Ray Brooks v NSW Grains Board No.2

Supreme Court of NSW|2002-06-12|Before: Austin J

CITATION : Ray Brooks v NSW Grains Board No.2 [2002] NSWSC 1175 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2078/02 HEARING DATE(S) : 12 June 2002 JUDGMENT DATE : 6 December 2002

Ray Brooks Pty Ltd (P) PARTIES : NSW Grains Board (Subject to scheme of arrangement) (D1) Murray Campbell Smith (as Scheme Administrator of D1) (D2) JUDGMENT OF : Austin J

COUNSEL : Mr R D Strong (P) Mr B A Coles QC with Mr D R Pritchard (D) SOLICITORS : Mallesons Stephens Jaques (P) Henry Davis York (D) CATCHWORDS : CORPORATIONS - schemes of arrangement - arrangement under special statute incorporating provisions of Corporations Act and Corporations Regulations - whether administrator of scheme has power to consent to variation of creditor's claim - whether Court may extend time for lodgement of claim, notwithstanding provisions of scheme document Corporations Act 2001 (Cth) ss 553C, 554A LEGISLATION CITED : Corporations Regulations Regs 5.6.54, 5.6.56 Corporations (Ancillary Provisions) Act 2001 (NSW) s 11 Grain Marketing Act 1991 (NSW) ss 80, 82 Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 Bond Corporation Holdings Ltd v Western Australia (1992) 7 ACSR 472 Caratti v Hillman (1973) 4 ACLR 170 Commissioner for Corporate Affairs v Harvey [1980] VR 669 Ex parte Adamson, re Collie (1978) 8 Ch D 807 Harrison v Kirk [1904] AC 1 Kempe v Ambassador Insurance Co [1998] 1 WLR 271 Ray Brooks Pty Ltd v NSW Grains Board [2002] NSWSC 374 CASES CITED : Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 Re Autolook Pty Ltd (1983) 8A CLR 419 Re Matine Ltd (1998) 28 ACSR 268 Re NFU Development Trust Ltd [1972] 1 WLR 1548 Re Nostata Pty Ltd (1986) 4 ACLC 584 Re Safety Explosives Ltd [1904] 1 Ch 226 Re Terri Co Pty Ltd (1987) 12 ACLR 457 Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Westpac Banking Corporation v Morton (1988) 79 ALR 206 DECISION : See under heading "Conclusions"

