In the matter of Pan Pharmaceuticals Limited (Administrators Appointed) ACN... [2003] FCA 855 | Case summary

REASONS FOR JUDGMENT 1 Application is made to the Court for final relief by way of an application filed in Court on 8 August 2003, that is last Friday. The applicant is a Mr Selim and the respondents are the voluntary administrators of the companies comprising what I will refer to as the Pan Group. The respondents are Mr McGrath and Mr Honey who are partners of the accounting firm KPMG. The relief sought in the application has been superseded by relief sought in a document entitled "Short Minutes of Order" which I have amended by hand and described as "Amended Terms of Application", which document was handed up on Tuesday; and which I will give leave to file in Court formally today. That document, the Amended Terms of Application, may stand as the amended application in the proceedings. I will refer to it as the amended application. 2 The terms of the amended application are as follows: 1. Order that if the respondents cause the companies or any of them to enter into a Business Sale Agreement as envisaged by the Pan sale process referred to in the letter of KPMG Corporate Finance (Australia) Pty Limited of 1 August 2003 (Tab 39 of the Exhibits to the affidavit of Andrew Bruce Thorpe sworn on 7 August 2003) such agreement is to be amended to provide that completion of the sale is not to take place prior to: (a) the expiration of the time limited for an appeal pursuant to s 1321 of the Corporations Act from the admission or rejection of a proof of debt or claim for voting purposes for the purposes of the meeting of creditors to be held on or about 1 September 2003; (b) if either of the respondents as Chairman should exercise a casting vote at the said meeting of creditors, the expiration of the time limited for any person to seek to review such casting vote pursuant to s 600B or s 600C of the Corporations Act; and (c) the expiration of such further time (if any) as the Federal Court of Australia may direct on application made for that purpose by any interested person prior to the expiration of the periods mentioned in paragraphs (a) and (b). 2. Order that the respondents pay the applicant's costs. 3 The application was supported by evidence being an affidavit of Mr Thorpe, or parts thereof, who is the solicitor for the applicant. The documents behind exhibits 16, 21, 26, 27, 28, 29, 30, 38, 39, 40 and 42 of Mr Thorpe's affidavit were admitted into evidence. Paragraph 2, insofar as it exhibited that material, and paragraphs 3 and 35 to 39 of that affidavit were read without objection. 4 The respondents' case was comprised of an affidavit of Mr McGrath sworn on 12 August 2003 which was read without objection. That included exhibit A which was an earlier affidavit of Mr McGrath. Mr McGrath repeated various paragraphs of that affidavit. Mr McGrath was cross-examined this morning by Mr Rayment QC who appears, with Mr Stanton, for the applicant. 5 The history of the matter is relevantly set out in the evidence and I do not stay to repeat too much of the detail of it. The events of the audit of the Pan Group by the Therapeutic Goods Agency (TGA) earlier this year is well known public knowledge. The companies in the group manufactured various administrations (whether properly described as pharmaceuticals may depend upon the nature of the definition of that term), health care products and some other products which I will refer to for present purposes as pharmaceuticals. Such products were, and have been for many years, prepared by companies in the Pan Group for sale to others. 6 The Pan Group by and large is not a retailer of these products but sells them to others who on-sell. The term "sponsors" is used in the material to identify those with whom the Pan Group has and had commercial relationships in the field of the sale of these pharmaceuticals. The business of the Pan Group was not limited to selling pharmaceuticals locally and domestically to Australian companies, but it also had a significant export business. 7 The withdrawal of its relevant licences to manufacture and sell the products which it had previously made naturally had a significant effect on the Pan Group's abilities to continue. A perception, and no doubt a legitimate one, of the directors of that problem caused the voluntary administrators to be appointed. 8 In the conduct of their administration the voluntary administrators have attended to questions which include the ascertainment of the claims and potential claims against the companies in the group. In assessment of those matters (as is called for by their appointment within the context of the Corporations Act 2001 (Cth)) they have attempted to assess the best way forward for the Pan Group, taking into account, no doubt, the interests of all interested parties, including creditors. The matter before me does not raise, in any fashion, the bona fides of those attempts. 9 Earlier in the year, the administrators formed the view that expressions of interest for the purchase of the business of the group should be sought from the commercial community. On 23 June 2003, the administrators circulated a document entitled "Requests for Registrations of Interest" which dealt with the possible trade sale of the business. It is unnecessary to descend to the specific terms of that document. The applicant was one of the parties who expressed an interest in acquiring the business proposed to be sold. In using those expressions, I should not be taken to be identifying a method of disposal of the assets necessarily outside of the company structure. The request for registrations of interest did not exclude the possibility of interested parties putting forward suggestions for the creation of a deed of company arrangement in which the existing corporate structure could be retained as one method of realising value for those interested in the affairs of the Pan Group. 