J Aron Corporation v Newmont Yandal

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2407/04 THE J ARON CORPORATION & ANOR V NEWMONT YANDAL OPERATIONS PTY LTD & ORS JUDGMENT (Revised to correct minor errors 29 November 2004) 1 HIS HONOUR: These reasons for judgment relate to several applications: the plaintiffs' application in proceeding No 4207 of 2004 ("the 2004 proceeding") for an order for the determination of separate questions, in the form set out in Appendix A to these reasons for judgment; the plaintiffs' application, in the alternative, for orders fixing hearing dates for the 2004 proceeding; and the application by the defendant for summary dismissal or an indefinite stay of the 2004 proceeding, or for its amalgamation with proceeding No 4666 of 2003 ("the 2003 proceeding"). 2 In 2003 the plaintiffs commenced the 2003 proceeding in circumstances generally described in my reasons for judgment of 12 March 2004 (J Aron Corporation v Newmont Yandal Operations [2004] NSWSC 159, "the 12 March judgment"). A factual summary, sufficient for the purposes of this interlocutory judgment, can be derived from the pleadings. 3 Newmont Australia Ltd is the Australian holding company in a group of companies which conduct goldmining operations in Western Australia. The ultimate holding company is a United States company. The Australian companies include Newmont Yandal (the first defendant in the 2003 proceeding), Clynton Court (the second defendant in that proceeding), and 12 other subsidiary companies (collectively the fourth defendants in that proceeding). 4 In 1998 the plaintiffs entered into a master agreement with Newmont Yandal for gold hedge transactions. They claim that they validly terminated the agreement for default, and that they were entitled to be paid a termination amount by Newmont Yandal in a sum exceeding USD57 million. They allege other events and transactions, eventually leading to resolutions by the directors of Newmont Yandal, Clynton Court and the other 12 subsidiaries on 3 July 2003 for the appointment of Messrs Korda and Mentha (the third defendants in the 2003 proceeding) as voluntary administrators. 5 On 29 August 2003 the creditors of Newmont Yandal, Clynton Court and the other 12 subsidiaries purportedly resolved to execute deeds of company arrangement, to which Newmont Australia would be a party. There was a principal deed for Clynton Court and secondary deeds for Newmont Yandal and each of the other 12 subsidiaries. The deeds of company arrangement were purportedly executed on 8 September 2003. Under those instruments Clynton Court became the administration company for the purposes of the deeds, the third defendants became the deed administrators, employees and trade creditors were to receive 100 cents in the dollar, the plaintiffs were to receive USD22.9 million, and all other creditors (if any) were two receive no less than they would have received in a liquidation if certain mine assets had been sold for USD150 million. 6 Each of the deeds contained a provision (clause 3.1) to the effect that the deed was conditional on the execution of the principal deed and each secondary deed by everyone named as a party, and a provision (clause 3.2) that if, as a result of clause 3.1, the deed had not come into full force and effect by 5 p.m. on 22 September 2003, it would automatically terminate. 7 By their amended statement of claim in the 2003 proceeding, the plaintiffs claimed relief on several grounds. First, they contended that the resolutions to enter into the deeds of company arrangement constitute an abuse of Part 5.3A and a breach of the directors' fiduciary duties. They said that there was no reasonable basis for an opinion to be formed that on 3 July 2003 Newmont Yandal was insolvent or likely to become insolvent. They claimed that the directors did not genuinely or in good faith form an opinion to that effect, instead acting for the sole or dominant purpose of facilitating the removal of the plaintiffs as a creditor at less than the termination amount due to them under the master hedging agreement. They sought, on this ground, declarations that the resolutions, the instruments of appointment of the voluntary administrators, and the deeds of company arrangement, were void ab initio or voidable. 8 Secondly, the plaintiffs contended that Messrs Korda and Mentha, while purporting to act as voluntary administrators, were not independent of Newmont Yandal in various ways and did not discharge their duty to act, and be manifestly seek to act, impartially as between creditors. On this ground, they claimed an order under s 449B that Messrs Korda and Mentha be removed as voluntary administrators and that a fit and proper person be appointed as voluntary administrator or liquidator. 9 Thirdly, the plaintiffs contended that Messrs Korda and Mentha, as voluntary administrators, failed to discharge their duty properly to investigate the business and affairs and financial circumstances of the corporate group, and to form reasonable opinions with respect to the interests of creditors. On this ground, they claimed an order under s 445D terminating the deeds of company arrangement. 10 Fourthly, the plaintiffs said that Messrs Korda and Mentha conducted the meeting on 29 August 2003 in a manner that was oppressive, discriminatory and prejudicial to them in various ways, for example by admitting votes by related creditors and failing to adjourn the meeting. They claimed an order under s 445D terminating the deeds of company arrangement, and an order under s 600A(2) that the purported resolutions of the creditors be set aside. 