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2078/02 RAY BROOKS PTY LTD V NEW SOUTH WALES GRAINS BOARD (SUBJECT TO SCHEME OF ARRANGEMENT) & ANOR JUDGMENT (revised to correct typographical errors, 9 December 2002) 1 HIS HONOUR: The New South Wales Grains Board ("the Grains Board"), the first defendant, was established by the Grain Marketing Act 1991 (NSW) ("the Act"), to improve the marketing of course grains and oilseeds in New South Wales. Its financial position had deteriorated by the year 2000, and consequently in October 2000 the Grains Board negotiated with its bankers to enable it to continue operations. 2 The immediate outcome of these negotiations was as follows. The Grains Board's day-to-day grain marketing and related functions were sold to Grainco Australia Ltd, in a transaction effectuated by a deed dated 30 October 2000. The deed provided for Grainco to perform contractual obligations of the Grains Board, subject to a contract review process. On the same day, a "standstill agreement" was made between the Grains Board and various banks, in which the banks agreed to forbear from taking enforcement action against the Grains Board under certain circumstances. A new standby facility was provided by the banks on the same day, to enable the Grains Board to meet outstanding liabilities to creditors. 3 On 10 November 2000 Mr Murray Smith, the second defendant, was appointed administrator of the Grains Board under s 31 of the Act. He made an assessment that there was a substantial deficiency of assets of the Grains Board to meet its liabilities. Under the contract review process, Grainco Australia had decided not to meet the Grains Board's obligations under certain contracts, exposing the Board to claims for damages for breach of contract in a substantial amount, although the Board contested Grainco's decisions. Additionally, some creditors had emerged after October 2000, who had not been provided for in the financial arrangements then made. Mr Smith formed the view that the Grains Board was insolvent. On 9 February 2001 he filed an application with the Court for the winding up of the Grains Board. 4 As an alternative to liquidation, Mr Smith developed a compromise scheme ("the Grains Board Scheme") with a view to achieving a better return for creditors than would be available in liquidation. Eventually the Grains Board Scheme was approved by creditors and the Court, as a compromise or arrangement under s 80 of the Act. Under s 80, a compromise or arrangement becomes effective after it has been agreed to at a meeting or meetings of creditors convened in accordance with the Court's orders, and it has been approved by order of the Court, when an office copy of the order approving the arrangement is lodged with the Minister. Section 82 states that any rules of court having effect for the purposes of the Corporations Law apply, with such adaptations as are necessary, as rules for the purposes of the compromise or arrangement provisions of the Act. Section 80 is closely modelled on the scheme of arrangement provision in the Corporations Act 2001 (Cth), namely s 411. 5 The Court made orders for the convening of meetings on 10 August 2001. Meetings were held on 18, 19 and 20 September 2001, and the Court made orders approving the Grains Board Scheme on 24 October 2001. 6 The plaintiff ("Ray Brooks") claims to be a creditor of the Grains Board for a very large amount. It made a claim under the Grains Board Scheme for $17,843,388.92 ("the First Claim"). Subsequently, after receiving advice, it lodged a claim for $31,343,127 ("the Second Claim"), intended to replace the First Claim. At the time of the hearing, Mr Smith was still considering the First Claim, but he had rejected the Second Claim. The present proceeding is an appeal against rejection of the Second Claim, under reg 5.6.54 of the Corporations Regulations, made applicable by clause 2 of Schedule 3 to the Scheme Document for the Grains Board Scheme. The purpose of the proceeding is to test the validity of Mr Smith's rejection, or to reverse the practical effect of it. 7 The plaintiff's amended summons seeks declarations and orders that raise the following issues: · whether the plaintiff was entitled to vary the First Claim, and whether Mr Smith was authorised by the Grains Board Scheme to permit a variation; · whether, as a matter of fact, Mr Smith consented to the plaintiff varying the First Claim by lodging the Second Claim; · whether the Grains Board Scheme authorised Mr Smith to extend the time for lodging claims, so as to permit the Second Claim to be admitted after the lodgement date for claims; · whether it is open to the Court to extend the time for lodging claims so as to permit lodgement of the Second Claim, under the Supreme Court Rules or otherwise. 8 The Amended Summons also sought a declaration that the Grains Board Scheme was not binding on creditors of the Grains Board because the meeting held to approve the Scheme was not held in accordance with the Court's orders made on 20 August 2001. I made orders striking out that prayer for relief on 1 May 2002, delivering written reasons for judgment on that day: Ray Brooks Pty Ltd v NSW Grains Board [2002] NSWSC 374. The relationship between Ray Brooks and the Grains Board 9 Ray Brooks was incorporated in Victoria in 1986 and carries on the business of grain merchants. Prior to the incorporation of the company, the same business had been conducted by Mr Raymond Brooks since 1958. The present managing director of the company, Mr Chris Brooks, is the son of Mr Raymond Brooks. 10 Ray Brooks has had a commercial relationship with the Grains Board since the inception of the latter in 1991. During most of the 1990s, the Grains Board engaged Ray Brooks, on a contract by contract basis, to accumulate various types of grain products, which would be marketed by the Grains Board. 11 In 1996 the company and the Grains Board entered into an arrangement referred to in evidence as "the storage joint venture". A company called Bulk Grains Storages Pty Ltd, which was wholly owned by the Brooks family, owned and leased various grains storage sites in New South Wales and Victoria. By a share sale agreement made in December 1996, 50% of the issued share capital of Bulk Grains Storages was sold to the Grains Board. At the same time, a Shareholders and Management Agreement was entered into, which gave the Grains Board a degree of control over the storage sites used by Ray Brooks, and ensured that the Grains Board would fill those storage sites before others in which it did not have an interest. 12 In October 1999 Ray Brooks entered into a marketing joint venture with the Grains Board. The business of the joint venture was the purchase, storage and sale of grain products in defined areas of Victoria, South Australia and New South Wales. Its purchasing strategies were decided by the Grains Board and Ray Brooks on a daily basis. It was the responsibility of Ray Brooks to purchase the grain from growers and to arrange transport and storage. The Grains Board provided funding. Once grain had been accumulated, it was gradually sold off when market conditions were regarded as most favourable. Almost all the grain was purchased and accumulated during the harvest, a period of about six weeks from mid-November to the end of December or early January. 13 At the end of the 1999/2000 harvest, the joint venture had accumulated about 600,000 tonnes of grain, according to the evidence of Mr Chris Brooks. Mr Brooks says that as a result of the financial difficulties of the Grains Board, the Board withdrew from the joint venture, leaving Ray Brooks with a large amount of grain in storage, including grain from the 1999/2000 harvest. Ray Brooks claims to be entitled to damages because the Grains Board withdrew from the marketing arrangements in breach of the joint venture agreement. 14 It is unnecessary and inappropriate to make any findings with respect to this claim, some of the components of which changed between the making of the First Claim and the making of the Second Claim. I shall return to a comparison of the two claims later. Specifically, I shall not attempt to resolve the conflicting evidence that was adduced as to whether a meeting between representatives of Ray Brooks and Mr Smith and his staff was held on 30 October 2001, or on 13 November 2001, and as to whether anything was said at the meeting with respect to revocation of the joint venture. The financial position of the Grains Board prior to the Grains Board Scheme 15 It is also unnecessary and inappropriate for me to give a comprehensive account of the Grains Board's financial position in 2001. However, some aspects of it need to be noted, because they contribute to an understanding of the operation and effect of the Grains Board Scheme. The relevant facts are taken from the explanatory statement for the Grains Board Scheme. 