10 As the administration proceeded, a work timetable was prepared which foresaw the culmination of the sale process as a change of ownership on 1 September after a meeting of creditors was held shortly prior to that to approve the sale. The administrators have at all times indicated to those interested that any decision to be made by them to deal with the business will be subject to the approval or consent of creditors at a meeting. That is not to say that the administrators have at any time indicated to parties that the only basis upon which they would deal with the business of the companies in the Group would be by way of deed of company arrangement; rather they have indicated that they do not propose to take such steps as selling the whole of the business of the company without, in effect, obtaining approval of the creditors. 11 The administrators have, however, the wide power granted to them by s 437A of the Corporations Act which is in the following terms: (1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. (2) Nothing in subsection (1) limits the generality of anything else in it. 12 Mr Sheahan SC appearing for the respondents, put the submission, and in my view it is correct, that the power granted by 437A is such as would enable the administrators to sell the assets of the company without approval of creditors. A decision so to do, in the light of what they have said to other creditors, may, for the administrators to act appropriately and without risk of criticism or legal action, require them to notify parties of their change of view. I make no finding in that regard; but the evidence as to what has happened thus far in their conduct of the administration does not amount, in my view, (if they could do it) to an abrogation of the statutory power vested in them by s 437A to sell the business without creditor approval. 13 Returning to the chronology, the evidence reveals that the administrators have taken significant steps to ascertain the number and extent of the claims on the Group arising out of the events earlier in the year. Those steps are not complete. As anyone familiar with litigation in the last 15 to 20 years in this country will understand, the assessment of the economic responsibility for companies in the Pan Group for claims in contract, and perhaps tort, for business interruption of customers and third parties consequent upon the dramatic withdrawal and re-call of large amounts of product, is not an easy one. 14 There will be numerous creditors whose entitlement to specific sums of money will be clear, such as trade creditors and the like. Those with unliquidated damages claims may clearly have a claim, but the quantum or value of that claim may be unclear. Some may have a claim for breach of contract but may suffer significant disadvantages in the assessment of damage because of remoteness of damage. Others may have no contract and may wish to base their claim on the law as laid down in Perre v Apand Pty Ltd (1991) 198 CLR 180 for economic loss. 15 The administrators have taken the view that notwithstanding the significant difficulties in assessing what are probably hundreds of claims, this should not slow down the attempt to sell what is perceived to be, notwithstanding its present difficulties, a very valuable business. This decision is not the subject of any criticism; what is before me is not a criticism of the propounding of a speedy sale resolution to the problem of extraction of value for those interested in the Group in the light of a great many potential claims, rather it is the detail of that sale solution which is the subject of debate. 16 I do not need to concern myself with all the details of what the administrators have been doing in furtherance of their desire to sell, except to say the following. Earlier this year an application was made to the Court for extension of time to hold the second meeting of creditors. This application was brought by the administrators, opposed by Mr Selim, and granted by Lindgren J. The next meeting of creditors is proposed on 1 September. The timetable, which had previously been propounded, therefore must be read in the light of these changed dates. 17 On 1 August 2003, the administrators, through a representative of KPMG, sent to Mr Thorpe (for Mr Selim) a copy of a proposed business sale agreement. In the letter covering the dispatch of that agreement there was a timetable set out for the sale process. Final bids were called for no later than 5 pm on Friday, 8 August. A second audit by the TGA was anticipated on 18 August. A decision by the TGA on one of the licences of the Pan Group for what is called "soft gel" products was hoped for on 22 August. The report and recommendation of the administrators about the sale process was anticipated five business days before the second meeting of creditors. The second meeting of creditors was to take place between 27 August and 2 September, but anticipated on 1 September. That is still the anticipated date. 18 Completion was identified as two business days after the later of, (a) the approval of the sale by the second meeting of creditors; and (b) the grant of the "soft gel" licence provided that it is prior to 15 September. There was said to be a "drop dead date" for the grant of the "soft gel" licence on 15 September. There was a rescission provision dealing with the state of the licences, the precise nature of which it is unnecessary to deal with. 19 In the business sale agreement, the completion date was defined as meaning the later of, (a) the date of the second meeting of creditors of the seller; and (b) any other date the seller and buyer agree on in writing before. That definition of completion date, when read with clause 5.1, identified a completion date somewhat differently from the letter of KPMG of 1 August. 20 The conditions precedent were found in cl 3.1 which was in the following terms. 3.1 Condition precedent to agreement for sale and purchase Except for: (a) this clause 3; (b) clause 1 Interpretation; (c) clause 2.2 Payment of Deposit; (d) clause 2.3 Deposit to vest or be returned; (e) clause 16 Confidentiality and announcement; (f) clause 18 Costs and stamp duty (g) clause 19 Notices; (h) clause 20 Amendment and assignment; and (i) clause 21 General, this agreement has no legal force, until the sale of the Business to the Buyer has been approved by the creditors of Pan, at the second meeting of creditors held pursuant to sections 439A, 439B and 439C of the Corporations Act. 21 As can be seen, the approval of creditors was a condition precedent to this agreement having legal force. 