In the matter of T Pty Ltd (subject to Deed of Company Arrangement)

Medium Neutral Citation: In the matter of T Pty Ltd (subject to Deed of Company Arrangement) [2025] NSWSC 1312

Hearing dates: 28 – 29 October 2025

Date of orders: 6 November 2025

Decision date: 06 November 2025

Jurisdiction: Equity - Corporations List

Before: Black J

Decision: Plaintiff’s Originating Process is dismissed with costs.

Catchwords: CORPORATIONS — voluntary administration — deed of company arrangement — where plaintiff creditor applies to set aside a deed of company arrangement — where plaintiff alleges several matters in support of claim that immediate winding up of the company would result in better return for creditors — where plaintiff’s claims depend, in large part, on whether creditor owed substantial claim for ‘make good’ obligations in relation to premises — where plaintiff alleges breaches of directors duties —held that plaintiff did not comply with contractual requirement to give rise to ‘make good’ obligation on which it relied — held that arguable case for breach of directors’ duties not established — plaintiff has not established that deed of company arrangement should be set aside

Legislation Cited: - Corporations Act 2001 (Cth), ss 436A, s 445D(1)(f), s 445D(1)(g)
- Insolvency Practice Rules (Corporations) 2016 (Cth), s 75-225

Cases Cited: - Adelaide Brighton Cement Ltd, Re Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (subject to deed of company arrangement) (No 4) [2019] FCA 1846
- Ali v Insurance Australia Ltd [2022] NSWCA 174
- Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) (2015) 110 ACSR 203; [2015] FCA 1360
- Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133
- Blacktown City Council v Macarthur Telecommunications Pty Ltd (2003) 47 ACSR 391; [2003] NSWSC 883
- BTI 2014 LLC v Sequana SA [2022] 3 WLR 709; [2022] UKSC 25
- Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (subject to a Deed of Company Arrangement) (2024) 172 ACSR 73; [2024] FCA 112
- Data Transfer Services Pty Ltd v White (2023) 111 NSWLR 25; [2023] NSWCA 16
- Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; (2004) 306 ALR 25; [2014] HCA 7
- Guo v Song; Re SG Capricorn Investments Pty Ltd (subject to Deed of Company Arrangement) [2018] NSWSC 12
- JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691; [2000] NSWSC 147
- Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191
- Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722
- Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37
- Newman v Hartwig (2024) 73 VR 326; [2024] VSC 54
- Price (as executor of the estate of Price (dec’d)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20
- Project Sea Dragon Pty Ltd (Subject to a Deed of Co Arrangement) v Canstruct Pty Ltd (2024) 305 FCR 465; [2024] FCAFC 141
- Re Academy Construction & Development Pty Ltd (subject to Deed of Company Arrangement) [2024] NSWSC 808
- Re ACN 613 909 596 Pty Ltd (formerly Minle Wine Negociants of Australia Pty Ltd) (subject to Deed of Company Arrangement) [2023] NSWSC 753
- Re Citadel Financial Corporation Pty Ltd (subject to Deed of Company Arrangement) (2020) 146 ACSR 220; [2020] NSWSC 886
- Re Condor Blanco Mines Ltd [2016] NSWSC 1196
- Re Hayes Steel Framing Systems Pty Ltd (admins apptd) [2017] NSWSC 385
- Re Mayne Pharma Group Ltd [2025] NSWSC 1204
Re Pilot Advisory Pty Ltd (2019) 141 ACSR 458; [2019] FCA 2171
- Scott v Olde [2025] FCA 1014
- SIF Holdings Pty Ltd v CRC Gosford Pty Ltd (2021) 392 ALR 697; [2021] NSWCA 174
- Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; [2004] HCA 52
- University of Sydney v Australian Photonics Pty Ltd (subject to deed of company arrangement) (2005) 53 ACSR 579; [2005] NSWSC 412
- Vero Insurance Ltd v Kassem (2011) 86 ACSR 607; [2011] NSWCA 381
- Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157

Category: Principal judgment

Parties: 529 Kent Pty Ltd (Plaintiff)
T Pty Ltd (subject to Deed of Company Arrangement) (First Defendant)
Cameron Gray (Second Defendant)
Tetsuya Wakuda (Third Defendant)

Representation: Counsel:
J Parrish (Plaintiff)
S Tame (First and Third Defendants)
Solicitors:
Kells (Plaintiff)
Hegarty Legal (First and Third Defendants)

File Number(s): 2025/206313

JUDGMENT

Nature of the proceedings and background

1. By Originating Process filed 29 May 2025, the Plaintiff, 529 Kent Pty Ltd (“529 Kent”) seeks orders setting aside a Deed of Company Arrangement (“DOCA”) dated 14 April 2025 in respect of T Pty Ltd (“Company”). By way of background, 529 Kent is the registered proprietor of the land known as 529 Kent Street, Sydney (“Premises”) and, it is common ground, is a creditor of the Company. The Company is the First Defendant in the proceedings. The Second Defendant, Mr Gray, was appointed voluntary administrator and then deed administrator to the Company and has filed a submitting appearance. The Third Defendant, Mr Wakuda, has been, since 8 July 1996, a director of the Company and its sole shareholder.

2. It is broadly common ground (Amended Points of Claim (“APC”) [5], Points of Defence (“POD”) [5]) that, for many years until 31 July 2024, the Company operated a restaurant business known as “Tetsuya’s” from the Premises. On or about 1 February 2018, 529 Kent acquired the Premises from an associated company, JSD Associates Pty Ltd, for a substantial sum (APC [6], POD [6]; Ex J1, 1499). The contract for sale of the land (Ex J1, 1499) to 529 Kent excluded “all fittings on the property which are owned by the lessee [the Company]”. That provision is profoundly ambiguous and it is unclear whether it acknowledges that all fittings in the Premises are owned by the Company or is limited to those fittings on the Premises which are fact owned by the Company, without attempting to define their content.

3. The Company’s former lease of the Premises expired in November 2020 and the Company then held over in the Premises on a month to month basis (Vartuli 29.5.25 [36]). From about September 2022, Mr Makkapati of Propinvest was engaged by the Company and Mr Wakuda to provide advisory services in relation to a possible relocation of the restaurant to new premises.

4. On or about 12 October 2022, 529 Kent and the Company entered into a new lease (“Lease”) of the Premises for a one year term expiring on 11 October 2023 (APC [7]–[8], POD [7]–[8]; Ex J1, 353). That lease contained, in cl 15.1, make-good obligations, which were expressly limited to the works (“Make Good Works”) required by 529 Kent. I will return to the proper construction of this clause and its significance below. On or about 9 August 2023, 529 Kent and the Company entered into a Deed of Variation of the Lease which extended the term of the Lease to 11 October 2025 (APC [9], POD [9]; Ex J1, 414). Clause 24 of the Lease, as varied, permitted the Company to terminate the lease from 12 October 2024 on 90 days written notice.

5. It appears that, by about May 2024, the Company decided that it would cease to operate the restaurant at the end of June 2024 and, about that time, Mr Wakuda asked Mr Makkapati to assist with managing the end of the Lease (Wakuda 26.9.25 [24], [47]; Makkapati 26.9.25 [7]). Mr Makkapati then engaged with representatives of 529 Kent in respect of make good requirements under the Lease (Makkapati 26.9.25 [9], [11]–[12]; Vartuli 14.10.25 [28]–[29]).

“Hi Matt, this Sashi here (Tetsuya’s), hope you are having a nice weekend. I am touching base to check on the make good requirements for 529 Kent St on is [sic] vacating. In this regard I was hoping we could meet on site possibly Monday (morning) as the restaurant is closed. If there is someone else from your side to manage this, I would appreciate it if you could put me in touch with them.”

7. Mr Vartuli responded, asking whether this was “because Tetsuya will be vacating this year” and Mr Makkapati then responded (although he was here in error as to the expiry date of the Lease) that:

“Yes lease expiry is in Oct this year, just getting a head start. …”

8. Mr Hill, who was employed by another company within the same corporate group as 529 Kent, then attended a meeting with Mr Makkapati at the Premises on 14 May 2024. On the same day, Mr Makkapati texted Mr Vartuli (Ex J1, 438) advising:

“Hi Matt, met with Simon [Hill] on site thank you for arranging. Simon mentioned that previously he had drawn up a works scope which he will share with you to pass on to me. Could you please provide that when received. …”

9. On 16 May 2024, Mr Hill emailed Mr Makkapati (Ex J1, 445) as follows:

“I refer to our meeting on site on Tuesday 14th.

I confirm that I am a retained adviser to [529 Kent].

The Lessee make good provisions at Termination are included under section 15 of the Lease particularly sub-clauses 15.1 and 15.2.

The obligations are to be undertaken to the extent required by the Lessor.

The obligations are required to be undertaken within 21 days of the Date of Termination 7th October 2025 whichever is the sooner.

As discussed, much of the Lessee’s fittings are integrated into the main structure and fabric of the Premises.

As requested, I am attaching a more detailed list of works that hopefully can be used as a basis to satisfy the Lessor’s requirements here.

Should you require to discuss the matter please do not hesitate to contact me.