11 Allegations of these kinds are not infrequently encountered in litigation when plaintiffs seek to challenge the execution and implementation of a deed of company arrangement to which they object. There is now a substantial and growing body of case law, much of it in this court. I personally have heard five cases in this general area: Deputy Commissioner of Taxation v Portinex (2000) 34 ACSR 422, Cresvale Far East Ltd v Cresvale Capital Ltd (2001) 37 ACSR 394; Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193; Young v Sherman (2001) 40 ACSR 12, and Bovis Lend Lease Ltd v Wily (2003) 45 ACSR 612. My experience has been that cases involving these issues, if fully contested, involve quite lengthy final hearings in which a substantial body of disputed evidence is received. In each of the five cases I have mentioned, the hearing time substantially exceeded the initial estimates of counsel. 12 It would be premature to attempt anything like an accurate estimate of the hearing time of the 2003 proceeding, when the defendants had not filed their evidence, the plaintiffs may still have some expert evidence to file, and there are some outstanding issues with respect to discovery. In my opinion, taking into account some tentative estimates by the parties, and in view of the amount of money in issue, the intensely combative approaches of the parties in all interlocutory hearings so far, and the fact that personal allegations are made against insolvency practitioners, a hearing of at least some weeks duration seems likely. 13 The plaintiffs also raised a fifth ground for relief, which is less typical of these cases. They relied upon a "formal defect" in relation to the deeds of company arrangement. They contended that the chairman of the meeting of creditors of 29 August 2003 held proxies for each company in respect of all inter-company indebtedness. They said that there was a single motion put to the meeting, and that the chairman abstained from voting in respect of the inter-company indebtedness of subsidiaries. According to the plaintiffs, the effect of putting the proposal as a single resolution without any vote in respect of inter-company indebtedness was that no resolution was passed by Clynton Court and eight of the other 12 subsidiary companies. They said this is because, the chairman not having cast votes in respect of inter-company indebtedness, there were no votes at all on the motion by the separate creditors of each of those companies. 14 The allegation of a "formal defect" raises issues which might be capable resolution after a hearing of much narrower scope than the final hearing, if heard and determined separately from the other four issues. As I explained in the 12 March judgment: "It is said to lead to the consequences that, as no resolutions were validly passed for the execution of secondary deeds of company arrangement by the nine subsidiaries, their subsequent execution of deeds cannot have been effective under Part 5.3A, and consequently the conditions stipulated in clause 3.1 of the principal and secondary deeds cannot have been satisfied, and therefore both the secondary deeds and the principal deed automatically terminated on 22 September 2003." 15 I have been given estimates of the hearing time for the separate determination of questions under Part 31, ranging from one or two days to a week, although it is impossible to be precise until the relevant evidence is prepared and identified. Taking those matters into account, it seems to me appropriate to plan on a three-day hearing, on the basis that directions will be given for the preparation of written submissions to be lodged prior to the hearing. 16 Newmont Yandal and the 12 subsidiaries deny the plaintiffs' claims. In a judgment that I delivered on 31 May 2004 (J Aron Corporation v Newmont Yandal [2004] NSWSC 543, "the 31 May judgment"), I described the defendants' position on the "formal defect" issues as follows: "They argue that the external creditors of other group companies have become creditors of the nine subsidiaries by virtue of deeds of cross-guarantee, under which each company in the group has guaranteed payment of the debts of each other group company. They say that even if the deed [the principal deed of company arrangement] is invalid or ineffective, the court may and should cure the defect by making orders under s 445G(3), s 1322 or s 447A. Their contention is that the making of orders under one of these sections would involve discretionary considerations making it inappropriate to deal with the 'formal defect' ground until the whole of the evidence in the proceeding was heard. But the plaintiffs respond that if the 'formal defect' ground is correct, the court has no jurisdiction under those provisions to grant any form of relief." 17 In March 2004 the plaintiffs made an application for orders for the separate determination of the "formal defect" issues and related matters. When the proposal for an order for the separate determination of questions under Part 31 was first floated, at a directions hearing in February 2004, it was contemplated that the questions for separate determination would be questions of law or construction, not involving the determination of contested facts or the exercise of judicial discretion. It was also contemplated that the questions would extend to whether the court had jurisdiction, as a matter of law, to cure any alleged formal defect under s 1322 or s 447A of the Corporations Act. However, when the questions came to be formulated, they extended to some matters of fact. 18 Four questions were formulated at that time, the first of which raised matters of fact, the other three raising questions of law. The four questions related to whether: (1) the meeting of creditors on 29 August 2003 had resolved that each of the nine subsidiaries in contention would execute a secondary deed of company arrangement specified in the resolution; (2) if not, whether the secondary deed of company arrangement into which each of those nine companies purported to enter after the meeting, was a deed of company arrangement to which Part 5.3A Division 10 of the Corporations Act applied; (3) whether the principal deed of company arrangement had terminated pursuant to clause 3.2 of that deed; (4) whether the court has jurisdiction under s 447A, s 445G or s 1322 to grant relief rendering the secondary deeds effective deeds of company arrangement for the purposes of Part 5.3A as from the date of their execution. 