22 On 4 August 2003, that is last Monday week, Mr Thorpe sent two facsimile transmissions to Blake Dawson Waldron to the attention of Mr Mainsbridge. One of those facsimiles sought an assurance that it be a term of any sale contract executed by the administrators with any bidder that the transfer of title of the assets of Pan is subject to a precondition that: … the appeal period in respect of a decision of the Court on the issue of a just estimate adverse to our client expires without our client filing an appeal, or declaratory proceedings, otherwise that our client's appeal or declaratory proceedings, to the Court (including any necessary therefrom) fails. We note that currently, the proposed sale document does not contain such term. 23 What Mr Thorpe was seeking was that the contract that the administrators propounded to interested parties cater, in contractual form, for the possibility of a challenge to the just estimates of claims for voting purposes at the meeting on 1 September by the administrators. 24 I will come in due course to the question of a possible legal challenge. 25 Two days later, on 6 August, Blake Dawson Waldron responded to that request on behalf of the administrators and declined to give any such undertaking as to the contents of the contract, however the letter did say that the administrators were willing to give their unequivocal assurance that they would comply with s 439A of the Corporations Act dealing with the convening of meetings and informing creditors. 26 Various matters were then raised and were set out in three paragraphs as follows: … (a) Giles JA in Kirwan v Cresvale Far East Ltd (In Liq) [2002] NSWCA 395 stated that a deed of company arrangement must be in existence before details of the proposed deed are provided in the Report. It is insufficient for the Report to contain details of an outline of the proposal, where there is no document evidencing the deed. Our clients therefore require Mr Selim to both outline the proposal and provide a draft deed when he submits his proposal on or before 8 August 2003. (b) Our clients consider that it is in the best interests of creditors that the terms of any proposed deed be negotiated and finalised prior to the finalisation of the report to creditors and certainly before the second meeting of creditors. (c) We understand that the continuation of the business is central to your client's proposal. Based on earlier versions of your client's embryonic deed proposal, a significant proportion of the return to creditors will be dependent upon continuation of the business following the second meeting of creditors. As part of the comprehensive outline of the key terms of your client's deed you must provide evidence acceptable to the administrators that the deed proponent (or those nominated under the deed proposal to direct, manage or have effective control of the company) is a "fit and proper" person for the purposes of the Therapeutic Goods Act (Cth) 1989 and accordingly is able to give effect, without the need for further consideration by or approvals from the Therapeutic Goods Authority to the company going forward under the deed. 27 Also on 6 August, Blake Dawson Waldron sent another facsimile to Mr Thorpe's firm, in which it was indicated as follows: … Our clients do not consider it is appropriate and are not willing to provide the written assurances sought. To advise your client three weeks prior to the second meeting of creditors of the administrators' intentions relating to the valuation of numerous proofs of debt which have yet to be filed would be premature. There is no obligation to form a view about the valuation of proofs of debt prior to the meeting. Indeed, if such a determination were to be made, then the administrators might be open to allegations that they had pre-determined the issue and fettered their discretion in relation to particular claims, especially in circumstances where relevant information had not yet been provided to them. Our clients are not willing to provide an undertaking now that they will delay any sale approved by creditors to allow your client to appeal or seek declaratory relief from the court, for the following principal reasons: (a) Your client has yet to put forward a deed proposal. The second meeting has not yet occurred. No decision has been made by creditors. Accordingly, the alleged irremediable harm to your client has yet to occur, may never occur, and that it might occur is nothing more than speculation on your part. (b) Administrators are given wide powers under the Act to dispose of all or part of the company's business without recourse to ascertaining the views of creditors. There is no statutory requirement that parties who allege that they are aggrieved have the right to postpone the sale of the company or its assets whilst they challenge the sale. (c) Agreeing to such a delay now could prejudice any sale and may deflate any price payable to the possibly significant detriment of creditors generally. There will inevitably be ongoing operational costs that will be incurred during any court or appeal process. (d) It is apparent from your letter that your client is well aware of the issues involved and is prepared to seek injunctive relief from the court weeks prior to actual decision. You state that you are able to commence declaratory proceedings immediately. As a consequence, we do not accept that, in any event, your client would be prejudiced by our clients' disinclination to provide the assurance sought. Should you seek to move the court for appropriate orders then we require that you provide us with sufficient notice prior to the filing of any such proceedings and that you would bring this correspondence to the Court's attention. 28 The applicant then brought these proceedings. 29 I have set out the claim for relief earlier. The matter was listed before last week's Duty Judge, Jacobson J, who listed the matter for final hearing before me on Tuesday, 12 August at 2.15 pm. I commenced the case at approximately 3.30 pm on Tuesday. The evidence was largely read on that afternoon. I have received further evidence this morning and have heard argument this morning. I am grateful for the efficiency and despatch of presentation by counsel for both sides in this matter. On 12 August the affidavit of Mr McGrath was served upon the applicant in which, in paragraph 17, he stated, amongst other things, the following: … I accept that there is a discrepancy between the covering letter dated 1 August 2003 and the draft sale contract. Further, given the recent advice from the TGA, I now propose to advise potential purchasers in words to the effect that "settlement will occur on the later of 15 September 2003 or two business days after the last of the conditions precedent occurs, provided that if a condition precedent is not satisfied or waived by 17 September 2003 either party may terminate the agreement by giving written notice". 