16 At the time when the Grains Board Scheme was formulated and proposed to creditors, Mr Smith had identified a net deficiency of up to about $151 million (as at July 2001). There were claims against the Board by New South Wales farmers ("Farmer Claims") arising in connection with the supply of grain to the Grains Board's grain pools in 1999/2000. There were also some claims by interstate farmers in connection with supply of grain, to the Board's grain pools, which was grown and harvested outside New South Wales ("Interstate Farmer Claims"). There were also ordinary unsecured creditors of the Grains Board ("Unsecured Creditors"), including priority creditors. Mr Smith estimated the total of the Farmer Claims, Interstate Farmer Claims and the claims of other unsecured creditors at $29,093,000. 17 As I have mentioned, a dispute had arisen between the Grains Board and Grainco Australia with respect to the contract review process under the deed entered into between them on 30 October 2000. Unperformed contracts had resulted in claims against the Grains Board totalling in excess of $23 million. Mr Smith took the view that the Grains Board might have had a claim against Grainco Australia in respect of these matters, but for the purpose of calculating the Board's financial position, he disregarded the value of any such claim. 18 Loans had been made to the Board and by the Commonwealth Bank of Australia and Rabo Bank ("the Lenders"), under seasonal funding arrangements and under the standby facility referred to above, in the total amount of about $163 million as at 9 July 2001. Loan repayments of substantial amounts had been made by the Grains Board to the Lenders in recent times. Mr Smith considered that a liquidator would have a case both to challenge the Lenders' security, and to recover as unfair preferences repayments made in the period commencing six months before the relation-back day. Mr Smith estimated that a maximum amount of about $192 million of repayments might be recoverable in a liquidation. However, he recognised that the Lenders would be likely to defend any preference claims, and would argue that they had no grounds for suspicion of the Grains Board's insolvency during the relation-back period. He calculated that if 47.3% of the maximum amount were recovered from the Lenders, creditors generally would receive 45 cents in the dollar, while if 76.6% of that amount were recovered, creditors would receive 55 cents in the dollar. 19 Because the collapse of the Grains Board might have serious implications for farmers and others, raising issues of policy and the public interest, the Government of New South Wales was prepared to provide some financial assistance. A compromise or arrangement under the Act would provide a framework within which Government assistance could be provided. The Grains Board Scheme 20 Essentially, Mr Smith negotiated arrangements with the Government and the Lenders under which the Farmer Claims would be paid in full with the assistance of Government funding, and a substantial portion of the claims of other unsecured creditors (including Interstate Farmer Claims) would be paid with the assistance of funding from the Lenders. The Lenders compromised their claims for recovery of money lent to the extent provided for in the Scheme Document, and agreed to make further funds available for the purposes of the Scheme. Although the Grains Board Scheme does not in terms release the Lenders from any unfair preference claims, under the Scheme there would be no liquidation and therefore no occasion to pursue unfair preferences. 21 Clause 2 of the Scheme Document sets out the objectives of the Scheme. One objective (clauses 2.3.1 and 2.4.4) was to avoid the uncertainties and asset realisation risks associated with a winding up. Another (clause 2.4.5) was to produce a return to unsecured creditors that would be paid at an early future date and would be relatively certain in amount. Clause 2.6 provides that if there is any ambiguity as to the meaning or interpretation of the Scheme, the ambiguity is to be resolved having regard to the objectives recorded in the Scheme Document. 22 Under the Grains Board Scheme, two funds have been created, namely the Grain Pool Fund and the General Scheme Fund. The Grain Pool Fund is made up of money provided by the State and "ABF collections", to a maximum of $13 million. ABF (authorised buyers' fees) collections are fees charged to producers of commodities for the Grains Board exempting sales of those commodities from the operation of the pooling arrangements in s 45 of the Act. The Grain Pool Fund has been constituted under the Scheme to pay Farmer Claims in full up to a limit of $13 million less certain expenses and costs. 23 The General Scheme Fund is a fund of up to $17.5 million provided by the Grains Board's bank accounts and funds received by Mr Smith, and the "Lenders' Contribution". The Lenders entered into commitments in the Lenders Deed of Covenant, which, generally speaking, ensure that the General Scheme Fund is not less than the amount required to pay a dividend to unsecured creditors of 61 cents in the dollar, but is in any event no more than $17.5 million (less prepaid priority claims). 24 The General Scheme Fund is to be used to pay priority claims to employees of up to $350,000, and then a dividend to unsecured creditors (other than the Farmer Creditors but including Interstate Farmer Creditors). The amount of the dividend varies depending upon the total amount of participating claims. In the explanatory statement for the Scheme, Mr Smith calculated that, for example, if the participating claims were less than $7 million, the dividend payment rate would be 65%. If the participating claims were more than $25 million but less than $34.3 million, the dividend payment rate would be 50%. 25 The Lenders are not included in these distributions. The returns to them depend upon the ultimate recoveries from assets, and are to be paid to the Lenders over time. Mr Smith estimated a return of between 56 and 58 cents in the dollar to Lenders. 26 Under the terms of the Scheme, the rights of creditors at general law (in respect of claims arising before 2 November 2000) are replaced by their entitlement to receive a distribution under the Scheme (clauses 6.7, 7.6 and 9.4). By its terms, the Scheme imposes a moratorium preventing creditors from taking any action to pursue their claims or to wind up the Grains Board (clauses 5.1 and 9.3). 27 Mr Smith is the Administrator of the Grains Board Scheme. The provisions of the Scheme for admission of claims 28 After payment of priority claims in full, the General Scheme Fund is to be distributed under clause 7.5.2 of the Scheme Document in payment of a dividend on "all Admitted Claims that are Participating Claims (including, for the avoidance of doubt, Interstate Farmer Claims)". 29 "Admitted Claims" are defined to mean Claims admitted to proof by the Administrator or otherwise established pursuant to the provisions of the Arrangement relating to the determination of Claims. "Participating Claims" are defined, in a circular way, to mean the Claims that are to participate in a distribution out of the General Scheme Fund as provided for in clause 7.5.2, being Claims of Unsecured Creditors that are admitted to proof by the Administrator or otherwise established pursuant to the provisions of the Arrangement relating to the determination of Claims. Farmer Claims, which are provided for out of the Grain Pool Fund, are excluded from the definition. The word "Claims" is defined very broadly, to include all causes of action, whether certain or contingent, present or future, ascertained or sounding only in damages, provided that the circumstances giving rise to them occurred on or before 10 November 2000. 30 The arrangements for proving and admission of claims are detailed in Schedule 3, made applicable by clause 10 of the Scheme Document. Clause 1.1 of Schedule 3 provided for the Administrator to issue a notice to unsecured creditors (but not Farmer Creditors), requiring that they formally prove their claims on or before a stated date, which became the "Lodgement Date". An advertisement to similar effect was required by clause 1.2 to be lodged in various newspapers. The Administrator's notice was required to comply with Schedule 4. 31 The following provisions of Schedule 3 are of particular importance: " 1. FORMAL PROOF OF UNSECURED CREDITORS' CLAIM The Administrator will issue a notice to all Unsecured Creditors other than Farmer Creditors and Interstate Farmer Creditors, requiring them to formally prove their Claims and: … 1.3 subject to paragraph 7 of the Schedule, in order to have their Claims admitted so as to participate in a distribution from the General Scheme Fund, those Unsecured Creditors must formally prove their Claims to the Administrator by lodging with the Administrator a Form 535 Formal Proof of Debt or Claim (General Form) and accompanying documents evidencing the Claim by the Lodgement Date."