I would like to show a potentially interested party through the space at 10am next Thursday 23rd May if convenient.” [emphasis added]

10. That email attached a document headed “Make Good Scope of Works – 529 Kent Street Sydney NSW 2000 – 15th May 2024” and indicated a number of make good requirements. Mr Makkapati forwarded the document provided by Mr Hill to Mr Hansen, who worked with Mr Wakuda, and Mr Makapassi did not engage in further discussions with Mr Hill about any Make Good Works.

11. It is not apparent that the document headed “Make Good Scope of Works” prepared by Mr Hill had regard to the terms of the Lease, and, on the face of it, it extended beyond the scope of any requirements under cl 15.1 of the Lease, for example, by suggesting the installation of a new air conditioning service, the repainting of the exterior of the building, the landscaping of the gardens and work to be undertaken in the car parks. Mr Parrish, who appears for 529 Kent, contends that Mr Hill’s email and its attachment constituted 529 Kent Street’s notification of the Make Good Works required by 529 Kent to the Company, for the purposes of cl 15.1(a) of the Lease. It is plain that that email did not have that effect. First, Mr Hill had there confirmed that he was simply an adviser to 529 Kent, and he did not purport to commit 529 Kent to requiring those particular works be undertaken, particularly where the matters specified extended beyond the requirements of the Lease. Second, it is plain that Mr Hill was not holding out that those works were all that was required by 529 Kent, or would be sufficient to satisfy 529 Kent’s requirements, where he observed that they “hopefully can be used” as a basis to satisfy 529 Kent’s requirements. That proposition is plainly inconsistent with their constituting a notification of 529 Kent’s requirements, so that performing them would satisfy the Company’s obligations under the Lease and not merely “hopefully” do so. Third, it is plain that 529 Kent itself did not understand that it (though Mr Hill) had required those works to be undertaken by the Company, because it proceeded on a contrary basis that it had not, for example, required the removal of the kitchen at the Premises in dealing with third parties in subsequent months. It is not necessary to address the further question whether Mr Hill had actual or ostensible authority to commit 529 Kent in that respect, absent any corporate decision of 529 Kent by its directors as to the scope of the Make Good Works that it required, where it is plain enough that he did not purport to do so.

12. Subsequently, 529 Kent made arrangements for access to the premises on several occasions, by emails exchanged between Mr Vartuli and Mr Makkapati, to show the Premises to potential tenants. In June 2024, 529 Kent also negotiated the terms of an agency arrangement with Radius Property, which it subsequently appears to have engaged in relation to the leasing of the Premises to potential tenants (Ex D2, Tab 7).

13. On or about 31 July 2024, the Company ceased trading from the Premises (APC [10]; the evidence does not support the pleading in POD [10] that the Company ceased trading in May 2024). The Company did not, earlier or at that time, formally exercise its right of early termination under cl 24.2 of the Lease (as varied by the Variation of Lease) so as to terminate the Lease on 90 days’ notice, although 529 Kent had previously taken and continued to take steps toward re-letting the Premises. As will emerge below, 529 Kent subsequently held the Company to the strict terms of the Lease, contending that the Lease had not been terminated and remained on foot, until it accepted the termination of the least in late November 2024. Of course, a party which insists on strict compliance with contractual terms may find that it does not itself meet that standard, and 529 Kent now finds that it failed to identify which Make Good Works it required the Company to perform under cl 15.1 of the Lease. I will return to that matter below.

“Tetsuya’s existing fit-out to remain including all kitchen equipment, furniture, fixtures, finishes and crockery.

The Lessor provide contribution in the form of fit-out works.

These works will include the following:

● Bathroom upgrades.

● Dining room upgrades

● External landscaping upgrades

● Façade upgrades

● Internal courtyard re-design for seating and activation.

That email compared the terms of that offer with another offer, apparently made by Cessleigh to lease the Premises. Plainly, 529 Kent did not then consider that it had previously required the Company to undertake specified Make Good Works, by Mr Hill’s email of 16 May 2025, which would have been entirely inconsistent with the kitchen equipment, furniture, fixtures and finishes being left in the Premises for the incoming lessee as contemplated by that offer.

16. On 6 September 2024 (Ex D2, Tab 14) Mr Vartuli sent Mr Shane Teoh (a director of 529 Kent) a proposed counter-offer to be made to that third party, which agreed to the requirements that Tetsuya’s existing fit-out including kitchen equipment and other items would remain in the Premises, again emphasising that 529 Kent did not then understand itself to have required the removal of those items by the Company. Discussions with that third party continued until at least 18 September 2024 (Ex D1, Tab 15), on the continuing basis that Tetsuya’s fit-out would remain in the premises. There is no evidence as to how those discussions concluded.

17. By 21 October 2024, Mr Makkapati returned the keys for the Premises to 529 Kent (Makkapati 26.9.25 [17], Wakuda 26.9.25 [27], Ex J1, 713). Also by late October 20241, Radius Property was in discussions with two other parties and advised them of “[Tetsuya’s] lease expiry and that we’d be looking to get someone in imminently” (Ex D2, Tab 17). That proposition does not sit comfortably with 529 Kent’s subsequent claim, as against the Company, that the Lease remained in effect as at November 2024.

18. By email dated 4 November 2024 (Ex J1, 726), Ms Grenfell (who was a property manager with a company associated with 529 Kent) contended that the Lease remained on foot and that the Company was subject to continuing obligations to pay rent under it. This appears to be the first occasion in the correspondence in evidence in which 529 Kent had asserted the continuance of the Lease, notwithstanding the return of the keys to 529 Kent on 21 October 2024. The Company responded that the Lease had previously been terminated by agreement (Ex J1, 728).

19. On 6 November 2024, Ms Grenfell advised Mr Makkapati (Ex J1, 730) that:

“Please be advised that I have spoken to Shane [Teoh] [a director of 529 Kent] and confirmed that there has been no agreement to terminate the Lease. The Lease is still current and there is a back to base make good obligation under the agreement.

We will send under separate cover the scope of the make good and a cost in lieu of undertaking these works.” [emphasis added]

20. Mr Parrish relied on this communication, in the alternative to Mr Hill’s email of 16 May 2024, as 529 Kent’s notification to the Company of what Make Good Works it required the Company to undertake. I do not accept that that communication had that effect. First, this communication is plainly not itself an advice as to the scope of the Make Good Works that was required by 529 Kent, because the phrase “back to base” is too general and too vague to specify such work, and it expressly indicates that such notification would subsequently be provided under separate cover. Second, Ms Grenfell was here doing no more than communicating her understanding of the terms of the Lease and was not indicating what specific Make Good Works that 529 Kent did or did not require to be performed. Third, as Mr Vartuli observed in cross-examination, Ms Grenfell was an employee of an associated company of 529 Kent and a property manager who managed tenants after a leasing (T34) and it is not apparent that her authority extended to reaching a decision as to the scope of required Make Good Works for 529 Kent. Fourth, for completeness, that communication is also plainly inconsistent with 529 Kent’s claim that Mr Hill had (on 16 May 2024) notified the scope of its required Make Good Works, where it indicates that 529 Kent will subsequently (after 6 November 2024) provide that notification. There is no evidence and no suggestion that a notification of the required works was later given by 529 Kent to the Company.

21. On 13 November 2024, 529 Kent obtained a quotation from Sity Construction Pty Ltd (“Sity”) (Ex J1, 740ff), purportedly for Make Good Works at an estimated cost of $1,043,417.85, exclusive of GST. It is not apparent that that quotation had any regard to the scope of the make good obligations under the Lease, and it is not sufficiently detailed to allow any assessment as to which works were within the scope of the make good obligations under the Lease or whether those works were properly costed. In any event, the obligation as to the Make Good Works had not then arisen for reasons that I address below, where 529 Kent had not then advised the Company of the Make Good Works that it required for the purposes of cl 15.1 of the Lease.

22. It is common ground that, on 21 November 2024, 529 Kent gave the Company a notice (“First Notice”) of a claimed breach of the Lease (APC [11], POD [11]; Ex J1, 757). The covering letter to the First Notice reserved an entitlement to make a future claim for costs of Make Good Works (Ex J1, 758) but did not suggest that such a claim had then arisen. The First Notice also did not assert a breach of the obligation as to Make Good Works under cl 15.1 of the Lease, and it was right not to do so where, first, 529 Kent had not then (or later) indicated what works it required to be undertaken and its then position was that the Lease remained on foot, so the time for completion of those works had not yet passed. The Company and Mr Wakuda deny the breaches of lease alleged in the First Notice.

“1. The handing over of the keys were unconditionally accepted by [529 Kent], knowing that the [Company] had vacated the subject premises and was surrendering the subject lease;

2. We are of the view that as a consequence, the subject lease has been surrendered

3. No further correspondence will be entered into.

4. It is noted the [Company] is impecunious.”

24. The Company’s accountant, Mr Lin, contacted Mr Gray, who was later appointed as voluntary administrator, on 22 November 2024 to advise that the Company was negotiating with 529 Kent in respect of the termination of the Lease and that the Company might need to be liquidated if an agreement could not be reached with 529 Kent (Ex J1, 900). The reference to negotiations with 529 Kent is inconsistent with the Company’s solicitor’s position, taken the day before, that no further correspondence would be entered into, and Mr Lin presumably did not know that position had been taken.