30 By this paragraph, it can be seen (and it was common ground between the parties in the debate before me) that settlement or completion of the contract will not take place, as presently anticipated, prior to 15 September, two weeks after the meeting. Thus, what really divides the parties is the absence of a contractual provision not obliging the parties not to complete the sale for a further period beyond those fourteen days, to encompass another seven days for what is said to be a potential appeal under s 600B or 600C of the Corporations Act and any further time which might be required to deal with any application brought by an interested party before the Federal Court or the Supreme Court of New South Wales in relation to the voting at the meeting and the use of any casting vote at the meeting. That further time would be such further time as either the Federal Court or the Supreme Court ordered. 31 The potential disputes that have been foreshadowed might arise, in part, out of the possibility that a casting vote may have to be considered by the administrators at the meeting. Sections 600B, 600C and 600D are in the following terms: SECT 600B Review by Court of resolution of creditors passed on casting vote of person presiding at meeting (1) This section applies if, because the person presiding at the meeting exercises a casting vote, a resolution is passed at a meeting of creditors of a company held: (a) under Part 5.3A or a deed of company arrangement executed by the company; or (b) in connection with winding up the company. (2) A person may apply to the Court for an order setting aside or varying the resolution, but only if: (a) the person voted against the resolution in some capacity (even if the person voted for the resolution in another capacity); or (b) a person voted against the resolution on the first-mentioned person's behalf. (3) On an application, the Court may: (a) by order set aside or vary the resolution; and (b) if it does so - make such further orders, and give such directions, as it thinks necessary. (4) On and after the making of an order varying the resolution, the resolution has effect as varied by the order. SECT 600C Court's powers where proposed resolution of creditors lost as casting vote of person presiding at meeting (1) This section applies if, because the person presiding at the meeting exercises a casting vote, or refuses or fails to exercise such a vote, a proposed resolution is not passed at a meeting of creditors of a company held: (a) under Part 5.3A or a deed of company arrangement executed by the company; or (b) in connection with winding up the company. (2) A person may apply to the Court for an order under subsection (3), but only if: (a) the person voted for the proposed resolution in some capacity (even if the person voted against the proposed resolution in another capacity); or (b) a person voted for the proposed resolution on the first-mentioned person's behalf. (3) On an application, the Court may: (a) order that the proposed resolution is taken to have been passed at the meeting; and (b) if it does so - make such further orders, and give such directions, as it thinks necessary. (4) If an order is made under paragraph (3)(a), the proposed resolution: (a) is taken for all purposes (other than those of subsection (1)) to have been passed at the meeting; and (b) is taken to have taken effect: (i) if the order specifies a time when the proposed resolution is taken to have taken effect - at that time, even if it is earlier than the making of the order; or (ii) otherwise - on the making of the order. SECT 600D Interim order on application under section 600A, 600B or 600C (1) Where: (a) an application under subsection 600A(1), 600B(2) or 600C(2) has not yet been determined; and (b) the Court is of the opinion that it is desirable to do so; the Court may make such interim orders as it thinks appropriate. (2) An interim order must be expressed to apply until the application is determined, but may be varied or discharged. 32 There was debate before me as to whether or not there was a time limit for such application by reference to the Federal Court Corporations Rules, in particular rule 14.1 which relevantly, is in the following terms: FEDERAL COURT (CORPORATIONS) RULES 2000 RULE 14.1 Appeal from act, omission or decision of administrator, receiver or liquidator etc (Corporations Act s 554A, s 1321) (1) All appeals to the Court authorised by the Corporations Act must be commenced by an originating process, or interlocutory process, stating: (a) the act, omission or decision complained of; and (b) in the case of an appeal against a decision - whether the whole or part only and, if part only, which part of the decision is complained of; and (c) the grounds on which the complaint is based. (2) Unless the Corporations Act or the Corporations Regulations otherwise provide, the originating process, or interlocutory process, must be filed within: (a) 21 days after the date of the act, omission or decision appealed against; or (b) any further time allowed by the Court. 33 Mr Sheahan points out that the language of s 600B and s 600C are applications to the Court for orders as to the dealing with the resolution rather than of the act or decision of the administrator, and that the word "appeal" is not used, but rather words of primary application. 34 Mr Rayment points out that whether or not the word "appeal" is used, involved is an act or omission of the administrators in deciding to use or not to use their casting votes and that the word "appeal" is sufficiently broad to encompass the type of primary application there contemplated. 