" 2. APPLICATION OF DIVISION 6 OF PART 5.6 OF THE LAW Except where inconsistent with a provision of this Arrangement, the provisions of subdivisions A, B, C and E of Division 6 of Part 5.6 of the Law and the Regulations applicable to those provisions, apply to the making, determination and admission of Claims of Unsecured Creditors under this Arrangement as if the references to the liquidator were references to the Administrator. …"

" 7. LIMITATION OF CLAIMS WHERE NO PROOF OF DEBT SUBMITTED Any Unsecured Creditor to whom the notice referred to in paragraph 1.1 of the Schedule is sent must submit a proof of debt to formally prove their Claim so that it is received by the Administrator by the Lodgement Date, failing which: 7.1 the Administrator will assess the Claim by reference to the material presently in the Grains Board's possession; and 7.2 the Administrator must not admit the Claim for an amount that exceeds the amount ascribed to that Creditor in the list of Claims recorded in schedule # of the Explanatory Statement."

I should interpolate here that, although "schedule #" are the words appearing in clause 7 of Schedule 3 to the Scheme Document, Schedule 9A to the Report as to Affairs which was Appendix 1 to the Explanatory Statement of August 2001 is a list of contingent liabilities, which includes "Louis Dreyfus/Ray Brooks - possible damages claim in respect of NSWGB contracts - gross liability $117,834 - estimated to rank for or capped at $117,834". Schedule 9A appears to be the schedule intended to be designated by clause 7, and therefore the amount ascribed to the plaintiff for the purposes of clause 7 is $117,834. However, since the First Claim was lodged within time (in the circumstances that I shall describe), clause 7.2 has no application in respect of that claim or any permitted amendment of it. " 8. TREATMENT OF LATE CLAIMS If a Claim (or a revised Claim) is received after the Lodgement Date from an Unsecured Creditor to whom a notice referred to in paragraph 1.1 of this Schedule was not sent, the following provisions will apply to it: 8.1 the Claim must not be admitted if the distribution to Participating Creditors under clause 7.5.2 has been made in full; 8.2 the Claim must not be admitted to the extent that its admission would cause the Dividend Rate to fall (ie by causing the Total Value of Participating Claims to exceed one of the threshold levels in clause 7.7) and interim dividends have already been paid to some Creditors in an amount that exceeds the Dividend Rate that would apply if the Claim were to be admitted; 8.3 the Claim must not be admitted if it is received after the Dividend Cut Off Date; 8.4 the Claim will otherwise be assessed and will, if proven, be admitted." 32 Clause 8 does not apply because Ray Brooks is a creditor to whom the notice referred to in paragraph 1.1 was sent, on 8 November 2001. I have set it out because it may be of assistance in the construction of clauses 1,7 and 9. " 9. EXCLUSION OF CLAIMS FROM PARTICIPATION IN DISTRIBUTION FROM GENERAL SCHEME FUND Except as permitted by paragraphs 7 and 8 of this schedule, all Claims not received by the Administrator on or before the Lodgement Date will not participate in a distribution from the General Scheme Fund notwithstanding that they will be subject to the Moratorium and extinguishment provisions of this Arrangement." 33 The notice issued by Mr Smith under clause 1.1, complying with schedule 4, did not specifically draw attention to the effect of clause 9. Relevant provisions of the Corporations Act and Regulations 34 Although clause 2 of Schedule 3 refers to the Corporations Law, it appears that those references are to be updated to become references to the corresponding provisions of the Corporations Act and the regulations made under it, with respect to facts occurring after the commencement of the Corporations Act in July 2001: Corporations (Ancillary Provisions) Act 2001 (NSW), s 11(1). The facts with respect to the making of the First and Second Claims and the rejection of the latter all occurred after the commencement of the Corporations Act. Nothing turns on this, because the provisions of the Corporations Law and Regulations relevant to this case are not materially different from the corresponding provisions of the Corporations Act and Regulations. However, I shall refer to the Corporations Act and its Regulations. 35 Clause 2 makes ss 553 to 554J and ss 563B to 564 of the Corporations Act applicable to the making, determination and admission of claims by unsecured creditors under the Scheme. Thus, for example, the set-off provisions of s 553C may be relevant to the claim by Ray Brooks. Section 554A, as applied by clause 2, would require Mr Smith as the Scheme Administrator to make an estimate of the value of the claim by Ray Brooks as at the relevant date, 10 November 2000, or refer the question of the value of the claim to the Court, if the Claim became an admitted claim. Ray Brooks would have a right of appeal to the Court against Mr Smith's estimate of the value of its claim under s 554A(3) and reg 5.6.43A. 36 It appears that the Corporations Regulations made relevant by clause 2 are regs 5.6.39 to 5.6.57. The requirements for a formal proof are set out, as to form, in reg 5.6.49, and as to content, in reg 5.6.50. Rejection of proofs, and appeal from rejection, are governed by regs 5.6.53 and 5.6.54. 37 Withdrawal or variation of a proof of debt or claim is governed by reg 5.6.56, which provides that: "A proof of debt or claim may be withdrawn, reduced or varied by a creditor with the consent of the liquidator." Facts regarding the plaintiff's claim 38 Mr Smith's notice, required by clause 1.1 of Schedule 3 to the Scheme Document, was dated 31 October 2001. It required proofs of debt to be lodged on or before 3 December 2001, which became the "Lodgement Date" for the purposes of the Scheme. The Dividend Cut Off Date under the Scheme was fixed at 31 December 2001. 39 On 31 October 2001 Mr Chris Brooks wrote to Mr Smith drawing attention to claims under the marketing joint venture agreement between Ray Brooks and the Grains Board made in October 1999. Mr Smith replied on 1 November 2001 saying that to his knowledge Ray Brooks had not established any claim against the Grains Board that had required acceptance or settlement, and asserting that there was a significant amount owing by Ray Brooks to the Board. He sought the company's co-operation to reconcile the trading account, and said that if Ray Brooks had a Claim, a proof of debt should be lodged. He said he would send the appropriate form. 40 Mr Smith's demand for information and for the lodgement of a proof of debt came at a bad time for Ray Brooks. The grain harvest was about to begin, and for the ensuing six weeks or more all of the staff of Ray Brooks were extremely busy. Nevertheless, Mr Brooks replied on 2 November 2001, asserting that officers of the Grains Board were well aware of the claims made by Ray Brooks, and the reasons why it disputed that it had any liability to the Board. The letter did not indicate that Ray Brooks intended to lodge a very large claim, but it implied that a claim would be lodged with respect to the marketing joint venture. The letter said that Mr Brooks awaited receipt of a form of proof of debt. 41 A form of proof of debt was sent by Mr Smith to Mr Brooks on 8 November 2001, under cover of a letter also enclosing a copy of the notice dated 31 October 2001, which required creditors to submit claims on or before 3 December 2001. 42 Ray Brooks lodged a formal proof of debt (Form 535) and annexures dated 28 November 2001, under cover of a letter by Chris Brooks as managing director, bearing the same date (the First Claim). The proof of debt and some of the accompanying documents were transmitted by facsimile on 30 November 2001, and the document and annexures were sent by express post on the same day. Mr Smith does not assert that the First Claim was lodged out of time. 43 The First Claim alleged breach by the Grains Board of the joint venture between it and Ray Brooks made in October 1999, and made claims to damages for lost management fees, transport income losses, storage concession losses and for the supply of grain and recovery of storage. There were separate claims for $17,373,365.84 and $470,023.08. I accept evidence given on behalf of Ray Brooks that the proof of debt was prepared by the company without external assistance, and in very difficult circumstances because of the pressures of the grain harvest. 44 Mr Smith wrote to Ray Brooks requiring further particulars of the First Claim, by letter dated 10 December 2001, attaching a schedule summarising the information required. He said he could not make any determination to accept or reject the First Claim until the further and better particulars were provided. He noted that the timeframe for submission of proofs of debt had elapsed and that he intended to declare an interim dividend, but would set aside funds sufficient to pay an equalising dividend in the event that the First Claim was ultimately admitted. 45 Mr Smith wrote again on 21 December 2001, repeating his request for particulars and noting that he had received no response to his earlier letter. He foreshadowed his intention to reject the proof in full on 11 January 2002, unless the particulars previously sought were provided within an agreed timeframe. 46 Mr Smith declared and paid an interim dividend of 40 cents in the dollar to unsecured creditors on 21 December 2001, on their Admitted Claims. In a circular accompanying the payment he explained the reason for the discrepancy between the maximum payment of 61 cents in the dollar contemplated by the Grains Board Scheme, and the interim amount of 40 cents. He said that the difference was due to the impact of substantial additional claims submitted in the Scheme. He set out some figures that showed that the total unsecured claims estimated in the explanatory statement and additional materials was $28,350,000, whereas the claims made as at 3 December 2001 amounted to $43,228,000. Mr Smith said that if all claims submitted by the lodgement date were admitted in full, there would be sufficient funds to pay creditors only 40 cents in the dollar. 