25. By letter dated 27 November 2024 (Ex J1, 771), 529 Kent’s solicitors contended that the Company had terminated the Lease by conduct with effect from 19 February 2025. That letter asserted a repudiation of the Lease and observed that:

“We otherwise remind you that you remain liable for end of Lease obligations set out in the Lease, including a full make good of the Premises. You failed to comply with these obligations prior to your vacation. [529 Kent] has now considered the make good required and calculated the cost to be incurred by it in undertaking all make good obligations on your behalf. These are now due and payable to [529 Kent].

26. That letter also demanded payment of $1,688,206.21 for outstanding rent and charges, including costs of Make Good Works, and the latter costs were stated in that letter as follows:

“Landlord’s costs of the Tenant’s Make Good Works and other end of lease obligations $1,147,759.64.”

27. The claim for those casts was also derived from the previous quotation by Sity, but 529 Kent has not established that that quotation was directed to the Make Good Works that it required under the Lease, had it identified what they were. The amount then claimed by 529 Kent also substantially exceeded the amount quantified for such costs in a report subsequently obtained by the voluntary administrator, who had apparently wrongly understood that an obligation to perform those works had by then arisen. These observations were also inconsistent with the terms of the Lease. First, those obligations did not arise, as I will find below, until 529 Kent had advised what Make Good Works were required, which it had not then done and, so far as the evidence goes, did not later do. Second, the Company was not required to comply with those obligations prior to vacating the premises, but only within 21 days of termination of the Lease, which 529 Kent there contended would not occur until February 2025. Third, for these reasons, the proposition that the costs of the Make Good Works were then due and payable to 529 Kent was plainly wrong.

28. That letter also enclosed a further notice (“Second Notice”) of a claimed breach of the Lease (APC [12]; POD [12]). By contrast with the First Notice, the Second Notice asserted a breach of the Make Good Works obligation under cl 15.1 of the Lease. That claim was also not justified where 529 Kent had not then or previously advised the Company of which Make Good Works it required to be undertaken; that letter was the first occasion on which 529 Kent accepted a termination of the Lease, and it contended it would not take effect until February 2025; and, on that basis, the Company then had 21 days to complete the Make Good Works after the termination of the Lease, if 529 Kent had (which it did not) advised it of what works it required. The Company and Mr Wakuda deny the breaches of lease alleged in the Second Notice.

29. Mr Parrish contended that this letter was, on a third alternative claim, a notification by 529 Kent of the Make Good Works that it required the Company to perform under cl 15.1 of the lease. It was not, both because it did not identify what those works were and because it was a claim for breach of an obligation that it wrongly asserted had previously existed, not a notification of Make Good Works to be done in the future.

30. Mr Wakuda, Mr Lin and Mr Makkapati met with the proposed voluntary administrator on 4 December 2024 (Ex J1, 900) and, on 11 December 2024, the Company entered voluntary administration pursuant to s 436A of the Corporations Act 2001 (Cth) (“Act”) (APC [14], POD [14]).

31. On 18 December 2024, 529 Kent lodged a proof of debt in the amount of $1,689,930.01 in the voluntary administration, prior to deducting an amount of $106,150 pursuant to a bank guarantee called on 3 December 2024. That amount included:

“Costs of Tenant’s make good works under end of lease obligations – being/to be incurred by the Landlord and recoverable under the Lease $1,147.759.64. Claimed to have arisen on 13 November 2024.”

32. That claim was also not properly founded in respect of the costs of the Make Good Works, because 529 Kent had not previously advised the content of the works that it required. After deducting the amount of the make good costs claimed in that proof of debt, the amount for which 529 Kent would properly be permitted to vote at that meeting would be $436,020.37.

33. On or about 17 January 2025, the voluntary administrator issued a report to the Company’s creditors pursuant to s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (“IPR”) titled ‘Administrator’s Report and Statement of Opinion to Creditors’ (“Report”) (APC [15], POD [15], Ex J1, 880). The voluntary administrator there noted his intention to adjourn the creditors’ meeting convened for 28 January 2025 to allow for any DOCA proposal to be received from Mr Wakuda and for finalisation of the voluntary administrator’s investigations. The voluntary administrator also noted that his appointment had followed the Company’s receipt of a claim from 529 Kent in the amount of $1,688,206.21 on 27 November 2024 (Ex J1, 884). He referred to the estimated realisable value of the Company’s assets as at the date of his appointment, which fell well short of total liabilities quantified as trade creditors of $1,644,877 (presumably including 529 Kent’s claim); a debt owed to the Australian Taxation Office of $329,234; a debt owed to Revenue NSW of $40,293 and debts owed to related parties of $3,359,369. He observed that funds were advanced by Mr Wakuda to pay creditors from the date that the Company ceased trading to the date of the voluntary administrator’s appointment in the amount of $1,035,000 and that:

“This supports the director’s opinion that the reason for the Company’s failure was the significant claim received from [529 Kent] for inter alia unpaid rent and make-good on 27 November 2024.”

34. The voluntary administrator also there reviewed the Company’s historical financial statements, noted the adverse impact of COVID-19 on the Company’s earnings and noted competing factors which might indicate either the Company’s possible insolvency or its solvency prior to his appointment.

35. On 28 January 2025, the second meeting of the Company’s creditors was held and then adjourned (APC [17], POD [17]; Ex J1, 74).

36. 529 Kent, by its solicitor, subsequently provided the voluntary administrator with information regarding the Company’s assets including a wine collection and an art collection and the administrator responded to 529 Kent’s comments as to those matter (Ex J1, 979, 1045, 1096).

37. A report dated 20 March 2025 (Ex J1, 1106ff) obtained by the voluntary administrators quantified the costs of Make Good Works in respect of the Premises in the amount of $798,076.13 exclusive of GST, or $877,833.74 including GST, a substantially lesser amount than that of $1,147,759.64 inclusive of GST previously claimed by 529 Kent. As I noted above, that report plainly proceeded on the incorrect basis that an obligation to undertake those works had arisen, when 529 Kent had not yet indicated what works it required, and presumably reflected its author’s assessment as to the works that could properly be required by 529 Kent.

38. By letter dated 25 March 2025 (Ex J1, 1268), 529 Kent’s solicitors noted its claim for costs of Make Good Works totalled $1,147,759.64 inclusive of GST and recognised that the “independent make-good assessment report” obtained by the voluntary administrator provided for a make-good cost of $798,076.13, excluding GST ($877,833.74 including GST). It reserved 529 Kent’s “rights to make further comment on the detail in the independent make-good assessment report”. There is no evidence that 529 Kent subsequently sought to explain the substantial extent to which its initial claim for make-good works exceeded the amount of that assessment or sought to support its original claim, or, as In have noted above, that it communicated any determination as the Make Good Works it would require.

39. On or about 24 March 2025, the voluntary administrator issued a supplementary administrator’s report to creditors (“Supplementary Report”) (Ex J1, 1192) which expressed the opinion that it was in the interest of the Company’s creditors that the Company execute the DOCA. That report also referred to the Company’s then assets, including cash-at-bank in the amount of $81,851, inventory in the amount of $82,634, shares in a subsidiary company which could realise between $25,000 and $30,000, investments in unlisted companies and unit trusts in an unknown amount and artworks which could realise up to $90,059. It also referred to claims in a liquidation which might achieve net realisations of between $33,750 and $455,109, including a possible claim for insolvent trading with a maximum gross return of $449,346; an unfair preference claim against Mr Wakuda with a maximum gross return of $55,000; and an unfair preference claim against the Australian Taxation Office (“ATO”) with an “optimistic” gross return of $100,763 (APC [18]–[22], POD [18]–[22]). It also noted the receipt of a DOCA proposal from Mr Wakuda.

“UNFAIR PREFERENCES – My investigations have been focused on identifying regular payments or “round” amounts which may be indicative of a repayment and/or instalment arrangement. I have noted payments/transactions totalling $201,526 made to the ATO during the six months prior to my appointment which, subject to further investigation by a liquidator, if appointed, may constitute unfair preferences.

The abovementioned payments to the ATO are four separate payments made by the Company after it defaulted on its payment plan in August 2024. It is noted that the Company entered into a new payment plan with the ATO on 3 September 2024 and three of the four payments received by the ATO were instalments paid pursuant to this plan with the remaining payment being for the liability on the September 2024 activity. Considering this, it may be possible that the ATO could successfully defend an unfair preference claim on the basis that it received the payments in good faith and/or that the Company was solvent at the time of some or all of the relevant payment/transaction. A pre-requisite for an unfair preference is that the Company was insolvent at the time of the relevant payment/transaction.”

41. The voluntary administrator also referred creditors to his analysis of the possible date of the Company’s insolvency; however, that analysis is now undermined, and the prospects of establishing insolvency significantly reduced, by my finding that 529 Kent had not required Make Good Works to be undertaken, in accordance with cl 15.1 of the Lease, during the relevant period.