35 I do not think I need to make a decision about this. I do not think it ultimately matters. I will approach the matter on the basis that Mr Rayment is correct that there is a requirement that the originating process be filed within twenty one days or such further time as allowed by the court. That can be viewed, and is often expressed, as a right to appeal within a particular time, but it equally can be seen as a requirement that any such application be brought, if it is to be brought within that time. The proper characterisation of it as a right or a prescription indicating the period beyond which there is no entitlement, without the leave of the Court, again is not central. I will approach the matter on the basis that there is a time period for each of the applications in s 600B and s 600C and that each should be characterised, in a sense, as a right given by the Rules. 36 The other possible complaint which may arise is in relation to the admission of proofs for the purposes of voting at the meeting. The matter may well arise in the following context. Whilst there are so called "hard" creditors and "soft" creditors of the Pan Group, the matter was argued before me on the basis that it may be that the proposal put forward by the applicant, which is one based upon the entry into a deed of company arrangement, is one which may be perceived as more likely to appeal to some classes of the creditors and not others. It may become important for those supporting the applicant's proposal, if it is not the chosen and favoured one of the administrators, to reduce the number and value of unsecured creditors claiming damages. That, in large part, is how the matter was set in background for me. It is not clear at all who will line up with whom in the voting on 1 September. However, all sorts of commercial interests could conceivably intrude, and by commercial interests I mean legitimate commercial interests. Thus, there is a possibility that questions of the conduct of the administrators in dealing with the proofs for voting purposes might arise. 37 Regulation 5.6.23 of the Corporations Regulations deals with creditors who may vote. Sub-regulations 5.6.23(1) and (2) are in the following terms: (1) A person is not entitled to vote as a creditor at a meeting of creditors unless: (a) his or her debt or claim has been admitted wholly or in part by the liquidator or administrator of a company under administration or of a deed of company arrangement; or (b) he or she has lodged, with the chairperson of the meeting or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim: (i) those particulars; or (ii) if required - a formal proof of the debt or claim. (2) A creditor must not vote in respect of: (a) an unliquidated debt; or (b) a contingent debt; or (c) an unliquidated or a contingent claim; or (d) a debt the value of which is not established; unless a just estimate of its value has been made. 38 It will be likely that the administrators have to make just estimates of values of various debts for the meeting. The structure of these regulations has been dealt with in a number of cases, in particular Vincent White and Associates Pty Limited v Vouris (1998) 28 ACSR 93-111 (Hodgson CJ in Eq), Austin J in the Bovis Lend Lease v Wiley [2003] NSWSC 467 in particular at [269] and following, Hansen J in Spiteri v Lindholm [2003] VSC 42 in particular at [34] and following, and Thomas J in Re Oriel Homes Pty Limited (1997) 15 ACLC 564. An appeal might lie from any decision as to the just estimate of a debt or debts under s 1321 of the Corporations Act, for which there is a 14 day time limit to commence such an appeal. 39 What has not been the subject of judicial consideration as far as the research of counsel and solicitors is able to throw up is the test or approach which is to be applied by the Court in an appeal against a decision as to a just estimate of a debt by the administrator under s 1321. 40 It is possible to view appeal from the administrator's just estimate of the value of a claim as a valuation question in which one sees the Court as a judicial valuer assessing the just estimate of the claim and thereby supplanting the administrator's decision, if it is different. That would involve the Court, here, in understanding all the facts of the claim, the legal advice of the administrators' solicitors and counsel, if any, and other matters which attended the judgment of the administrator and which attended the claim itself. It would not be a final assessment of the worth of the claim for the purposes of proof as referred to in Tanning Research Laboratories Incorporated v O'Brien (1990) 169 CLR 332but it would be or could be seen to be a significant question as to what is a just estimate. 41 Alternatively, the appeal might recognise that the notion of a just estimate under the regulations, in the context of the structure of the Corporations Act and the place it gives administrators and administrations, involves the professional judgment of the administrator in respect of a matter about which reasonable minds would almost certainly differ. It may well be that in the context of an administrator's decision of this kind at a meeting, the Court should not be required to undertake a form of judicial valuation of a claim which the person, to whom the Corporations Act gives responsibility for such decision making with his or her advisers, has made and which cannot be criticised for lack of bona fides, or for lack of rationality, and which does not appear on its face to be manifestly unreasonable. 42 However, I do not need to decide this question. It is sufficient to approach this case on the basis that there may be an appeal from one or more decisions of the administrators about the admission of proofs for the purposes of voting, that is for the making of just estimates where that is required or for admission of proof where that is done. 43 There is assistance for me, however, in understanding precisely what a Court's role in an application under ss 600B and 600C is or would be. Hodgson J in Young v Sherman (2002) 170 FLR 86 said at page 106 [78] the following: In so far as the appellant sought a review pursuant to s 600B of the Corporations Act of the exercise of the casting vote, there is a question as to the role of the Court. However, whether the role extends to reconsideration of matters of commercial judgment, or is limited to intervention if some other serious error is detected, I am inclined to think that the Court should have available to it all the material that was available to the administrator in deciding how to exercise the casting vote. In this case, that included the instructions given by the directors as to the facts alleged to give rise to the cause of action, the legal advice on which the administrator acted, and (if known) the terms of the proposed litigation funding. However, I note that this point was not taken either below or on appeal, and could not have been given effect to in this decision. 