47 Ray Brooks decided to engage a firm called "Pattison's Business Advisers and Insolvency Specialists" to assist it to respond to Mr Smith's requests for particulars. On 10 January 2002 Mr Paul Pattison, a principal of the firm, wrote to Mr Smith saying that he had been engaged for this purpose, and seeking an extension of time to provide particulars and supporting documentation. The letter made it plain that Mr Pattison's brief was to supply particulars, and no mention was made of a further proof of debt. 48 Mr Smith replied on 11 January 2002, agreeing to an extension, to 12 February 2002, to comply with the request he had made on 10 December 2001 relating to compilation of support for the proof of debt. A proviso to this consent was that a schedule of all of the joint venture records in the possession of Ray Brooks was to be provided by 14 January 2002. 49 Mr Pattison was on vacation for the last two weeks of January 2002 but the staff of the firm continued to work on the matter. Then on 5 and 6 February 2002 Mr Malcolm Howell, executive manager of Pattison's Business Advisers and Insolvency Specialists, visited the offices of Ray Brooks and formed the view that the First Claim was understated by about $60 million. He telephoned Mr Pattison to tell him, and later on 6 February Mr Pattison left a message for Mr Smith informing him that the claim by Ray Brooks might increase by $60 million. Then Mr Howell checked his calculations and realised that he had made an error. On 7 or 8 February he told Mr Pattison that he had reassessed the loss of profits claim and believed that the increase would only be about $6 to $8 million. 50 Mr Pattison had a telephone conversation with Mr Smith on 8 February 2002. According to Mr Pattison, the conversation was as follows: Pattison: "One of my staff members has been up to Ray Brooks' offices in Barooga to investigate the documentation to support their claim. We're going to lodge an amended claim. Originally we thought that Brooks' claim might increase by about $60 million, but we think now that it will be more like $6 million. We must have put a decimal point in the wrong place. I thought the best approach would be for us to sit down and go through the claim together before we formally lodge it." Smith: "Submit the information to me and I'll have a look at it." Pattison: "We're still doing some more work on it, so we will need a further extension of time to put all the supporting documents together." Smith: "How much time to you need?" Pattison: "Until about the 18th of February." Smith: "Okay." 51 In his evidence Mr Smith agreed with Mr Pattison's account of the conversation except in one respect. He said that his reply to Mr Pattison's proposal to sit down and go through the claim together was: Smith: "I don't see any purpose in reviewing draft documents with you. Submit the information to me and I'll consider it." 52 Mr Smith's qualification to Mr Paterson's account of the conversation was not specifically denied on behalf of the plaintiff. I accept Mr Smith's version of the conversation. 53 Mr Smith asserted that neither he nor any member of his staff verbally agreed to allow an amended proof of debt to be lodged on or before 18 February 2002, and that the only extension given was to submit further information in support of the First Claim, in response to Mr Smith's written requests. I shall return to this point. 54 Mr Pattison wrote to Mr Smith on 8 February, referring to his discussion and saying that members of his office had undertaken an audit of the documentation available "in support of the claim lodged". The letter said: "As agreed a formal proof of debt with supporting documentation will be lodged on or before 18 February 2002 for your consideration." 55 Mr Pattison wrote to Mr Smith on 18 February 2002 (transmitted by facsimile late on that day), enclosing what he called "an amended formal Proof of Debt form" submitted on behalf of Ray Brooks (the Second Claim). The letter purported to explain the components of the increased claim of $31,343,127. It did not specifically compare the new claim with the previous one, and so it was not immediately obvious whether the new claim merely expanded the components of the earlier claim, or added new components. 56 However, affidavit evidence given by Mr Howell addresses the point in some detail. That evidence indicates that, although various adjustments to the First Claim were made in the Second Claim, the main components accounting for the dramatic increase in the total claim were as follows: 1. The claim for loss of transport profits was increased by $7.203 million (from $4.8 million to $12,003,039), because Mr Howell recalculated the First Claim by taking actual tonnages transported in the 1999-2000 season, applying estimates of profitability based on figures supplied by Ray Brooks at his request, and then assuming that the same level of profitability would apply over the lifetime of the joint venture. In particular, the estimated average profit per tonne was increased from $3 to $9.62. 2. The claim for a pool receivables fee was increased by $189,849 (from $1.6 million to $1,789,847). The original claim was based on a tonnage of 200,000, and the revised claim increased the tonnage to 223,731. 3. A new claim for $10.285 million was made for loss of Ray Brooks' 50% share of future profits of the joint venture, based on the actual profits of the joint venture in the first of its five years of operation, and the assumption that the same level of profitability would have applied for the remaining four years. 4. A new claim was made for $2.88 million for loss of income under the storage joint venture made in December 1996, for grains stored in sites owned or leased by Bulk Grains Storages. 5. A new claim in respect of loss on prime mover leases of $932,992. The claim appears to be in respect of rentals for two prime movers and four trailers which Ray Brooks had ordered in respect of the joint venture and which were leased for a five-year term commencing October 2000 at a rental of $15,582.30 per month. 57 It should be noted that an item in the First Claim for management fees for joint venture purchases was reduced by $1.738 million in the Second Claim, and an offset of $6,252,285 was allowed in the Second Claim but not in the First Claim. 58 On 15 March 2002 Mr Smith wrote to Mr Chris Brooks by facsimile, referring to the proof of debt dated 18 February 2002, and enclosing a notice of rejection. The letter said that the proof of debt dated 28 November 2001 remained under consideration, and Mr Smith would be in contact regarding further information or clarification shortly. The enclosed Notice as to Rejection of Formal Proof of Debt or Claim stated as the ground for disallowance of the whole claim dated 18 February 2002: "the Claim was received by me after the lodgement date which was 3 December 2001 and is therefore not entitled to participate in a distribution from the General Scheme Fund". 59 On 20 March 2002 Mr Pattison wrote to Mr Smith inviting him to revoke his decision, and seeking his consent to a variation of the First Claim pursuant to reg 5.6.56 under the Corporations Act. The letter said that if Mr Smith did not accede to this request, an appeal would be made against his decision and past correspondence and discussions would be relied upon to show that consent was verbally given to allow an amended proof of debt to be lodged on or before 18 February 2002. 60 On 22 March 2002 Mr Smith replied to Mr Pattison, saying that he was unable to revoke his decision because the Corporations Regulations relating to variation of proofs of debt were inconsistent with the provisions of the Scheme and therefore did not apply. This was because the Scheme did not permit him to admit claims from creditors after the lodgement date of 3 December 2001 (where the creditor had received the notice required by the Scheme) or after the dividend cut off date of 31 December 2001 (where the claim was a late claim). He denied that he had authorised lodgement of an amended proof of debt on or before 18 February 2002, or at all. 61 In a circular to creditors dated 8 April 2002, Mr Smith updated the position with respect to disputed claims. He said that claims to the value of $22,754,000 had been admitted. He noted that the claim by Ray Brooks on 28 November 2001 for $17,843,000 had been "stood over", and that the claim by Ray Brooks on 28 February 2002 for $31,343,000 (which included elements of the proof of debt dated 28 November 2001) had been rejected. Mr Smith explained that he rejected the latter claim on the basis that it was submitted after the claims lodgement date. He noted that Ray Brooks had commenced the present proceeding seeking to set aside his decision. 62 Mr Smith said he held General Scheme Funds of approximately $8.2 million to make further interim and final payments to unsecured creditors, but there were ten claims totalling $20.4 million upon which he would be required to adjudicate before he could determine the extent of further dividends. He continued: "The major claim impacting on the ability to declare further dividends is the Proof of Debt for $17.843 million submitted by Ray Brooks Pty Ltd ("Brooks") on 3 December 2001. The Proof is, inter alia, in respect of alleged damages resulting from the purported termination on 30 October 2000 by NSWGB of a grain accumulation joint venture agreement entered into between NSWGB and Brooks during October 1999. I was unaware of and was not notified of the claim prior to the Scheme. I have requested further particulars to support the claim and I am liaising with Brooks to attempt to resolve and document its many elements. In the meantime, I am required to hold sufficient property in the General Scheme Fund to pay an equalising dividend to Brooks in the event the claim is admitted in full." Variation of proof of debt or claim