42. Mr Parrish rightly points to the voluntary administrator’s assessment of the pro-rata returns to unsecured creditors of 1.7 cents in the dollar in a “low” liquidation scenario; 16.6 cents in the dollar in a “high” liquidation scenario; and 16.8 cents in the dollar under the DOCA, and to the workings which underpin those scenarios in Annexure 4 of his Supplementary Report to Creditors (Ex J1, 1234). I recognise, for completeness, that the return to other creditors will likely be increased, although the return to 529 Kent will be decreased, by my finding that 529 Kent was not properly entitled to claim the costs of Make Good Works which it had not then required to be undertaken, although that matter will likely not affect comparison between the several scenarios.

43. Mr Parrish submits:

“[529 Kent] contends that the realisable assets component of a liquidation scenario was undervalued by [the voluntary administrator]. It submits that the amount which Mr Gray considered could be recovered from the [ATO] on the unfair preference claim in the high liquidation scenario is undervalued, and that if it were adjusted to reflect a more appropriate amount, the projected return to creditors on the high winding up scenario would exceed that of the DOCA scenario.”

44. Mr Parrish then addresses the position in respect of a potential preference claim against the ATO at some length in submissions. This claim depends upon establishing the Company’s insolvency and I have referred to the voluntary administrator’s comments as to that matter above. Mr Parrish also fairly recognises that, although the Company, perhaps unsurprisingly, suffered financial difficulties during and after the COVID-19 pandemic, its financial position subsequently improved and it recorded a significant profit in 2023 and a lesser profit in 2024 and had a significant excess of current over non-current assets as at 30 June 2024 (Ex J1, 1198), although it subsequently realised significantly less than the then going concern value of the Company’s assets on the forced sale of those assets in the voluntary administration.

45. The prospects of establishing the Company’s insolvency and any unfair preference claim against the ATO is here undermined by the fact that 529 Kent cannot establish a claim for the costs of Make Good Works against the Company at any relevant time, which weakens any claim that the Company was insolvent prior to, or at, November 2024, and by the funds made available on an ongoing basis by Mr Wakuda to meet its debts, until 529 Kent’s (overstated) claim emerged. I also do not accept Mr Parrish’s submission (made in the context of possible preference claims against trade creditors) that there is any reason to think that the funding provided by Mr Wakuda to the Company merely substituted a debt payable to Mr Wakuda for a debt payable to the trade creditors, where there is no reason to think that Mr Wakuda was providing funding on a basis that contemplated repayment by the Company in the short or middle term and every reason to think that he was providing funding on a basis that did not contemplate repayment in that time frame, so as to support the Company’s solvency, at least until the Company received the overstated claim made by 529 Kent in November 2024.

46. 529 Kent’s suggestion of a higher return from the preference claim against the ATO is also unsupported by evidence of dealings between the Company and the ATO or a sufficient analysis of the defences that may be available to the ATO in an unfair preference claim, which had been noted by the voluntary administrator in his Supplementary Report. I also do not accept Mr Parrish’s submission that the ATO’s obligations as a “model litigant” would impact its attitude to defending a preference claim against it, where there would be no inconsistency in a model litigant defending a weak claim, where the Company’s insolvency for the relevant period was doubtful and there is no reason to think that the ATO would not have available the defences noted by the voluntary administrator in his report.

47. Ms Tame, who appears for the Company and Mr Wakuda, conversely submits that the voluntary administrator’s “high” liquidation scenario was “wildly optimistic”. I accept the substance of that submission, although I would not myself have put that conclusion in quite those terms. First, that scenario assumed the Company was insolvent from 1 May 2024, being the date from the time the Company decided to cease operations at the restaurant by the end of July 2024. It is not apparent that that proposition could be established, for the reasons noted above. Second, that scenario assumed that the date of insolvency would be admitted. There is no apparent reason why any defendant would do so, where the voluntary administrator himself identified matters that suggested the Company was not insolvent until November 2024, and the claim for insolvency at November 2024 (as distinct from the prospect of future insolvency) is now undermined by the fact that the Company was not then obliged to incur the costs of the Make Good Works, and would arguably not be obliged to do in future since 529 Kent did not notify the work that it required before the time for the Company to perform it had expired, at least by late February 2025. Third, that scenario assumed that the unfair preference claim against the ATO would be settled at 50% of the gross claim without the need to litigate, and it is not apparent that the ATO would have any reason to settle such a claim on that basis, given its apparent weakness.

“Should the Company proceed to liquidation, I estimate that ordinary unsecured creditors would receive a dividend of approximately 1.7 cents in the dollar on a pessimistic basis and 16.6 cents in the dollar on an optimistic basis which includes possible recoveries from a liquidator litigating claims. Should the proposed DOCA complete as contemplated, ordinary unsecured creditors will receive a dividend of approximately 16.8 cents in the dollar dependent upon the extent of creditor claims ….

I am of the opinion, subject to the assumptions and qualifications detailed hereunder, that it is in the creditors’ interest that the Company executes a DOCA for the following reasons:

1. The return to creditors under the proposed DOCA exceeds the potential return in a liquidation on a pessimistic basis with a similar return on an optimistic basis with substantially less risk.

2. Creditors will receive a return faster and a more certain return under the DOCA than they would in a liquidation.

3. The estimated return on liquidation on an optimistic basis is speculative and only possible achievable if creditors fund a liquidator to pursue a claim for insolvent trading and there is a return.

4. All assets of the Company other than the remaining wine stock, shares in T Two Pty Ltd and artworks remain for the benefit of creditors.

5. The related parties will not participate in any return under the DOCA, whereas in a liquidation scenario they would participate equally with other unsecured creditors in any return.”

49. By letter dated 25 March 2025 (Ex J1, 1271), the voluntary administrator advised 529 Kent that he would proceed on basis that the Lease had continued until it was terminated by 529 Kent on 27 November 2024; that he would admit 529 Kent’s claim for unpaid rent, carparking fees and legal costs for voting purposes in the amount of $436,020.37; and that he would admit 529 Kent’s claim for costs of Make Good Works at $798,076.13, in accordance with the independent report that he had obtained. The voluntary administrators approach to the last of those matters is inconsistent with the findings that I reach below.

50. By letter dated 26 March 2025 (Ex J1, 1365) 529 Kent’s solicitors put a proposal to the voluntary administrator to fund a liquidator’s costs, the costs of public examinations and Counsel’s advice as to prospects of recovery actions, although that proposal did not commit it to funding any subsequent proceeding, and requested that proposal be drawn to the attention of creditors. The administrator properly drew that proposal to the attention of creditors at the adjourned creditors’ meeting before they voted to approve the DOCA (Ex J1, 959–960).

51. On 28 March 2025, Mr Wakuda submitted a revised proof of debt (Ex J1, 1375), decreasing his claim to $682,962, apparently reflecting adjustments identified by the voluntary administrator and the setting off of related party loans.

52. It is common ground that the reconvened second meeting of the Company’s creditors was held on 31 March 2025 (APC [27]–[31], POD [27]–[31]; Ex J1, 956). The voluntary administrator there made several observations (Ex J1, 960) as follows:

“The investigations undertaken by him as administrator have been extensive, considering the time and current cost constraints of the administration. If the Company is wound up, further investigations may be undertaken by a liquidator but considering the significant cost of doing that, significant funding would be required to undertake those investigations.

Further investigations carried out by a liquidator will be at significant cost and may not result in any further recoveries. His supplementary report provides the reasons for the difference between the current value of artwork and previously reported for insurance purposes and also deals with the realisation of wine stock. He has not been provided with any evidence of the existence of any assets not already reported. It is likely a liquidator would need to conduct public examinations and/or an audit/forensic review to further investigations.

[529 Kent] has indicated that it may be willing to fund a liquidator to conduct further investigations. He understands it may be willing to fund the pursuit of claims through the Courts, subject to Counsel’s advice. It is noted, however, that the letter from [529 Kent’s solicitor] is a preliminary proposal and that it is not an agreement to fund. Any funding arrangements would need to be accepted by a liquidator and be subject to approval of creditors or the Court after considering the interests of creditors as a whole.”

53. 529 Kent’s solicitor was given the opportunity to address 529 Kent’s position at the creditors’ meeting and she did so, at some length, before the voluntary administrator summarised the terms of the proposed DOCA at that meeting. Creditors had the opportunity to ask questions and did so and creditors then voted upon relevant resolutions at that meeting.

54. A resolution (“DOCA Resolution”) was put to the meeting:

“That a deed of company arrangement be executed in accordance with the revised proposal sent to creditors on 28 March 2025 and tabled at today’s meeting of creditors.”

55. That revised proposal provided for a deed fund which was to consist, inter alia, of a contribution of $300,000 by Mr Wakuda (“Deed Contribution”); the return of Excluded Assets (as defined) to Mr Wakuda or his nominee(s) 14 days after the later of full payment of the Deed Contribution and satisfaction of all other obligations of Mr Wakuda and Company under the proposed DOCA; and for the Company’s creditors, other than Excluded Creditors (as defined) to accept the payments received under the proposed DOCA in full satisfaction and complete discharge of all debts and Claims (as defined) which they have against the Company as at a specified date.

