effect of automatically appointing liquidators. The strong case for using s 447A(1) to make sure that the companies pass from administration into members' voluntary winding up is equally a strong case for making an ancillary amendment to the regulation to ensure that the administrator and his partner become the liquidators when the transition occurs. Conclusion 57 Therefore, so as to deal with the extension of reg 5.3A.07 to the present circumstances, and to provide for the winding up to be a members' voluntary winding up and not a creditors' winding up, and to deal with the deemed appointment of liquidators, my order under s 447A(1) will be as follows: Pursuant to section 447A(1) of the Corporations Act 2001 (Cth) ("Act"), Part 5.3A of the Act is to operate in relation to each of the 3rd to 15th defendants ("Companies") as if regulation 5.3A.07 of the Corporations Regulations, made pursuant to section 446B of the Act, were amended in the following ways: (a) in subparagraph (1)(b) delete the words "and the company is to be wound up"; and (b) in subparagraph (2)(b) substitute "with" for "without"; and (c) delete paragraph (3); and (d) insert the following provision: "(4) For the purposes of subsection 495(1) of the Act, the Companies are taken to have appointed David John Frank Lombe and Simon Cathro of Deloitte Touche Tohmatsu to be the joint and several liquidators of the Companies." 58 I shall also order, as requested in the interlocutory process, that the applicant's costs of and incidental to the interlocutory process be paid from the Deed Fund, and that my orders be entered forthwith. As I understand it, I shall also be asked to make orders in accordance with the short minute of consent orders, which will dispose of the proceedings. **********

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