63 Regulation 5.6.56 of the Corporations Regulations expressly permits a creditor to vary a proof of debt or claim with the consent of the liquidator. It is one of the group of regulations which support Subdivisions A and B of Division 6 of Part 5 of the Corporations Act, and it is therefore a regulation "applicable" to those subdivisions. Clause 2 of Schedule 3 to the Scheme Document therefore has the effect, subject to one qualification, that reg 5.6.56 applies to the making, determination and admission of claims of unsecured creditors under the Scheme, as if the reference in the regulation to the liquidator were a reference to the Scheme Administrator. The qualification is that clause 2, in its terms, does not apply where a provision of the Corporations Act or Corporations Regulations is inconsistent with a provision of the Scheme. Therefore reg 5.6.56 applies to permit Ray Brooks to "vary" the First Claim unless the regulation is inconsistent with some provision of the Scheme Document.

64 Counsel for Mr Smith seeks to derive inconsistency from the following: · the binding effect of the Scheme, created by the combined effect of the Grain Marketing Act and the subsisting final order of the Court; · the specific object of the Scheme, in clause 2.4.5, to produce a return to unsecured creditors that is paid at an early future date and is relatively certain in amount; · clause 7.5 of the Scheme Document, which provides that the General Scheme Fund is to be distributed by the Administrator as soon as reasonably practicable, in contrast with the "saraband-like" process of winding up; · clause 7.6, according to which all rights of unsecured creditors in respect of their claims are forever extinguished and in lieu thereof the creditor is only entitled to receive the distributions provided for in clause 7.5; · the wide definition of "Claims", to encompass all aspects of the rights asserted by Ray Brooks against the Grains Board; · paragraph 1.3 of Schedule 3, according to which "Claims", so defined, must be formally proved by the Lodgement Date; · paragraph 7 of Schedule 3, according to which, if an unsecured creditor to whom notice has been given does not formally prove their "Claim" (as defined) by the Lodgement Date, the Administrator is to assess the claim by reference to the material in the Grains Board's possession, and in such a case the amount of Ray Brooks' claim is limited to $117,834; · paragraph 9 of Schedule 3, according to which all "Claims" (as defined) not received by the Administrator by the Lodgement Date are not to participate in the distribution from the General Scheme Fund.

65 If, as is likely, the word "inconsistent", when used in clause 2 of Schedule 3, refers to strict or logical inconsistency, then none of these provisions create any inconsistency between the Scheme Document and reg 5.6.56. The various provisions assert the proposition that the claim must be lodged on or before the lodgement date, if it is to be admitted to participate in the benefits of the Scheme. It is logically consistent with this proposition that the claim, so lodged, may subsequently be varied, even if the variation increases the amount of the claim.

66 If, however, the word "inconsistent" is to be given a broader meaning, to the effect that a regulation contrary to the spirit or policy underlying the provisions of the Scheme Document is inconsistent with them, the matter is more debatable. Even so, in my opinion the better view is that there is no "inconsistency" between reg 5.6.56 and the provisions of the Scheme Document.

67 Creditors' schemes of arrangement under companies legislation are closely analogous to the Scheme in this case. Creditors' schemes are frequently proposed as an alternative to liquidation, with a view to achieving an expeditious distribution to unsecured creditors. The present Scheme is hardly unique in this respect. When considering a creditors' scheme which purported to authorise the scheme administrator to admit or reject a late proof of debt in his sole, absolute and unfettered discretion (Re Nostata Pty Ltd (1986) 4 ACLC 584), McLelland J said (at 585): "I consider that generally speaking discretions of this kind are unsatisfactory. Unless there are special reasons to the contrary, I do not believe that creditors of a company which enters into a scheme of arrangement should be in a situation where, unless they lodge proofs within strict time limits imposed by the scheme (which they may conceivably not even be aware of), they will lose all entitlement to participate in distributions under the scheme, and perhaps have their claims barred, except at the uncontrolled discretion of a scheme administrator. I do not see why such creditors should be put in any worse position in relation to proof of claims and entitlement to share in distributions, than creditors in a winding up."