56. At the second meeting of creditors, the ATO (which was admitted to vote in the amount of $389,234.44), Mr Wakuda (who was admitted to vote in the amount of $682,962.61), an entity associated with Mr Wakuda and two advisers to the Company with smaller claims voted in favour of the DOCA proposal. 529 Kent and Revenue NSW (with a claim of $37,870.63) voted against that proposal. I recognise that, with the exception of the ATO, the entities that supported the DOCA were associated with Mr Wakuda or the Company. I also recognise that Mr Parrish speculated in opening that the ATO may have voted in favour of the proposal to avoid a preference claim against it. There seems to me to be no basis for that speculation, where it is not apparent that the ATO would have had any particular concern to avoid a preference claim, given the availability of potential defences to such a claim and its statutory rights of indemnity in respect of such a claim. On the taking of a poll at that meeting, the majority of creditors in value (as it was then understood) voted against the DOCA Resolution; the majority in number of creditors voted in favour of the DOCA Resolution; and the voluntary administrator exercised his casting vote in favour of the DOCA Resolution. It is now apparent, for the reasons noted below, that 529 Kent should only have been permitted to vote at that meeting in respect of outstanding rent, since costs of the Make Good Works were not then due to it and it had provided no basis to quantify any separate costs for the removal of lessee fittings. Had it been admitted to vote only for its proper claim, the resolution at that meeting would arguably have been passed by a majority of creditors by both value and by number and without the need for the exercise of a casting vote.

57. On or about 14 April 2025, the Company, the voluntary administrator and Mr Wakuda entered into the DOCA (Ex J1, 1388). As Mr Parrish rightly notes, the DOCA relevantly provides for the creation of a deed fund which will comprise of, inter alia, the Company’s cash-at-bank, shares held by the Company in Rockliff Seafoods Pty Ltd and Ceas Crabpack Pty Ltd, the Company’s wine stock, any moneys paid under an indemnity by Mr Wakuda for the payment of priority debts, all remaining assets of the Company that are not Excluded Assets (as defined), and Mr Wakuda’s Deed Contribution of $300,000 (cl 5.1); Mr Wakuda and MIDO Holdings Pty Ltd were Excluded Creditors (as defined) and would not participate in a distribution (cl 8); two categories of the Company’s assets were excluded from the deed fund, namely its shares in T Too Pty Ltd (“T Too”) and artworks previously located at the Premises (“Excluded Assets”) and title in the Excluded Assets was to be transferred to Mr Wakuda within 14 days after the payment of the deed contribution and the satisfaction of all other obligations of Mr Wakuda and the Company under the DOCA (cl 5.6). 529 Kent also accepts that Mr Wakuda made the $300,000 contribution required under the DOCA. The DOCA also provides (cl 12.1(d)) that, if the DOCA is terminated, the deed administrator must repay the balance of the deed contribution then held, after deducting specified costs, to Mr Wakuda. Accordingly, there is a real detriment to creditors in a termination of the DOCA, which would deprive them of access to the balance of the deed fund and at least delay their recoveries by a significant time.

Affidavit evidence

59. 529 Kent read two affidavits of Mr Vartuli dated 29 May 2025 and 14 October 2025. Mr Vartuli is an accountant. He was formerly a consultant to the Company. He was a director of the Company from 1 April 2020 (Ex J1, 1451) (although he did not acknowledge that matter in his first affidavit) and, in late 2021, he was replaced as a director of the Company by Mr Kusuma and his engagement with the Company ceased (Lin 26.9.25 [24]–[25], Wakuda 26.9.25 [20], [45]). As I noted above, Mr Vartuli is now the chief financial officer of Cessleigh, the holding company of 529 Kent.

60. Mr Vartuli, in his first affidavit, refers to the claim made by 529 Kent in the voluntary administration as the sum of $1,583,780.01 including rent and other costs and a significant component of costs of Make Good Works of $1,147,759.64. I will find below that the evidence has not established that that claim for costs of Maker Good Works was properly founded, although a lesser amount of rental and an unquantified amount as to the removal of lessee’s fitout was likely then payable by the Company to 529 Kent. Mr Vartuli’s evidence is that the amount of the costs of Make Good Works claimed in 529 Kent’s proof of debt lodged in the voluntary administration was based on Sity’s quotation to which I have referred above and I have noted the difficulties with that quotation above. Mr Vartuli’s first affidavit otherwise largely addressed a chronology of events by reference to documents and did not much advance matters beyond what would have been apparent from the tender of those documents. Mr Vartuli largely did not there address matters internal to either the Company on the one hand or Cessleigh or 529 Kent on the other.

61. Mr Vartuli there purportedly addressed 529 Kent’s willingness to fund a liquidator. His evidence as to that matter was plainly hearsay and was rejected on that basis. The directors of 529 Kent did not give evidence, nor was any resolution of 529 Kent or its holding company tendered, so as to establish a corporate decision to provide such funding to a liquidator. However, nothing turns on that, or on a controversy as to 529 Kent’s capacity to fund a liquidation from its own resources, where no basis to set aside the DOCA is established for the reasons set out below.

62. By his second affidavit dated 14 October 2025, Mr Vartuli responded to evidence led by the Company and Mr Wakuda as to his previous dealings with the Company and Mr Wakuda. There are significant disputes as to the nature and effect of Mr Vartuli’s dealings with the Company. There is a dispute as to whether the services provided by Mr Vartuli to the Company were in the nature of accounting or consulting services and there is a dispute as to the adequacy of those services. There is also a dispute as to the extent to which his responsibilities extended to lodging any application for JobKeeper grants for the Company during the COVID-19 pandemic or for lodgement of business activity statements in respect of the Company and as to the circumstances of a transaction relating to a “JSD loan” in the first half of 2020 and as to the extent of Mr Vartuli’s involvement in that matter. There is a dispute as to whether, in early January 2021, Mr Vartuli had told Mr Wakuda that, despite a debt then owed by the Company to the Australian Taxation Office and concerns then raised by the Company’s accountant, Mr Lin, “things were under control” (Lin 26.9.25 [13], [15]). It is not necessary to resolve these disputes in order to determine the proceedings where they are, at most, potentially relevant to Mr Vartuli’s credit. It is also not necessary to reach a finding as to Mr Vartuli’s credit, where relevant factual matters are established by documentary and objective evidence of significant matters and little turns on his evidence. Although Mr Vartuli was cross-examined, that cross-examination did not much advance the matters in issue in the proceedings.

529 Kent’s claim that the DOCA is contrary to the interests of creditors

72. 529 Kent seeks an order pursuant to s 445D(1)(f)(ii) of the Act terminating the DOCA on this basis. I should first address the applicable case law before turning to the basis of 529 Kent’s claim.

73. Mr Parrish refers to the principles applicable to an application to set aside a deed of company arrangement under, inter alia, s 445D of the Act, as summarised in my decisions in Re Citadel Financial Corporation Pty Ltd (subject to Deed of Company Arrangement) (2020) 146 ACSR 220; [2020] NSWSC 886 at [16]ff (“Citadel”) and Re ACN 613 909 596 Pty Ltd (formerly Minle Wine Negociants of Australia Pty Ltd) (subject to Deed of Company Arrangement) [2023] NSWSC 753 at [42]ff and [56]ff. Ms Tame in turn refers to my summary of the applicable principles in Re Academy Construction & Development Pty Ltd (subject to Deed of Company Arrangement) [2024] NSWSC 808 at [53]ff (“Academy Construction”), on which I have drawn for the summary that appears below, and to the observations of Lee J in Scott v Olde [2025] FCA 1014 at [30]–[43].

74. An order terminating a deed of company arrangement may be made under s 445D(1)(f) of the Act if that deed is, relevantly, contrary to the interests of the creditors of the company as a whole. In JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691; [2000] NSWSC 147 at [90], Santow J observed that, where it is clear that it is not possible for the company or its business to continue in existence, then those who support a deed of company arrangement bear an onus to show that it would result in a better return for the company’s creditors and members than would result from an immediate winding up.

75. In Blacktown City Council v Macarthur Telecommunications Pty Ltd (2003) 47 ACSR 391; [2003] NSWSC 883, Barrett J terminated a voluntary administration where a company’s sole director placed the company in voluntary administration with a view to adopting a deed of company arrangement by a decision of creditors (being himself and two persons allied with him) of doubtful value that would bar particular claims already being litigated against the company. I recognise that Barrett J there noted that a connection between a majority of creditors and the Company’s directors is relevant in a matter of this kind. However, here, I also have regard to an objective review of the prospect of claims against the Company’s directors and to the fact that the ATO, which was not aligned with Mr Wakuda, and (as I have held) had no particular reason to fear a preference claim supported the DOCA.