19 The draft order which is Appendix A to the present reasons for judgment is more amply and precisely drafted, and raises some additional specific legal points, but it contains the same four elements. 20 In the 12 March judgment I denied the application for separate determination of questions in the 2003 proceeding. There is a summary of my reasons in a subsequent judgment, J Aron Corporation v Newmont Yandal [2004] NSWSC 554 ("the 22 June judgment"), which is as follows: (1) either there is no deed of company arrangement for the purposes of Part 5.3A of the Corporations Act, or deeds of company arrangement have been executed to which Part 5.3A applies, but those deeds are arguably defective in ways entitling the plaintiffs to apply for relief under the statute; (2) if there is no deed of company arrangement for the purposes of Part 5.3A, but only an instrument inter parties, then (a) the plaintiffs, claiming to be creditors of Newmont Yandal, are not entitled to seek separate determination of a question concerning the proper construction of the instrument, because they are not parties to it; (b) even if the plaintiffs, as non-parties to the principal deed, were entitled to ascertain the proper construction of the instrument, it would be inappropriate to decide that question in the 2003 proceeding as presently constituted, because the decision would affect persons not parties to the proceeding, namely Newmont Australia (a party to the principal deed) and other unsecured creditors of Newmont Yandal; (c) a separate determination, in favour of the plaintiffs, of the questions which were then proposed would not lead to a judgment disposing of the 2003 proceeding, because, the deeds of company arrangement have been performed, employees and trade creditors have been paid, and complex questions would remain as to the appropriate orders in light of performance of the deeds; (3) if the principal deed is effective under Part 5.3A (whether or not any formal defect exists), then (a) the rights of the plaintiffs are those rights conferred by Part 5.3A and other parts of the Corporations Act; (b) if the plaintiffs make any application in reliance on their statutory rights to do so (such as s 445G, 447A or 1322), the statutory provisions give the court substantial discretion; (c) the exercise of the court's discretion depends upon an understanding of all relevant facts and circumstances; (d) therefore, in order to persuade the court to grant relief under such statutory provisions, it would be necessary to enter into proof of the whole or a substantial part of the facts that would be at issue in the final hearing, and little or nothing would be gained by having those matters considered in the context of a separate determination of questions. 21 In the 12 March judgment I observed (at [24]) that if there was no valid deed of company arrangement for the purposes of Part 5.3A as the plaintiffs contended, then as a creditor of Newmont Yandal they would be entitled to bring a proceeding for recovery of their debt. After publication of my 12 March judgment the plaintiffs elected to take such a proceeding, and they filed their summons in the 2004 proceeding, against Newmont Yandal (the first defendant in the 2003 proceeding) as sole defendant. The plaintiffs proposed to avoid overlapping between the 2003 and 2004 proceedings by seeking leave to amend their statement of claim in the 2003 proceeding to remove the "formal defect" issue from that proceeding. 22 At a directions hearing on 27 April 2004, counsel for the defendant informed me that if the new proceeding were allowed to continue, his client would rely on the principal deed of company arrangement by way of defence, and would also file a cross-claim seeking to invoke s 1322 or s 447A to cover the possibility that there might be some defect in the deed needing to be cured by order of the court. In counsel's submission, the court would then be presented with issues identical with the issues raised under the "formal defect" ground in the 2003 proceeding. He submitted that the 2004 proceeding should be summarily dismissed or indefinitely stayed, or else joined with the 2003 proceeding in some appropriate fashion. 23 Counsel for the plaintiffs responded by saying that there are differences between his clients' position in the 2004 proceeding and their position in the 2003 proceeding, and the court should wait for pleadings to be filed in the 2004 proceeding before considering any application. I invited the parties to provide some brief written submissions outlining the points of law which they would seek to invoke in the event that the defendant were to file a cross-claim seeking curative orders. The purpose of receiving the submissions was not for me to take a final view as to the plaintiffs' prospects of success in the 2004 proceeding, but to make an assessment whether there was, in the plaintiffs contentions, sufficient substance that I should decline to intervene in the matter proposed by the defendant. 