44 Further illumination of the nature of the application under those sections was given by the Court of Appeal of New South Wales in Kirwan v Cresvale Far East Ltd (In liq) [2002] NSWCA 395. There Meagher JA agreed with Giles JA in his enunciation of the relevant principles. Giles JA in [201], [202], [206] and [208] dealt with the matter in a way importantly differently, I think, from the way Austin J had apparently dealt with it at first instance. One can see from Giles JA's reasons that notions of honesty, impropriety, and rationality are central to the question of review under section 600B. Giles JA said: 201. In my opinion, the grounds given by Austin J for his conclusion that it was clearly inappropriate for Mr Gould to have exercised his casting votes as he did at the meeting of 30 June 2000 did not warrant that conclusion. Beyond the matter of conflict of interest there was little exploration in the evidence of Mr Gould's exercise of his casting votes at the meeting of 30 June 2000, as distinct from his exercise of his casting vote at the meeting of 21 July 2000. Whether Mr Gould acted correctly may be debated. It may be unusual for an administrator to remain in office contrary to the wishes of the significantly major creditor. But it can be so (see Network Exchange Pty Ltd v MIG International Communications Pty Ltd (1994) 13 ACSR 544), and it must depend on the circumstances. The administrator has responsibilities to the minor creditors as well as to the major creditor, and would not act correctly in complying with the wishes of the major creditor simply because it was the major creditor. Whatever the answer in the debate, however, acting improperly is another matter. 202. The circumstances included Mr Gould's critical attitude towards Mr Hedge's conduct of the liquidation of Capital, and I do not think he acted improperly in exercising his casting vote so that the administration did not pass to Messrs Hall and Hedge. The stance of counsel for Far East in that respect has already been noted. Exercise of his casting vote so that the administration did not pass to Mr McGrath is more questionable, because Mr McGrath was not open to the same attitude. From the minutes of the meeting, it seems that Mr Gould was influenced by his view of Far East's clean hands. It is not easy to see that this was relevant, but it is also not easy to be sure of the relevance he saw in the absence of exploration in the evidence. Apart from that, however, the competence of Mr Gould was not questioned and the question was one of size of the administrator's establishment. The minority creditors wished to avoid the cost structure of a major firm. There was that positive reason for Mr Gould to remain as administrator, and I do not think that it was shown that as an exercise by Mr Gould of his voting entitlement it was improper in a pejorative sense. … 206. As to the balance between creditors, Mr Gould's view of the status of Capital and Newland was not as favourable as that taken by his Honour. Putting aside any question of issue of shares, the DCA would be better for creditors than liquidation, although (as I have indicated) in a discriminatory manner - better for some creditors. Still putting aside any question of issue of shares, it can readily enough be seen as not irrational, still less improper, that in weighing up the relative advantages and disadvantages Mr Gould took the view that he should exercise his casting vote in favour of the proposed DCA. The key, then, is the issue of shares. The DCA would give control of Securities to Mr Kirwan. … 208. This was the furthest the cross-examination went towards complicity in wresting control of Securities from Capital. It may be sufficient to permit criticism of Mr Gould for failing to take into account, when considering the exercise of his casting vote, that implementation of the DCA would involve misuse of the directors' power to issue shares. The criticism must be tempered, however, by the availability of a contrary view eloquently demonstrated by the reasons of Young CJ in Eq in the present case, which I have had the advantage of reading in draft. Whether or not he acted incorrectly, on which minds can (and do) differ, it can not be said that Mr Gould acted improperly in voting as he did because control of Securities would be given to Mr Kirwan. 45 In the same case, Young CJ in Eq dealt with the matter. At [372], his Honour referred to Neill LJ's words in R v Bradford City Metropolitan Council; Ex parte Corris [1989] 3 All ER 156 at 160 where his Lordship in giving the judgment of himself and Nourse and May LJJ said as follows: A person who has a second or casting vote is clearly under a duty to exercise it honestly and in accordance with what he believes to be the best interests of those who may be affected by the vote. Subject to this, however, it seems to me that the person presiding at a meeting was fully entitled to use his vote as he thinks fit. 46 Thus, there is the possibility that those kinds of applications will be made by a person or persons, perhaps the applicant, who is or are, dissatisfied (a) with the result of the meeting and (b) with the procedural conduct of the meeting. It is to cope with these possible dissatisfactions that the applicant propounds the relief in the document I have treated as the amended application. 