76. In University of Sydney v Australian Photonics Pty Ltd (subject to deed of company arrangement) (2005) 53 ACSR 579; [2005] NSWSC 412 at [37], Palmer J observed that:

“In determining whether a deed should be terminated under s 445D(1)(f), the court does not make a judgment founded upon mere possibility or speculation; it makes a determination on the characteristics of the deed as they are seen to be at the date of hearing. If a deed is to be terminated under s 445D(1)(f), it has to be seen as having operated, or as presently operating, or as highly likely to operate in the future, in a way which is oppressive, unfairly prejudicial, unfairly discriminatory or contrary to the interests of the creditors as a whole. If the future operation of a deed is in question under s 445D(1)(f), the court should be satisfied that its adverse effect is not a mere possibility or speculation but is, at least, highly likely.”

77. That passage was treated as common ground between the parties in Vero Insurance Ltd v Kassem (2011) 86 ACSR 607; [2011] NSWCA 381, where Campbell JA (at [83]) (with whom Meagher JA agreed) and Young JA (at [144]) expressed no disagreement with it, and was also approved in Re Pilot Advisory Pty Ltd (2019) 141 ACSR 458; [2019] FCA 2171 at [82].

78. Whether a deed of company arrangement should be set aside on this basis will be determined by reference to the general principles underlying Pt 5.3A, including a creditor’s right to be paid or wind up a company or have the company administered by the administrator in a way which will see the creditor paid from the company’s property: Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (subject to a Deed of Company Arrangement) (2024) 172 ACSR 73; [2024] FCA 112 at [207]–[208] (“Canstruct”), appeal dismissed in Project Sea Dragon Pty Ltd (Subject to a Deed of Co Arrangement) v Canstruct Pty Ltd (2024) 305 FCR 465; [2024] FCAFC 141. In Canstruct, Derrington J would have terminated a deed of company arrangement under this paragraph (had she not terminated it under s 445D(1)(g)) where it allowed an insolvent company to avoid a third party’s claim against it under an adjudication award, while maintaining its relationships with other arm’s length creditors which were paid in full.

79. Ms Tame responds that:

“… the DOCA is in the interests of the creditors of the Company as a whole; it is not oppressive or unfairly prejudicial to, or unfairly discriminatory against, any of the Company’s Creditors or against the public interest. In any event, the Court would not exercise its discretion to terminate the DOCA having regard to the interests of the creditors as a whole and the public interest. The fact that [529 Kent] is a major creditor which has a preference for further exploration of speculative claims, is unlikely to render termination of the DOCA to be in the interests of the creditors as a whole or the public interest.”

80. She submits that the fact that a majority creditor does not support a DOCA is not sufficient basis to set it aside and that a DOCA will not be set aside lightly: Academy Construction at [60], [65]–[66]. She also emphasises that, even if the criteria in s 445D of the Act are satisfied, the Court retains a discretion whether to terminate a DOCA, having regard to creditors’ interests and the public interest: Academy Construction at [82], [86]. Ms Tame submits that the DOCA will allow a better return to creditors than an immediate winding up, and I accept that is likely to be the case on the analysis set out above. Ms Tame also points out that the DOCA provides for a pari passu distribution to creditors, including 529 Kent, other than Excluded Creditors.

81. Turning now to the particular matters on which 529 Kent relies, it claims (APC [44]) that the DOCA “might reasonably be expected to not result in a better return for the Company’s creditors than would result from an immediate winding up of the Company.” 529 Kent particularises four matters in support of this claim, as follows:

“In an immediate winding up of the Company, a liquidator might reasonably be expected to achieve recoveries from the Breach of Directors’ Duties Claims against the third defendant and/or Mr Kusuma.

Recoveries from the Breach of Directors’ Duties Claims might reasonably be expected to increase the net pool of funds available for distribution between the Company’s creditors.

In an immediate winding up of the Company, a liquidator might reasonably be expected to recover more than 50% of the unfair preference claim identified by [voluntary administrator] as subsisting against the [ATO], thereby increasing the net pool of funds available for distribution between the Company’s creditors.

In an immediate winding up of the Company, a liquidator might reasonably be expected to recover the artworks that forms part of the Excluded Assets (as that term is defined in the Deed), the realisation of which might reasonably be expected to increase the net pool of funds available for distribution between the Company’s creditors”

82. The Company and Mr Wasuda deny this claim (POD [44]) and add that they:

“(c) say that the artworks that form part of Excluded Assets (Artworks) are owned by the Third Defendant, not the First Defendant; and

(d) say that the recoveries of the Artworks and the possible recoverable transactions (including the unfair preference claim against the Australian Taxation Office), even considered in a best-case liquidation scenario, is unlikely to result in a better return for the Company’s creditors than that provided under the Deed.

Particulars

(i) The [voluntary administrator], based upon an independent valuation of the Artworks, estimates that the value of the Artworks upon realisation would be $90,059 at best (Page 23 of the Supplementary Report).

(ii) The [voluntary administrator] estimates that the value of the possible recoverable transactions would be $455,109 net of costs (Page 24 of the Supplementary Report).

(iii) The estimated returns to the creditors in a best-case liquidation scenario would be 16.6 cents in a dollar, compared with 16.8 cents in a dollar under the Deed (Annexure “4” to the Supplementary Report).

83. The first two of 529 Kent’s particularised claims depend upon its claim for breach of the Lease, including the Make Good Obligations (APC [13]) and a consequential claim for breach of directors’ duties (“Breach of Directors’ Duties Claims”) (APC [23]–[24]). It is necessary to deal with these claims in some detail. As to the first aspect of the claim, paragraph 13 of the APC relevantly pleads that:

“The Company has failed to:

(a) pay to [529 Kent] any of the amounts specified in either [the First or Second] Notice[s];

(b) complete the Make Good Works (as that term is defined in the Lease) pursuant to its obligations under clause 15.1(a) of the Lease; or

(c) remove from the Premises all of the Lessee’s Fittings (as that term is defined in the Lease) pursuant to its obligations under clause 15.1(b) of the Lease.”

84. 529 Kent’s case therefore has a significant, and likely essential, premise that the Company had, at a relevant time, been required by cl 15.1(a) of the Lease to undertake the Make Good Works and had breached an obligation to do so, since that founds the large part of the amount claimed in the Second Notice and the claim as to the Make Good Works, and 529 Kent did not seek to quantify any separate claim that it may have as a result of any failure by the Company to remove any lessee’s fittings under cl 15.1(b) of the Lease.

85. Clause 15.1 of the Lease relevant provides that:

“15.1 [The Company] must within 21 days after the Date of Termination:

(a) complete the Make Good Works (to the extent required by the Lessor) to the reasonable satisfaction of the Lessor;

(b) remove from the Premises all the Lessee’s fittings together with any signs or advertisements affixed by the Lessee …”

86. The term “Make Good Works” is defined in cl 1.1 of the Lease as all of the following:

(a) Remove all of the Lessee’s fittings and property in the building, including any fit-out completed by the Lessee under this Lease or a previous Lease of the Premises;

(b) Remove all floor coverings, adhesives and penetrations and return the floors to a clean and even surface;

(c) Remove any flush or suspended ceilings and if there is a concrete slab or other like surface, return the ceiling to the lower level of the concrete slab or other like surface above the Premises;

(d) Strip walls back to their bare surface after removing any covering and penetrations, patch any holes where necessary;

(e) Return air-conditioning to open plan configuration in accordance with the relevant Australian Standards; and

(f) Otherwise leave premises in good repair and condition taking into account the Lessee’s obligations under this Lease.

87. The term “Lessee’s fittings”, which is used in both cl 15.1(b) and the definition of “make good works” is defined as including “all fixtures, fittings, plant, equipment, partitions or other articles and chattels of all kinds (other than stock in trade) which are not owned by the Lessor and at any time are on the Premises.”

88. The significance of the construction of cl 15.1 of the Lease to the outcome of the application only fully emerged in Counsel’s closing submissions. I approach the question of construction of this clause with regard to the High Court’s observations as to the objective approach to construction in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; [2004] HCA 52 at [40]; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; (2004) 306 ALR 25; [2014] HCA 7 at [35] and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 at [46]–[52], [59] and I proceed on the basis that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances. In Price (as executor of the estate of Price (dec’d)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20 at [27], the High Court again observed that an objective approach is applied in determining the rights and liabilities of a party to a commercial contract, by reference to its text, context and purpose, and “[t]he meaning to be given to its terms is determined by reference to what a reasonable business person would have understood those terms to mean”. I proceed on the basis that it is necessary to construe the language of that clause according to its natural and ordinary meaning, having regard to the circumstances which the document addresses, and the objects which it is intended to secure; and the inquiry will start, and usually finish, by asking what is the ordinary meaning of the words used: SIF Holdings Pty Ltd v CRC Gosford Pty Ltd (2021) 392 ALR 697; [2021] NSWCA 174 at [73]; Ali v Insurance Australia Ltd [2022] NSWCA 174 at [29]. I have here drawn on my summary of the applicable principles in Re Mayne Pharma Group Ltd [2025] NSWSC 1204 at [352].