68 The general attitude to late claims in a winding up can be seen in such cases as Harrison v Kirk [1904] AC 1; see also, in the bankruptcy context, Westpac Banking Corporation v Morton (1988) 79 ALR 206, where there is also a survey of the case law on the amendment of proofs of debt. Counsel for the plaintiff submitted that a provision excluding any variation of a timely claim after the lodgement date, like a provision absolutely excluding any late claim from participation, would be confiscatory. He referred to Re NFU Development Trust Ltd [1972] 1 WLR 1548, where Brightman J quoted with approval from Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213, at 243, where Bowen LJ said that the object of the scheme of arrangement section of the Companies Act was not confiscation, and therefore a scheme in which a person might be required to give up everything and receive nothing might not be a scheme of arrangement for the purposes of the legislation at all.

69 The importance of such observations is that they disclose a discernible judicial attitude to provisions in a scheme of arrangement or other external administration that purport to exclude untimely claims absolutely - that is, without taking into account whether other creditors or the administrator would be unfairly prejudiced by the admission of the claim. According to McLelland J, the presence of provisions of this kind may provide a ground for the Court refusing to approve a creditors' scheme of arrangement. A particularly harsh clause might be so confiscatory, according to Bowen LJ's reasoning, that the arrangement does not qualify as a scheme at all.

70 Mr Smith's argument is that to allow variations after the lodgement date is to countenance procedures which will work against the speed and certainty that the Scheme was intended to deliver. Therefore, to give effect to the policy underlying provisions of the Scheme Document, there should be no power at all subsequently to make or receive a variation to a claim that has been lodged on or before the lodgement date.

71 Given the general approach of the courts that I have described, I would be reluctant to reach that conclusion unless there were compelling reasons to do so. But upon analysis, nothing in the policy underlying the Scheme Document supports Mr Smith's contention.

72 In my opinion, Mr Smith's approach could lead to unfair outcomes, surely not intended by the drafters of the Scheme. Consider, as an extreme case, a creditor who, by simple mistake, understates his claim in the proof of debt, and seeks to correct the mistake before any distribution has been made or other prejudice suffered. But unfairness can occur in less extreme circumstances - indeed, whenever there is a good explanation for the incorrect proof and, on balance, the prejudice to the creditor who is shut out exceeds the prejudice that other creditors would suffer if he were let in.

73 Moreover, Mr Smith's argument would not justify refusing variations on all occasions. It would not justify refusing to prevent variations made before any distribution had occurred. The argument would justify refusing a variation sought after all funds had been distributed, but it would not justify refusing a variation if a partial distribution had been made, provided that the variation was on terms that did not seek to undermine the existing distribution: compare, in other contexts, Re Safety Explosives Ltd [1904] 1 Ch 226; Ex parte Adamson, re Collie (1978) 8 Ch D 807. It would therefore be consistent with Mr Smith's argument to allow variations with the consent of the administrator. In deciding whether to consent, the administrator would act in a manner comparable to quasi-judicial capacity described by Brennan and Dawson JJ in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 338-9, and would be subject to the duty of impartiality discussed in such cases as Commissioner for Corporate Affairs v Harvey [1980] VR 669 and Re Autolook Pty Ltd (1983) 8A CLR 419. Acting in this fashion, the administrator would be expected to take into account whether distributions had already been made and consequently whether other creditors might be prejudiced if a variation were to be allowed. The administrator would also be expected to take into account what undertakings might be accepted or other arrangements might be made so as to avoid any such prejudice.

74 My conclusion is that, whatever might be the correct meaning of the word "inconsistent" in clause 2 of Schedule 3, reg 5.6.56 is not inconsistent with the provisions of the Scheme Document. Consequently Ray Brooks was entitled to vary the First Claim with the consent of Mr Smith.

75 However, reg 5.6.56 does not authorise anything more than a variation of a proof of debt or claim. It does not permit the creditor to substitute an entirely different claim for the one previously lodged. It is unnecessary in this case to give a precise definition of the word "varied" as it appears in reg 5.6.56. Some aspects of the Second Claim cannot be regarded as variations of the First Claim in any sense of the word. In my opinion the new claims of $10.285 million, $2.88 million and $932,992 were not variations of the First Claim. They introduced new categories of claim, and in one case, a different joint venture as the source of the claim. Conversely, the increased claim for loss of transport profits (an increase of $7.203 million) is properly regarded as a variation, although the quantum was increased very substantially, because the increased quantum flowed from a variation of the estimated average profit per tonne from $3 to $9.62. Similarly, the increase of $189,849 in the claim for a pool receivables fee was properly a variation, as was the reduction of $1.738 million for management fees for joint venture purchases.

76 As a result, it was open to Mr Smith to consent to some aspects of the Second Claim as variations, but not other aspects.

Did Mr Smith consent to a variation of the First Claim?

77 The plaintiff asserts that Mr Smith consented to the variation of the First Claim in his telephone conversation with Mr Pattison on 8 February 2002.

78 As I have indicated, some aspects of the Second Claim did not amount to variations of the First Claim, and to that extent Mr Smith had no power to accept the Second Claim as a variation of the First Claim. Putting that point aside, however, it seems to be clear on the facts that Mr Smith did not consent to any variation of the First Claim.

79 The conversation on 8 February arose in the context, made clear by the chain of correspondence beginning on 10 December 2001, of Mr Smith seeking further information about the First Claim. Mr Pattison was retained to assemble that information. On his own evidence, his staff conducted an audit to produce it. Although he said in the telephone conversation that his client intended to lodge an amended claim, and on the same day he said in a letter that there had been agreement that a formal proof of debt would be lodged on or before 18 February, it is implausible to contend that Mr Smith intended to respond on the telephone in any other manner than to extend the time for provision of information he had sought.

80 Further, I agree with the submission by counsel for Mr Smith that a consent, for the purposes of reg 5.6.56, must be a consent with knowledge. All that Mr Smith was told in the telephone conversation was that the claim might increase by about $6 million. No reasons were given, and indeed, when the Second Claim was finally made on 18 February, the increase was rather larger.

81 I therefore reject the contention that Mr Smith gave his consent for the purposes of reg 5.6.56 on 8 February 2002. There is no basis for contending that the consent was given on any other occasion.