24 I reviewed the submissions of the parties in my 31 May judgment. I expressed the opinion that the written submissions of both parties had been carefully constructed and represented well thought-out positions, based partly on some legal issues that are both fundamentally important and contestable. I took the view that there was an arguable case for the plaintiffs' position that the principal deed is invalid and cannot be saved under the statutory curative provisions. I noted that to meet the plaintiffs' arguments, the defendant had found it necessary, in its written submissions, to penetrate some deep legal issues. It seemed to me possible that, once the 2004 proceeding had been fully pleaded, it would become apparent that the plaintiffs could avoid some of the obstacles to separate determination of questions that had defeated the application in the 2003 proceeding. 25 The position I reached in my 31 May judgment was that I should allow the 2004 proceeding to evolve through pleadings and see what applications would then be made. At a directions hearing on 15 June 2004, counsel for Newmont Yandal and the other 12 subsidiaries informed me that in the circumstances, his client would consent to orders for the separate determination of questions, if they were drafted so as to exclude discretionary matters. He suggested that the newly drafted questions could be determined in the 2003 proceeding, or alternatively in the 2004 proceeding provided that at all the parties in the 2003 proceeding were joined as parties. Senior counsel for Clynton Court and Messrs Korda and Mentha informed me that his clients opposed the determination of separate questions. I gave directions for the preparation of the proposed new questions, and when the matter returned to me on 18 June, it emerged that substantial agreement had been reached as to the text of the proposed questions, though there was still opposition from Clynton Court and Messrs Korda and Mentha to the making of orders for the separate determination of those questions. By that stage the proposed questions were almost identical with the draft which is Appendix A to these reasons for judgment. 26 The question for determination in the 22 June judgment was whether the circumstances had become sufficiently different that I should make an order for separate determination of questions, notwithstanding my earlier refusal to do so. I decided, in my 22 June judgment, not to make such an order in the 2003 proceeding. I noted that the position had changed because the questions had by that stage been drafted so as to exclude the discretionary component of ss 445G, 447A and 1322, so that the concerns articulated in paragraph (3)(c) and (d) above were no longer present. But the problems identified in paragraphs (2)(b) (absence from the 2003 proceeding of Newmont Australia and other unsecured creditors of Newmont Yandal) and (2)(c) (inability of the answers to the separate questions to deliver certainty of outcome, in view of the substantial performance of the deeds of company arrangement) would remain. There would also still be some difficulty about the plaintiffs' standing seek certain relief. 27 In the 22 June judgment I expressed the opinion that if the separate determination of the questions were to take place in the 2004 proceeding, these issues would have a different complexion. Since, in the 2004 proceeding, the plaintiffs assert their right as a creditor to recover a debt, and the deeds of company arrangement would be pleaded in answer to their claim, they would appear to have an interest in contending that the deeds have been terminated and could not provide a defence to their claim in debt. The fact that they are not a party to the principal deed ought not to prevent them from making such submissions. I noted that the problem of making a determination in the absence of interested persons might be overcome during the pleading process and I envisaged the possibility of an application for joinder of parties. As to certainty of outcome, I pointed out that if the plaintiffs could show that the "formal defect" argument is correct, and that the court has no jurisdiction to intervene under any of ss 445G, 447A and 1322, the plaintiffs may well be entitled to judgment in the 2004 proceeding. 28 I reached the provisional view that there was probably a good case for making orders for the separate determination of questions in the 2004 proceeding, but that it was premature to make a decision on the matter until the precise issues in that proceeding had been defined by pleadings and any application for joinder of parties had been heard and determined. I dismissed the application for separate determination of questions so far as it related to the 2003 proceeding, and adjourned the application so far as it related to the 2004 proceeding, part heard, for further consideration once pleadings had closed. 29 Now that the pleadings have closed, I am asked to decide whether to make orders, in the 2004 proceeding, for the separate determination of the questions set out in Appendix A. 30 In their statement of claim filed on 31 August 2004, the plaintiffs pleaded the terms of their master swaps agreement with the defendant and alleged that they had terminated the agreement because of the occurrence of an event of default. They claimed to be entitled to the termination amount due under the agreement, and sought a declaration of indebtedness and an order that the amount owing be referred to a Master or a referee for inquiry and report. 31 By its defence filed on 5 August 2004 [sic], Newmont Yandal substantially admitted the plaintiffs' claims with respect to the agreement and termination of the agreement, but pleaded that it was not liable to pay the plaintiffs any money under the agreement because of the terms of the principal and secondary deeds of company arrangement and an associated deed of release. The defence contended that these instruments had the effect of releasing the plaintiffs' claim and substituting an entitlement to a distribution in the administration. 