89. It seems to me clear that, on its proper construction and read in its commercial context, cl 15.1(a) of the Lease only requires the Company to complete the Make Good Works to the extent required by 529 Kent (as it expressly says), and no obligation to complete those works could arise until 529 Kent communicated its requirements in that regard, by identifying the particular works that it required. It seems to me that, objectively, neither party would have objectively understood the clause to require the Company to undertake Make Good Works that 529 Kent preferred not to have done. That reading is consistent with the language of the clause and with the commercial context where the lessor of premises that are highly customised as a restaurant would plainly seek to preserve the opportunity to relet the premises to a tenant which will use the restaurant’s existing fittings, rather than necessarily require Make Good Works to be done that would result in the destruction of those fittings. Second, neither party would have objectively understood that the Company should have had to guess what works that 529 Kent required, at the risk that it was later told that different works were required, rather than being notified by 529 Kent of its requirements. Third, the obligation under that clause was only to complete those works within 21 days after the Date of Termination (as defined), which 529 Kent contended was not until February 2025, after notification by 529 Kent of what its requirements were and would not be breached prior to that date.

“By May 2024, Mr Wakuda had determined that the Company would cease trading and bring its lease with the plaintiff to an end by October 2024 (Wakuda, [24]). The plaintiff submits that any reasonable director would have been conscious at that time of the Company’s obligations the 2022 Lease to provide the requisite 90 days’ notice and perform the make good works provided for by clause 15 of the 2022 Lease.

Instead of taking that course, the Company proceeded to cease operations, divest itself of its assets and pay out its trade creditors in full, leaving the plaintiff, the ATO and the Office of State Revenue as the only genuinely third-party creditors.”

94. I remind myself, here, that one aspect of this submission repeats the error that has underpinned much of 529 Kent’s case, in failing to recognise that the Company was only obliged to perform the Make Good Works to the extent required by 529 Kent under cl 15.1 of the Lease. I address the further suggestions that the Company divested itself of assets below. Mr Parrish also submits, uncontroversially, that the duties owed by a Company’s directors require them to have regard to its creditors’ interests when Company is near insolvency: Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722 at 730; Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191 at [162]; Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 per Lee AJA at [1092]–[1093]), per Drummond AJA at [2042]–[2095]; Data Transfer Services Pty Ltd v White (2023) 111 NSWLR 25; [2023] NSWCA 16 at [42]. I also recognise that the point at which that obligation arises has been controversial in recent case law: BTI 2014 LLC v Sequana SA [2022] 3 WLR 709; [2022] UKSC 25. The findings which I have reached as to 529 Kent’s claim for the costs of Make Good Works undermines any suggestion that the Company was insolvent at least prior to or at November 2024.

95. Mr Parrish also submits:

“a matter which warrants investigation is whether a claim of breach of directors’ duties arises on the basis that, commencing in May 2024 (when the decision to cease operations of the Company’s business was made), or alternatively July 2024 (when the Company ceased operating), the Company’s directors had, but failed, a duty to take into account the interests of the Company’s obligations to ]529 Kent], and had but failed a duty to not act in a way that would prejudice the Company’s ability to meet those obligations, even though the time to satisfy them had not yet arrived.

The logic of that claim is that, by denuding the Company of its assets throughout July to December 2024, the directors failed in their duty to act with care and diligence, and thereby may have contravened sections 180 and/or 181 which would give rise to a claim for compensation under s 1317H. That is so even if it did so by paying out other unsecured creditors because, the duties owed by a director to a company’s creditors when that company is insolvent is to administer the company’s assets in a way that will not imperil the entitlement of the creditors to a pari-passu distribution to which they would otherwise be entitled to in a winding up.

The present case is not in unfamiliar territory in respect of this principle. In Newman v Hartwig [2024] VSC 54, Matthews J found at [652]-[656] that the directors had breached their duties under s.181(1)(a) of the Act in paying certain creditors of the company while making a conscious decision not to pay other creditors.”

96. Two things should be noted about this submission. First, as Mr Parrish implicitly recognised in a subsequent submission, the payment of the Company’s ordinary course creditors did not in fact “denud[e] the Company of its assets”, since the payment of a creditor is balance sheet neutral, reducing the amount of the Company’s debt by the amount paid to the relevant creditor. Second, the decision in Newman v Hartwig (2024) 73 VR 326; [2024] VSC 54 is far removed from the facts of this case, involving payments to entities related to the Company’s directors and uncommercial transactions, as distinct from the payment of third party suppliers of the Company that occurred here.

97. Mr Parrish also relies on the observation of Derrington J in Canstruct that:

“The avoidance of an unwanted indebtedness is not an appropriate purpose for a DOCA. No aspect of Pt 5.3A is designed to permit a company to use the DOCA process to rid itself of a liability, merely to restart operations in an almost identical position to the pre-DOCA state save for the existence of the erstwhile debt. In that sense, the DOCA in the present case was entered into to achieve a purpose which was alien to the objects of Pt 5.3A. That is more than sufficient to warrant setting both the administration and the DOCA aside.”

98. He also submits:

In the present case, [529 Kent] submits that Mr Wakuda caused the Company to enter administration as a direct response to receiving notice of [529 Kent’s] claim. That was so notwithstanding that the Company had ceased trading and has no appreciable prospect of resuming its trade. Viewed in its broader context, that occurred after Mr Wakuda denuded the Company of its assets in circumstances where a reasonable director would have appreciated the obligations of the Company under the [L]ease and corresponding liability to [529 Kent]. Mr Wakuda’s actions in appointing an administrator and then promoting the D[OCA] have sacrificed the interests of [529 Kent] whose claim, which is considerable, will be extinguished without any recourse against Mr Wakuda that might be available in a winding up. Plainly, that is one of Mr Wakuda’s purposes in promoting the D[OCA].

99. I do not accept these submissions. First, my finding that 529 Kent had not become entitled to payment of the costs of the Make Good Works means that the substantial part of the so-called “unwanted indebtedness” to 529 Kent did not exist. Second, the indebtedness to 529 Kent was not here avoided, but would be treated on a pari passu basis with other third party creditors, and in a more advantageous way that the debt owed to Mr Wakuda and his associates, under the DOCA. Third, entry into voluntary administration is a proper response to the receipt of a large claim, and even a largely unwarranted claim, with the capacity to bring about the Company’s future insolvency. Fourth, as I have noted above, the proposition that Mr Wakuda “denuded the Company of its assets” is neither correct, as a matter of the Company’s balance sheet, nor a fair description of the payment of the Company’s third party creditors in the ordinary course.

100. Ms Tame responds that:

“To the extent that [529 Kent] has suggested that there may be potential claims available against Mr Wakuda and a former director of the Company, those claims are speculative at best and might be more appropriately described as spurious. Certainly, the Court would not be satisfied that the Company “was likely to have a claim against” either of the directors as pleaded in [POC] [13], [23]-[24]. [529 Kent’s] pleaded allegations in that regard seem to be based on a false premise, being that if a company does not pay an alleged debt or perform an alleged contractual obligation, that means its directors have breached a duty under s 180(1), s 181(1) or s 182(1) of the Act or the general law. That contention is misconceived.”

101. In summary, the premise of this claim is not established in respect of the failure to pay the amount claimed in the Second Notice relating to Make Good Works or to complete those works, for the reasons noted above. It is not apparent that the Company’s breach of the Lease, in respect of the non-payment of rental for a relatively short period or the Company’s failure to remove lessee fittings in the two weeks between 529 Kent’s recognition of the termination of the Lease (on 27 November, which it contended would not take effect until February 2025) and the appointment of the voluntary administrator (on 11 December), without more, gives rise to a breach of directors’ duties on Mr Wakuda’s part. 529 Kent does not here identify either a statutory or factual basis for a claim for breach of directors’ duties against Mr Kusuma.

102. I now turn to 529 Kent’s third particularised claim concerning the likely return on a preference claim against the ATO, is undermined by the matters which I noted in addressing Mr Parrish’s submission as to that matter above, including the difficulty in establishing the Company’s insolvency prior to or at November 2024 and the lack of any adequate analysis of the defences that may be available to the ATO in an unfair preference claim. A real prospect of a higher return from that claim is not established for these reasons.

103. Mr Parrish also submits, by reference to Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133 at [55] and [58] (“Betfair”), that 529 Kent should be permitted to advance a claim that payments to third party creditors gave rise to preferences or at least that matter warrants further investigation by a liquidator. I am not persuaded that permitting 529 Kent to pursue that claim would, within the language of Betfair, promote a “just outcome” to the proceedings, not least because it would deprive the deed administrator (who filed a submitting appearance before that claim was raised) of the opportunity to be heard in respect of it and deprive the Company and Mr Wakuda of the opportunity to lead evidence in response to that claim. In any event, 529 Kent made no attempt to identify third party creditors against which such claims might be brought or assess the defences that may be available to them, although the voluntary administrators had provided it with the relevant payment information. It seems to me that any preference claims against third party creditors is also undermined, as was the preference claim against the ATO, by the difficulty in establishing the Company’s insolvency prior to, or at, November 2024, where 529 Kent cannot establish a claims to the costs of the Make Good Works at that time. As I noted above, I do not accept Mr Parrish’s submission that there is any reason to think that the funding provided by Mr Wakuda to the Company merely substituted a debt payable to Mr Wakuda for a debt payable to the trade creditors, where there is no reason to think that Mr Wakuda was providing funding on a basis that contemplated repayment by the Company in the short or middle term, and every reason to think that he was providing funding on a basis that did not contemplate such repayment, so as to support the Company’s solvency, at least until the Company received the overstated claim made by 529 Kent in November 2024. It seems to me that 529 Kent has not led evidence to establish that any investigations into such claims are more than speculative, or that such claims would have any real prospect of success, given the defences that would likely be available to third party creditors in the relevant circumstances.