82 It is reasonably clear from the provisions of the Scheme Document that there is no room for any implied authority to extend the time for lodging claims beyond the Lodgement Date.

83 Clause 1.3 of Schedule 3 is expressed in mandatory terms and requires claims to be lodged by the Lodgement Date. Clause 7 and clause 8 deal comprehensively with late lodgement of claims by unsecured creditors who have received a notice, and those who have not. Clause 9 excludes all claims not received by the administrator on or before the Lodgement Date, except in the circumstances set out in clauses 7 and 8.

84 Counsel for the plaintiff has not identified any provision of the Corporations Regulations capable of operating to permit the Administrator to grant an extension of time contrary to the clear effect of these provisions. Power of the court to grant an extension of time for lodgement of a proof of debt or claim

85 As I have said, the effect of s 82 of the Grain Marketing Act is to make the provisions of rules of court having effect for the purposes of the Corporations Act apply for the purposes of a compromise or arrangement under the Grain Marketing Act. The Corporations Rules of this Court do not expressly authorise the Court to extend time for compliance with a provision of a scheme of arrangement approved by order of the Court. However, Corporations Rule 1.3 (2) states that the other rules of the Court apply, so far as they are relevant and not inconsistent with the Corporations Rules, to a proceeding in the Court under the Corporations Act.

86 Part 40 rule 4 (1) of the Supreme Court Rules states that where a judgment or order requires a person to do an act within a specified time, the Court may, by order, require him to do the act within another specified time.

87 The question which is whether Part 40 rule 4 empowers the Court to extend the time for compliance with a provision of a scheme that sets a deadline for the lodgement of proofs of debt. On the one hand, the scheme, which contains the deadline, depends for its force on an order of the Court, suggesting that rule 40.4 is available. On the other hand, a compromise or arrangement under s 80 of the Grain Marketing Act (or, for that matter, under s 411 of the Corporations Act) depends for its efficacy on matters other than the order of the Court - specifically, in the case of s 80, approval by creditors at a meeting or meetings convened by order of the Court, and lodgement of an office copy of the Court's order approving the scheme with the Minister. Indeed, it is arguable that the ultimate source of the efficacy of the scheme is the legislation, which prescribes all of these things. Consequently, the argument runs, the rules of court are not a source of power to vary something taking effect in this manner.

88 The issue was addressed, admittedly in a different context, in Caratti v Hillman (1973) 4 ACLR 170. In that case the Full Court of the Supreme Court of Western Australia took the view that the procedure leading to the extinguishment of rights of creditors under a scheme of arrangement under companies legislation was a procedure created by order of the Court. The order approving the scheme of arrangement fixed the period within which a creditor was authorised to lodge a claim under the scheme. Therefore the order of the Court approving the scheme was an order fixing the period within which a person was authorised to do an act, for the purposes of the rule of court comparable with Part 4 rule 4. Consequently the rule of court was available to permit the Court to extend the period for lodgement of claims by creditors.

89 That reasoning has been accepted by later Australian cases on several occasions: Re Terri Co Pty Ltd (1987) 12 ACLR 457; Bond Corporation Holdings Ltd v Western Australia (1992) 7 ACSR 472; Re Matine Ltd (1998) 28 ACSR 268. However, it is inconsistent with the reasoning of the Privy Council in Kempe v Ambassador Insurance Co [1998] 1 WLR 271, where Lord Hoffmann, delivering the advice of the Board, referred to Caratti and expressly disagreed with it. He said: "It is true that the sanction of the court is necessary for the scheme to become binding and that it takes effect when the order expressing that sanction is delivered to the registrar. But this is not enough to enable one to say that the court (rather than the liquidators who proposed the scheme or the creditors who agreed to it) has by its order made the scheme. It is rather like saying that because royal assent is required for an Act of Parliament, a statute is an expression of the royal will. Under section 99 it is for the liquidators to propose the scheme, for the creditors by the necessary majority to agree to it and for the xcourt to sanction it. It is the statute which gives binding force to the scheme when there has been a combination of these three acts, just as the rules of the constitution give validity to acts duly passed by the Queen in Parliament …"

90 The reasoning of Lord Hoffmann is highly persuasive. However, the approach taken in Caratti was the approach of an intermediate appellate court in Australia. According to the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, a judge at first instance in this country should not depart from the interpretation of companies legislation adopted by an Australian intermediate appellate court. Moreover, the Caratti decision has stood since 1973 and has been followed, as I have said, on several occasions. I note, in particular, that although Santow J found it unnecessary to choose between Caratti and Kempe in Re Matine, he expressed the view (at 286) that he would follow the Australian cases were necessary to do so. As a matter of precedent, therefore, I shall follow the reasoning in Caratti in preference to the reasoning in Kempe.

91 In my opinion, this is a case where considerations of fairness, in the exercise of its discretion under Part 40 rule 4, should lead the Court to vary the time for Ray Brooks to lodge a formal proof of claim from 3 December 2001 to 18 February 2002, so as to treat the Second Claim as the claim of Ray Brooks for the purposes of the Scheme.

92 In reaching this conclusion, I take specifically into account the difficulties to which the company was subjected in preparing proof of its claim during the extremely busy grain harvesting period, and the propensity for error that this circumstance created. I also take into account the very large discrepancy between the First Claim and the Second Claim, reflecting a considered assessment by Ray Brooks that its entitlement was much higher than originally framed. I also take into account that, according to counsel for Ray Brooks, his client does not seek to be able to rank for a distribution of a net amount greater than the amount of the First Claim. It seems to me that unfair prejudice to the administration and other creditors can be avoided if orders are appropriately framed to limit the participation of Ray Brooks in a further distribution by reference to counsel's concession.

93 Although there was, in my opinion, a power to vary the First Claim, variation would not permit all components of the Second Claim to be made. However, I have decided that I have the power to extend the time for the plaintiff to lodge formal proof of its claim, and that I should exercise that power so as to recognise the Second Claim for the purposes of the Scheme. This will permit the plaintiff to rely on the whole of the Second Claim.

94 The drafting of orders to give effect to my decision will not be straightforward, as I shall require qualifications to address potential unfair prejudice to other creditors, along the lines submitted by counsel for the plaintiff. I shall direct the plaintiff to bring in short minutes of orders, and stand the proceeding over for a short time for the purpose of making orders and hearing argument as to costs. **********

Last Modified: 12/11/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Corporations Act 2001(Cth)ss 553C, 554A

Grain Marketing Act 1991(NSW)ss 80, 82

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