32 A matter put in issue by the defence was whether the agreement had been entered into by Newmont Yandal with the plaintiffs, namely the J Aron Corporation and the Goldman Sachs Group, Inc, trading in partnership as J Aron & Company, or whether the correct counterparty was some other entity called J Aron & Company. Counsel for the plaintiffs informed me that his clients would rely on a letter from Newmont Yandal's counsel agreeing to admit the allegation that the plaintiffs are proper parties to sue on the master agreement, provided that acknowledgement was given that J Aron & Company would be bound by the outcome of the proceedings to which the plaintiffs are parties. Counsel for the plaintiffs gave that acknowledgement, in written submissions and orally. As I understand the position, this matter is not in contention, for present purposes. 33 By their reply to the defence, the plaintiffs alleged that at the meeting held on 29 August 2003 the creditors of Clynton Court and the creditors of eight of the other subsidiaries failed to pass resolutions in accordance with s 439C. Accordingly, they contended, the administrations of Clynton Court and the eight subsidiaries ended when the meeting of creditors came to an end without passing resolutions (s 435C(3)(e)), and further, the deeds terminated in accordance with their provisions. Consequently, according to the reply, the plaintiffs were thereafter not bound by the deeds of company arrangement, Messrs Korda and Mentha were never deed administrators authorised to execute instruments on behalf of Newmont Yandal, and so there had been no valid release. 34 By its amended rejoinder filed on 23 September 2004, Newmont Yandal claimed that Clynton Court and the eight other subsidiaries did pass resolutions that deeds of company arrangement be executed, and that the principal and secondary deeds were executed on 8 September 2003, commencing on that day. The rejoinder also contended that under s 445H the termination or avoidance of the deeds of company arrangement, if it occurred, would not have affected their previous operation, and that things done pursuant to the deeds were valid and effectual by virtue of s 451C(a). 35 There has been no application for joinder of parties in the 2004 proceeding. However, a cross-claim was filed in the 2004 proceeding, by Newmont Yandal, the 12 subsidiaries, and Newmont Australia, against the plaintiffs as first cross defendants, the deed administrators as second cross defendants and Clynton Court as third cross defendant. The current pleading is an amended cross-claim filed on 23 September 2004. The cross-claim pleaded facts relating to the passing of resolutions by creditors at the meeting on 29 August 2003, and pleaded relevant terms of the deeds of company arrangement. It alleged that between 8 September 2003 and 23 August 2004 Newmont Australia paid approximately USD39.4 million to Messrs Korda and Mentha for the purpose of distributions under the deed, and that sums of approximately USD16.4 million and AUD16.84 million had been paid out by Messrs Korda and Mentha up to 23 August 2004, to meet claims of trade creditors and employees as well as the costs of administration. The cross-claim contended that since 10 September 2003 certain of the companies in the group, including Newmont Yandal, had engaged in trade, including transactions by way of sale of mine assets that are specified in the cross-claim. 36 The cross-claim sought orders under s 447A, 445G and 1322 of the Corporations Act, having the effect of validating the execution of the deeds of company arrangement, as well as declarations that the deeds were executed in satisfaction of clause 3.1 of the respective deeds, declarations that the plaintiffs are bound by the deeds by reason of s 444D(1), and declarations that Newmont Yandal is released from the plaintiffs' claim made in the statement of claim. 37 Defences to the amended cross-claim have been filed by the plaintiffs as first cross defendants, and by Messrs Korda and Mentha and Clynton Court as second and third cross defendants. Although, once again, there have been inconsistent submissions as to duration, my view is that the 2004 proceeding will be a hearing of weeks rather than days, given the degree of overlapping with the issues in the 2003 proceeding. 38 I have decided, now that the pleadings have closed, to make orders for the separate determination of the questions set out in Appendix A. I shall first consider the matter in terms of the issues that led me to decide against making such orders in the 2003 proceeding, and then address the other matters raised by the parties at the interlocutory hearing on 22 October 2004. (2)(a) The plaintiffs' standing 39 The plaintiffs have standing to sue in debt, as they do in the 2004 proceeding, because they claim to be a creditor of Newmont Yandal by virtue of money alleged to be owing to them upon termination of the master agreement to which they and Newmont Yandal were the parties. They are not, in the 2004 proceeding unlike the 2003 proceeding, seeking a declaration as to the proper construction of the principal deed of company arrangement. (2)(b) Presence of interested persons 40 In the 2004 proceeding the plaintiffs sue to recover a debt alleged to be owing to them. It would be open to any other unsecured creditor of Newmont Yandal to do likewise. It cannot sensibly be contended that the plaintiffs should be precluded from recovering their debt because other unsecured creditors are not parties to the plaintiffs' debt recovery proceeding. 