47 The application before me in its terms recognises the substantive mandatory nature of what is being asked for. It can be expressed in a negative way, that is to restrain the administrators from conducting their administration otherwise than on the basis that they propound a contract which contains this term. So expressed, I think the request for relief throws up its primary problem. What is being sought is an order that mandates a course of conduct by the administrator. Fundamentally it is said that I should do this in a supervisory capacity under, at least, s 447E of the Corporations Act which is in the following terms: SECT 447E Supervision of administrator of company or deed (1) Where the Court is satisfied that the administrator of a company under administration, or of a deed of company arrangement: (a) has managed, or is managing, the company's business, property or affairs in a way that is prejudicial to the interests of some or all of the company's creditors or members; or (b) has done an act, or made an omission, or proposes to do an act, or to make an omission, that is or would be prejudicial to such interests; the Court may make such order as it thinks just. (2) Where the Court is satisfied that: (a)a company is under administration but: (i) there is a vacancy in the office of administrator of the company; or (ii) no administrator of the company is acting; or (b) a deed of company arrangement has not yet terminated but: (i) there is a vacancy in the office of administrator of the deed; or (ii) no administrator of the deed is acting; the Court may make such order as it thinks just. (3) An order may only be made on the application of ASIC or of a creditor or member of the company. 48 For that section to apply there would need to be shown, to my satisfaction, that there is an act or omission or a proposed act or omission that is or would be prejudicial to the interests of some or all of the companies, creditors or members. 49 Mr Rayment, on behalf of the applicant, did not limit the way he put the matter to me to that provision, but does rely upon it. What is sought by an interested party to the administration, and there is no question of any lack of standing, is that I interfere with the conduct of the administration by the administrator by mandating a particular course of conduct. Plainly I would have power to do that if I was satisfied that what was proposed was in fact prejudicial or would be prejudicial to the interests of the Group's creditors or members. 50 I do not see the terms of s 447E as a statutory requirement upon me to enter the field of commercial decision making undertaken by the administrator. That is, I do not see the terms of s 447E as requiring me to remake business and commercial decisions by the administrator (in order to see whether there is prejudice) even if those decisions have a legal element or a legal context. One should not, of course, and the High Court has time and again in the last ten years made this plain, read down powers of courts given in plain terms by some artificial mechanism of reference to considerations not within the Act in question. 51 However, the notion of what is or would be prejudicial must be set against the background of the Act and the sorts of considerations which have time and again been identified by the courts about the care with which interference with business decisions especially of people such as liquidators and administrators should be made. I refer in this respect to decisions such as Naumoski v Parbery [2002] NSWSC 1097 [13] to [15] and the Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998]195 CLR 1, in particular at [53] to [54]. 52 From the relevant cases dealing with the interference of the conduct of administrations and liquidations and from the text of s 447E I take my task to be an assessment as to whether what is proposed by Mr McGrath and Mr Honey is such that I can be satisfied that it is or would be prejudicial to the Group's creditors or members or alternatively so apparently potentially inconsistent with those interests as to require the interference of the court. There may be other circumstances in which an administrator may be required to act differently, for instance if the proposed course of conduct was unlawful or fraudulent. But this is not a case of those sorts of matters. So, I must make a value judgment as to potential prejudice or potential damage being caused to a not insignificant body of creditors or members. 53 Thus, one must, I think, look at this matter standing back and seeing what the position is. Mr McGrath said in evidence that to require the sort of provision sought in the amended application would be to bind the contract into the court process and he was of the view that it was far too prescriptive. 54 Earlier objections to earlier forms of orders sought by the applicant to a degree have fallen by the wayside with the new date for a meeting and at present the 14 day gap between the meeting and completion. Nevertheless, the view of the administrators propounded before me and given voice by Mr McGrath is that in their judgment, and his judgment, the interests of the creditors and of the members are best served by not, at least at this stage, having them forced to include in a contract, provisions of the kind sought in the amended application. 55 A debate about whether that is a decision which is self-evidentially correct can be undertaken. In a perfect world of reasonable people all actuated by reasonable but not overweening self-interest and a recognition that the court should not be used for extraneous purposes and in a context where a spirit of commercial co-operation was self-evident, rational and decent commercial person might take the view that, of course, everyone's full legal rights should be taken into account and that a commercial structure should so accommodate them. 56 Whether or not the circumstances facing the administrators in this case are a reflection of that type of happy commercial circumstance, I am not aware of, but in whatever commercial context these administrators find themselves, I take it from their views, and from what Mr McGrath said in the witness-box, that they do fear the commercial impact of the contract being so framed as to incorporate the capacity for the legal process as identified in the amended application. 