529 Kent’s claim that the DOCA should be terminated for some other reason

107. Alternatively, 529 Kent seeks an order pursuant to ss 445D(1)(g) or 447A of the Act terminating the DOCA. I should again address the applicable principles before turning to the factual basis of this claim.

108. An order terminating a deed of company arrangement may be made under s 445D(1)(g) of the Act if the Court is satisfied that the deed should be terminated for some other reason. In Australian Securities and Investments Commission v Midland Hwy Pty Ltd (admin apptd) (2015) 110 ACSR 203; [2015] FCA 1360 at [69]–[74], Beach J noted (and I followed these observations in Citadel at [20]) that:

“… I accept that s 445D(1)(g) is broad and on one view unconstrained, save by its context and s 435A generally, such that this proposition may only be of theoretical interest. …

The Court may set aside a DOCA pursuant to s 445D even where creditors may be better off under the DOCA than with a liquidation: Bidald Consulting at [286]-[291] per Campbell J. It may do so in the public interest.

Where the relevant company is not trading and there is no likelihood of its resuming its former business, the public interest in placing the company in the hands of a liquidator may prevail over the interests of creditors (see Australian Securities and Investments Commission v Storm Financial Ltd (recs and mgrs apptd) (admin apptd) (2009) 71 ACSR 81; [2009] FCA 269 at [69] and [71] per Logan J).

In QBI Corporation Pty Ltd v Plantation Rise Pty Ltd (admins apptd) (recs and mgrs apptd) (2010) 77 ACSR 573… a DOCA was set aside where there was no continuing business preserved and the structure designed and enshrined in the DOCA was to allow and facilitate the director of the company and third parties who were susceptible to voidable transactions to be protected from relevant action.

Generally, the breadth of s 445D(1)(g) is such that in a particular case the public interest can justify the termination of a DOCA even where it is not established that this would necessarily be in the creditors’ interests.

Finally, in any event, the preclusion of an effective investigation by a liquidator into relevant transactions and the opportunity for greater returns may render a DOCA contrary to the creditors’ interests overall (see Canadian Solar v ACN 138 535 832 Pty Ltd [2014] FCA 783 at [37] (per Perry J).”

109. I recognise that, in Canstruct, Derrington J terminated a deed of company arrangement under s 445D(1)(g) of the Act as an abuse of Pt 5.3A of the Act.

110. Mr Parrish also refers to the principles applicable under s 447A of the Act, by reference to my decisions in Re Hayes Steel Framing Systems Pty Ltd (admins apptd) [2017] NSWSC 385 at [29]ff and Guo v Song; Re SG Capricorn Investments Pty Ltd (subject to Deed of Company Arrangement) [2018] NSWSC 12 at [119]ff. He points out that, in the latter case, I had ordered that a deed of company arrangement be terminated under s 447A where the director likely acted with an “ulterior motive” in frustrating proceedings against the relevant companies and there was sufficient basis to warrant further investigation, and potentially pursuit, of a claim by liquidators against the that director. It does not seem to me that either of those matters is established here for reasons that I will note below, where 529 Kent’s proposed Breach of Directors’ Duties Claims seem to me to have little prospect, for the reasons noted above and the DOCA appears to have been structured to provide a better return to creditors than would likely emerge from a liquidation.

111. In Adelaide Brighton Cement Ltd, Re Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (subject to deed of company arrangement) (No 4) [2019] FCA 1846 at [11]–[13], Besanko J in turn addressed the possible application of s 447A of the Act, as follows:

“The Court has the power to vary a deed of company arrangement by an order made under s 447A as an alternative to a deed administrator seeking a variation of the deed of company arrangement by a creditors’ resolution under s 445A. Specifically, s 447A(1) of the Act gives the Court power to alter the operation of Part 5.3A of the Act as it operates in relation to a particular company. Section 447A has been held to confer wide discretionary power on the Court …

The Court’s power to vary a deed of company arrangement pursuant to s 447A(1) is well established. The power conferred by s 447A(1) is not subject to the limitations found in other sections within Part 5.3A of the Act. Relevantly, s 447A(1) of the Act grants the Court power to alter the operation of s 445A (or any other section in Part 5.3A), thereby empowering the Court itself to vary a deed of company arrangement …

It has been said that whilst the Court should be reluctant to exercise its power under s 447A to vary a deed of company arrangement and thereby deprive the creditors of their role under s 445A, it may do so in circumstances that are uncontentious, in the sense that no prejudice to creditors is involved …”

112. In respect of this aspect of the application, 529 Kent pleads (APC [48]–[50]) that the Company’s business has ceased to exist; repeats the allegation in and the particulars to APC [44], which has not been established, that the DOCA “might reasonably be expected to not result in a better return for the Company’s creditors than would result from an immediate winding up of the Company”’; and, by reason of these two matters, contends that the DOCA is contrary to the object of Pt 5.3A of the Act. I do not accept this submission. Where a DOCA likely leads to a better to creditors than a liquidation, then the fact that the Company’s business will cease does not, without more, have the result that the DOCA does not further the object of Pt 5.3A of the Act. Second (and repeating the claim in APC [45]), 529 Kent contends that the DOCA prevents an investigation being undertaken by a liquidator into the Company’s affairs. That is plainly correct but also does not have the result that the DOCA does not further the object of Pt 5.3A of the Act, for the reasons noted above.

113. 529 Kent in turn pleads that, by reason of these matters, it seeks an order pursuant to s 445D(1)(g) of the Act terminating the DOCA or, alternatively, an order pursuant to s 447A of the Act terminating the DOCA. These claims are not established since their factual basis is not established.

Other matters

114. Mr Parrish also points to discretionary factors which he contends permit the Court to terminate the DOCA. He submits that the DOCA provides a collateral benefit to Mr Wakuda where it transfers the artworks and shares in T Too to Mr Wakuda, and the value of the artworks “could” exceed the value of Mr Wakuda’s deed contribution, by reference to their previously insured value (Ex J1, 1214). I am not persuaded that there is an arguable case for that proposition, having regard to the voluntary administrator’s investigations into the value of those assets.

115. Second, Mr Parrish submits the Company has been in contravention of s 201A of the Act, after Mr Kusuma resigned as a director in November 2024, on the assumption that Mr Wakuda does not ordinarily reside in Australia. Mr Parrish submits, and I accept, that such a contravention is neither trivial nor without consequence: Re Condor Blanco Mines Ltd [2016] NSWSC 1196. However, it seems to me that it would be appropriate to deprive the Company’s creditors of the DOCA, which likely operates to their advantage on the findings that I have reached, as a means of addressing this matter, which could readily be addressed by the appointment of another director to the Company, or, if that does not occur, by regulatory action undertaken by the Australian Securities and Investments Commission if it considers such action is warranted in the circumstances.

116. The parties also led evidence and made submissions as to whether 529 Kent, in its own right, had the financial capacity to fund a liquidator’s investigations. It is not necessary to address that question given the conclusions which I have reached on other grounds. It is also not necessary to address the identity of a liquidator who might be appointed, where 529 Kent has nominated an appointee and Mr Gray has also consented to appointment as liquidator, where I have not found that the DOCA should be terminated,

117. Finally, and for completeness, 529 Kent also claims (APC [55]–[56]) an order under s 445G(2) of the Act that cl 5.6 of the DOCA be declared void ab initio and an order under as 445G(2) of the Act that cl 5.6 of the DOCA be declared void ab initio on the basis of any other ground which the Court sees fit. The basis for this claim is not established where 529 Kent has not established any basis for its broader attack on the DOCA.

Orders

118. I considered whether I should make a further order directing the deed administrator to reverse his approach in allowing any claim by 529 Kent for the costs of Make Good Works, in respect of its proof of debt, where I have found that claim was not properly founded. Mr Parrish submitted that I should not do so, at least without allowing 529 Kent a further opportunity to be heard. I do not accept that proposition, where the existence of that claim was an essential part of 529 Kent’s case, squarely raised by APC [13], and it has not established it after a full hearing on the merits. However, I have concluded that it is not necessary to make such an order, because 529 Kent’s proof of debt was previously admitted only for voting purposes by the voluntary administrator at the second creditor’s meeting and the extent to which it was admitted had no impact upon the outcome of that meeting. There is no reason to doubt that the deed administrator will act in accordance with the findings that I have reached in this judgment, which bind him, the Company and 529 Kent, in considering any further proof of debt which may be lodged by 529 Kent in respect of distributions under the DOCA.

119. For these reasons, the Originating Process is dismissed with costs.

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