41 The same reasoning applies to Newmont Australia. It is a party to the principal deed and has an interest in asserting the validity of the deed. But as the plaintiffs do not seek any relief with respect to the principal deed (such as a declaration as to its proper construction), instead seeking only orders for the recovery of the debt they claim from Newmont Yandal as counterparty to the master agreement, there is no necessity for them to join Newmont Australia as a party to their action. As it happens, Newmont Australia is a party to the cross-claim for validating orders. In the circumstances, it is on notice of the issues raised by the plaintiffs' claim and Newmont Yandal's defence. (2)(c) Final resolution disposing of proceeding 42 If the plaintiffs succeed in the 2004 proceeding and in the cross-claim, they will be entitled to orders along the lines of the orders sought in the statement of claim, such as a declaration of indebtedness and an order that the amount owing be referred to a Master or referee for inquiry and report, unless some discretionary reasons are advanced for not making the orders. Orders of that kind would finally resolve the 2004 proceeding. 43 It is true that if "formal defect" argument succeeds, some difficult problems may well need to be addressed by Newmont Australia, Newmont Yandal, Messrs Korda and Mentha and Clynton Court. Newmont Australia will have paid a very large amount of money to Messrs Korda and Mentha on an assumption as to validity of the deeds which, on this hypothesis, will have been proven wrong. Messrs Korda and Mentha will have paid large amounts of money by way of distributions under the deeds on the basis that the payments were in full satisfaction of the recipients' claims, whereas on this hypothesis the recipients' claims will not have been extinguished by the terms of the deeds. Newmont Yandal will have entered into substantial transactions on an assumption that there was power to do so, whereas on this hypothesis, the creditors having failed to pass valid resolutions for execution of the deeds, the company has arguably been in liquidation since August 2003. 44 It would not be ideal to leave such questions unresolved. But it is far from clear to me, at this stage, that the presence of these other difficulties would cause the court to decline relief to the plaintiffs as creditors seeking to recover their debt. The prospect that such discretionary considerations may arise arise if the plaintiffs succeed is not, in my opinion, an adequate ground for denying the plaintiffs the opportunity to bring their dispute with Newmont Yandal to an early resolution by the separate determination of questions. Nor is it persuasive that the cross-claim raises these issues, for a decision in favour of the plaintiffs will defeat the cross-claim to the extent that the cross-claim seeks orders under the discretionary provisions of ss 447A, 445G and 1322. 45 If the plaintiffs are unsuccessful on the separate determination of questions, the cloud of uncertainty that presently hangs over these administrations, because arguable claims have been made as to their invalidity, will not necessarily have been lifted, but at least some useful progress will have been made towards clarifying the position. Either the court will have decided that there is no defect warranting curative attention, or that there is a defect which is capable of being cured on discretionary grounds under one or more of the statutory provisions. It is desirable to make a determination that could lead to that outcome, sooner rather than later. (3)(a), (b), (c) and (d) Unsuitability of Part 31 where court has discretions 46 The objection originally raised to the separate determination of questions, on the ground that the procedure was unsuitable where the court may have discretions enabling it to cure formal defects, has been removed by the drafting of the proposed questions, which are relevantly confined to the question whether the court has jurisdiction to act under any of the curative provisions, rather than the question whether, if it has jurisdiction, it would act, in the exercise of its discretion. Therefore this objection has been eliminated. Other considerations 47 Counsel opposing orders for separate determination submitted that resolution, in favour of the plaintiffs, of the questions for separate determination would involve the court adopting some controversial propositions of law, particularly as to the scope of s 447A, and would undoubtedly lead to appeal. They also contended that, as the separate determination of questions would involve factual matters in which it is possible that credit could become an issue, the effect of hearing and determining the Part 31 questions might be to exclude the judge from hearing the two proceedings on a final basis, or to raise the prospect of inconsistent determinations as to credit by different judges. They also said that the amount of saving of time was not sufficiently substantial to justify these other consequences. 48 Considerations of the kind advanced by counsel are, of course, pertinent to the court's decision whether to embark upon the separate determination of questions under Part 31. As I understand the authorities, however, the court's decision involves a weighing up of all the factors that may have a practical impact on the just, quick and cheap determination of the issues between the parties, pursuant to the overarching principle set out in Part 1 rule 3. Weighing the factors in this case, it seems to me that there will be, as I have mentioned, a probable substantial saving in time and speed of determining an important issue, one that should be resolved speedily whatever the answer; an issue which may well resolve the dispute between the plaintiffs and the other parties if the plaintiffs succeed. An appeal from the court's determination of legal issues, prior to the final hearing, would fragment the proceedings to a degree, but in my opinion the other considerations to which I have referred are more weighty and justify adopting the Part 31 procedure. 