57 That is a view which I do not think can be described as irrational, nor is it a view which can be described as one likely to give rise to prejudice to anyone. There will, on the evidence, be an opportunity for people to challenge what is being done at the meeting. It may not be perfect, and in one respect in relation to the applications under ss 600B and 600C it may, practically speaking, be less than 21 days, but it nevertheless will be 14 days. 58 A court may, if moved, grant interlocutory relief to hold the position. That may or may not cause the company to be technically liable for damages if completion does not occur on the relevant date. What those damages are and whether the purchaser will press for them is not known. Nor is it known what the circumstances of the dispute would be at that time. It is not known at the present time, obviously, what the voting will be on 1 September. There may be such an overwhelming vote in favour of whatever decision it is that the administrators decide upon in the exercise of their commercial judgment that any complaint about any particular voting is hypothetical only. It may be a bitter and closely tied meeting. The administrators, who have not as yet examined any of the bids which have been submitted, including Mr Selim's, may be undecided or unclear as to which is the best bid or which are the bids which fall into a class which might be described as the best or the better of the proposals. In these circumstances a bitter and evenly contested fight at a meeting may well lead the administrators to a view that they should reassess their whole position as to what they propose to do. Whilst they are having a meeting, they still have the powers which the Corporation Act gives them under in s 437A. 59 Whilst there is able to be foreseen, as Mr Rayment has clearly put, the possibility of difficulties on certain hypotheses, and whilst it can be foreseen that a person or persons, perhaps not Mr Selim, may wish to complain about acts or events of late August and early September, the nature of those complaints, with some precision in terms of crystallised background, is simply absent. I do not think it can be concluded, and I am not satisfied, that the approach of the administrators is prejudicial or would be prejudicial to the interests of some or all of the companies, creditors or members, nor do I see any other basis for making an order requiring the administrators to take a particular course of action which orders would, in my view, be an unjustified restriction on the power granted to the administrators by the Parliament s 437A. 60 It is said that the Group will suffer, or could well suffer damages if the contract is entered, the time for completion passes and ensuing legal debate holds up completion. It is theoretically possible that that could occur. One has no concrete circumstance to assess it. However, if there is a prima facie case to restrain the completion it may well be that an undertaking as to damages will have to be given in relation to any interim relief. That could alleviate the position of the company, if given and if of substance. There are other possibilities such as a court setting aside voting to such a degree that it becomes plain that the resolution to support the administrators' decision was never in fact passed, in which case it may well be that there is no operative contract. These permutations and combinations about the possibility of damage to the company and whether or not that damage is significant and likely to prejudice the interests of the creditors when set against the commercial judgment of the administrators in attempting to get the greatest value for those interested in the company indicate to me that there is simply no body of circumstances from which I can conclude that the administrators have made a choice or wish to pursue a body of conduct which I can criticise, find inappropriate or, more relevantly, conclude would be prejudicial to the interests of creditors. 61 For those reasons, I propose to dismiss the application. As to the question of costs, Mr Rayment puts to me that I should, in effect, view this as if it were an application in an estate; that is that Mr Selim has brought forward a legitimate complaint about the conduct of the administration which was not in any way fanciful and which was a legitimate matter to raise and which, in a sense, should have been brought forward by the administrators for directions. 62 Thus, his submission was that I really should treat this as a circumstance whereby the estate, that is the assets of the company, should pay for the questions ventilated and so, he submitted, I should make an order for costs in his client's favour against the respondents, not of course personally, but identifying that those costs should be costs of the administration capable of being paid out of the assets of the companies under administration. In particular in that submission, Mr Rayment points to the fact that until Tuesday, 12 August, there was the real risk that there would be no real gap between the meeting and anticipated completion. It was not until then, that Mr McGrath's affidavit of 12 August was served, that paragraph 17 made clear that there was at least 14 days' grace, as it were, for people to act, if there was a perceived problem with their position. 63 Whilst I think these submissions, if I may put it without the slightest disrespect intended, have a superficial attraction, and whilst I perhaps would have been slightly more concerned about the matter than I am if there had been no substantial period allowed for appeal, I do not think that even those circumstances, if the administrators were of the view that it was appropriate, would have demonstrated prejudice to the creditors requiring curial intervention at this stage. 64 I say this in particular in the context of the lack of any concrete material by reference to which the Court can conclude that there necessarily will be a justifiable, prima facie complaint, in the slightest, about the conduct of the administrators in their formation of just estimates and their use, if it does arise, of the casting vote question. 65 Whilst, as I said, the submissions of Mr Rayment are not without force, I think that, in all the circumstances, the appropriate order is that the applicant pay the respondents' costs. The applicant has failed in the matters brought forward by him in his own legitimate interests. In my view he should pay the costs. 66 The orders of the Court are: (1) the application in terms of the amended terms of application be dismissed; (2) the applicant pay the respondents' costs. I certify that the preceding sixty six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop.

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