49 It seems to me, on my understanding of the evidence likely to be led on the application for separate determination, that the prospect of findings of credit that might create an inconsistency with findings at the final hearing is not high. It may be best for the judge who hears the application for separate determination not to be the trial judge, if there is any risk of this kind, but the necessity to take that course is not a weighty matter here, given the size of the Equity Division and the way work is distributed through the general list. 50 Senior counsel for Messrs Korda and Mentha and Clynton Court complained that there was a substantial risk, by following the procedure for separate determination of questions, that the administrators would be left in the state of limbo as to the validity of their appointment and conduct, especially if a decision in favour of the plaintiffs were subject to an appeal, or a decision was made that there was a defect but the statutory discretionary grounds are available to cure it. I agree that there is a prospect that this will occur, but at least the separate determination of questions will be a step towards clarifying the administrators' position, and it is open to them, if the state of uncertainty becomes difficult, to make some other form of application, as it has been open for them to do at all times after the formal defect allegation was raised. The applications to set the 2004 proceeding down for final hearing, and to discontinue the 2004 proceeding or amalgamate it with the 2003 proceeding 51 Since I have decided that it is appropriate to make orders under Part 31 rule 2, in relation to the 2004 proceeding, it follows that I will not at this stage set that proceeding down for final hearing or stay or amalgamate it. One of the points of making orders for separate determination is to raise the possibility of avoiding a trial. 52 It seems to me plain that the 2004 proceeding will not be ready for final hearing for some time. It is necessary for evidence to be filed and any appropriate discovery to take place (although discovery in the 2003 proceeding might be used in the 2004 proceeding, by consent), bearing in mind that the pleadings and the cross-claim now substantially overlap with the issues in the 2003 proceeding. I agree with the submission by counsel for the defendant that, since the 2003 proceeding now encompasses the matters pleaded in the 2004 proceeding (including the cross-claim), the proceedings should be heard at the same time, if the 2004 proceeding is allowed to survive. It is also plain that the 2003 proceeding is not ready for final hearing. There are outstanding issues of discovery and the evidence of the defendants has not yet been filed. 53 It is not appropriate to make a final decision, at this stage, as to whether, if the plaintiffs fail in their Part 31 application, I should dismiss the 2004 proceeding or amalgamate with the 2003 proceeding. There may be something to be said to the view that the correct course will be simply to order that the two proceedings be heard together, with evidence in one being evidence in the other. This would preserve for the plaintiffs whatever advantage they may have, in terms, perhaps, of the nature of final orders and questions of onus of proof, through commencing the 2004 proceeding. It is a course not opposed by the other parties. In the meantime, I shall list the two proceedings together for each directions hearing. Conclusion 54 I therefore propose to make an order under Part 31 rule 2 of the Supreme Court Rules in the form set out in Appendix A. Subject to any submissions that the parties may care to put, I am inclined to reserve costs of the application at this stage. I shall bring the parties back for a directions hearing after they have had the time to consider these reasons for judgment. At the directions hearing, I intend to make the foreshadowed orders, and give directions for the preparation of the hearing for the separate determination of the questions. 55 I intend to adopt the suggestion put forward by senior counsel for the defendant, that I should make the order on the condition that the parties to the 2003 proceeding acknowledge that they will be bound by the answers to the questions given in the 2004 proceeding. This may not be necessary, but seems to me an appropriate way of avoiding any uncertainty with respect to estoppel and res judicata. * * *

APPENDIX A Proposed questions for separate determination A. Order pursuant to Part 31 rule 2 that the Court determine separately, before the trial of any other issue in the proceedings (such as discretionary issues and any issues as to the relief, if any, which is appropriate consequent upon the answers to the questions, including any equitable relief) the following questions:

1. At the second meeting of creditors held on 29 August 2003 under s 439A of the Corporations Act, did the creditors of each of the following NYOL Group companies ("Companies") pass resolutions pursuant to s 439C that each of the Companies execute deeds of company arrangement: Clynton Court Pty Ltd ("Clynton") Quotidian No.117 Pty Ltd Australian Metals Corporation Pty Ltd Great Central Holdings Pty Ltd Great Central Investments Pty Ltd Great Central Mines Pty Ltd Matlock Castellano Pty Ltd Matlock Mining Pty Ltd Newmont Wiluna Metals Pty Ltd?
2. If the answer to question 1 is "no": (a) in respect of the deed of company arrangement executed by Clynton Court ("Principal DOCA") and the deeds of company arrangement executed by the other Companies ("Secondary Deeds"), was there "execution" thereof purportedly by Clynton Court and the other Companies within the meaning of Clause 3.1 of each such instrument and also within the meaning of Clause 3.1 of the Secondary Deed entered into by Newmont Yandal Operations Pty Ltd? (b) In respect of the condition precedent in Clause 3.1 of each of the Principal DOCA for Clynton Court, the Secondary Deeds for the other Companies and also the Secondary Deed for Newmont Yandal Operations Pty Ltd, was that condition satisfied by the purported execution of the instruments identified therein even in the absence of the said creditors' resolutions? (c) Are the Principal DOCA and Secondary Deeds for the Companies: (i) presumed to be valid until such time as a Court declares or orders otherwise under s 445G? (ii) by reason of s 445H, operative between the time of their purported execution until termination under Clause 5.1 thereof or a Court making a declaration or order that such Deeds are void under s 445G?

If the answer to question 1 is "no", was the purported execution of the Principal DOCA (in the case of Clynton Court) or each Secondary Deed (in the case of the other Companies) in the absence of the required creditors' resolutions: (a) a procedural irregularity within the meaning of s 1322(2)? (b) a contravention of the Act within the meaning of s 1322(4)(a)? (c) an act, matter or thing, or a proceeding essentially of a procedural nature within the meaning of s 1322(6)(a)(i)?

If the answer to question 1 is "no": (a) does the Court have jurisdiction or power under s 445G(2) to now order that the Principal DOCA (in the case of Clynton Court) and the Secondary Deeds (in the case of the other Companies) are not void? (b) is the Court's exercise of jurisdiction or power under s 445G(2) limited by s 445G(3)?

If the answer to question 1 is "no": (a) was the execution of the Principal DOCA and the Second Deeds for each of the other Companies in the absence of the required creditors' resolutions a "contravention" of a provision of Part 5.3A within the meaning of s 445G(3)? (b) if "yes" to (a), was such a provision of Part 5.3A "substantially complied with" within the meaning of s 445G(3)(a)?

Do the provisions of ss 445G and 445H provide a statutory codification: (a) executing any jurisdiction or power otherwise than under s 445G to declare the Principal DOCA and the Secondary Deeds to be void or invalid? (b) which precludes the Court's jurisdiction or power to make an order or declaration inconsistent with s 445H?

If the answer to question 1 is "no", were the Principal DOCA and the Secondary Deeds for the Companies valid deeds of company arrangement nevertheless, by the operation of s 451C(a)?

If the answer to question 1 is "no", does the Court have jurisdiction or power under s 447A(1) to modify the operation of Part 5.3A in respect of each of the Companies such that: (a) the creditors of each of the Companies are deemed or taken to have resolved to execute the Principal DOCA (in the case of Clynton Court) and the Secondary Deeds (in the case of the other Companies) in accordance with s 439C? (b) alternatively, the Principal DOCA and the Secondary Deeds were properly executed under s 444B? (c) alternatively, the Principal DOCA and the Secondary Deeds are and were at all relevant times valid and/or to be treated as deeds of company arrangement within the meaning of Part 5.3A?

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